TAIPEI (CNA) – Taiwan’s government plans to spend NT$1.5 billion (US$49.7 million) next year to subsidize interest payments to support a plan for local banks to loan up to US$3.5 billion to allied and New Southbound Policy countries for development projects.
Minister without Portfolio John Deng (鄧振中), the head of the Cabinet’s Office of Trade Negotiations, told CNA on Saturday that the government will be spending a total of NT$3 billion on the program, with half of that sum already listed in next year’s budget.
The much larger sum of US$3.5 billion that the government originally described as a “financing facility” to be managed under what Taiwan is calling its version of an “Official Development Assistance” program will actually come from Taiwan’s commercial banks.
The goal of Taiwan’s program is to help Taiwanese businesses win contracts to build public infrastructure in targeted countries, Deng said.
That differs from the normal definition of official development assistance, which is usually seen as “government aid” provided through grants or soft loans that include grants to promote the welfare of developing countries.
Under Taiwan’s program, however, interested countries will propose a public infrastructure project for Taiwan to review, and once the plan has been approved, Taiwanese commercial banks will make low-interest loans to the country’s government to finance the project.
Not only will the foreign governments have to supply a repayment guarantee but they also must contract the proposed projects to Taiwanese businesses, Deng said.
The countries will pay the contractors at various intervals of the project, and once the project is completed and businesses have been paid, their governments will pay back the loans according to a previously agreed upon schedule.
Taiwan’s government will therefore have two roles in the ODA program, Deng said – to review and approve the proposed infrastructure plan and subsidize the interest on the loans disbursed.
The official suggested that this ODA model has been used by both Japan and South Korea, and he argued that it will help remove barriers to entry for Taiwanese businesses in these emerging markets.
The New Southbound Policy focuses on South and Southeast Asian markets that offer opportunities many developed countries want to take advantage of, Deng said, and the ODA plan will make it easier for local businesses and commercial banks to invest their resources.
The NT$1.5 billion that has been listed in next year’s budget consists of NT$1 billion from the Ministry of Economic Affairs and NT$500 million from the Ministry of Foreign Affairs. •
By Ku Chuan, Elaine Hou and Kuan-lin Liu