Taiwan regulators stress openness to private equity - AVCJ Forum

"All foreign investments into Taiwan are subject to local regulatory approvals, but there are two sets of rules in terms of regulating mainland Chinese investments and non-Chinese foreign investments. That's one point," Mei Hua Wang, a vice minister with the Ministry of Economic Affairs (MOEA), told the AVCJ Taiwan Forum. "The second point is that we welcome [non-Chinese] foreign investments into Taiwan."

The approval ratio for overall foreign investment transactions - including those from mainland China - is much higher than the non-approved ratio, and the government is committed to streamlining regulatory processes and making decisions more transparent, Wang noted. The most common reason for rejecting a deal is a lack of sufficient documents.

"Those deals being rejected, which are reported by media, are special cases. The press mentions them again and again, which creates a misunderstanding in the community that Taiwan government isn't friendly at all in terms of allowing foreign capital to come in," she added.

Speaking on a separate panel, Melanie Nan, managing director at CDIB Capital, observed the government recognizes the importance of private equity and has made efforts to improve oversight of the asset class in the past 12-18 months. For example, the Limited Partnership Act - which allows GPs and LPs to set up limited partnership business entities in Taiwan - was passed by a few months ago.

"However, there is one shortcoming - which is taxation. The government has not decided whether to tax limited partnerships," said Nan. "On month ago, they decided that these partnerships would be taxed as a corporations. Fortunately, because of the efforts have been made by some of you sitting here, the government is now taking a second look into the issues. We are hoping to see some relaxation in terms of taxation for limited partnership."

Other encouraging initiatives include an amendment to corporate legislation that means PE firms can invest in companies through more flexible capital structures as well as a move to allow Taiwanese insurers to commit a higher percentage of their investable assets to private equity funds.

Investors would like to see a more conducive regulatory environment that facilitates access to strong potential local deal flow driven by succession issues and the transformation of traditional businesses. Cross-border transactions represent another angle. For example, Bain Capital recently partnered with Goldman Sachs to control of South Korean cosmetics brand Carver with a view to expanding the business into China. Similar deals could be done involving Taiwan companies, according to Jonathan Zhu, a managing director at Bain.

Mike Shang, an executive director at Morgan Stanley, agreed that most successful Taiwan companies have predominantly global customer bases and could benefit from private equity support when expanding further afield. But the major sticking point remains regulation.

"The regulatory environment is something that Taiwan needs to be improve," he said. "I know the current government is actively working on it. What we want to see is more clarity and predictability that help people look at entry as well as exit."

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• Greater China
• Buyouts
• Regulation
• Taiwan (China)
• AVCJ Events
• CDIB Capital