President Chen Shui-bian today attended the meeting to establish the Taiwan Financial Services Roundtable. During his speech, the President said:
I am very pleased to attend this founding meeting of the Taiwan Financial Services Roundtable. Your establishment conforms to the benchmarks of international business: the vigorous integration of associations in banking, securities and insurance services, strengthening the horizontal links and exchanges between members and thereby acting as a bridge between the financial services industry and the government, defining the development strategy of this industry and promoting a legal reform system.
The gross output value of Taiwan's service industry now takes up almost seventy percent of our gross domestic product (GDP) and within this industry, financial services offer an immense potential for development. Not only does Taiwan possess an adequate supply of foreign exchange reserves; we also lie in the center of the fast-growing East Asian region. We have excellent conditions to become the Asia Pacific region's financial services and capital resources management center.
In the past, Taiwan's financial services industry had an irregular development. The sudden shift from being tightly controlled to excessive liberalization gave rise to many problems for which our entire society paid a bitter price. In 1991, the government in one breath allowed the establishment of fifteen private banks. In 1997, credit cooperatives were encouraged to become commercial banks. Such an intense competitive environment not only made banking a tough business; it also hastened the deterioration of the whole financial structure. In the year 2000, the average return rate on banking assets in this country was only 0.39% and the bad-debt ratio in April 2002 reached 8.09%, a historical high. The total amount of overdue loans reached NT$1.157 trillion. A financial crisis could have exploded within the local industry.
Confronted with such a severe trial, I declared 2001 Financial Reform Year and in June of that year, the Six Financial Laws were passed, laying the initial groundwork for future financial reforms. In August 2002, we proposed the “258 Financial Reform” objective: within 2 years, to decrease the bad-debt ratio to below 5% in order to achieve an optimum return on capital of at least 8%. Thanks to everybody's efforts, in December 2003, the ratio went down to 4.33% and the optimum return on capital rose to above 8%, achieving our “258 Financial Reform” objectives. Moreover, according to the latest statistics, by the end of March this year, the bad-debt ratio has gone down to 2.74% and the optimum return on capital has already exceeded 10%. The accumulated value of bad debts written off has reached NT$1.405 trillion. Both the capital structures of banks and their capacities to lend to businesses have been strengthened. It was a timely and effective help for the recovery of the industry. In a short amount of time, the “258 Financial Reform” cured a long-standing and deeply rooted illness. It achieved fame in the financial industry as the most effective financial reform strategy of all time.
Nevertheless, besides solving problems, we must aim for what is beneficial. We cannot feel content with the success of the "258 Financial Reform." We must intensify our financial reform and hasten our pace to liberalize and internationalize Taiwan's financial services industry. Last year, on October 20, during the meeting of the Economic Advisors to the President, I announced the Phase Two Financial Reforms objective: To have at least three financial institutions occupy at least 10 percent of the market and decrease the number of government-owned banks to six. By the end of next year, we will decrease by half the number of financial holding companies and have at least one financial institution investing abroad or getting listed on a foreign market. The Phase Two Financial Reforms will hasten the privatization of government-owned banks and will rely on intra or cross-sector mergers to build internationally competitive financial institutions in order to transform Taiwan into a Regional Financial Services and Capital Management Center. The road before us may be long and many arduous challenges may lie ahead. But we are confident and determined that with the cooperation of the government and the industry, we will meet our objectives as scheduled.
Cross-industry mergers are happening in the provision of financial products. But financial associations and related organizations have not gone at the same pace of integration. Because of this, the Financial Management Committee of the Executive Yuan on November 17 last year, invited financial services managers and those from related organizations to plan the establishment of the Financial Services Roundtable and decided to entrust the preparatory work to the Taiwan Stock Exchange and the Banking Association. The preparatory work was complex and difficult. But thanks to the sense of mission of those involved in the long-term development of Taiwan's financial services industry, the objective was finally accomplished. I sincerely thank all those involved in that preparatory work. Looking at the output value and the future of the financial services industry, the Financial Services Roundtable would definitely not be inferior to the six big associations of industry and commerce. I am pleased to announce that Taiwan's associations of industry and commerce have sent reinforcements to help achieve the prosperous development of the Taiwan economy.
Looking to the future, the government shall include the financial services industry among the industries to be promoted. We shall rely on the rapid integration of financial institutions to boost the competitiveness of Taiwan in the international financial market. Our country has already entered the era of capital exports. If our financial services industry could go overseas, it would complement the development of our manufacturing industry and spur the internationalization of our service industry. This would enhance the position Taiwan occupies in the global market and make a valuable contribution to the growth of the financial industry in the Asia Pacific region.
The establishment of the Taiwan Financial Services Roundtable encourages us all to interact with similar organizations in Europe, America and other developed countries, to expand the scope of cooperation and nurture global talents for cross-sector financial services. This would enable us to soon transform Taiwan into the financial services and capital management center of the Asia Pacific region, marking the dynamic development of our financial services industry. Finally, I would like to wish success for everybody in this assembly. Distinguished guests and friends, I wish you all good health and good life!