Research on Taiwan’s Policies of Innovative Industry Development in Recent Years (2015-2016)
Research on Taiwan’s Policies of Innovative Industry Development in Recent Years (2015-2016)
1. “Five plus Two” Innovative Industries Policy
On June 15, 2016, Premier Lin Chuan met with a group of prominent business leaders to talk about a government project on five innovative industries, which aim to drive the next generation of businesses in R.O.C.. Subsequently the program was expanded to include “new agriculture” and the “circular economy” as the “+2.” The program was then broadened even further to include the Digital Economy and Cultural Innovation, with even Semiconductors and IC Design included, although the name of the policy remains 5+2. Speaking at the Third Wednesday Club in Taipei, Premier Lin said the industries require more investment to drive the next generation of industry growth momentum in R.O.C., create high-quality jobs, and upgrade the industrial competitiveness. Executive Yuan has selected the five innovative industries of Asia Silicon Valley, smart machinery, green energy, biotech & pharmaceutical industry, and national defense, which will be the core for pushing forward the next-generation industrial growth and improve overall environment by creating a cluster effect that links local and global industries, while simultaneously raising wages and stimulating employment.
Premier Lin said, regarding industrial competitiveness and investment issues the lackluster economy has stifled investment opportunities, and with limited government budgets, the private sector must play the larger role in investments. Regarding the “Five major Innovative Industries” project, Premier Lin said the National Development Council is currently drafting long-term plan to attract talent, create a thriving working environment, and infuse companies with more innovation, entrepreneurship and young workers. In addition, R.O.C. must also cultivate a strong software industry, without which it would be difficult to build a highly intelligent infrastructure.
The National Development Council said the program possess both the capacity of domestic demand and local characteristics, as the core for pushing forward the next-generation industrial growth. The government aims to promote a seamless synergy of investment, technology, and the talent, in order to develop innovative industrial clusters for furthering global linkage and nurturing international enterprises. In the meantime, the government also aims at achieving the enhancement of technology levels, balanced regional development, as well as realizing the benefits of job creation.
2. The Asia Silicon Valley Development Plan
In September 2016 the government approved the Asia Silicon Valley Development Plan, which connect Taiwan to global tech clusters and create new industries for the next generation. By harnessing advanced technological research and development results from around the world, the plan hopes to promote innovation and R&D for devices and applications of the internet of things (IoT), and upgrade Taiwan’s startup and entrepreneurship ecosystem.
The four implementation strategies are as follows:
(1) Building a comprehensive ecosystem to support innovation and entrepreneurship
(2) Connect with international research and development capabilities
(3) Create an IoT value chain
(4) Construct diversified test beds for smart products and services by establishing a quality internet environment
Taiwan’s first wave of industrial development was driven by continuous technological innovation, and the wave that followed saw the information industry become a major source of economic growth.
3. Global Hub for Smart Machinery
On July 21, 2016, Premier Lin Chuan said at a Cabinet meeting, the government aims to forge Taiwan into a global manufacturing hub for intelligent machinery and high-end equipment parts. Upgrading from precision machinery to intelligent machinery is the main goal of putting intelligent machinery industry into focal execution area expecting to create jobs and to maximize the production of production line as well as to forge central Taiwan into a global manufacturing hub for smart machinery. The Ministry of Economic draws up the Intelligent Machinery Promotion Program to establish the applications of the technology and capacity of services that fit the demand of the market. The program embodies two parts. The first is to accelerate the industrialization of intelligent machinery for building an ecosystem. The second is to improve intelligentization by means of introducing the intelligent machinery into the industries.
