The government’s efforts to encourage households and institutional investors to return their massive financial assets parked abroad have made little progress over the past several years. Taiwanese have about NT$20 trillion (US$623.2 billion) in assets, but most of that money is tied up in overseas bonds, foreign equities or other types of international investment instruments, the Financial Supervisory Commission (FSC) said. However, expectations are growing among those in the local financial industry that a significant change in the situation is coming, albeit slowly and despite persistent geopolitical risks.
The source of that optimism is a new FSC policy plan that aims to develop Taiwan into an asset management center in the region with unique characteristics, such as the nation’s strong semiconductor and manufacturing industries, and its ample household financial assets.
The new initiative appears inclined to take a more realistic approach than previous efforts by at first encouraging the domestic financial industry, local institutional investors and Taiwanese households not to move funds into foreign markets, but to invest in Taiwan. After retaining local wealth onshore, it would then work to attract more foreign funds and build up the nation’s asset management industry.
Last month, the FSC proposed five measures to achieve its asset management goal. First, the commission would establish a special financial zone within the country for asset management. Next, it would establish the Taiwanese individual savings account (TISA) scheme in the spirit of inclusive finance. The commission would also promote family office institutions for wealth management and look at capital investment in public construction to guide private capital investment. Last, it plans to guide capital investment into national strategic industries.
The FSC said it aims to achieve its policy goals through a six-year, three-stage course. It plans large-scale regulatory easing, as well as market adjustments and cross-departmental cooperation in two years. In four years, it aims to significantly increase the size of Taiwan’s asset management and market participants. It would eventually achieve the asset management center goal with Taiwanese characteristics and regional competitiveness in six years, with the hope of doubling the scale of the nation’s wealth management from about NT$30 trillion to NT$60 trillion.
Last week’s announcement by FSC Chairman Peng Jin-lung (彭金隆) that the commission would set up a special financial zone in Kaohsiung is a starting point for moving toward its larger policy goal. He said five foreign asset management firms and four domestic banks would move into the special zone in the first half of next year. In addition, the commission’s proposed TISA scheme, which is designed to provide investment options for people along with favorable fees and tax-exemption benefits, really stands out, as it could help people build up assets amid the rising cost of living and create a positive environment for the asset management industry.
Developing a regional asset management center in Taiwan was one of President William Lai’s (賴清德) major policy proposals during his election campaign last year and it is definitely the top priority of Premier Cho Jung-tai’s (卓榮泰) Cabinet. However, it is no easy job, as Taiwan is not the only place seeking a share of this big pie, with neighboring economies including Hong Kong, Singapore and Japan already doing it and moving ahead of Taiwan. The commission must make greater efforts to communicate with lawmakers, push for more reforms within the local asset management industry and improve the public’s financial literacy so that it can reach its policy goal smoothly and effectively.
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