(本文翻譯自 陳冲 國家主權基金 也是主權雞精 2020-06-12)
AmCham Taiwan recently released the 2020 Taiwan White Paper which covers a wide range of topics. Among them are as usual some rules and suggestions for domestic affairs. Well, it is understandable to stand in the interests of American businessmen. Interesting is that one of the proposals suggests the government use part of the 480 billion US dollars foreign exchange reserve to establish a sovereign wealth fund and invest in valuable international investments. The suggestion deserves our notice.
The sovereign wealth fund (SWF), derived from a country’s surplus reserves, invests in various assets. Since the 1950s, the scale of global SWF has continued to expand. From a strategic point of view, one that discussed the most is the RERF fund established by the British colonial authorities in the Gilbert Islands in 1956. The fund acted as a store of wealth for the country’s earnings from phosphate mining. Now that the guano has been totally excavated, the benefits from the fund have become an important financial income for Kiribati now.
But has our president seriously studied SWF? It seems that she has only mentioned quasi-funds. It doesn’t really matter because most national security staff before have probably not done a careful study. It is reported that Kung Ming-hsin, minister of National Development Council, didn’t reply about the issue to AmCham and that the staff didn’t agree with it.
Before I served in the Executive Yuan, I wrote two articles in the newspaper titled “Love and Hate of the Sovereign Wealth Fund”(2007/11/21) and “Taiwanese style Sovereign Wealth Fund”(2008/1/15), calling on the government not to refuse the establishment of SWF and that there should be a set of rules that is purely for commercial decision and not interfered by politics in case of misappropriation of public goods. I remembered when I was still working in private sector in Sep. 2008, I was invited to participate in the SWF forum held by economic development authority. I vaguely felt the opposition from the central bank then.
At a symposium on Jun. 5th 2014, two years after I stepped down as Premier, I suggested farms and mine grounds be set as targets to invest through SWF in response to the emerging issues of food security and energy security. And we can even consider securitizing some funds to let people take part in it. Unfortunately, the chairman of the symposium, id est our president, then didn’t give any instructions.
As of this year, COVID-19 has rendered the world a chance to review the international division of works. We, who are in a key position in the global value chain, could feel the crisis of chain disconnection more than any other trade partner. However, it’s not the most dangerous part since it’s just like a cold and the COVID-19 level crisis is approaching. The Food and Agriculture Organization of the United Nations (FAO) had several times reminded that the global food supply chain crisis may occur in the near future. In other words, this is not only a problem of rising food prices but also one of food sources affecting people’s basic need for food. After all, we can not eat IC chips. What FAO says are not simply frightening words. Shutdown, flight interruptions, export controls and even panic caused by the pandemic may aggravate food crisis. According to the forecast of the World Food Programme, under the pandemic, the number of people facing food crisis in 2020 may increase by 130 million to 265 million. And undoubtedly, those food importing countries will face huge impact.
According to data last year, Taiwan's food self-sufficiency rate is about 34.7%, which is still a long way to the goal set in 2011 National Agricultural Conference to increase the rate to 40% by 2020. Besides, the gross agricultural production decreased by 3.2%, and the changed dietary habits has resulted in Taiwan’s imports of cereals(soybeans, wheat, and corn) except for rice. Coupled with fallowing policy and the aging population, the planting area has been reduced and the number of farm households has been declining. All these has caused a potential crisis for Taiwan’s food supply.
As for energy, according to the statistics of the Bureau of Energy, Ministry of Economic Affairs, the total amount of imported energy has gradually increased in the past 20 years, and has grown by 28% since the 1990s to last year. The proportion of self-produced energy has dropped from 2.41% twenty years ago to 2.03% last year, and even reached lowest point 1.86% during the period. The overall energy dependence rate on imports kicks high as 98%, which shows that we really rely on foreign energy. As the imports of natural gas increase, to make sure that the source is within control becomes a thorny issue.
As the pandemic swept across the world, people started to realized that they should not take free trade and international division of labor for granted. Taiwan, highly dependent on international trades and lacking in food and energy, should especially have a higher-order thinking pattern. Although AmCham’s whitepaper didn’t mention the investment target, it was absolutely not talking nonsense. I sincerely suggest the president consider it carefully. Many policies and strategies now emphasize sovereignty. How can we manifest it? Setting up a food/energy fund in the name of sovereign and securitizing part of it might be a good option. SWF is the chicken essence that can help our sovereign develop to a higher stage!
(Released on Appacus Foundation website, Jun.12th 2020)