The execution policy of the Intelligent Machinery Promotion Program is to integrate the intelligent functions such as malfunctions predictions, accuracy compensation, and automatic parameter setting into the machinery industry so as to have the ability to render the whole solutions to the problem. Simultaneously, the program employs three strategies, which are connecting with the local industries, connecting with the future, and connecting with the world, to develop the mentioned vision and objectives. Especially, the way to execute the strategy of connecting with the local industries consists of integrating the capabilities of industry, research organization and the government. At the meantime, the government will encourage the applications of smart vehicles and unmanned aerial vehicles and train the talents as well. The thinking of connecting with the future lies in the goal of deepening the technologies, establishing systematic solutions, and providing a testing areas, which focus on the related applications such as aerospace, advanced semiconductor, smart transportation, green vehicles, energy industry, whole solutions between factories, intelligent man-machine coordination, and robots of machine vision combined with intelligent machinery applications. The government would strengthen the cross-cutting cooperation to develop machines for aerospace and integrate the system of industrial division to form a cluster in order to create Taiwanese IoT technology. Eventually, Taiwan will be able to connect with the world, enhance international cooperation, expand export trade and push industry moving toward the age of information and digital economy and break the edge of industry technology to make the industry feel the goodwill of the government.
4. Green energy innovations
The government’s “five plus two” innovative industries program includes a green energy industrial innovation plan passed October 27, 2016 that will focus on Taiwan’s green needs, spur extensive investments from within and outside the country, and increase quality employment opportunities while supporting the growth of green energy technologies and businesses.
The government is developing the Shalun Green Energy Science City. The hub’s core in Shalun will house a green energy technology research center as well as a demo site, providing facilities to develop research and development (R&D) capabilities and conduct the requisite certification and demonstration procedures. The joint research center for green energy technologies will integrate the efforts of domestic academic institutions, research institutes, state-run enterprises and industry to develop green energy technologies, focusing on four major functions: creating, conserving and storing energy, as well as system integration. Development strategies include systems integration and finding better ways to conserve, generate and store energy by promoting green energy infrastructure, expanding renewable energy capabilities and cooperating with large international firms.
The emergence of the green economy has prompted the government to build infrastructure that will lay the foundation for Taiwan’s green energy sector, transform the nation into a nuclear-free society, and spur industrial innovation. For innovative technology industries, green energy industries can drive domestic economic development by attracting more venture capital and creating more employment opportunities.
5. Biomedical Industry Innovation Program
To facilitate development of Taiwan’s biomedical industry, the government proposed a “biomedical industrial innovation promotion program” on November 10, 2016 to serve as the nation’s new blueprint for innovative biomedical research and development (R&D). To facilitate development of the biomedical industry, the government proposed a “biomedical industrial innovation promotion program”. The program centered on the theme of “local, global and future links,” “the biomedical industrial innovation promotion program” includes four action plans:
(1) Build a comprehensive ecosystem
To address a rapidly ageing global population, Taiwan will enhance the biomedical industry’s capacity for innovation by focusing on talent, capital, topic selection, intellectual property, laws and regulations, and resources.
(2) Integrate innovative business clusters
Established by the Ministry of Science and Technology and based in Hsinchu Biomedical Science Park, the center will serve as a government think tank on related issues. It is also tasked with initiating and advancing exchanges among local and foreign experts, overseeing project implementation, promoting investment and recruiting talents. Equally important, it will play a central role in integrating resources from other biomedical industry clusters around the country, including Nangang Software Park in Taipei City, Central Taiwan Science Park in Taichung City and Southern Science Park in Tainan City.
(3) Connect global market resources
Building on Taiwan’s advantages, promote M&A and strategic alliances, and employ buyout funds and syndicated loans to purchase high-potential small and medium-sized international pharmaceutical companies, medical supply companies, distributors and service providers. Use modern mosquito-borne disease control strategies as the foundation of diplomatic cooperation, and promote the development of Taiwan’s public health care and medical services in Southeast Asian countries.
(4) Promote specialized key industries
Promote niche precision medical services, foster clusters of world-class specialty clinics, and develop industries in the health and wellness sectors.
