It shouldn't have to be this way. No country as democratically successful as Taiwan needs to put up with rogues such as those who are now running the legislature. But the people of Taiwan do put up with them. Unbelievable.
One wonders when the great middle class that Taiwan has created over four decades of economic boom will finally say, "enough is enough" and throw these thugs out of office. The most obvious answer seems to be, when it starts to really hit them in the pocket. Only when the corruption which is running freely through the country's democratically created institutions starts to have a serious drag on the economy, will Taiwanese likely pluck up the courage to elect the devils they don't know. But until then, I just wonder how Taiwan is going to get through the coming Internet craze without some serious damage being done.
Changing times
The main reason why the influence of "black gold" [the combination of corrupt politics and organized crime, for the uninitiated] hasn't been too bad until now should be fairly obvious. Taiwan has been too busy making a fortune from electronics exports to worry about the longer-term impact of corruption on the economy. The high-tech boom has kept Taiwan awash with capital for the past decade, even though so much individual wealth has been lost in the stock and property markets.
As a result, nobody has worried too much about collusion between corrupt politicians and gangsters, because they pretty much kept to themselves in the construction industry, which has been propped up by state-promoted lending, or in finance, which is a place where ye takes yer chances anyway.
But it may not be so easy for Taiwanese to keep shrugging their shoulders indefinitely. Organized crime has obviously had enough of the slim margins to be picked from traditional industries. The "black gold" elite wants a piece of the high-tech action. And the Internet is offering them opportunities beyond their wildest dreams.
Forgive me for being alarmist, but this is chilling. If left unchecked, "black gold" has a very good chance of killing Taiwan's budding Internet industry in its infancy, just as it did Taiwan's movie industry a decade ago.
So where's my beef? It's simple. The high-tech industry has, until now, been fairly well protected from the influences of corruption and organized crime. The hardware companies that have made Taiwan famous were started up with the help of government techno-boffins and American Taiwanese entrepreneurs who operated in an atmosphere too rarefied for their "black gold" colleagues. Business plans were based on pieces of silicon and other such tangibles, and backed up by scientifically calculated theories.
None of this matters in the dawning of the Internet age here in Taiwan.
All that's needed is connections and good PR. And a member of the Legislative Yuan or two in your camp.
It's a dream come true for the purveyors of "black gold." All they have to do is follow a simple procedure: Find yourself a budding Internet company that talks a good talk, use your intimidatory prowess to convince its managers that they need an "angel investor" such as yourself, threaten a state-owned bank into giving you the money to take an early equity stake in the company, and then ram the necessary legislation through that allows the company to list in the blink of an eye. Then, sit back and wait for the share price to go through the roof as retail investors catch the Internet fever that's raging around Asia, and sell out for a huge multiple of the original investment. What could be easier for a person with all the right connections in Taiwan?
Of course, if you really couldn't be bothered with finding a decent company, you could just set a few up yourself, copy the business plans that have made such IPO successes of Internet start-ups in the US, and voila! Earnings records? Who needs 'em? You can just pass legislation that does away with the listing criteria demanded by those wimps at the Securities and Futures Commission.
Now, this is not meant to cast any aspersions on all the genuine, promising Internet companies in Taiwan that are desperate to get listed. They need an IPO to fund their rapid expansion and fuel the development of some truly world-class products. But I worry for them. In the beginning, it will be tough for them to catch the eye of investors if they are surrounded by so many frauds. And later, they will sink as a group if investors, especially international institutions, get burned by the first batch of IPOs.
Still, it may not be too late. Even though some shady characters have set up their own venture capital companies in an effort to put on a veneer of respectability for the coming IPO campaigns, it should be easy enough for serious, committed regulators in the Ministry of Economic Affairs and the Ministry of Finance to sort the black from the gold.
What to look for
Companies that plan to also list overseas, for instance, should stand out. If they can make it past regulatory scrutiny on the NASDAQ or Hong Kong's GEM, they should be fine in Taiwan.
For the smaller ones, a few more criteria might be needed. But even then, the difference should be obvious between a company that has some serious, committed venture capitalists on board and those who are just out for a quick ride. For one thing, venture capitalists are supposed to do more than just inject cash into a company. They're supposed to help it with management, too. These companies might not have a track record of earnings, or even revenue, but they should have a history of key personnel hirings and unbiased reviews of their product development.
The question is, will the regulators be in on the act, too? I certainly hope not. But you do have to wonder why the Executive Yuan's Development Fund has given out as much as NT$100 million to venture capital companies. I thought it was supposed to be a venture capital fund itself. Why not just invest directly?
I hope I'm being too pessimistic, I really do. Taiwan could fly in the Internet era. But if these crooks get their way in the coming months, Taiwan could also be in for a stock market bubble and crash to make the 1989-90 debacle seem like nothing.
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