Competitive Strategies for the Taiwanese Financial Market in a

Global Market

By

Shyan Yuan Lee

Commissioner, FSC

Professor, Dept. of Finance, NTU

Outline:

What role should the Taiwanese financial market play in a global market? How should Taiwan position our financial market? What market niche should we take? What are the policies we need to change? With what attitude should we take to develop the financial industry?

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London, Singapore & HKwithout

Particular Domestic Connection

Characterize the Taiwanese financial market Characterize the Taiwanese financial market

New York & Tokyowith

Great Presence of Domestic Economy

How did London, Hong Kong, and Singapore become a key financial center despite not

being backed by a massive economy?

Strategically using the economic strength of their neighborsTransforming that into their own potential

What market niche should we take?

The most appropriate niche for Taiwan financial markets is to develop Taiwan as the fund raising center and the asset management center. There are two main drivers to fuel the growth of these two centers, domestic growth in Taiwan, and the rapid growth of Taiwan’s neighbors.

The economic growth and financial strength of Taiwan • GDP growth rate at 3-5% per annum• US$720 billion in total NTD deposits • US$560 billion in total loans• Foreign Reserves at 260 billion• USD deposits of OBU at 20 billion• USD deposits of DBU at 60 billion • Taiwanese deposits abroad in total US$300--500 billion • Pension saving is anticipated to collect US$4.5--6.0 billion per annum. Twenty years from now the future prospective fund size will be US$1,215 billion.•Sales of structured products have totaled US$40 billion•The potential of asset securitization market

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1. Open Economy2. Credible Legal & Judicial Systems3. Free Entry of International Players4. Knowledgeable & Skilled Labor5. Top Banks & Securities Houses6. Politically Independent Market Supervision7. Efficient Transportation & Communication8. Non-Restrictive Tax Regime9. Stable Currency10. Connection to Economic Hinterlands

Features of the International Financial Center

Features of the International Financial Center

Four areas need substantial improvement

Top Banks and Securities Houses

The continued consolidation of domestic financial institutions to create National Champions and Regional Champions is the correct path to take.

Non-Restrictive Tax Regime

Major revisions to the tax code for the financial industry

The withholding tax issue

The tax on overseas investments of individuals

Four areas need substantial improvement

Stable Currency & Free Capital Mobility

The global FX trading volume is: New York(19.2%), Tokyo(8.3%), London(31.3%), Hong Kong(4.2%), Singapore(5.2%), Taiwan(0.3%).

Connections to Economic Hinterlands The financial industry has not build up connections to economic hinterlands. Building up connections to economic hinterlands is strategically vital for us to become more competitive.

International Financial CenterInternational Financial Center

Growth of efficient and high-value-added financial service sector

Little needs for plant and equipment

High invisible infrastructure costs e.g. legislation, taxation, etc.

Overwhelming foreign players – “Wimbledon Effect”

Pros & Cons to be an IFCPros & Cons to be an IFC

Upside

Downside

Source: Apple Daily News

NBA 大鯊魚或東方沙丁魚

只是台投或在世界棒壇抬頭

Source: Apple Daily News

Thank You!!