In 1949 and 1950, the influx of both civilians and troops evacuated from the mainland confronted Taiwan with a burden that has proved a strain on its economy. During that period, certain provisional measures were taken by the Government to coordinate the functions of the existing government agencies with a view to attaining economic stability. Consequently, various advisory committees and groups were formed to assist the existing government agencies in charge of financial, economic, and monetary matters. The reasons for the formation of such committees and groups were twofold, namely, (1) the necessity for better coordination, and (2) the nature of certain functions which could be better handled through previous screening and deliberation.
In the fall of 1950, a series of informal discussions between top Government officials and the representatives of American Government agencies in Taiwan on strengthening the coordination of U.S. Aid with the Government's own efforts in stabilizing the economy were started. In the course of time, these informal discussions became a regularly scheduled part of the weekly calendar of activities. As a result of the usefulness of these meetings, the Economic Stabilization Board was established under the Executive Yuan on March 9, 1951, under the co-convenership of Governor K. C. Wu and Minister C. K. Yen.
The functions of the Economic Stabilization Board were to bring about further coordination in financial, economic and monetary matters between the National and local governments, the Chinese and American government agencies, and among the various government agencies themselves. Specifically, the scope of its discussions and planning covered (1) important monetary, economic and financial measures, (2) important agricultural, industrial and other construction projects, and (3) the principles of utilization of U.S. aid supplies and the Counterpart Fund. Within the broad outline of its functions, the organization of the Economic Stabilization Board proceeded, more or less, on a functional basis and its structure was formed to fit the functions. With a view to facilitating the study of specific problems, various sub-committees and working groups were organized under the ESB to take charge of the planning, fact-finding and coordination work. Representatives of American Government agencies in Taipei were also invited to participate in the meetings of the ESB, as well as those of its sub-committees and working groups.
The Economic Stabilization Board was not the only planning and advisory body that dealt with financial, economic and monetary matters. There were concurrently other committees in existence, such as the Planning Commission of the Executive Yuan, the Taiwan Production Board, the Joint Committee on U.S. Aid, the Production Finance Committee, etc. However, in view of its composition and services rendered, the ESB was undoubtedly the most important body in making recommendations on the economic and financial policies of the Government.
It should be noted that the ESB was established at a time when the Government was confronted with two major financial difficulties, namely, (1) a large internal consolidated budgetary deficit, and (2) a large foreign exchange deficit. Therefore, the ESB started its operations in March 1951 with the primary objective of balancing the consolidated Government budget and the international payments.
During the year 1951, a new foreign exchange and trade control system was introduced by the ESB. Various ways and means were also devised to cut down non-essential expenditures, to increase Government revenues, and to coordinate both the industrial and agricultural production goals. By the end of 1951, the Government was able, for the first time, to bring both its internal consolidated budget and its international payments within the range of being balanced. This major accomplishment could be attributed to the coordinated efforts of the ESB, MSA/CM*, and the various other Government agencies concerned.
The year 1952 ushered in brighter prospects of continued improvement in both the general economy and the fiscal position of the Government. During 1952, the major efforts of ESB were directed toward (1) the promotion of external trade, and (2) increasing the productive facilities of Taiwan, whereby the production of this island would gradually become sufficient to cover its minimum civilian foreign exchange requirements in some definite projected future years. Continued efforts were also made by the ESB in giving preliminary screening of Government budgets and recommending measures for cutting down non-essential expenditures and increasing Government revenues.
As a result of the redoubled efforts of ESB, MSA/CM, and other Government agencies concerned, the economic development of Taiwan in 1952 was considered by observers of MSA/CM as having entered a "new phase." The period of "defensive protection against inflation" was over; and the Government with its increased economic capabilities had been able to invest some of its financial resources in developing industry and agriculture. It might be justifiably said that the Government made the Calendar Year 1952 a memorable year in the economic and financial history of Free China. It was also under the impetus of this new phase of economic development that the Government, in anticipation of economic self-support, formulated the "THE FOUR-YEAR PLAN FOR ATTAINMENT OF ECONOMIC INDEPENDENCE," although the Plan itself at that time did not go through the ESB structure for deliberation.