6. DIGITAL NATION AND INNOVATIVE ECONOMIC DEVELOPMENT PLAN
On November 24, 2016, the Executive Yuan promote the Digital Nation and Innovative Economic Development Plan (2017-2025) (DIGI+ program), the plan’s main goals for 2025 are to grow R.O.C.’s digital economy to NT $ 6.5 trillion (US$205.9 billion), increase the digital lifestyle services penetration rate to 80 percent, speed up broadband connections to 2 Gbps, ensure citizens’ basic rights to have 25 Mbps broadband access, and put R.O.C. among the top 10 information technology nations worldwide.
In addition to the industrial economy, the program can jump off bottlenecks in the past industrial development, and promote the current Internet of things, intelligent machinery, green energy, medical care and other key national industries, but also attaches great importance to strengthening the digital infrastructure construction, the development of equal active, as well as the creation of a service-oriented digital government. It is also hoped that through the construction of a sustainable and intelligent urban and rural area, the quality of life will be improved and the people will enjoy a wealthy and healthy life. Over the next 8 years, the government will spend more than NT $ 150 billion.
The plan contains several important development strategies: DIGI+Infrastructure: Build infrastructure conducive to digital innovation. DIGI+Talent: Cultivate digital innovation talent. DIGI+Industry: Support cross-industry transformation through digital innovation. DIGI+Rights: Make R.O.C. an advanced society that respects digital rights and supports open online communities. DIGI+Cities: Build smart cities through cooperation among central and local governments and the industrial, academic and research sectors. DIGI+Globalization: Boost R.O.C.’s standing in the global digital service economy.
The program aims to build a favorable environment for digital innovation and to create a friendly legal environment to complete the draft amendments to the Digital Communications Law and the Telecommunications Act as soon as possible, foster cross-domain digital talents and develop advanced digital technologies, To create a digital economy, digital government, network society, smart urban and rural and other national innovation ecological environment in order to achieve "the development of active network society, promote high value innovation economy, open up rich countries of the policy vision.
In order to achieve the overall effectiveness of the DIGI + program, interdisciplinary, inter-ministerial, inter-departmental and inter-departmental efforts will be required to collaborate with the newly launched Digital National Innovation Economy (DIGI +) Promotion Team.
7. “NEW AGRICULTURE” PROMOTION PROJECT
At a Cabinet meeting On December 08, 2016, Premier Lin Chuan underscored the importance of a new agricultural paradigm for Taiwan’s economic development, adding that new agriculture is an integral part of the “five plus two” industrial innovation projects proposed by President Tsai Ing-wen. The “new agriculture” promotion project uses innovation technology to bring value to agricultural, and build new agricultural paradigm, agricultural safety systems and promote agricultural marketing. This project also takes resources recycling and environmental sustainability into consideration to promote agricultural transformation, and build a robust new agricultural system.
This agricultural project is expected to increase food self-sufficiency rate to 40%, level up agricultural industry value by NT$43.4 billion, create 370,000 jobs and increase portion of total agricultural exports to new overseas markets to 57% by 2020.
This project contains three aspects:
First is “building new agricultural paradigm”: to protect farmers, agricultural development and ensure sustainability of the environment.
Second is “building agricultural safety systems”: Ensuring product safety and quality, and building a certification system which can be trust by the consumers and is consistent with international standards.
Last but not least is “leveling up agricultural marketing and promotions”: enhancing promotion, making the agricultural industry become profitable and sustainable.
Council of Agriculture’s initiatives also proposed 10 policies to leverage agricultural industry, not only just use the passive subsidies measure of the past. These policies including promoting environmentally friendly farming practices; giving farmers that are beneficial(green) to the land payments; stabilizing farmers’ incomes; increasing the competitiveness of the livestock and poultry industries; using agricultural resources sustainably; ensuring the safety of agricultural products; developing technological innovation; leveling up food security; increasing diversification of domestic and external marketing channels; and increasing agriculture industry added value.
In this statutes report, Council of Agriculture said this project will accelerate reforms, create new agricultural models and safety systems, but also build a new sustainable paradigm of agricultural. Premier Lin Chuan also backed this “five plus two innovative industries” program and “new agriculture” project, and asked Council of Agriculture to reviewing the possible legal changes or amendment that may help to enhance the transformation of agricultural sector.
