The Prolonged Reform of Taiwan's State-owned Banks (1989-2005)

Following the global trend of financial liberalisation, Taiwan's government has dedicated itself to its own financial "Big Bang" since the late 1980s. An essential part of this financial overhaul has been the reform of the state-owned banks (SOBs). It was believed that privatisation and deregulation of the SOBs could effectively enhance the efficiency of Taiwan's financial sector. After almost two decades, however, the reform is still not complete. Given its importance, the question arises: why is it taking so long? This article argues that the state has been unable to implement its planned reform policies as its ability to carry out the SOB reform has been significantly constrained by the newly rising political forces resulting from Taiwan's democratisation. This study highlights the new challenges and possibilities of financial governance for the state in Taiwan in an era of democratisation, and could be interesting for future comparative study with other young democracies that also actively undertake financial liberalisation.