Finance Minister Proposes to Integrate Public Funds Into Sovereign Fund

Taipei, Nov. 16, 2012 (CENS)--Chang Sheng-ford, minister of finance, stated yesterday (Nov. 15) that the four major public funds are now under the jurisdiction of different government agencies and score unsatisfactory returns in outsourcing their investments. As a result, he has proposed to the Council for Economic Planning and Development (CEPD) to integrate the four public funds into a Taiwan sovereign fund, so as to boost their clout and enhance their efficacy.

In the past, many people proposed to appropriate part of the nation's forex reserves to establish a Taiwan sovereign fund but encountered opposition from the Central Bank of China (CBC). The CBC doesn't object to the Chang's proposal of integrating the four public funds into a sovereign fund, so long as it is independent from the CBC.

Some Asian countries, including Singapore and China, have established sovereign funds. Temasek Holdings, Singapore's sovereign fund, has scored outstanding performance in overseas investments. Chang stressed that the integration of the four public funds into Taiwan sovereign fund in a tentative idea, which needs in-depth study, due to its involvement of organizational overhaul and personnel movement.

The total scale of the four public funds tops NT$7.1 trillion (US$240 billion), including labor insurance fund with NT$546.8 billion, labor pension fund with NT$1.4 trillion, pension fund for public functionaries and military personnel with NT$503.1 billion, and postal savings fund with NT$4.67 trillion. They are subject to the jurisdiction of the Council of Labor Affairs, the Ministry of Civil Service, and the Ministry of Transportation and Communications, respectively.

Chang put forth the idea of forming a sovereign fund via integration of the four public funds at the financial committee of the Legislative Yuan yesterday. Many legislators criticized the problems associated with the outsourcing of investments by public funds, including deception of fund managers and unsatisfactory investment returns.

Chang remarked that although the proposed sovereign fund will still lag the scale of Temasek Holdings by far, it can assure the achievement of a certain level of returns, rather than just making short-term investments in stocks. In addition, it can contribute to the maintenance of national security, according to Chang.