While there are risks and challenges to investing a portion of Taiwan’s foreign exchange reserves, as noted in a Taipei Times’ editorial (“Wealth fund proposal lacks reason,” May 16, page 8), those risks are manageable, and the benefits — both financial and geopolitical — could be significant.
There is a substantial body of experience and expertise on the establishment and management of sovereign wealth assets available to Taiwan. It happens that the Milken Institute just produced a report Best Practices of Sovereign Wealth Funds: The Case for The Philippines. Many of the recommendations in this report could be applied by Taiwan as well.
There might be, as the editorial pointed out, “no guarantee that an investment will be profitable,” but it is hardly “wishful thinking” that attractive risk-managed returns cannot be achieved over a long-term horizon if a portfolio of investments is strategically diversified across asset classes, geographies and economic sectors.
The diplomatic returns of investing reserves might prove far more important than investment returns.
Former Chinese premier Zhou Enlai (周恩來) once said: “All diplomacy is a continuation of war by other means,” which was a twist on military strategist Carl von Clausewitz’s maxim: “War is a continuation of diplomacy by other means.”
Aggressive People’s Republic of China (PRC) efforts to weaken and marginalize Taiwan globally should be seen in this light, as a proxy for, and possible prelude to, war.
With rising cross-strait tensions, Taiwan can ill afford not to employ every tool at its disposal to counter PRC diplomatic aggression. Strategically investing sovereign assets offers numerous opportunities for Taiwan to raise its profile and increase its global influence.
I appreciate the concerns of the central bank, but could it not achieve its goals with the 90 percent of foreign exchange reserves that would remain in its control should a proposed 10 percent be allocated to a sovereign wealth fund?
I am puzzled by naysayers focused on the challenges and possible negative outcomes of a Taiwan sovereign wealth fund, rather than focusing on and working toward the positive outcomes I believe Taiwan is fully capable of achieving.
Eric D. Tucker
New York
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