The Taiwan Banker

In his first media appearance, the incoming Foreign Minister Lin Chia-lung mentioned three major diplomatic directions: value diplomacy, alliance diplomacy, and economic diplomacy. Taiwan should move from a “strong nation” to a “prosperous nation,” he said, strengthening cooperation with friendly countries to jointly solve problems. That means exporting Taiwan's experience, allowing friendly countries to benefit from development. Taiwan’s investment diplomacy has shown results in the Central and Eastern Europe Credit Fund of Taiwan EximBank. Looking ahead, Lin also looks forward to organizing a Prosperous Nation Fund to help Taiwanese businesses enter friendly countries around the world, strengthening our industry supply chains. Such an initiative would not only strengthen Taiwan’s diplomatic relations, but also open a new platform for international growth, creating new investment targets for Taiwan’s excess savings. This is the value of sovereign allies. International development aid has evolved. In addition to increasing aid amounts, diversification of aid projects, and attention to ESG, the unilateral aid of the past has been changed to investment cooperation to assist industry development and infrastructure in recipient countries. In other words, international donors have found that simply giving money is no longer the best way to help. Instead, diverse cooperation models better meet the needs for development financing. Many aid programs now use project financing, mobilize different sources of funds, and use intergovernmental agreements to strengthen the project credit and protect the interests of investors. In the past, for example, development of an industrial zone may have been funded directly by the donor country. Often, however, due to a variety of factors, the funds were eventually misappropriated, or used to build a ‘white elephant.’ Nowadays, in addition to the expenditure of funds, we also consider the probability and rate of capital return. In addition to the initial aid from donor countries, venture capital funds or banks can also contribute capital. During the operation period, refinancing from medium and long-term funds (such as life insurance) can also improve the sustainability of the project. However, the success of this model is predicated on the two governments acting as sovereign guarantors to reliably attract the favor of funding contributors. Specifically, the recipient country must maintain political stability, protect investors’ rights, and strive to improve its economic performance and investment environment to improve its sovereign ratings and reduce capital costs. Cooperation agreements between the two nations to strengthen the credit of the project, such as credit or operating volume guarantees, or inter-sovereign agreements such as the Prosperous Nation Fund, can make the project more likely to succeed. When I was the Director of Finance of Yilan County, faced with a large public debt and lack of financial resources, my biggest discovery was that the power to change land use was actually a legal money printer for the county, demonstrating the direct relationship between power and money. Similarly, even though we have few diplomatic allies, they all enjoy sovereignty and seats in international institutions. Domestic financial institutions must work together with the government to develop the limitless potential of these nations, allowing Taiwan to join forces with the people of friendly countries to share progress. Once upon a time, with the help of US aid, Taiwan moved towards economic independence to became one of the most important economies in the world. Now it is our turn to export our development experience to other countries, so that more people can enjoy the fruits of economic growth and democracy. I hope that Taiwan will be a loyal friend and make full use of the Prosperous Nation Fund, coupled with our abundant private capital, to jointly build infrastructure and industry in friendly countries. I believe this will be the best way for Taiwan to present itself to the international community amid a difficult international environment.