(II) The Functions of the Economic Stabilization Board After Its Reorganization
The implementation of the "FOUR-YEAR PLAN FOR ATTAINMENT OF ECONOMIC INDEPENDENCE" called for the establishment of an effective organization or authority tied in with the Government structure to that its decisions could have force. Although the ESB was the most effective advisory body in formulating the financial and economic policies of the Government, it had yet to be further strengthened for implementing the Four-Year Plan.
The changes in the economic conditions of Taiwan, together with the recent developments in the world situation, also called for an over-all revamping of the various committees or groups relating to financial and economic matters, which were organized according to the then existing needs, in the course of the Government's efforts to stabilize Taiwan's economy. The functions of some of such committees or groups gradually became overlapping as the situation changed, thus resulting in cumbersome procedures and a complicated system. Concomitantly with the actual need for strengthening the ESB, it was deemed necessary, that such committees or groups should either be reorganized, abolished, or amalgamated with a view to streamlining the structure, centralizing the authority, and clarifying the responsibility.
In view of the above, the Executive Yuan in June 1953 worked out a plan for reorganizing the ESB and for the establishment of a Foreign Exchange and Trade Control Commission under the Provincial Government. In carrying out this plan, many organizational defects of the ESB and those of other committees have been eliminated and the three objectives as mentioned in the preceding paragraph have been attained.
The Economic Stabilization Board was reorganized under the Regulations Governing the Organization of ESB promulgated by the Executive Yuan on July 1, 1953. The salient points of the reorganization may be summarized as follows:
(A) ORGANIZATIONAL CHANGES: —As stated in (I) above, the organization of the Economic Stabilization Board before the reorganization proceeded, more or less, on a functional basis. To some extent, it still retained the characteristics of the original informal discussion group, as may be conveyed by its official name in Chinese which, it translated literally, would be "COMMITTEE ON FINANCIAL AND ECONOMIC MATTERS, EXECUTIVE YUAN." In strengthening the authority of the Board under the reorganization plan, the official name in Chinese has been changed to "ECONOMIC STABILIZATION BOARD, EXECUTIVE YUAN" in conformity with its official name in English.
The members of ESB before its reorganization were appointed by the Executive Yuan. Two of the members were authorized by the Premier to be the Co-Conveners. An Executive Secretary was also appointed by the Executive Yuan. However, there was no formal organization of the ESB Secretariat. With the expansion of ESB activities, various sub-committees and working groups were organized under the ESB. Some of them held regular meetings; some of them were ad hoc in nature. But such sub-committees and working groups lacked uniform nomenclature, as well as precise terms of reference.
The reorganization of the Economic Stabilization Board has remedied all such organizational defects. With a view to centralizing the authority, the ESB has been placed under the direction of a Chairman appointed by the Executive Yuan. The structure of the ESB has also been streamlined. There are altogether four Committees and one Commission under the ESB. A full-time Secretariat has also been formally authorized to be organized. The names of the Chairman and members of the ESB, as well as those of the Conveners of the four Committees and the Commission arc listed hereunder: —
Chairmen: Mr. O. K. Yui
Members: Mr. C. K. Yen
Mr. T. K. Chang
Mr. C. H. Ho
General C. C. Kuo
General C. J. Chow
Dr. Monlin Chiang
Mr. P. Y. Hsu
Mr. K. Y. Yin
Dr. T. H. Shen
Mr. Martin Wong
Convener of Committee "A": Mr. P. Y. Hsu
Convener of Committee "B": Mr. C. K. Yen
Convener of Committee "C": Mr. C. K. Yen
Convener of Committee "D": Dr. T. H. Shen
Convener of Industrial Development Committee: Mr. K. Y. Yin
Executive Secretary: Mr. C. T. Chien
The members of the ESB and the Conveners of its Committees and the Commission are all appointed by the Executive Yuan. The Executive Secretary and members of the Committees and the commission are appointed by the Executive Yuan upon the recommendation of the Chairman. Representatives of the American agencies stationed in Taiwan are invited to participate in the meetings of the ESB as well as those of its Committees and the Commission as observers. The following is a list of the names of American observers attending the meetings of the ESB: —
