TAIPEI: Taiwan aims to raise at least NT$39.6 billion ($1.2 billion) to help fund reconstruction, by putting up for sale a 40 percent stake in the Land Bank of Taiwan.

Deputy finance chief William Tseng said in a telephone interview yesterday that the government will sell debt to finance the relief effort in the aftermath of Typhoon Morakot.

The government-owned Land Bank, based in Taipei, had net assets of NT$99 billion on December 31, he said.

Typhoon Morakot dumped record rainfall on Taiwan from August 6 to August 9, killing 461 people and leaving 192 missing. The government, battered by criticism that it responded too slowly to the storm, on August 20 approved plans for a three-year, NT$100 billion budget for reconstruction.

"The government didn't want to fully rely on selling bonds to fund the relief budget as it will push up the debt level, so it is selling a stake in Land Bank," Tseng said.

Taiwan has forecast a 2010 budget deficit of NT$187.8 billion after cutting taxes to help stimulate the economy. Under the budget proposal, the government plans to sell NT$466 billion of bonds next year.

The government expects to complete a listing plan for Land Bank within two months and submit the proposal to legislature for approval, Tseng said. The government has yet to appoint an underwriter to manage the initial public offering, he said.

Land Bank, set up by the government in 1946, offers housing and consumer loans and wealth management services, and markets trust funds. It also takes deposits and has a securities brokerage business.

The government doesn't plan to sell other assets to fund the reconstruction budget, Tseng said.

The sale of Land Bank does not come under existing plans to privatize government-owned assets, Tseng said. As part of the wider privatization effort, the government plans to sell a 10 percent stake in Taiwan Financial Holdings Co, Taiwan's largest financial-services company, in early 2010, he said. It will sell a stake in Taiwan Tobacco & Liquor Corp later in the year, Tseng said.

Taiwan had 37 local banks, 32 foreign lenders and more than 300 credit associations serving 23 million people as of May, according to the Financial Supervisory Commission's website.

Bloomberg News

(HK Edition 08/27/2009 page2)