I have been working with venture capital since 1992. For the first eight years, the market for venture capital grew strongly. But since 2000, the situation has deteriorated and entered a long, cold winter.
The Cabinet's Development Fund (行政院開發基金) is calling for the establishment of a NT$100 billion venture capital fund, NT$30 billion of which would be provided by the Development Fund and the remaining NT$70 billion by private entities. The plan is to establish 100 venture capital companies, each with a capital of NT$1 billion. I'm in a position to alert the decision-makers in the government to the fact that there is no shortage of capital among venture capitalists in Taiwan. There is, however, a shortage of good investment opportunities. The investment companies managed by a few large venture capital management firms all have quite large amounts of idle capital that they are unable to put to good use.
Government statistics also show that private investment in Taiwan has fallen sharply over the past two years. Last year, private investment was 29.5 percent lower than in 2000, and the first six months of this year fell a further 11.5 percent. During the past two years, private investment as a proportion of GNP has also fallen to 17 percent. This compares unfavorably with the average of 24 percent between 1992 and 2000, and is also the lowest figure in 40 years.
This is true not only for private enterprises, but also for individuals. Interest rates in Taiwan are already the lowest on record, but the will to invest in housing is still weak, and the real estate market remains in the doldrums. The common concern is the future of Taiwan. Government policy directions keep shifting, and the general public doesn't know which way to turn.
Since the DPP came to power, the public has demanded the government improve cross-strait relations, lower the fiscal deficit and reduce the proportion of bad loans weighing on the financial sector. Despite a deteriorating financial situation, the government keeps expanding welfare expenditures but is too afraid to increase taxes. Government debt, which stood at NT$2 trillion when the DPP took power, keeps expanding and now stands at NT$3 trillion. Now there are also plans to expand the scope of the senior citizens stipend program. The annual budget will increase by between NT$1.8 billion and NT$4 billion.
The government is also planning to establish a financial restructuring fund holding NT$1 trillion for the purchase of bad bank-assets. The question is whether the decision-makers in the enterprises and financial institutions responsible for the creation of all these bad loans will carry legal responsibility for embezzlement or violation of trust, or joint responsibility for compensation. Many of these people deliberately emptied their companies or banks and have already divested themselves of the capital by moving it overseas, or left their debts in Taiwan while moving the capital to China. If these people are not brought before the law, social justice and legal discipline will become non-existent.
How is the DPP government -- with its slogans of "clean co-governance" -- different from the KMT and its collusion with unscrupulous conglomerates and "black gold?"
A year has already passed since the Economic Development Advisory Conference was held. Ninety percent of the conclusions reached by the government have been implemented. We cannot deny that the government has been trying. A majority of the general public, however, is still disapproving. Economic statistics also tell their story. The government's actual achievements must weigh heavier than its words.
Chang Chung-pen is the president of Hotung Group.
Translated by Perry Svensson
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