The Study on offshore island development fund
Date Issued
2011
Date
2011
Author(s)
Yen, Tzu-Chieh
Abstract
Offshore Islands Development Fund（離島建設基金）, passed in the year 2000, is an important financial resource for Taiwan’s island governments, like Penghu（澎湖縣）, Kinmen（金門縣）, LienChiang（連江縣）, and other small islets surrounding Taiwan. The central government allocates approximately a total of NT$30 billion exclusively for offshore islands for development projects such as transport infrastructure, fishing port, infrastructure construction through the Offshore Islands Development Act（離島建設條例）. During the first phase of the Act, between 2000 and 2004, the Ministry of Interior（內政部） weighted too much on durable and stable infrastructure development, and therefore had negative impact on the islands’ natural landscape. Also, funding was not used in a cost-effective fashion. Environmental organizations and media constantly criticized the Act. When the Council for Economic planning and Development（經濟建設委員會） overtook the leadership of the Act in 2005, it changed the island policy goal from “Growth stage” to “Sustainable Development Stage,” and promoted investment and financing planning and entrusted Institute for Physical Planning & Information (PPI) （財團法人國土規劃及不動產資訊中心）with island policy, and Offshore Islands Office was established. Still, island governments were not satisfied.
This paper argues that the “Offshore Island Development Fund” has the proper motivation, but it is a wrong policy tool. According to laws and regulations of our budget, “Offshore Island Development Fund” is categorized in the Special Revenue Fund（Extra Budgetary Fund）, and the accounting theory regards it as “governmental fund.” Therefore, there has been a reasonable dispute about the fund. This paper uses several views and theories to validate “Offshore Island Development Fund” establishment, implementation, and administration. R. Musgrave’s theory about government fiscal functions: the allocation function, the distribution function, the stabilization function, and extra budgetary funds theory, and the Public Choices theory about four problems for government failures are adapted.
Overall, there is poor execution capacity of the local government and insufficient supervision of the central government. The study identifies four main issues of the policy. The problems inherent in Bureaucratic Supply, for example, arise from the local governments’ poor implementation and the central government inefficiency of policy planning and decentralization. As a result, average implementation rates of LienChiang County, Kinmen County and Penghu County are 76%, 73%, and 54% respectively. Penghu performs the worst, but ironically gets the most share of the funding.
“Offshore Island Development Fund” is established to pursuit the function of “income distribution” raised by Musgrave. However, it turned out to be budget politics under compromise for the sake of votes and the interests of all parties. About the Representative Government problems, legislators tend to legislate and consider the budget and final accounts on the basis of self-interest and contradiction. The lack of communication among the central government, local county and township administrative organizations also appears. Furthermore, the residents of both inlying and outlying islands misunderstand the funds. People usually take it for granted for the central government to give the vulnerable islands regions allowance.
In terms of New Institutionalism, the Government proposes a purposeful policy. And for the continuity of its policy, legislation has to ensure the property against “common-pool problem.” However, the “Offshore Island Development Fund” is not financially independent accounting entity. And being highly dependent of the state treasury can practice neither “compensation principle” from the special fund nor the concept of user fees.
In the future, the central government should address the special fund budget, assess the implementation, and promote financial transparency of special funds. Financial assistance and the central business of additional manpower and organizations for the Islands should be enforced before amending the law by repealing the setting of “Offshore Island Development Fund” and returning it to the regular public budget.
Subjects
Offshore island development fund
Extra Budgetary Fund
Government failure
Policy analysis
Type
thesis
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