Will the ‘Asian Silicon Valley’ take roots in Taiwan?
TAIPEI (The China Post/ANN) - The Asian Silicon Valley initiative, an important part of President Tsai Ing-wen’s economic reforms, focuses on transforming the country into a hub for innovation in the Asia-Pacific region.
The government’s Asian Silicon Valley initiative, aimed at turning the nation into a centre of innovation in the Asia Pacific, paints a future almost too ambitious to be true.
The initiative is a key part of President Tsai Ing-wen’s economic reforms, which include plans to create an ecosystem of start-ups focused on internet of things (IoT) technology in Taoyuan — home to the nation’s main international gateway.
Around 11.2 billion new Taiwanese dollars have been earmarked for the project, with the National Development Council (NDC) in charge of coordinating government resources.
One feature is an experimental zone for testing technology for the fast-growing IoT subsector.
Taipei-based market research firm TrendForce expects the Asian Silicon Valley programme to increase significantly the nation’s capacity for innovation.
However, the plan has received a backlash from the start-up scene and lawmakers, including legislator and TEDxTaipei founder Jason Hsu, who criticised the government for failing to sufficiently communicate with industry professionals.
“The government would rather spend lavishly on constructing an Asian Silicon Valley Industry Park than deal with simple matters such as internet business regulations, plans to recruit skilled talent, or improve the financial and technological environment ... With one misguided policy after another, Taiwan is wasting resources and forsaking the future,” said Hsu.
Restrictions Risk Stifling Innovation
Drawing from his experience as a lawyer in Silicon Valley, Legislator Wayne Chiang said legal limitations have caused many Taiwanese firms to lose out on opportunities for growth, and urged the public sector to adopt a more open-minded attitude.
Chiang said US financial regulators allow companies to carry out practices that are in line with the law, but Taiwanese regulators would reject new ways of doing things, often saying “the law has no regulations for that yet, and nobody has done so in the past.”
“In the US, you are free to do whatever is not restricted by the law. But in Taiwan, people are afraid to do what is not regulated yet,” said Chiang.
Nice Cheng, co-founder of the Taiwan based accelerator and venture fund AppWorks, said too many restrictions on online payment services have slowed down the expansion of e-commerce.
Taiwan has been laggard to adopt mobile payment technologies, and third-party payment platforms such as PChome Interpay have only began to launch this year. The change comes over a decade after mainland Chinese regulators allowed Alipay to launch in China in as early as 2004.
The private sector has been calling for the government to give a green light to third-party mobile payment operators for nearly a decade.
Cheng said he felt “both glad and sorry” to see the wait is finally over.
Skills Gap Concerns Loom Large
“Talent is an urgent problem,” added Cheng.
“When university faculty themselves aren’t familiar with emerging sectors, the country will face a talent gap within the next few years. If Taiwan wants to become an innovation superpower in the digital economy, it needs to step up its game in cultivating the right skills.”
Meanwhile, Taiwan is much less attractive to foreign professionals because of lower salary levels and tough eligibility requirements for foreign nationals to work in the country.
On September 1, NDC Deputy Minister Kao Shien-quey said the Finance Ministry is set to revise tax regulations, so less income tax will be levied on foreign professionals, at least for the first three years, to ease the burden on companies hiring international talent.
The Executive Yuan — the top administrative branch of the government — will release a draft bill that would comprehensively "ease residence-related restrictions on foreigners” by the end of the year at the earliest, said NDC head Chen Tain-jy.
No Access to Capital
Another issue is that start-ups and small firms lack access to the capital market, making it harder to raise funds, according to Nice Cheng.
“It’s a pity because you see foreign investors jumping at the chance to acquire small firms in Taiwan, while local investors lose out,” he said. “Over a half of funds in the capital market are directed to the electronics industry. But the aim is to grow the digital economy — there should be more funds allocated for the innovative tech industry.”
Former EasyCard Co. co-chair Tai Chih-chuan pointed to the attitude of investors as a key problem.
“Culture is the largest problem of all ... in mainland China, investors eye start-ups like the way young boys chase girls. Taiwanese investors sit back and wait for people to approach them. For them, investing in a budding firm is more like charity work,” said Tai.
Tai said that foreign investors offer mentorship to budding entrepreneurs, but Taiwanese investors put excessive pressure on sustained growth and profit return.
“High calibre Taiwanese with great ideas are driven away,” Tai said.
Too Timid, Too Comfortable
“Taiwanese children grow up feeling afraid: Afraid of failing, afraid of trying, afraid of raising their hands in class, afraid of conflict,” he said.
Echoing Tai, legislator and founder of the Taiwan Fair Trade Organization Karen Yu said much of the current hurdles to entrepreneurship stem from deep-seated issues involving the education system and culture.
“Throughout their education, you hardly hear anyone encouraging students to innovate or embrace failure,” said Yu.
Yu said after she spoke with many domestic and foreign venture capitalists, she found that Taiwan’s venture funds are more inclined to invest in companies on the brink of taking off, instead of betting on an idea at its infancy.
Though foreign investors often praise the technical capabilities and skills of Taiwan’s start-ups, they highlighted the main reason for rejection as a lack of international perspectives within their teams, Yu said.
“Some entrepreneurs prefer not to leave the country and have shied away from challenging global players,” she said.
Earlier this month, David Sutton, a researcher with NATO Association of Canada, said in online news magazine The Diplomat that Taiwan is entering a crowded field — neighbours South Korea, mainland China, and Japan are competing in the Asia-Pacific’s IOT market.
Compared to its regional rivals, Taiwan has a smaller population, a limited domestic market and is not a member of the United Nations, shutting it out of many trade and financial talks, said Sutton.
However, Sutton remains optimistic that, as “a small, densely populated country under immense pressure to perform,” Taiwan possesses great agility and alacrity, adding it could potentially become a model for countries coping with similar challenges.
- Will the‘Asian Silicon Valley’ take roots in Taiwan?