The Executive Yuan hosted a "Straight Talk" teatime event this afternoon for 10-plus members of the international media to meet with senior officials and financial experts to discuss the government's financial services action plan for free economic pilot zones (FEPZs).
In his opening remarks, Executive Yuan spokesperson and event host Sun Lih-chyun said that the purpose of the event is to enhance the foreign press's understanding of how the FEPZs work in terms of financial channels, capital flow and relevant services.
Financial Supervisory Commission (FSC) Vice Chairperson Huang Tien-mu said Taiwan's financial businesses and commodities still have much room to grow. As such, in August 2013, the FSC launched a plan to incorporate financial businesses into the FEPZs by utilizing the concept of virtual offshore banking units (OBUs). The commission sought to establish virtual banking divisions, loosen regulations and open up all pilot zones with a view to retaining talent and capital. Government agencies have been proactively implementing the plan since it gained the Executive Yuan's approval.
Huang said 19 related financial regulations and decrees have been amended to allow Taiwan to offer more products and services. These amendments ease limitations on OBU businesses not specifically banned by the government; allow securities companies to establish offshore securities units; loosen restrictions on domestic banking and securities units; and encourage insurance companies to invest in land for the pilot zones.
The action plan has achieved measurable results so far, said Huang. Domestic banks, for example, took in pre-tax revenues of NT$234.40 billion (US$7.81 billion) through the end of August, a year-on-year rise of 28.09 percent. Of this amount, OBU pre-tax revenues accounted for NT$61.47 billion (US$2.05 billion), an increase of 66.52 percent from the same period last year.
FSC Banking Bureau Deputy Director-General Loui Huei-rung indicated that the FSC is planning a financial imports substitution program to further liberalize the FEPZs. The program will encourage banks to gain critical capabilities through mergers and acquisitions, help banks improve their product development abilities, and cultivate more financial experts.
The FSC is also considering the possibility to allow customers to open OBU accounts through more diverse channels, encouraging banks to offer attractive financial commodities to draw overseas investors, and developing OBUs into wealth management centers for foreign and mainland Chinese clients.
National Development Council Deputy Minister Kao Shien-quey said the FEPZs allow for small-scale experimentation of free trade measures. Regulatory easing and innovative systems inside the zones encourage creative business models and attract more domestic and foreign investors. The government, meanwhile, will continue to promote deregulation and abolish laws that are outdated or conflict with international trends. This will help create a freer investment environment to spur the country's economic growth.
Taiwan Financial Holdings President Shiau Chang-ruey noted an important principle in financial services—that the financial sector must first support industry growth before the industries can revitalize it. He hopes that the special statute governing FEPZs will be passed soon, so that banks can begin providing FEPZ businesses with financing for land acquisition and other purposes, which in turn will help financial institutions generate greater revenues.
Chu Hau-min, professor of National Chengchi University's Department of Money and Banking, said financial services are different from other sectors in the physical economy. The government is moving in the right direction by setting up virtual zones where qualified domestic financial institutions can operate in a deregulated environment on a trial basis. Taiwan has much room for improving its financial services and products before it can become a major financial center in Asia, the Chinese-speaking community, and the world. As a small-scale economy, Taiwan must continue opening itself to the world and create a friendly financial environment in order to stay competitive.
Asked by the press about the risks associated with Taiwan's liberalization, FSC Vice Chairperson Huang said that the government has been cautious to manage risks and abide by legal procedures in its push for deregulation and innovative reforms. Among the many financial reforms being implemented, there have been absolutely no changes to regulations concerning domestic banks' exposure to mainland China, and the government will maintain this stance on the issue.