Taiwan Premier and Finance Minister Offer to Resign

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Taiwan premier and finance minister offer to resign

Fri Nov 22,10:35 AM ET

By Alice Hung

TAIPEI (Reuters) - Taiwan Premier Yu Shyi-kun and Finance Minister Lee Yung-san offered to resign over a delay in financial reforms but they were both asked to stay on, officials said on Friday.

The offers to step down came on the eve of a big protest by farmers against the controversial reform plan; the farmers are not satisfied with the delay and are demanding the plan be scrapped altogether.

"The premier sincerely tendered his resignation to the president, saying this incident has hurt the image of the administration," cabinet spokesman Chuang Suo-hang told reporters.

"The premier blamed himself deeply," the spokesman said, adding: "President Chen asked him to stay on."

Earlier on Friday, Finance Minister Lee offered to step down to take responsibility for a deferment on credit controls for agricultural credit cooperatives, the latest twist in an escalating policy debacle for President Chen Shui-bian.

Taiwan's cabinet said this week it would postpone credit controls on shaky agricultural and fishermen's credit cooperatives, sparking fears that the government was losing its resolve on financial reform that led to four straight days of declines on the stock market.

Public opinion polls by Taiwan newspapers have shown President Chen's popularity has been hurt by the decision to back-pedal on the financial reforms, and his support is at a record low.

The policy flip-flop has backfired badly on the government, as supporters of reform have been disappointed, while opponents have not been appeased by the postponement of credit controls.

Protest organisers say some 100,000 farmers are determined to march through Taipei on Saturday to protest against the planned reforms, which they say could lead to the disappearance of an important source of funding for farmers and fishermen.

Finance Minister Lee told reporters he handed his resignation letter to Premier Yu at noon over "poor communication of the government's policy change".

Lee, who assumed office in February, said the premier asked him to stay, but Lee did not say what his final decision was.

Patrick Liang, chairman of state-run Taiwan Cooperative Bank, has said the delay in the reforms would make it more difficult for parliament to pass a cabinet's proposal to raise a state bank rescue fund by T$910 billion (US$26 billion) to T$1.05 trillion to help clear bad loans.

The new funds are critical for Taiwan to reduce a near record level of overdue loans, which are making banks reluctant to lend and crimping the island's recovery from recession, economists say.

The credit cooperatives, which make up only a small part of Taiwan's financial system, are plagued by soaring non-performing loans and analysts worry the policy flip-flop could signal weakening government resolve to tackle larger, more important reforms.

Opponents of the reforms argue they will lead to the disappearance of the agricultural cooperatives, often the only source of funding for poor farmers and fishermen.