Taiwan to raise nat'l development fund five-fold

TAIPEI (Reuters) - Taiwan on Thursday raised the size of its National Development Fund five-fold to T$1 trillion ($30 billion), as it looks for new resources to help firms that may run into trouble due to the global credit squeeze.

The government will borrow some of the new funds from the Taiwan postal service, operator of Taiwan's largest financial institution with T$4.9 trillion in deposits, said Chen Tain-jy, chairman of the Council of Economic Planning and Development, the state planner, after the cabinet's weekly meeting.

The move will make better use of the island's idle funds to help businesses, the cabinet, which has jurisdiction over the fund, said in a statement.

"The National Development Fund's current size is limited, and (the move) will increase the fund's function from investing in venture capital and financing to help businesses in seeking capital injections, mergers and acquisitions," it said.

The government has previously announced a programme to help otherwise healthy companies that were running into problems stemming from the global financial crisis that has seen credit tighten considerably.

But that programme did not provide any specific government funding pledges.

The Thursday move was the latest in a long string of government initiatives in response to the global financial crisis, which has seen stock markets worldwide plunge and lending slow considerably over concerns about borrowers' ability to repay.

In a bid to stem declines in the local stock market, which has dropped 33 percent since the beginning of September, Taiwan's financial regulator has banned short selling through the end of the year and temporarily reduced the daily limit that individual stocks can fall to 3.5 percent from a previous 7 percent.

Taiwan has also activated its National Stabilisation Fund, which can buy and sell stocks to bring stability to the market during volatile periods.

(Reporting by Jeanny Kao; writing by Doug Young and Gina Chang; Editing by Nick Macfie)