Traditional industries pass major hurdle

Any industry other than those classified as an "Important Technology" industry (-?n科?THORN>事業) in the "Statute for Industry Upgrading" (促進2ㄦ~?伔鑄屭?/CHINESE>) will be defined as a traditional industry, the Cabinet-level Council for Economic Planning and Development (CEPD) said yesterday.

Two weeks ago, Vice President Lien Chan asked the CEPD, the Ministry of Finance (財政3? and the Ministry of Economic Affairs (經濟3? to develop plans to save traditional industries. The request stemmed from the fact that the value of more than 100 stocks, mostly firms in traditional sectors, is less than the companies' worth.

Since then, industrial leaders, the ministries and the Council had been scratching their heads as they attempted to nail down a definition of "traditional industries."

Meanwhile, in light of the aforementioned definition, the profitability of traditional industries has decreased significantly since 1980s.

For example, the average profitability of the paper industry has decreased from 9.1 percent in 1987 to 5.4 percent today.

In addition, average net productivity gains derived from capital investments for manufacturing industries between 1990 and 1997 was 0.675. The figure for electronics industries was 1.185, according to the CEPD's analysis.

While the government has come up with plans, "Industries need to understand that the market mechanisms needed to be respected," said Hu Chung-Ying (-J仲-^), director of the CEPD's economic research department. "The current environment has changed to government policies promoting a healthy competitive market."

The CEPD's ministry-level meeting yesterday proposed several major mechanisms to help ease the problems of traditional industries.

According to Hu, plans include establishing a capital restructure fund -- such as the Jardine Fleming Securities value growth fund -- to help companies to raise their stock price; allowing firms to issue and sell special stocks with a face value less than NT$10; allowing foreign investors to buy a company's convertible bonds; and designing second-type stocks (2?G?thorn>股) for small and medium-sized business to issue in the OTC market.

The Executive Yuan's Development Fund would also provide NT$30 billion for industries to upgrade, while the CEPD's long-term fund would provide NT$10 billion and the MOEA's Industry Bureau would provide another NT$3 billion for the development of lands.

The definition released yesterday also means that the MOEA's earlier proposal to reduce the required level of investment for "important investment business" from the current NT$2 billion to NT$500 million is meaningless, because the new "Statute for Industry Upgrading" covers only "Emerging Important Strategic Industries."

"The new statute would not provide the technology sector with additional tax incentives," said Schive Chi (薛琦), vice-chairman of the CEPD, noting that the government understands that traditional industries have been unequally taxed.

"The combination of the business tax and personal tax this fiscal year will benefit all industries, not just the information technology industry," Schive said. "The unequal taxation between high-tech industries and traditional industries would therefore be largely removed."