Taiwan Government Lauched the “Biotechnology Action Plan” The Taiwan Government has planned to boost the support and develop local industries across the following six major sectors: biotechnology, tourism, health care, green energy, innovative culture and post-modern agriculture. As the biotechnology industry has reached its maturity by the promulgation of "Biotech and New Pharmaceutical Development Act" in July, 2007, it will be the first to take the lead among the above sectors. Thus, the Executive Yuan has launched the Biotechnology Action Plan as the first project in building the leading industry sectors, to upgrade local industries and stimulate future economic growth. Taiwan Government Planed to Promote the Biotechnology and Other newly Industries by Investing Two Hundred Billion To expand every industrial scale, enhance industrial value, increase the value around the main industrial field, and to encourage the industrial development by government investments for creating the civil working opportunities to reach the goal of continuous economic development, the Executive Yuan Economic Establishment commission has expressed that, the government has selected six newly industrials including "Biotechnology", "Green Energy", "Refined Agriculture", "Tourism", "Medicare", and "Culture Originality" on November 19, 2009 to promote our national economic growth. The government will invest two hundred billion NT dollars to support the industrial development aggressively and to enhance the social investments from year 2009 to 2012. According to a Chung-Hua Institution for Economic Research report, the future growth rate will reach 8.16% after the evaluation, Hence, the future of the industries seems to be quite bright. Currently, the government plans to put money into six newly industries through the existing ways for investment. For instance, firstly, in accordance with the "Act For The Development Of Biotech And New Pharmaceuticals Industry" article 5 provision 1 ",for the purpose of promoting the Biotech and New Pharmaceuticals Industry, a Biotech and New Pharmaceuticals Company may, for a period of five years from the time it is subject to corporate income tax, enjoy a reduction in its corporate income tax payable for up to thirty-five percent (35%) of the total funds invested in research and development ("R&D") and personnel training each year; provided, however, that if the R&D expenditure of a particular year exceeds the average R&D expenditure of the previous two years or if the personnel training expenditure of a particular year exceeds the average personnel training expenditure of the previous two years, fifty percent (50%) of the amount in excess of the average may be used to credit against the amount of corporate income tax payable. Secondly, according to same act of the article 6 provision 1 ", in order to encourage the establishment or expansion of Bio tech and New Pharmaceuticals Companies, a profit-seeking enterprise that (i) subscribes for the stock issued by a Biotech and New Pharmaceuticals Company at the time of the latter's establishment or subsequent expansion; and (ii) has been a registered shareholder of the Biotech and New Pharmaceuticals Company for a period of three (3) years or more, may, for a period of five years from the time it is subject to corporate income tax, enjoy a reduction in its corporate income tax payable for up to twenty percent (20%) of the total amount of price paid for the subscription of shares in such Biotech and New Pharmaceuticals Company; provided that such Biotech and New Pharmaceuticals Company has not applied for exemption from corporate income tax or shareholders investment credit based on the subscription price under other applicable laws and regulations. Thirdly, to promote the entire biotechnological industry development, the government has drafted the "Biotechnology Takeoff Package" for subsidizing the startup´s social investment companies which can satisfy the conditions to invest in "Drug discovery", "Medical Device" or other related biotech industries up to 5 billion with the capital invest in domestic industry over 50%, , with operating experience of multinational biotech investment companies with capital over 150 million in related industrial