“We are studying the initiative’s feasibility with regard to soaking up excessive liquidity in the marketplace,” Chang Sheng-ford, deputy minister of finance, said March 5. “Private investment funds are finding it difficult to identify blue-chip opportunities at a time when the economy is being undermined by the global financial crisis.” He added that public construction needs long-term funding with low interest charges in order to help the economy weather the recessionary storm. “The platform can overcome both challenges and attain investment efficiency,” he explained.
According to Chang, such a mechanism will allow idle funds to earn interest from their investments while safeguarding primary capital from risk. “Qualified investment targets will be those that can produce revenue to repay their debts,” he explained. “We have yet to draw up a blueprint for the platform, but it is hoped this will be drafted within six months.”
A preliminary measure under consideration is tapping government-related and private insurance funds to establish an investment pool for targeting public projects. Local analysts estimate these entities control assets totaling NT$14 trillion (US$402.5 billion). The labor insurance, labor pension and public servants’ pension funds—three major government endowments—had combined assets of NT$1.38 trillion as of year-end 2008. In addition, the postal savings fund had NT$4.5 trillion.
Among investment targets of the proposed fund is the “i-Taiwan 12 Projects” that require outlays of NT$3.99 trillion over eight years. The government is pushing to boost domestic demand in hopes of offsetting the impact of the deteriorating global economy. Public Construction Commission Minister Fan Liang-shiow said March 9 that plans were in the pipeline to spend NT$599.6 billion on public construction projects this year, of which NT$150.6 billion is earmarked for the expansion of such programs. “We are committed to raising implementation rates on public construction projects to stimulate the economy,” Fan said.
Domestic demand is critical to the island’s export-based economy this year as overseas trade is being undermined by slumping consumption in foreign markets. The Directorate-General of Budget, Accounting and Statistics last month forecast a 2.97 percent decline in domestic gross product for 2009 on a projected slump of 20.1 percent in exports this year.
Statistics from the finance ministry March 9 showed the island’s exports in February plunged 28.6 percent from a year ago to US$12.59 billion, marking the sixth month of year-on-year decline in a row. For the first two months this year, exports totaled US$24.96 billion, down 37.2 percent from the corresponding period last year.
Write to Adela Lin at adela2009@mail.gio.gov.tw