Q&A: NDC Vice-Minister Chiou on Unicorns, Taiwania and the ASVDA

Q&A: NDC Vice-Minister Chiou on Unicorns, Taiwania and the ASVDA
Credit: ASVDA

What you need to know

Too much emphasis has been placed on the Executive Yuan's promise to foster Taiwanese unicorns.

The National Development Council (NDC) is charged with implementing policies formulated by Taiwan's Executive Yuan, or Cabinet. With the administration of President Tsai Ing-wen (蔡英文) now well into its first term, The News Lens sat down with NDC Vice-Minister and Asia Silicon Valley Development Agency (ASVDA) co-chief executive officer Dr. Chiou Jiunn-rong (邱俊榮) to talk about how the government's aims to transform Taiwan's economy are progressing,

The News Lens: Under a recently announced action plan, The Executive Yuan has promised to help incubate Taiwan’s first unicorn business (a startup valued at over US$1 billion) within two years and foster a total of three in the next six years – who is responsible for achieving this goal?

Chiou Jiunn-rong: We’re concerned that too much emphasis has been placed on the idea of fostering unicorns, but they are important to provide other companies with an example to aspire to. But we can’t focus all our resources on that. Various ministries need to work on fostering a healthy ecosystem. The ASVDA will work in cooperation with the Ministry of Economic Affairs (MoEA), the Ministry of Science and Technology and other departments to ensure that there is sufficient early funding, and that talent is developed and regulations are adapted, so that the government can partner startups across multiple channels and help them advance in the international market. It’s not the responsibility of one ministry or government department.

TNL: The plan proposes offering angel investors personal income tax breaks and the lifting of a restriction on the National Development Fund (NDF) to allow it to invest more than NT$1 billion (US$34 million) in a single start-up, which do you expect will be the most beneficial to promoting Taiwan’s first unicorn?

CJR: They are complementary. These policies are like the legs of a table that will provide the foundation for a strong ecosystem. At this point we are not only loosening tax and investor-side restrictions, we have also, on a legal level, been cooperating with international startups and talent on relevant policies, looking for what we lack and attempting to make up for it.

TNL: Does that include tax and other incentives for venture capital (VC) firms?

CJR: This year, there has been an adjustment of VC taxation in the Statute for Industrial Innovation, which will correct a double taxation problem under which VCs were taxed both as enterprises and individuals. Now, only individual tax is required. There are also proposals under discussion to encourage Taiwanese overseas capital and foreign capital to invest in Taiwan by offering a tax holiday to companies investing in target industries.

The tax breaks focus on areas including government-supported social enterprises, those listed under the government’s Forward-looking Infrastructure Plan, and 5+2 Industrial Transformation Plan. Other target industries are also possible but that is still under consideration.

TNL: Startups can tap a total of about US$4 billion of government funding from various channels, the majority of which is available through the NT$100-billion (US$3.4 billion) Industrial Innovation and Transformation Fund (IITF). Can you outline what is available and how much has been allocated so far?

CJR: We’ve just started with the IITF, and so far we haven’t allocated that much, but as you know, SMEs are the backbone of Taiwan’s economy and the fund will be deployed to encourage them to merge and upgrade.

Otherwise, each of the funding channels has a different focus. These include:

The Entrepreneurship Angels (Subsidy) Program, which provides five-year investments of NT$1 billion to foster startups.

The NDF is also rolling out investments totaling NT$40 billion across a variety of areas. The MoEA is very active in finding SME cases and so tends to deploy funds quickly, but again, not that much has been allocated. We are in phase three of funding allocation, under which NT$6 billion is available for funding TV, movies and music. The aim is to invite more VCs, angel investors and private investors to Taiwan and to assist with matching them with suitable projects. The aim is to help Taiwan’s creative industries achieve international success. Previously, about NT$4 billion has been allocated to different targets, but movies tend to require spending a lot of money so the funding allocation is slightly larger.