fields, and with the working experiences of doctor accumulated up to 60 years. Additionally, the refined agriculture industry field has not only discovered the gene selected products, but also combined the tourism with farming business for new business model creation. According to the "Guidelines for Preferential Loans for the Upgrading of Tourism Enterprises" point 4 provision 1, the expenditure for spending on machine, instruments, land or repairing can be granted a preferential loan in accordance with the rule of point 6, and government will provide a subsidy of interest for loaning Tourism Enterprises with timely payments. At last, Council for Economic Planning and Development also points out because most of technology industry has been impacted seriously by fluctuation of international prosperity due to conducting the export trade oriented strategy. Furthermore, the aspects of our export trade of technology industry have been impacted by the U.S. financial crisis and the economic decay in EU and US; and the industrial development seems to face the problem caused by over centralization in Taiwan. Hence, the current framework of domestic industry should be rearranged and to make it better by promoting the developmental project of six newly industries. Taiwan Government Had Modifies Rules to Accelerate NDA Process and Facilitate Development of Clinical Studies in Taiwan In July 2007, the "Biotech and New Pharmaceutical Development Act" modified many regulations related to pharmaceutical administration, taxes, and professionals in Taiwan. In addition, in order to facilitate the development of the biotechnology and pharmaceutical industries, the government has attempted to create a friendly environment for research and development by setting up appropriate regulations and application systems. These measures show that the Taiwanese government is keenly aware that these industries have huge potential value. To operate in coordination with the above Act and to better deal with the increasing productivity of pharmaceutical R&D programs in Taiwan, the Executive Yuan simplified the New Drug Application (NDA) process to facilitate the submission that required Certificate of Pharmaceutical Product (CPP) for drugs with new ingredients. The current NDA process requires sponsors to submit documentation as specified by one of the following four options: (1) three CPPs from three of "ten medically-advanced countries," including Germany, the U.S., England, France, Japan, Switzerland, Canada, Australia, Belgium, and Sweden; (2) one CPP from the U.S., Japan, Canada, Australia, or England and one CPP from Germany, France, Switzerland, Sweden, or Belgium; (3) a Free Sale Certificate (FSC) from one of ten medically-advanced countries where the pharmaceuticals are originally produced and one CPP from one of the other nine countries; or (4) a CPP from the European Medicines Agency. Thus, the current NDA process requires sponsors to spend inordinate amounts of time and incur significant costs to acquire two or three FSCs or CPPs from ten medically-advanced countries in order to submit an NDA in Taiwan. According to the new rules, sponsors will not have to submit above CPPs if (1) Phase I clinical studies have been conducted in Taiwan, and Phase III Pivotal Trial clinical studies have been simultaneously conducted both in Taiwan and in another country or (2) Phase II and Phase III Pivotal Trial clinical studies have been simultaneously conducted both in Taiwan and in another country. Besides, the required minimum numbers of patients were evaluated during each above phase. Therefore, sponsors who conduct clinical studies in Taiwan and in another country simultaneously could reduce their costs and shorten the NDA process in Taiwan. The new rules aim to encourage international pharmaceutical companies to conduct clinical studies in Taiwan or to conduct such studies cooperatively with Taiwanese pharmaceutical companies. Such interactions will allow Taiwanese pharmaceutical companies to participate in development and implementation of international clinical studies in addition to benefiting from the shortened NDA process. Therefore, the R&D abilities and the internationalization of the Taiwanese pharmaceutical industry will be improved.
