Foreign banks in Taiwan are taking off their rose-tinted glasses. They have discovered, a bit late in the day, that high economic growth does not always mean high profits.
Since the beginning of 1980, their number has grown from 12 to the current 32 branches. Newcomers flooded into what looked like a highly lucrative market. Taiwan's economy had grown by an average annual rate of 9.6% over the previous two decades. Export expansion during the same period exceeded 20% A year.
This performance produced mounting trade surpluses. Taiwan entered the current decade with a debt service ratio of less than 5%. What's more, the frugal lifestyle of its citizens contributed to a savings rate that hovered above 30% of the gross national product.
Why the disappointment now? "A few years ago, Taiwan was often erroneously described as a Klondike for bankers," said a local bank executive. "It was a speculators' paradise that attracted foreign banks like flies to carrion."
The numbers bear him out. Despite the rush of newcomers, the foreign banks' share of total bank assets in Taiwan slumped from 9.6% to 5.1% in the five years to the end of 1985.