Not so long ago, a third-party investment manager handling government funds caused heavy losses for Taiwan’s Labor Pension and Labor Insurance funds. Now another market trader is suspected of speculating on shares with board members of an over-the-counter listed company, causing the pension fund to lose more than NT$60 million (US$2 million).
Minister of Finance Chang Sheng-ford (張盛和) has suggested setting up a “Taiwan sovereign fund,” but nothing more has been done about it. If fund managers are inexpert and third-party traders keep mishandling the funds, establishing a sovereign fund could be a solution, since it could kill two birds with one stone by averting rogue trading and improving investment performance.
Sovereign funds are wealth funds that are owned, controlled and budgeted for by governments. They seek to maximize return on investment following risk adjustment and are managed by specialist investment bodies independent of the central bank and finance ministry.
Norway’s Government Pension Fund Global is recognized worldwide as the best-governed sovereign wealth fund. Some aspects of the Norwegian fund’s operations would be worthy references in planning for a future sovereign wealth fund for Taiwan.
First, the purpose of the fund is to provide welfare for the nation’s citizens and its basic strategy is clear. In principle, the fund’s overseas investments have no political strategic purpose and it does not gain controlling interests in the companies in which it invests. It is also stipulated that the fund may not invest in companies that act immorally, violate human rights, are involved in major corruption or badly damage the environment. The fund is not allowed to manipulate the market share price of single companies, or to hold more than 3 percent of the total shares of any one company.
Second, the Norwegian fund has established commercial, professional and independent operating principles. Its internal organizational structure, mode of governance and management team are like those of a world-class private investment firm, rather than a government administration department.
The fund enlists first-rate financial talent from around the world. Its chief investment officer and fund mangers are all externally recruited professionals. The makeup of its investment portfolio is made public periodically, as is the rate of return on its investments, and its asset flows are all listed on its Web site. This makes it much more transparent than other sovereign wealth funds.
Another notable feature is the fund’s ethical council, with a broad-based membership, including not just economists, but also philosophers, human-rights lawyers, product safety experts and experts in international law.
It must be admitted that many difficulties stand in the way of setting up a Taiwan sovereign fund.
First, existing funds are based on different laws. They serve specific groups of people, have differing regulations about charges and are answerable to different government departments. These factors will make integrating all these funds a complicated task.
Second, it will take a long time to draw up all the necessary legal amendments and new legislation.
Third, it will not be easy to find highly qualified personnel and set up an independent body or company to manage the fund’s investments, without over-concentration of power, and to make the fund’s operations completely transparent and free of political interference.
Setting up a Taiwan sovereign fund is achievable, and the successful experiences of other countries are available for reference. It can be done if the government is diligent in its planning so that the obstacles can be overcome.
Lee Wo-chiang is a professor in the Department of Banking and Finance at Tamkang University.
Translated by Julian Clegg
Why is Chinese President Xi Jinping (習近平) not a “happy camper” these days regarding Taiwan? Taiwanese have not become more “CCP friendly” in response to the Chinese Communist Party’s (CCP) use of spies and graft by the United Front Work Department, intimidation conducted by the People’s Liberation Army (PLA) and the Armed Police/Coast Guard, and endless subversive political warfare measures, including cyber-attacks, economic coercion, and diplomatic isolation. The percentage of Taiwanese that prefer the status quo or prefer moving towards independence continues to rise — 76 percent as of December last year. According to National Chengchi University (NCCU) polling, the Taiwanese
It would be absurd to claim to see a silver lining behind every US President Donald Trump cloud. Those clouds are too many, too dark and too dangerous. All the same, viewed from a domestic political perspective, there is a clear emerging UK upside to Trump’s efforts at crashing the post-Cold War order. It might even get a boost from Thursday’s Washington visit by British Prime Minister Keir Starmer. In July last year, when Starmer became prime minister, the Labour Party was rigidly on the defensive about Europe. Brexit was seen as an electorally unstable issue for a party whose priority
US President Donald Trump is systematically dismantling the network of multilateral institutions, organizations and agreements that have helped prevent a third world war for more than 70 years. Yet many governments are twisting themselves into knots trying to downplay his actions, insisting that things are not as they seem and that even if they are, confronting the menace in the White House simply is not an option. Disagreement must be carefully disguised to avoid provoking his wrath. For the British political establishment, the convenient excuse is the need to preserve the UK’s “special relationship” with the US. Following their White House
US President Donald Trump’s return to the White House has brought renewed scrutiny to the Taiwan-US semiconductor relationship with his claim that Taiwan “stole” the US chip business and threats of 100 percent tariffs on foreign-made processors. For Taiwanese and industry leaders, understanding those developments in their full context is crucial while maintaining a clear vision of Taiwan’s role in the global technology ecosystem. The assertion that Taiwan “stole” the US’ semiconductor industry fundamentally misunderstands the evolution of global technology manufacturing. Over the past four decades, Taiwan’s semiconductor industry, led by Taiwan Semiconductor Manufacturing Co (TSMC), has grown through legitimate means
RSS