Observing Recent Foreign Developments upon Bio-medicine、 Marketing Medical Devices、Technology Development Project and the Newest Litigation Trend Concerning the Joint Infringement of Method/Process Patents1、Chinese REACH has put into shape, how about Taiwan REACH? - A Perspective of Chinese Measures on Environmental Management of New Chemical Substances Taiwan food industry has been struck by the government agency's disclosure that certain unfaithful manufacturers have mixed toxic chemicals into the food additives for the past 30 years, and the chemicals may seriously threaten public health. This event has not only shocked the confidence of the customers to the industry, but also drew public attention on the well-management and the safe use of chemicals. In order to manage the fast advancing and widely applicable chemical substance appropriately, the laws and regulations among the international jurisprudences in recent years tend to regulate unfamiliar chemicals as “new chemical substances” and leverage registration systems to follow their use and import. REACH is one the most successful models which has been implemented by European Union since 2006. China, one of our most important business partners, has also learned from the EU experience and implemented its amended " Measures on Environmental Management of New Chemical Substances" (also known as "Chinese REACH") last year. It is not only a necessity for our industry which has invested or is running a business in China to realize how this new regulation may influence their business as differently , but also for our authority concerned to observe how can our domestic law and regulation may connect to this international trend. Therefore, except for briefing the content of Chinese REACH, this article may also review those existing law and regulations in Taiwan and observe the law making movement taken by our authority. We expect that the comparison and observation in this article may be a reference for our authorities concerned to map out a better environment for new chemical management. 2、The study on Taiwanese businessmen Join the Bid Invitation and Bidding of Science and Technology Project China government invests great funds in their Science and Technology Project management system, containing most of innovated technology. It also creates the great business opportunity for domestic industry. China government builds up a Bid Invitation and Bidding Procedure in the original Science and Technology Project Regime recent years, in order to make the regime become more open and full of transparency. It also improves Regime to become more fairness and efficiency. Taiwan industry may try to apply for those Science and Technology Project, due to this attractive opportunity, but they should understand china's legal system before they really do that. This Article will introduce the "Bid Invitation and Bidding Law of the Peoples Republic of China", and the "Provisional Regulation on Bid Invitation and Bidding of Science and Technology Project", then clarify applied relationship between the "Bid Invitation and Bidding Law of the Peoples Republic of China", and "Government Procurement Law of the Peoples Republic of China". It also analyzes "Bid Invitation and Bidding Procedure", "Administration of Contract Performance Procedure", "Inspection and Acceptance Procedure", and "Protest and Complaint Procedure, providing complete legal observation and opinion for Taiwan industry finally. Keyword Bid Invitation and Bidding Law of the Peoples Republic of China; Government Procurement Law of the Peoples Republic of China; Provisional Regulation on Bid Invitation and Bidding of Science and Technology Project; Applying for Science and Technology Project Regime; Bid Invitation and Bidding Procedure; Administration of Contract Performance Procedure; Inspection and Acceptance Procedure; Protest and Complaint Procedure. 3、Comparing the Decisions of the United States Supreme Court regarding Preempting Marketing Medical Devices and Drugs from State Tort Litigations with the Decision of a Hypothetical Case in Taiwan The investment costs of complying with pertinent laws and regulations for manufacturing, marketing, and profiting from drugs and medical devices (abbreviated as MD) are far higher than the costs necessary for securing a market permit. The usage of MD products contains the risk of harming their users or the patients, who might sue the manufacturer for damages in the court based on tort law. To help reduce the risk of such litigation, the industry should be aware of the laws governing the state tort litigations and the preemption doctrine of the federal laws of the United States. This article collected four critical decisions by the United States Supreme Court to analyze the requirements of federal preemption from the state tort litigations in these cases. The article also analyzed the issues of preemption in our law system in a hypothetical case. These issues include the competing regulatory requirements of the laws and regulations on the drugs and MDs and the Drug Injury Relief Act versus the Civil Code and the Consumer Protection Law. The article concluded: 1. The pre-market-approval of MD in the United States is exempted from the state tort litigations; 2. Brand-name-drug manufacturers must proactively update the drug label regarding severe risks evidenced by the latest findings; 3. Generic-drug manufacturers are exempted from the product liability litigations and not required to comply with the aforementioned