The idea of reforming the finances of the credit units of farmers' and fishermen's associations has been bandied about for years. With great effort, some progress was finally made after the DPP came to power. I fear that if the government hesitates to carry out reforms simply because of electoral concerns, progress will be very difficult to achieve.
The government would do well to reconsider its policies in the light of the experience of Japan -- which is similar in political and economic background to Taiwan -- and studying the reform of farmers' associations that has been undertaken there.
Restricted by its limited supply of arable land, Japan has relied heavily on technology-oriented agricultural management and has a great demand for capital. Its government also stresses agricultural financing.
Japan's agricultural finance system is based on agricultural associations and the government-funded Agriculture, Forestry and Fisheries Finance Corp (AFC). Ninety percent of agricultural loans are granted by the associations or the corporation. In particular, however, the associations provide six times more loans than the AFC.
But, as a result of both the sluggishness of Japan's agricultural sector and trade liberalization, agricultural protection has gradually been reduced. As business has declined, many farmers have become incapable of paying the interest on their loans, so the number of bad loans has drastically increased.
The Japanese government, as a result, has actively pushed for mergers of farmers' and fishermen's associations. In addition, at the height of the bubble economy, Japanese farmers took out large loans for land purchases, creating a huge non-performing loans albatross when land prices crashed.
To solve this problem, the government has authorized the Norinchukin Bank to establish a financial supervision department to supervise agricultural financial policy.
In recent years, under the framework of the WTO, agricultural development has faced enormous challenges, but the Japanese government has actively guided the transformation of the agricultural sector and the development of a highly refined form of agriculture emphasizing value-added agricultural processing and agro-tourism.
Moreover, the system of agricultural financing was reformed at appropriate times while agricultural techniques and skilled workers were cultivated with the result that the population was actually encouraged to go back to rural areas, alleviating the unemployment problems resulting from an economic slowdown.
There may be lessons that we can learn from Japan's agricultural financial reform. Examining the process by which Japan undertook the mergers and transformation of agricultural associations, we see that Japan's reforms were successful as they allowed agriculture to weather the Asian financial crisis.
We must therefore persist with reform. But before the government reforms the agricultural finance system, it must first solve the related problems of buying and selling agricultural land and providing loans for agricultural land. This will dispel farmers' fears that their interests will be compromised and eradicate the problem of "black gold" influencing matters like agricultural land transactions and agricultural loans.
At the same time, the government should actively help farmers to develop a more refined agriculture and promote agro-tourism so that the impact of WTO entry on Taiwan's agricultural sector will be minimized.
This is the only way to continue with agricultural finance reform.
Wang Tuoh is a DPP legislator.
Translated by Jackie Lin and Ethan Harkness
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