Taiwan must foster Net development

While Taiwan has been debating whether to allow Internet-related companies to list on the OTC market, Fortune magazine has been busy putting together its first Internet index, the Fortune e-50.

According to Fortune, whereas the Dow Jones Industrial Average could be seen as a symbol of 20th century industry, the Fortune e-50 could very well be the symbol of the next century.

Nineteen Internet companies were selected to be a part of the e-50, along with 16 Web software firms, 11 hardware makers and four communication companies.

In order to qualify, an Internet or related company had to have been public for at least six months, with a market capitalization exceeding US$100 million.

And while government officials have expressed worry about Internet companies losing money, a lack of profits did not concern the editors at Fortune as much.

Among the 19 Internet companies that make up the index, 11 companies have lost money over the last twelve months and the remaining eight managed to write their books in black ink.

Profits and losses aside, the 19 companies do have one thing in common: All are the Internet industry's largest players, and all have market caps of at least US$2.5 billion.

Why have so many investors been willing to purchase the stocks of money-losing companies?

The Internet, broadly defined, may soon offer trillions of dollars in opportunity, Fortune reported.

A recent study by the University of Texas found that the Internet economy -- including revenues from e-commerce, software, and infrastructure -- was a US$301 billion industry in 1998 that could reach US$507 billion this year.

Also, the Internet economy next year is expected to grow US$206 billion, or 68 percent, while the US GDP growth is expected to be just US$340 billion, or 4 percent.

In light of the above figures, analysts say government officials should do more to develop Taiwan's Internet-related industry, or else watch the nation lose out to competitors.

But the Internet's prospects sometimes comes into conflict with the interest of numerous companies, especially many large Taiwanese listed firms.

Recently, several government leaders, including Vice President Lian Chian (3s戰), have stressed in speeches the importance of assisting many listed or unlisted companies raise capital through the market.

Also, Premier Vincent Hsiau (蕭萬長) said last week that the second board of the OTC market would be established soon for any qualified unlisted company.

Meanwhile, whether to approve Internet-related firms for OTC listing has raised questions.

"To allow Internet-related companies to list in the second board of OTC market could have a crowd-out effect for many companies in the so-called traditional industries," said Hwang Da-yeh (黃1F業), a professor of Taiwan University. "Government officials have been trying to revive the share prices of traditional industries. If most market capital goes to electronics or Internet-related shares -- like what happened in the Taiwan Stock Exchange -- all the effort would be in vain."

Others favor allowing the market's invisible hand to be the arbiter.

"We should let the market decide which industry gets the market capital," said Hwang Ming-chu (黃敏助), president of ROC OTC (??華民國櫃檯買賣????/CHINESE>). "What the government should do is to provide an opportunity for any business venture to raise capital from the second board of the OTC market, whether its high-tech or not. As long as the rules of game is fair and transparent, it should not be of concern to the government who gets the capital in the end."