Ambassador Karl L. Rankin, American Embassy
Mr. H. P. Jones, Minister Counselor, American Embassy
Maj. General William C. Chase, Chief, MAAG
Dr. Hubert G. Schenck, Chief, FOA/MSM/C
Mr. Joseph L. Brent, Deputy Chief, FOA/MSM/C
Mr. K. M. Arndt, Economic Advisor, FOA/MSM/C
Mr. R. D. Smith, Acting Chief, Budget and Finance Division, MSM/C
Mr. W. H. Fippin, Commissioner, JCRR
Mr. R. B. Elwood, American Embassy
Col. W. E. Reese, MAAG
The establishment of an Industrial Development Commission under the ESB, instead of a Committee on Industry, parallel to the other four Committees, calls for a brief explanation. It should be noted that the ESB after its reorganization was entrusted with the additional task of implementing the Four-Year Plan. To be effective in its implementation, there should also be parallel and coordinating work between agriculture and industry. On the agricultural side, knowledge, skill, and organization are now available in the existing Joint Commission on Rural Reconstruction. The establishment of Committee "D" with policy-making responsibilities would serve the purpose of coordinating the agriculture, forestry, are fisheries programs in connection with the Four-Year Plan. On the industrial side, however, similar facilities are not available. That is why the Executive Yuan decided to establish the Industrial Development Commission under the ESB, in lieu of a Committee on Industry. As the scope of the Commission's work would be somewhat similar to that of the JCRR, a Committee for Industry having only policy-making responsibilities would be inadequate.
With a view to clarifying the responsibilities, separate detailed regulations governing the organizations and meetings of the four Committees and the Commission were all carefully drawn up. As a result of the overall revamping, the ESB has become a more streamlined and effective organ for the planning and formulation of financial, economic, and monetary policies, as well as for the implementation of the Four-Year Plan.
(B) CHANGES IN FUNCTIONS: —The functions of ESB after its reorganization shall be as follows: —
(1) The planning of and deliberation on matters relating to monetary, trade, and foreign exchange policies;
(2) The planning of and deliberation on matters relating to measures for investigation of commodity prices and distribution of supplies;
(3) The planning of and deliberation on matters relating to the utilization of U.S. Aid and Counterpart Fund derived therefrom, as well as the coordination of Economic and Military Aid programs;
(4) The planning of and deliberation on matters relating to Government budget and taxation;
(5) The planning of and deliberation on matters or projects concerning agriculture, forestry, irrigation, fisheries, animal industry, industries, mining, and communications, as well as the implementation of the "FOUR-YEAR PLAN FOR ATTAINMENT OF ECONOMIC INDEPENDENCE"; and
(6) The deliberation and recommendation on matters referred to it by the Executive Yuan.
The functions of the four Committees and the Industrial Development Commission may be summarized as follows: —
Committee "A": This Committee shall be responsible for the preliminary planning of and for making recommendations on policy matters with respect to the following: —
(1) The note-issue and reserves, and all questions relating thereto;
(2) Loan policies of banks, control of bank credit, and regulation of deposit reserve requirements, money supply, and interest rate;
(3) Foreign exchange control, and all policy and administrative matters relating thereto;
(4) Regulation of exports, imports, including Chinese Government and MSM/C joint over-all import programs, and all policies and measures relating thereto;
(5) Classification of import and export items and/or schedules;
(6) Checking and regulating costs of export commodities, and of the landed costs and re-sale prices of imported commodities;
(7) Reviewing and regulating commodity prices and service charges in general;
(8) Financial and monetary policies in general, and all administrative matters relating to the above;
(9) Other matters referred to it by the Economic Stabilization Board for deliberation and those brought up by the respective government organizations and enterprises for consideration.
