The Ministry of Finance is to suggest that the Cabinet create a platform to marshal the operations of four state funds to boost their efficiency and profitability so they can better help strengthen the nation’s financial health, Minister of Finance Chang Sheng-ford (張盛和) said yesterday.
“The idea is to integrate the four funds into a quasi-sovereign wealth fund [SWF] without needing to revise the law,” Chang said by telephone.
The funds are the Labor Insurance Fund, Labor Pension Fund, Public Service Pension Fund and postal savings deposits with an aggregate value of more than NT$7 trillion (US$223.34 billion).
Government agencies are due to recommend measures to revive the economy during the Cabinet’s regular weekly meeting tomorrow.
The four funds cannot now function as an SWF, maximizing returns through investment in global stocks, commodities, real estate, hedge funds and private equities because they are designed to operate separately, with a focus on Taiwanese shares and helping support the local bourse if requested, Chang said.
Due to a lack of integration and coordination, one fund might be selling certain shares while another is buying them, which is inefficient, the minister said.
Existing rules also limit the use of profits generated by the funds, tying government’s hands in times of need, he said.
“A joint management platform can prevent such scenarios and make the funds more profitable and flexible,” Chang said.
For the medium and long term, the ministry plans to push for legal revisions to establish a sovereign wealth fund, allowing the four state funds to have a more diversified portfolio and higher returns, Chang said.
There should be no big obstacle to a joint management platform even though the four have separate contracts with different portfolio managers.
Chung-Hua Institution for Economic Research (中華經濟研究院) vice president Wang Jiann-chyuan (王健全) voiced support for an SWF whose return may be used to finance social welfare spending linked to the nation’s aging population.
The nation also needs to diversify its exports as overconcentration on a few electronic industries has made the economy vulnerable to global cyclical movements, Wang said.
The Cabinet is likely to set up a NT$10 billion mergers and acquisitions (M&A) fund using the National Development Fund and money from the private sector, local media reported.
The M&A fund would be designed to help Taiwanese companies expand their scale so they can better compete internationally, the media reports said.
The government would help firms to seek acquisition targets at home and abroad, and help them obtain raw materials, technology, brands and talents, the reports said.
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