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Taiwan's Tsai mulls new quasi-sovereign fund to boost industries

[TAIPEI] Taiwan's incoming administration is moving to establish a new quasi-sovereign wealth fund with local and overseas cash to finance emerging industries, according to a top adviser to President-elect Tsai Ing-wen.

Under a plan she is now considering, the government will be the largest shareholder in the fund with ownership below 50 per cent, while the rest will be comprised of local and foreign investors, said Kung Ming-Hsin, Ms Tsai's top adviser on industry policy. The fund will help nurture the development of key industries such as biotechnology and smart machinery, he said.

"There's a lot of money in Taiwan, but people are just collecting fixed interest payments," said Mr Kung, who is vice president of the Taiwan Institute of Economic Research in Taipei.

"An innovative financing mechanism can make full use of the local excess savings." Ms Tsai, who will take office in May after winning in a landslide in January's election, campaigned on fostering new industries as economic growth slumps from a global trade slowdown.

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The island is facing increasing pressure to find new engines for growth as mainland Chinese firms become more competitive and demand weakens in the electronics sector, its key export.

The new leadership hopes to keep central government deficit below 3 per cent of gross domestic product so it needs to find more innovative ways to fund new industries beyond selling debt, Mr Kung said. The proposed fund's investments will focus on five areas highlighted by Ms Tsai's campaign: green energy, biotechnology, national defense, Internet of Things and smart machinery.

While the fund may also acquire fledgling businesses, unlike the Singaporean sovereign wealth fund Temasek Holdings Pte, it won't buy large companies.

Mr Kung declined to comment on the fund's size. The new company may hire foreign managers, he added.

Taiwan's National Development Council also said last July it would consider forming a sovereign wealth fund, while adding that it doesn't have to include foreign-exchange reserves. Huan Lin, deputy minister of the NDC, said this week exploratory research conducted under the current administration would be passed to Ms Tsai's government if need be.

The local economy grew 0.75 per cent last year, the least since 2009, as exports shrank in the last 12 months. Local technology firms have declined as demand for PC hardware fell, while those in other nations moved into Internet services. The five worst performers in Morgan Stanley's 106-member Asia-Pacific Infotech Index last year came from Taiwan.

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