Taiwan model would fit NZ: adviser

By Yoke Har Lee

Taiwan's transformation from a low-value manufacturing country to a high-tech hothouse in Asia hinged on the Government directing venture funds at high-tech industries as well as well-focused fiscal incentives.

The Taiwanese Government also had the courage to take on risks where the private sector hesitated, providing the jumpstart for the venture capital industry by investing an original $NT2.4 billion ($140 million) in seed money, said Dr Tzong-Rong Tsai, head of the Taipeh Venture Capital Association, in Auckland last week.

Dr Tsai, also deputy executive secretary for the Development Fund, Executive Yuan of Taiwan, a Government agency responsible for overseeing the venture capital industry's development, told the Business Herald that while New Zealand need not adopt the full Taiwanese model in developing its venture capital industry, Taiwan's example was worthy of consideration.

But he emphasised that one of the key successes of the Taiwanese model was to be found in the fiscal incentives. "The Government was asking people to invest in the high-risk industry. It also had to give something in return by way of providing tax incentives."

The group met with a series of budding companies seeking venture capital for high tech, bio-tech as well as information technology development during the Auckland visit, organised by the New Zealand-Taiwan Business Council.

In Taiwan, investors with money in venture companies could get tax credits for 20 per cent of the value of those shares, provided the shares are held for at least two years. Another incentive was an 80 per cent tax exemption for dividends earned from money invested in venture companies.

The development fund's original investment in the venture capital industry had grown into assets worth $4 billion since it started in 1984, Dr Tsai said.

One of the best moves made by the Taiwanese Government had been to direct funds towards high-tech industries. Dr Tsai said: "Our textile industries were disappearing because of our high labour costs were high against other countries like Vietnam or Malaysia. Without the Government's direction, we wouldn't have the high-tech industries that we have."

According to the Taipeh Venture Capital Association, there are 121 venture funds in Taiwan with $NT59 billion invested in 1,500 companies.

And while Taiwan investments had been focused largely on domestic companies, there was a move towards forming strategic alliances with overseas firms, either through co-investments or raising foreign investments.