Wednesday News Round Up: FSC, EPA, MND

Lots of things out and about this week... First, the Financial Supervisory Commission stopped the Nanshan deal.

The proposed takeover of Taiwan’s Nanshan Life Insurance Co. Ltd. by Hong Kong-based Primus Financial Holdings Ltd. was vetoed by the Investment Commission under the Ministry of Economic Affairs Aug. 31.

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In October 2009, AIG signed an agreement with Primus Nanshan Holding Co. Ltd., a PFH subsidiary created specifically for the deal, for the Hong Kong group to take over AIG’s entire Nanshan stake for US$2.15 billion. Had it been greenlighted, the deal would have been the biggest merger on record in the Asian insurance sector.

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FSC Deputy Minister Wu Tang-chieh pointed out that the deal was rejected as the FSC has concerns over PFH’s financing capabilities and the buyer’s long-term commitment to running the business in Taiwan. “The decision was based on an objective and professional evaluation of the current state of affairs,” Wu said.

.......

According to the FSC, Nanshan has about 4 million clients and more than 37,000 employees in Taiwan. The firm’s financial statements reveal that it has total assets of NT$1.73 trillion (US$53.89 billion), accounting for 15.32 percent of the local insurance sector. The firm’s net value amounts to NT$140.3 billion, or more than one third of the sector’s combined net worth. (THN)

An amazing and highly connected cast of characters dominated the Chinese side. Ma Ying-jeou was strongly backed in 2008 by the big global financial houses, and I expected deals like this would soon become the norm. But the public showed great interest in the deal, which, on the Chinese side, became ever more difficult to pin down, according to the KMT news service -- and politically explosive, especially as Ma's ratings have plummeted and the KMT program of putting Taiwan into China's orbit is not popular in Taiwan. That second paragraph is the kicker:

The public paid close attention to this deal because the investment capital was suspected of coming from the Mainland. Vice Economics Minister Hwang Jung-Chiou yesterday stated that the Investment Committee had conducted a thorough investigation into the background of each shareholder in the consortium through the national security system, Taipei missions abroad, and even private credit-reference companies. The consortium was forced to change the list of its shareholders because Taiwan financial authorities had adopted strict examination measures to go through the backgrounds and sources of the capital of the shareholders.

Officials close to the case disclosed that the consortium’s first list included 44 shareholders, but the number increased to 52 afterwards, and later the number of shareholders had changed several times. “Whenever the media revealed that some the shareholders appeared to have connections to the Mainland, the list of shareholders was immediately revised,” forcing the Investment Committee and the FSC to restart their investigations from the beginning. The official said that the most bizarre occurrence was that the consortium deleted 23 names from its shareholder list on August 4, the deadline for submitting the complete application.

The review period had lasted 8 months, with supplementary documents having been submitted 13 times and 3 consultation meetings having been held. The complicated procedures were indeed unusual in Taiwan’s financial history.

There's been a lot of discussion of the back story, but that second paragraph tells an important story. A second consideration was widespread fear of mass layoffs if the unit were sold. Yet another factor is that ChinaTrust, the big local financial firm, has also expressed an interest in buying the unit.

Note that the decision may be appealed, meaning that it may be reversed. After the November election, of course.

A second piece of important news was that the EPA shoved through the environmental impact assessment for the science park expansion:

The environmental impact assessment for the controversial third-stage development of the Central Taiwan Science Park was passed by the Environmental Protection Administration Aug. 31.

The National Science Council may now resume its expansion project at the Qixing Farm site in Houli, Taichung County, EPA officials said.

After a five-hour long meeting, the Environmental Impact Assessment Committee ruled unanimously at the end of the day to conditionally pass the plan without requiring a phase-two impact assessment.

This despite protests from activists outside the EPA. The project had been halted due to an injunction from the Taipei High Court on Aug 2. The park was given a list of pollution conditions which, if not met, will cause it to be fined. ROFL.

Third, despite ECFA, despite the President's gutting of the nation's independent foreign policy, despite the close and warming ties between the KMT and the CCP, the Ministry of National Defense released a report today noting that China's military threat toward Taiwan remained unchanged: they still say they will maim and kill the island's citizens if Taiwan is not annexed to China. There was much speculation this week regarding a possible political deal -- China will remove the missiles facing Taiwan if the nation agrees to political talks.

Interestingly, Taiwan's military budget is now at its lowest level in five years, according to the Taipei Times, after Ma had repeatedly promised during and just after the election to raise it to 3% of GDP. In fact the Taipei Times report claimed that the current level is "the level it was at before the Democratic Progressive Party came to power in 2000." You can argue that, well, the threat of Chinese invasion is reduced because of the KMT-CCP lovefest but the MND says, nope, not true. Moreover a direct conflict over Taiwan is not the only way Taiwan could become embroiled in a conflict in the region -- see islands, South China Sea, for example. If Taiwan wasn't doing enough to defend itself in the Chen Administration, what about now, when China is becoming more militant by the day?

Which reminds me.

I know it is a stupid question. I realize it is pointless to ask it. But I'm going to ask it anyway: where are all the voices who whined during the latter years of the Chen Shui-bian administration that Taiwan was not doing enough to defend itself? The defense budget continues to slide, yet a vast silence reigns, bereft of apology or acknowledgement.

Cowards.
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Daily Links

• Reuters on a double (popular with Chinese tourists) for dictator Chiang Kai-shek who ruled Taiwan "singlehandedly". I guess that means without even a secretary to help him!
• AEI's Gary Schmitt with a wonderful piece on the craven use of "Chinese Taipei" in Little League broadcasting.
  
• GM helps China corner the market in magnet technology.
  
• Taiwan Link hits one out of the park on the issue of retired officers from Taiwan visiting China.
• Frozen Garlic asks: what is the ROC?
• Date of November elections officially confirmed: Nov 27, along with number of seats in the new city councils
• Chris Taylor, long-termer from Taiwan, now in China, interviewed about his first book.
  

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