Borrowing cut puts brakes on Taiwan spree
Taiwan's financial muscle has historically been in inverse proportion to its
TAIWAN'S six-year development plan announced two years ago was filled with sound and fury, with its US$300 billion spending spree aimed at dragging the island's infrastructure into the 21st century.
However, it is becoming rapidly apparent that the plan signifies less than the noise suggested.
The Government is discussing a substantial cut in the NT$786 billion (about HK$231 billion) budget for the plan next year in the face of a borrowing squeeze.
It will also soon announce the results of a review of the plan, which will postpone work on some grandiose projects.
This looks set to turn the plan back into a collection of projects that were under way in 1991, before then prime minister Hau Pei-tsun announced 771 separate project proposals to be undertaken during President Lee Teng-hui's six-year term.
It seems now that it was little more than a publicity stunt - but a successful one.
It has raised Taiwan's international profile through the offering of politically leveraged deals to recession-hit Western nations, and it has helped Taiwan weather a property, stock market and investment slump.
The 1991 plan was for a $8.2 trillion investment programme that would channel Taiwan's notoriously speculative capital flows into infrastructure projects.
Then, the Government said: ''Let us work hand in hand for the happiness of all our citizens and let us exert ourselves for the future of our nation.'' Two years later, Taiwan's people are viewing the plan with cynicism.
The Northern Section highway was budgeted to cost $58 billion, but difficulties in land acquisition led to a final cost of $178 billion. The Government had to negotiate with 10,000 landowners.
Taipei's much-needed $444 billion Mass Rapid Transit railway has been mired by corruption investigations over contracts and by a recent incident in which a train carriage burst into flames during a test run.
The biggest problem is of a more fundamental nature - money.
Tsai Hsung-hsiung, vice-chairman of the Council for Economic Planning and Development - which co-ordinates the project - said: ''From a macro point of view, the resources are there. The problem is channelling these resources into the projects.'' The Government, in spite of its legendary US$82 billion in foreign reserves, is having difficulty finding its portion of the finance.
''We expected a current account surplus of about $200 billion in 1991. The actual figure was around a quarter of what we expected,'' Mr Tsai said.
The Government has expanded its bond issuing programme. Outstanding bonds will account for about 21 per cent of gross national product by the end of the year to June 1994, up from five per cent in 1991.
However, bond issues have a ceiling that has nearly been reached in relation to government expenditure.
The Government also faces opposition from MPs, who have to approve financing for the scheme.
One merchant banker said: ''It has been slowed down by the fact that it has happened at the same time as the economy is being democratised.''