|Can Taiwan's Economic Miracle Persevere?|
Before we attempt to answer these questions, let's look
at some of the specific problems that have surfaced.
Taiwan's miracle persevere?
Taiwan follow Japan's footsteps, which has for
the past eight years been mired in recession?
does it have to do with the Asian economic crisis?
Problems-In spite of the presence and influence
of multi-national accounting firms in Taiwan,
generally accepted accounting principles have
not been practiced and properly consolidated financial
statements are not presented, as a rule. Typical
of all Chinese societies, accurate book-keeping
is not normally followed. Even companies on Taiwan's
stock exchange, many of them multi-national entities
with subsidiaries all over the world, aren't any
better. It is common practice for the parent company
to inflate transfer prices to its subsidiary,
thereby overstating the parent company's financial
results and strength which, in turn, are used
to secure loans from its bank, or raise funds
in the stock market. Basic inter-company transactions
are not properly eliminated in consolidation to
reflect the true state of affairs. When the government
issues its edict to adopt the accounting profession's
suggestion to correct these fallacies, the three
super-powerful elder tycoons who head up the three
major merchants' associations came out openly
to voice their strong defiance. The result? Tycoons
1, government 0 and the order was put off at least
until next year.
Problems-Taiwan still has a long way to go in
terms of setting up and executing sophisticated
regulatory systems. A recent good example involved
a conglomerate group that set up some bogus affiliates
and bought the proxies to control a bank from
which the group borrowed substantial money to
artificially buy and bid up an affiliate's stock.
It then used the exaggerated stock value to borrow
more money from the bank to again inflate the
stock price of the next affiliate so more money
was borrowed. This process repeated itself several
times until finally these monies defrauded from
the bank were transferred overseas, leaving the
bank and some investing public all in financial
ruins. The SEC regulations are so incomplete with
loopholes abounding, it is no surprise that abuses
such as transacting with false, borrowed, or stolen
I.D., insider trading, and money laundering are
all daily common occurrences.
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