Taiwan scores poorly on attracting PE – white paper

According to AmCham's 2013 White Paper, Taiwan ranks second last among 17 Asian countries - trailing Sri Lanka and ahead of only Pakistan - in attracting private equity investment.

"International PE funds have been a major source of investment capital flowing into the Asian region in recent years, but those funds have become virtually inactive in Taiwan after several high-profile investment projects failed to receive approval," the report said.

The Ministry of Economic Affairs responded by saying it would review the content of current regulations on foreign investments and look at ways to speed up approvals. It welcomed AmCham's suggestion for an increase in the $1 million threshold below which foreign investments are not subject to review. It also promised to consult with industry participants on adding clarity to rules regarding evaluation of private equity investments.

Speaking at the launch of the white paper, William Bryson, a partner with Jones Day and head of AmCham's private equity committee, said that Taiwan had scared away $20 billion in foreign investment with the rejection of $1.6 billion KKR-led bid to privatize domestic electronics component maker Yageo.

"The Investment Commission withheld approval due to concerns over the financial soundness and transparency of the deal, ending hopes of 10 to 11 other investment deals valued at $2 million each," Bryson said, The China Post reported.

The criticism echoes that of C.Y. Huang, chairman and CEO of local GP FCC Partners and chairman of the Taiwan M&A and Private Equity Council (MAPECT), made to AVCJ earlier this year. Huang identified three concerns: that the authorities are fundamentally opposed to privatizations; that they are overprotective of minority shareholders' interests; and that they don't offer clear enough guidance on the interpretation of regulations.

"We are trying to make the government realize that this is a serious situation. They say it is just one case [Yageo] but it isn't: this one case has damaged confidence of all PE investors in Taiwan," Huang explained. "There is no certainty regarding government approval and as a result there have been no major PE transactions in Taiwan in the last 2-3 years."

Taiwan attracted $5.56 billion in foreign direct investment last year, up from $3.81 billion in 2010 and $4.96 billion in 2011. However, the report noted this remains extremely low compared to the likes of Thailand, Vietnam, Indonesia, Hong Kong and Singapore. South Korea, which is often compared to Taiwan, drew $16.3 billion in FDI last year.

In addition to relaxing restrictions on foreign investment approvals - and private equity in particular - AmCham would like to see the government do more to prevent talent from moving overseas. Suggested measures include making it easier for companies to bring employees from China affiliates to Taiwan for training, conferences and short-term assignments, and cutting personal income tax rates.

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• Topics
• Regulation
• Buyouts
• Greater China
• Taiwan (China)
• regulation
• buyout
• FDI