Credit: Reuters/TPG
Actor Lin Po-hung poses backstage after winning Best Supporting Actor for his movie 'At Cafe 6' at the 53rd Golden Horse Film Awards in Taipei on Nov. 26, 2016. The National Development Fund aims to improve the visibility of Taiwan's audiovisual output overseas.

Together with the private sphere, the NDF has also jointly established a national investment company (Taiwania Capital Management, or “Taishan”), which will play an important role in the future. We want it to become like Singapore’s Temasek [which currently manages more than US$200 billion]. The NDF will provide 40 percent of the fund’s NT$10 billion total fundraising, with an eye to attracting international investment to Taiwan and assisting in the growth of startup companies in internet of things (IOT), biotech, smart machinery, green energy, national defense, new agriculture, new materials and other areas. The goal is that, assisted by the professional management of Chief Investment Officer David Weng (翁嘉盛), the fund will be highly efficient and generate returns that allow it to grow continuously.

TNL: How does the government determine where to allocate Taiwania's funds?

CJR: At this early stage for Taiwania, the focus is fundraising, with IoT being first on the list. Some NT$4.6 billion (exceeding the NT$4 billion target) has already been raised, and IoT investment has already begun. The next item on the list is biotech, funds for which are still being raised. The funds will be placed under the guidance of our private sector partners, ensuring that they are efficiently allocated.

In terms of allocating funds for the ITTF, this is a three-stage process. Stage one involves reviewing whether the project falls under the scope of the fund’s policy. Stage two comprises an evaluation of the investment by a committee of experts, who review the project’s rate of return and investment plans. It’s a rigorous process. The committee has 17 full-time members and seats available on rotation for experts in the field of the project being reviewed. Stage three is a final review by the fund’s chair, NDC Minister Chen Mei-ling (陳美伶).

TNL: How transparent is the process?

CJR: During the deliberation process while decisions have yet to be reached, such information will not be made public. If a company is rejected, for example, that information will not specifically be announced. However, if a proposal for investment has been accepted after deliberation, that information will be published in a press release. Of course, only a very small percentage of the most innovative companies will succeed, especially when moving as fast as the Executive Yuan is trying to transform the economy. Those that receive funding will have representatives of the fund placed on the company’s board to monitor how they deploy the funding.

TNL: The government is discussing making changes to the Immigration Act to make coming to Taiwan easier for workers from overseas, are you able to update us with any information on this?

CJR: Like Germany and Japan’s model, the aim is to target middle-class, white-collar workers. But the Immigration Act is very sensitive, the changes cannot be allowed to influence Taiwanese graduates’ chance of employment, but that’s not easy. We haven’t made any decisions yet, but the Executive Yuan has tasked the NDC with handling this and so we will do it. My opinion is that we should target positions where we have a shortage of talent.

Credit: Reuters/TPG
Activists holding sunflowers take part in a gathering outside as protesters, whom they support, leave Taiwan's parliament in Taipei April 10, 2014. Taiwan's graduates are likely to be protected from the vagaries of global competition under changes to the Immigration Act.

TNL: Since the ASVDA started its work over a year now, what would you say are its major successes so far?

CJR: This is the same question that President Tsai has: what has the ASVDA been doing and how can we demonstrate its success? She’s anxious to see a strong outcome. But the ASVDA’s development won’t happen that quickly. The ASVDA primarily acts as a platform that sets a crucial tone for the growth of IoT, startups, and the government as a whole. It helps connect Silicon Valley with Taiwan. Moreover, the government is anxious for the ASVDA to promote Industry 4.0, but IoT is an essential first step for that to succeed.

Since its establishment by ASVDA, the IoT Alliance has helped foster collaboration between the strongest incumbents in the field, including the likes of Acer, MediaTek as well as foreign companies like Cisco and Microsoft, and the most promising new entrants, and has opened a platform to facilitate cross-company collaborations. For example, an established company might help foster a young company, or a software company partner with a hardware company. Another important factor is promoting IoT system integrators as a key export – that’s the final goal. In medical, Southeast Asia is a target market, and Taiwan also has an opportunity in smart autos and public transport.

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Editor: Morley J Weston