Taiwan regulators stress commitment to PE – AVCJ Taiwan

The Ministry of Economic Affairs (MOEA) has formed a taskforce to coordinate between different government agencies with a view to clarifying the criteria on which transactions are assessed by regulators. The move is intended to resolve longstanding concerns from private equity investors that deals are being rejected for arbitrary reasons.

In addition, an amendment to the Statute for Investment by Overseas Chinese and Foreign Nationals has been put before the Taiwan's Legislative Yuan that would allow certain deals to proceed without first receiving regulatory approval.

"According to the Investment Commission, if the ceiling for post-investment reporting is set at $1 million then 83% of all investment projects will only have to be reported after the fact," Minister of Economic Affairs Chia-juch Chang told the AVCJ Taiwan Forum.

Private equity investment in Taiwan reached just $56.9 million in 2012. Although Asia's seventh-largest economy, Taiwan ranked 16th by PE deal value, sandwiched in between Sri Lanka and Pakistan. It flies in the face of independent studies that rank the island state highly among its regional peers in terms of investment environment - for broader M&A - and economic competitiveness.

Jan-juy Lin (pictured), a commissioner with the Financial Supervisory Commission (FSC), echoed Chang's sentiments that Taiwan is very much open to PE investment - although he made the distinction between "long-term investors" and "short-term profit opportunities," alluding to the fact that the asset class has in the past been regarded with suspicion.

Lin indicated that private equity could support Taiwan as its economy, which rose to power on the back of original equipment manufacturing (OEM), enters a period of transition.

"The focus has shifted to transformation and upgrading of existing industries so they become more internationalized in their operations. This is an important part of our considerations when we look to further develop Taiwan's economy," he said. "We know it is important for us to attract foreign investment and we need to make sure we improve the investment environment."

For the American Chamber of Commerce in Taipei's (AmCham) private equity committee, which has coordinated industry lobbying efforts, the issue is one of execution. They say it remains very difficult for PE investors to predict how regulators might respond to a particular deal.

Referring to a panel later in the AVCJ Taiwan Forum featuring three senior regulators and included a discussion on what might trigger an investment review, the committee said it "continues to see a disconnect between the government's stated desire to increase foreign investment and the statements from regulators on its role in receiving investment based on subjective criteria such as ‘national security' and ‘investor rights' without any clear definition on those terms."

This suggests that despite two years of concerted lobbying efforts from the private equity industry and a warmer response on the part of the government, there is still work to be done.

"We have to be better at explaining our case, but at the same time Taiwan should recognize the enormous value private equity brings when properly executed," added Mark Chiba, chairman and partner of The Longreach Group.

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