brand-name-drug manufacturers' obligation; 4. No preemption issues are involved in these kinds of product liability litigations in our country; 5. The judge of general court is not bound by the approval of marketing of drug and MD; 6. The judge of general court is not bound by the determination and verdict of the Drug Injury Relief Act. 4、Through Computer-Aided Detection Software, Comparing by Discussing and Analyzing the Regulatory Requirements for Marketing Medical Devices in the United States and in Taiwan Computer-Aided Detection (CADe) software systematically assists medical doctors to detect suspicious diseased site(s) inside patients' bodies, and it would help patients receive proper medical treatments as soon as possible. Only few of this type of medical device (MD) have been legally marketed either in the United States of America (USA) or in Taiwan. This is a novel MD, and the rules regulating it are still under development. Thus, it is valuable to investigate and discuss its regulations. To clarify the requirements of legally marketing the MD, this article not only collects and summarizes the latest draft guidance announced by the USA, but also compares and analyzes the similarities and differences between USA and Taiwan, and further explains the logics that USA applies to clarify and qualify CADe for marketing, so that the Department of Health (DOH) in Taiwan could use them as references. Meanwhile, the article collects the related requirements by the Administrative Procedure Act and by the Freedom of Government Information Law of our nation, and makes the following suggestions on MD regulations to the DOH: creating product code in the system of categorization, providing clearer definition of classification, and actively announcing the (abbreviated) marketing route that secures legal permission for each individual product. 5、A Discussion on the Recent Cases Concerning the Joint Infringement of Method/Process Patents in the U.S. and Japan In the era of internet and mobile communication, practices of a method patent concerning innovative service might often involve several entities, and sometimes the method patent can only be infringed jointly. Joint infringement of method/process patents is an issue needed to be addressed by patent law, since it is assumed that a method patent can only be directly infringed by one entity to perform all the steps disclosed in the patent. In the U.S., CAFC has established the "control or direction" standard to address the issue, but the standard has been criticized and it is under revision now. In Japan, there is no clearly-established standard to address the issue of joint infringement, but it seems that the entity that controls and benefits from the joint infringement might be held liable. Based on its discussion about the recent development in the U.S. and Japan, this article attempts to provide some suggestions for inventors of innovative service models to use patents to protect their inventions properly: they should try to avoid describing their inventions in the way of being practiced by multi-entities, they should try to claim both method and system/apparatus inventions, and they should try to predict the potential infringement of their patents in order to address the problem of how to prove the infringement.
Impact of Government Organizational Reform to Scientific Research Legal System and Response Thereto (2) – For Example, The Finnish Innovation Fund (“SITRA”)Impact of Government Organizational Reform to Scientific Research Legal System and Response Thereto (2) – For Example, The Finnish Innovation Fund (“SITRA”) III. Comparison of Strength and Weakness of Sitra Projects 1. Sitra Venture Capital Investment Model In order to comprehend how to boost innovation business development to upgrade innovation ability, we analyze and compare the innovation systems applied in Sweden, France and Finland[1] . We analyze and compare the characteristics, strength and weakness of innovation promotion models in terms of funding, networking and professional guidance. Generally, the first difficulty which a start-up needs to deal with when it is founded initially is the funding. Particularly, a technology company usually requires tremendous funding when it is founded initially. Some potentially adequate investors, e.g., venture capitals, seldom invest in small-sized start-up (because such overhead as supervision and management fees will account for a high percentage of the investment due to the small total investment amount). Networking means how a start-up integrates such human resources as the management, investors, technical advisors and IP professionals when it is founded initially. Control over such human resources is critical to a new company’s survival and growth. Professional guidance means how professional knowledge and human resource support the start-up’s operation. In order to make its product required by the market, an enterprise usually needs to integrate special professional knowledge. Notwithstanding, the professional knowledge and talents which are available from an open market theoretically often cannot be accessed, due to market failure[2]. Assuming that Sitra’s funding is prioritized as Pre-seed-Initiation stage, Seed-Development stage and Follow-up – Growth stage, under Finland model, at the Pre-seed-Initiation stage, Sitra will provide the fund amounting to EUR20,000 when Tekes will also provide the equivalent fund, provided that the latter purely provides subsidy, while the fund provided