1)	Can Taiwan's miracle persevere?
2)	Will Taiwan follow Japan's footsteps, which has for the past eight years been mired in recession?
3)	What does it have to do with the Asian economic crisis?

     Before we attempt to answer these questions, let's look at some of the specific problems that have surfaced.

INFRASTRUCTURE PROBLEMS

1)

Accounting 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.

2)

Regulatory 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.