Taipei, Oct. 7, 2008 (CENS)--The government should transform the existing NT$100 billion national development fund into a national investment holding company and inject more funds into the company by issuing government bonds or corporate bonds for domestic and overseas investments, Perng Fai-nan, governor of the Central Bank of China (CBC), suggested yesterday (Oct. 6).

The projected national investment holding firm should be formed according to the three major principles of independent legislation, transparent operation, and the hiring of professional managers, similar to the practice in Singapore, according to Perng.

Perng put forward the proposal at the Legislative Yuan when replying to the interpellation of legislators concerning the establishment of a sovereign wealth fund (SWF) by the government, an idea raised by the presidential economic and financial advisory task force, headed by Vice President Vincent Siew, the other day.

The CBC governor opposed the establishment of a SWF by appropriating fund from the nation`s forex reserves directly, saying the forex reserves, under the management of the CBC, as well as the nation`s existing public funds, have clear balance sheets and cannot be utilized arbitrarily.

The government bonds or corporate bonds for the fund raising of the national investment holding company can be sold to Chunghwa Post Co., Ltd., which controls the majority of the nation`s excess savings totaling NT$6.5 trillion in scale. For overseas investment, the holding company can use its NT-dollar fund to purchase foreign currencies from the CBC, according to Perng.

Perng pointed out the projected national investment holding firm is patterned after a similar national holding firm in Singapore, which is funded by issuing corporate bonds sold to the nation`s Central Provident Fund for domestic and overseas investments. China also issued special government bonds for raising reminbi fund which is then used to purchase US$200 billion fund from its forex reserve for the establishment of a SWF.

The practice is different from SWFs set up by oil-producing countries in the Middle East, which appropriate fund directly from their forex reserves, deriving from their oil income, for the establishment of SWFs. Those oil-producing countries now control 70% of the world`s SWFs, said Perng.

(by Philip Liu)