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Talk of the Day -- Governor Perng prescribes for economic woes

2013/11/19 18:03:35

Central Bank Governor Perng Fai-nan has come under some pressure recently over his policy not to allow the new Taiwan dollar to depreciate as much as some of the country's exporters would like.

His critics include Morris Chang, founder of the world's largest contract chipmaker Taiwan Semiconductor Manufacturing Company(TSMC). Chang argues that Taiwan's export performance has been hamstrung by the fact that both the Korean won and the Japanese yen have depreciated significantly over the past year, which has helped the two countries' exports.

Perng insisted, however, that currency depreciation alone cannot boost Taiwan's exports or its economy. What is required is a combination of several measures, he said.

In a report submitted to the Legislative Yuan, the well-respected central banker spells out his prescriptions.

The following are excerpts of his report titled "A Healthy Exchange Rate Policy and Stable Economic Development," as reported by the United Daily News:

In the written report submitted ahead of his appearance before the Legislature's finance committee, Perng offered a four-point prescription aimed at improving the health of Taiwan's overall economy.

First, he said there should be more investment. While the rate of savings has remained high at about 28 percent since 2000, the rate of investment has dropped from 25 percent in 2000 to 19 percent this year, leading to an accumulated excess savings of NT$13.54 trillion (US$450 billion), he said.

That money should be invested in research and development, and innovation, with the aim of increasing productivity in order to create jobs and raise wages, he said. He urged companies to take advantage of the low real interest rates to raise money for long-term investments.

Second, Perng called on the cash-strapped government to permit private-sector funding of public construction projects, which would allow self-liquidating entities such as Taoyuan International Airport Co. and financially healthy companies like Taipei Rapid Transit Corporation to expand by raising funds on their own.

Third, he said Taiwan should use its excess savings on overseas investments to help secure sources of raw materials or key technologies as a way of enhancing the competitiveness of Taiwan's economy.

Fourth, the five major public funds, including the labor insurance and national pension funds, should be integrated in a way that will help save operating costs, increase the flow of information and make their investments more effective, he said.

In his report, Perng also listed reasons against significant depreciation of the local currency, saying any benefit achieved through the depreciation would be offset by higher consumer prices. (Nov. 19, 2013)