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Economic growth needs proper strategy

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Economic growth needs proper strategyAn economic task force the government recently set up to deal with the impact of the eurozone debt crisis announced several measures after its first meeting on Thursday last week. However, a closer look at those proposals reveals no discernible difference between this task force and its many predecessors.

The task force concluded that the government should underwrite the stability of domestic financial markets through the state-owned National Stabilization Fund, which uses the four major government funds — labor insurance, labor pensions, civil-servant pensions and postal savings.

However, this was nothing new, as people have heard such suggestions many times before. It was not even prudent, because any government intervention in the equity markets in the current climate could prove futile before European and US markets show signs of stabilization.

If the task force wants to differentiate itself, it should tell investors to invest carefully given the current negative macroeconomic environment, rather than focus on the health of Taiwan’s stock market and economic fundamentals.

Another of its suggestions — that the government encourage insurers to invest in public infrastructure — was not new either, yet still lacked details about specific projects and when they would commence.

The task force last week also concluded that the government should increase its donation to the small and medium enterprise (SME) credit guarantee fund to NT$8 billion (US$264 million) next year from NT$5.6 billion at present to help SMEs obtain loans.

This is good news. Beefing up the credit guarantee fund would encourage banks to provide loans of up to NT$140 billion to SMEs, the government estimates.

However, the primary concern is not just the size of SME loans, but also the ease of obtaining them.

In general, SMEs receive less preferential rates and have less access to capital than large companies because they are viewed as higher risk, lacking sufficient assets and collateral. Moreover, they also face a set of complex, time-consuming credit-assessment and asset-appraisal approval procedures when they try to gain access to capital. Many SMEs fail to gain this approval and are unable to meet their urgent funding needs in the shortest time possible.

Read More: http://www.kurat.com/links/editorial-economic-growth-needs-strategy-taipei-times?&stream=eurozone-crisis-0

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