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FINANCE-ASIA: TAIWAN SEES OPPORTUNITY IN REGION'S MISERY

FINANCE-ASIA: TAIWAN SEES OPPORTUNITY IN REGION'S MISERY

By Yojana Sharma

HONG KONG, Jan. 29 '98(IPS) -- Whenever top Taiwanese officials take a swing through Asia, Beijing routinely protests, but the latest visit by Prime Minister Vincent Siew to Manila and Jakarta drew anger from China.

Official newspapers warned Taipei not to capitalise on the financial turmoil in Asian countries, none of which have diplomatic ties with Taiwan although it is the biggest investor in many of the countries.

As Siew visited Manila and Jakarta for unofficial talks last week, China accused Taipei of taking advantage of the economic crisis and trying to gain political and diplomatic allies in return for offering cash to the region's stricken economies.

Beijing has often accused Taiwan of using economic aid to gain friends and supporters for its bids to join key international organizations such as the UN and the International Monetary Fund as well as the Asia-Pacific Economic Cooperation (APEC) forum.

In particular Beijing is still smarting from the visits by Singapore's Prime Minister Goh Chok Tong and Malaysia's Mahathir Mohamad to Taipei on their way back from the Asia Pacific Economic Cooperation Summit in Vancouver last November.

More recently, Beijing objected to Taipei's presence at a regional meeting of finance ministers to discuss the turmoil in Southeast Asia's stock markets.

Taiwan last year expressed its willingness to use some of its huge foreign exchange reserves to shore up regional currencies.

This time it has not escaped Beijing's notice that in the midst of the collapse of currencies across the region, the Taiwan dollar has been relatively unaffected. At the same time Taiwan appears to be shopping for bargains all over the region, taking advantage of rock-bottom prices caused by devalued currencies.

And Beijing characteristically believes this is none other than a brazen attempt by Taiwan to buy political allies by offering economic assistance.

A delegation of some 80 Taiwanese industrialists led by Chiang Ping-kun, chairman of the ministerial-level Council for Economic Planning and Development, has been touring Thailand, Philippines, Malaysia and Indonesia, and has accompanied Siew to Manila and Jakarta in search for more business opportunities.

Benny Hu, President of the China Development Corporation, the business arm of the ruling Kuomintang party, recently said: "This is the worst financial crisis ever in Asia and it is a one in a lifetime opportunity."

"If I don't take advantage of it now, people might ask later 'why did you let this chance slip by?'" he told the Taipei-based China News.

Although the bulk of CDC investments are still in Taiwan, the Taipei makes no secret of the fact that it would like businessmen to invest more in Southeast Asia to reduce economic dependence on Mainland China. It has likewise resurrected its "Go South" policy first mooted in 1993 to encourage investment in the region rather than China.

Taiwanese investment in Southeast Asian countries was $37.1 billion at the end of September 1997, but the huge growth in regional investment was in the 1980s rather than as a result of the "Go South" Policy.

Siew himself has been emphasizing Taiwan's healthy prospects for economic growth. "There is still plenty of potential for further such growth despite the recent financial turmoil."

He added: "While no one welcomes such adversity, the Taiwan government feels that this crisis should be regarded as a basis for increasing regional co-operation. Taiwan is ready to play a role in helping the region regain financial stability."

The Taiwanese government has reportedly set up a $50 billion loan fund to help regional governments in need. Deputy governor of Taiwan's Central Bank, Liang Cheng-ching, told Taiwan investors during the delegation's trip to Manila that Taipei was ready to extend $20 million in credit to banks in the Philippines to help local businesses.

But on his return from Jakarta, Siew noted "none of the four governments visited by the delegation expressed any demands whatsoever for so-called loans or cash."

"All that was done was to exchange experiences and opinions on dealing with the crisis," he said.

However, he noted that Southeast Asian countries wanted Taiwanese investors to continue providing employment and hoped the government would encourage more investment in the region. Taipei has already earmarked up to $1.2 billion from its central bank to back up Taiwanese investments in the region.

But not everyone seems to agree that "money diplomacy" is the way to go. Businessmen have not been rushing in to mop up the bargains despite the tempting prices particularly of finance houses and hotels.

And while there are reports that Taiwanese businessmen are interested in buying five-star hotels in Thailand and South Korea, some have put their investment plans on hold. Tuntex, a Taiwanese petrochemical company has recently frozen plans for a new plant in Thailand.

The majority of Taiwanese investors believe the risks are still too great in the region and that further price falls are still possible, even though the currencies of Malaysia, Thailand, Indonesia, Philippines and South Korea have tumbled by between 30 and 70 per cent in recent weeks, providing cheap investment opportunities for Taiwanese businessmen whose currency has dropped only 20 per cent during the same period.

Investors also fear social unrest in Thailand and Indonesia. Some analysts also point out that Asian countries, particularly Indonesia and Malaysia, are not happy seeing wealthy foreigners buying up their assets when the chips are down. "It's a matter of pride," said a Hong Kong-based Taiwanese broker.

Even the Taiwanese government is treading carefully over official assistance. While it is willing to give aid as part of a region-wide effort to stabilize the currencies, there is still some resistance politically to direct assistance -- particularly to South Korea. Taiwan was deeply mortified in 1988 when Seoul switched its diplomatic ties to Beijing with little warning.

Yok Mu-ming, a member of the opposition New Party said: "If the government tries to win friends in the region amid the financial crisis by giving them huge amounts of money in the name of aid, we will oppose the move."

He said it was "inappropriate" for government to pursue the illusion of diplomatic relations at the expense of the Taiwanese public, pointing to high interest rates and inflation at home. If the trips were intended to promote fairer trade terms and to fight for longer-term privileges for Taiwanese businessmen, they would serve the Taiwan economy better, Yok said.

Source: Inter Press Service, distributed in the U.S. by Global Information Network, 29 January 1998.



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last updated: 6/18/98