TAIWAN FACES a costly clean-up after a succession of brutal typhoons hit the island this summer but the buffeting of a damaged economy continues unabated. In an apparent case of shooting the forecaster, at least one foreign analyst has been slammed by central bank mandarins for writing a negative report on the economy.
Last month the Securities and Futures Commission revealed it was probing 'inappropriate trading' by foreign investment banks. The accusation was of a deliberate bid to drive down share prices in Taiwan by short-selling index futures in Singapore. Boding ill for transparency in economic affairs, many analysts are loath to make public statements for fear of official reprisals.
The accusations against foreign traders are a reminder of the lead-up to Thailand's currency crisis in July 1997. Then police raided foreign brokerage houses to track the source of rumours that five banks were insolvent. Weeks later the country effectively devalued the baht and eventually ended up taking over six banks.
Officials took such a hard line against the offshore short-selling, in part, because it undermined their interventionist efforts to prop up the stock market, which last month hit an eight-year low.
There are many causes for concern. Taiwan is a two-track economy. Its prodigiously successful electronics sector has driven growth during the past decade. But less conspicuously another economy, to a great extent hidden from foreign eyes, shares many of the worst Asian traits.
Leading the list is a long history of bad lending by banks which overly relied on real estate and shares as collateral. The sector's problems are inexorably linked with a 10-year grinding property bear market which has seen prices decline 35 per cent.
In the non-bank financial sector, the life insurance industry faces Japanese-style under-funding problems, having lured account holders with guaranteed returns of up to 9 per cent.
