Chen to liberalize fund-raising rules

President Chen Shui-bian (陳水扁) yesterday announced his decision to liberalize regulations allowing corporations to raise funds in the domestic capital market.

"In recent years, the government has loosened regulations for local corporations to raise funds abroad, and it has helped enhance the international visibility of Tai-wanese companies and improve their efficiency and management," Chen said. "But because existing regulations have more restrictions for corporations to issue bonds in the domestic market, issuing euro-convertible bonds and bank loans have become the major means for local businesses to raise funds here, and it is not advantageous for the domestic capital market in the long run."

To strengthen accumulation of domestic capital while hooking up the nation's capital market with the international financial system, Chen said the Ministry of Finance had decided to loosen up the regulations for companies to issue convertible bonds domestically.

Chen made the remarks while giving a speech at a Rotary Club meeting yesterday. The government is planning several financial reform proposals as Chen prepares for the election in March, but some of the major reforms have been blocked by the pan-bule camp.

To open up the domestic capital market, Chen cited three major directives in his speech yesterday:

The lockup period for convertible bonds will be shortened from three months to one month, which is the international custom. This should help enhance the investors' interest in holding domestic bonds.

The restriction imposed on domestic fund raisings, which was set to avoid a decrease in earnings per share when companies seek to increase capital, will be recalled.

The restrictions for companies' domestic assets will be loosened. For example, when firms use funds to purchase fixed properties and have concrete plans to raise more funds, then there would be no ceiling for the fund-raising.

"With the above measures, Taiwan definitely can establish a more pluralistic and convenient environment for corporations to raise funds and lower the cost of capital, and enhance further the competitiveness of the country and corporations," Chen said.

Chen, who is campaigning for re-election, announced late last month several new measures that would broaden venture capital companies' sources of raising capital from domestic capital market.

The government will allow the NT$300 billion Postal Simple Life Insurance Fund (郵政簡易人壽保險基金), Labor Pension Fund (勞退基金) and Labor Insurance Fund (勞保基金), as well as capital reserves in private financial holding companies and insurers to invest in the venture capital industry, Chen said at that time.