Financial Supervisory Commission Chairman William Tseng’s (曾銘宗) idea to collaborate with the Ministry of Economic Affairs, the Ministry of Culture and other agencies to promote the cultural and creative industry may be an important issue to interested investors and enthusiastic start-ups, but people should not get too excited about his proposal, which still contains questions as to the real value of cultural and creative businesses, the appraisal of intangible assets of these companies and the feasibility of a successful industry business model.
Over the past month, the commission announced several proposals to support cultural and creative enterprises. These include providing necessary funds to these industries, offering training to local banks and establishing a professional appraisal mechanism for start-ups’ ideas.
Last week, Tseng reiterated at a banking forum that the commission would assist cultural and creative enterprises to raise funds through either direct or indirect financing.
Moreover, he said the commission is considering lowering the regulatory threshold for companies to launch initial public offerings in the near future and introducing a stock index to cover the companies listed in Taiwan in the long-term.
The proposals came as the government launched an incubation board focused on the over-the-counter market to help cultural and creative businesses and other small start-ups raise funds. The proposal is an indication of delayed government action in carrying out President Ma Ying-jeou’s (馬英九) 2009 plan to promote six emerging industries — including the cultural and creative industry — while Taiwan’s information technology and communications technology industry faces structural woes and stagnant development.
However, both the government and the legislature need to do a thorough check on the commission’s proposal, which includes measures to provide banks with incentives to double lending for cultural and creative enterprises in three years to NT$360 billion (US$12 billion), to increase the size of government-backed credit guarantee funds firms and allow local life insurance companies greater flexibility to channel funds into the industry.
While no one is sure whether the proposals are good enough to prompt banks to do what they have been unwilling to do in the past, certainly the government’s policies to encourage banks to lend billions of dollars to the DRAM and LCD industries years ago have only led to the accumulation of bad loans. Why would banks want to repeat that experience?
There are other challenges. For instance, some companies may turn their creative ideas into profit, but the industry as a whole has not yet developed an efficient supply chain with enough backups from design to manufacturing and from marketing to service. There are discrepancies between creativity-oriented firms and earnings-focused investors about the real value of innovative ideas and workable business models.
The commission said it would request the Taiwan Financial Asset Service Corp establish databases for intangible assets evaluation and provide independent appraisal services for banks and companies. However, the legislature should closely watch whether the government devises complementary measures to ensure a safety net that could minimize the negative consequences.