Committee "B": This Committee shall be responsible for the preliminary planning of and for making recommendations on policy matters with respect to the following: —
(1) Utilization of U. S. Aid;
(2) Utilization of Counterpart Fund;
(3) Co-ordination of economic and military aid programs;
(4) Other matters referred to it by the Economic Stabilization Board for deliberation and those brought up by the respective government organization and enterprises for consideration.
Committee "C": This Committee shall be responsible for the preliminary planning of and for making recommendations on policy matters with respect to the following: —
(1) Balancing the budgets of the various levels of the Government;
(2) Unified control of receipts and expenditures of Government enterprises;
(3) Improvement of tax systems; and
(4) Other matters referred to it by the Economic Stabilization Board for deliberation and those brought up by the respective government organizations and enterprises for consideration.
Committee "D": This Committee shall be responsible for the preliminary planning of and for making recommendations on policy matters with respect to the following: —
(1) Policies aiming at the full realization of the agricultural phase of the "Four-Year Plan for Attainment of Economic Independence";
(2) Review of agriculture, forestry, fisheries, animal husbandry and water conservancy programs and budgets of various government agencies concerned, in the light of approved policies, with a view to promoting coordination and cooperation of the work of the agencies concerned;
(3) Review of the progress and financial status of the various above-mentioned programs; and
(4) Other matters referred to it by the Economic Stabilization Board for consideration and those brought up by the respective government organizations and enterprises for deliberation.
The Industrial Development Commission: This Commission shall be responsible for the preliminary planning of and for making recommendation on the following: —
(1) Matters concerning plans aiming at the full realization of the industrial phase of the "Four-Year Plan for the Attainment of Economic Independence";
(2) Matters concerning coordination and supervision of industrial and production programs;
(3) Matters concerning production and sales plans of various enterprises;
(4) Matters concerning the supervision and inspection of the progress and accomplishment of the above-mentioned production programs:
(5) Matters concerning the arrangements for securing working capital for various enterprises, and industrial programs requiring U.S. Aid or Counterpart Fund;
(6) Matters concerning research on economic and industrial problems;
(7) Other matters referred to it by the Economic Stabilization Board for consideration and those brought up by the respective Government, organizations and enterprises for deliberation.
(III) A Brief Review of the Major Activities of the Economic Stabilization Board During the Period from July 2, 1953, to September 4, 1953
In addition to the matters referred to it by the Executive Yuan and those submitted by various government organizations for deliberation, Chairman O. K. Yui has directed the attention of the Board to more basic policy problems by mapping out an initial program for the operations of ESB right after its reorganization. A list of policy questions was drawn up by the Chairman and the following directives were given to the four Committees and the Commission for making concrete recommendations thereon: —
(1) A fund requirement and money supply estimate for the 2nd half of the current year should be drawn up by Committee "A" to be submitted to the ESB for consideration at its 4th meeting to be held on August 6, 1953.
(2) An over-all plan for the collection, distribution, conservation and exportation of rice should be worked out by the Provincial Government to be submitted for the consideration of the ESB at its 4th meeting to be held on August 6, 1953.
(3) Committee "A", together with the Foreign Exchange and Trade Control Commission, should make a joint review of the existing foreign exchange and trade restrictive system and submit their findings and recommendations for the consideration of the ESB at its 4th meeting to be held on August 6, 1953.
(4) Committee "A", together with the Foreign Exchange and Trade Control Commission, should jointly work out a price investigation and end-use check system to be submitted to the ESB for consideration at its 5th meeting to be held on August 20, 1953.
(5) A joint import program with both Chigovt and MSM/C exchange funds for FY1954 should be worked out by Committee "A" in conjunction with the Foreign Exchange and Trade Control Commission to be submitted to the ESB for consideration at its 5th meeting to be held on August 20, 1953.
(6) An export promotion program for the second half of the current year should be worked out jointly by Committee "A" and the Foreign Exchange and Trade Control Commission to be submitted to the ESB for consideration at its 5th meeting to be held on August 20, 1953.
(7) Committee "A" should review the Estimate of Foreign Exchange Receipts and Disbursements for CY1953 as contained in the Four-Year Plan in the light of the actual foreign exchange receipts and disbursements for the first six months of the current year. Committee "A" should be requested to submit its findings thereon to the ESB for consideration at its 6th meeting to be held on September 3, 1953.
(8) Committee "B" should re-estimate the counterpart fund military requirements for FY1954, especially those requirements for the second half of the current year. The said Committee should also make a joint study with Committee "C" on the financial resources, both from Government revenue and the counterpart fund, for meeting such requirements. Should it be found that the available financial resources are inadequate to meet all such requirements, Committee "B" should make a careful study of the priority of such proposed projects so that certain projects may be postponed or rejected. It is hoped that Committees "B" and "C" submit their joint findings in this connection to the ESB for consideration at its 6th meeting to be held on September 3, 1953.
(9) A re-estimate of the revenues for the current year should be made by Committee "C" in the light of the actual collections of the first half year of CY1953. Committee "C" should be requested to submit its findings to the ESB for consideration at its 6th meeting to be held on September 3, 1953.
(10) The technical details involved in the bond issue for meeting the sugar-rice parity guarantee price for the 1952-53 sugar crop should be worked out by the Provincial Government, to be submitted, through Committee "C", to the ESB for consideration at its 6th meeting to be held on September 3, 1953.
(11) Committee "D" should review the agricultural production goals for CY1953 as set out in the "Four-Year Plan for Attainment of Economic Independence", as well as the means for attaining such goals as outlined therein, and report its findings and recommendations to the ESB for consideration at its 6th meeting to be held on September 3, 1953.
(12) The Industrial Development Commission, after its establishment, should review the industrial production goals for CY1953 as set out under the Industrial Plan of the Four-Year Plan, and report its findings to the ESB for consideration at its 6th meeting to be held on September 3, 1953.
The four Committees and the Commission have submittedd their respective recommendations on the above questions to the ESB on schedule. On the basis of their recommendations, the ESB, in the course of its 6 meetings, has accomplished the following: —
(1) Prepared (a) a preliminary estimate of fund requirements and money supply for the 2nd half of CY1953, (b) a preliminary over-all plan for the collection and distribution of rice for the period from July 1953 to June 1954, (c) a tentative Counterpart Fund Expenditure Budget for FY1954, (d) a re-estimate of the revenues and expenditures of the National and the Provincial Governments for CY1953, and (e) a joint import program with both Chinese Government and MSM/C foreign exchange funds for FY1954, all of which will be subject to periodic review by the relevant committees under the ESB.
(2) Re-evaluated the agricultural and industrial production goals for CY1953 and CY1954 and analyzed the budgetary and financial requirements for attaining such production goals, with the objective of expediting the implementation of the Four-Year Plan; and
(3) Formulated a plan for improving the existing system of screening the applications for foreign exchange made by private importers to be submitted to the Executive Yuan for final approval and implementation.
During this period, the Board also gave attention to various other immediate problems, such as the urgent financial requirements of several government enterprises and major private industries, military procurement, foreign trade transactions, and raising the necessary revenue for improving the treatment of school teachers and staff beginning from August 1953.
Under the direction of Chairman O. K. Yui, the Secretariat of the ESB has taken steps to keep in close contact with all existing research groups in order to gather available data on basic economic conditions and problems for staff study and to assist in seeing to it that the required data are compiled by the organizations concerned when they would advance the work of the ESB. It is hoped that through the coordinated efforts of the Secretariat of the ESB and the organizations concerned in getting reliable and timely statistics, the Board's deliberations on various immediate problem as well as its long-range planning work will be facilitated.
*Effective August 1, 1953, the name of the Mutual Security Agency Mission to China (MSA/CM) was changed to Foreign Operations Administration Mutual Security Mission to China (FOA/MSM/C).