by Sitra means a loan to be repaid (without interest) after some time (usually after commercialization), or a loan convertible to shares. Then, the loan would be replaced by soft or convertible (to shares) investment and the source of funding would turn to be angel investors or local seed capital at the Seed-Development stage. At this stage, the angel investors, local seed capital and Sitra will act as the source of funding jointly in Finland, while Tekes will not be involved at this stage. At the Follow-up-Growth stage, like the Sweden model, Sitra will utilize its own investment fund to help mitigate the gap between local small-sized funding and large-sized international venture capital[3]. How to recruit professional human resources is critical to a start-up’s success. Many enterprises usually lack sufficient professional human resources or some expertise. DIILI service network set up by Sitra is able to provide the relevant solutions. DILLI is a network formed by product managers. Its members actively participate in starts-up and seek innovation. They also participate in investment of starts-up independently sometimes. Therefore, they are different from angel investors, because they devote themselves to the starts-up on a full-time basis[4]. In other words, they manage the starts-up as if the starts-up were their own business. 2. Key to Public Sector’s Success in Boosting Development of Innovation Activity Business In terms of professional guidance, voluntary guidance means the direct supply of such professional resources as financing, human resource and technology to starts-up, while involuntary guidance means the supply of strategic planning in lieu of direct assistance to help the enterprises make routine decisions[5]. The fractured and incomplete professional service attendant market generates low marginal effect. Therefore, it is impossible for the traditional consultation service to mitigate such gap and the investment at the pre-seed initiation stage will be excessive because of the acquisition of the professional services. Meanwhile, professional advisors seldom are involved in consultation services at the pre-seed initiation stage of a start-up because of the low potential added value. Therefore, at such stage, only involuntary professional guidance will be available usually. Under Sitra model, such role is played by an angel investor. Upon analysis and comparison, we propose six suggested policies to boost innovation activities successfully as the reference when observing Sitra operation. First of all, compared with the French model, Finland Sitra and Sweden model set more specific objectives to meet a start-up’s needs (but there is some defect, e.g., Sitra model lacks voluntary professional guidance). Second, structural budget is a key to the successful model. Sitra will receive the funds in the amount of EUR235,000,000 from the Finnish Government, but its operating expenditure is covered by its own operating revenue in whole. Third, it is necessary to provide working fund in installments and provide fund at the pre-seed-initiation stage. Under both of Finland model and Sweden model, funds will be provided at the pre-seed-initiation stage (Tekes is responsible for providing the fund in Finland). Fourth, the difficulty in networking must be solved. In Sitra, the large-sized talent network set up by it will be dedicated to recruiting human resources. Fifth, the voluntary professional guidance is indispensable at the pre-seed-initiation stage, while the same is unavailable at such stage under Sitra model. Instead, the Sweden model is held as the optimal one, as it has a dedicated unit responsible for solving the difficulty to seek profit. Sixth, soft loan[6] will be successfully only when the loan cannot be convertible to shares. At the pre-seed initiation stage or seed-development stage, a start-up is usually funded by traditional loan. Assuming that the start-up is not expected to gain profit, whether the loan may be convertible to shares will also be taken into consideration when the granting of loan is considered (therefore, the fund provider will not be changed to the “capital” provider). Besides, the government authorities mostly lack the relevant experience or knowledge, or are in no position to negotiate with international large-sized venture capital companies. For example, under the French model, the government takes advantage of its power to restrict the venture capital investment and thereby renders adverse impact to starts-up which seek venture capital. Finally, the supply of own fund to meet the enterprises’ needs at seed-development stage and follow-up-growth stage to mitigate the gap with large-sized venture capital[7] is also required by a successful funding model. IV. Conclusion－Deliberation of Finnish Sitra Experience As the leading national industrial innovation ability promoter in Finland, Sitra appears to be very characteristic in its organizational framework or operating mechanism. We hereby conclude six major characteristics of Sitra and propose the potential orientation toward deliberation of Taiwan’s industrial innovation policies and instruments. 1. Particularity of Organizational Standing In consideration of the particularity of Sitra organizational standing, it has two characteristics observable. First, Sitra is under supervision of the Finnish Parliament directly, not subordinated to the administrative organizational system and, therefore, it possesses such strength as flexibility and compliance with the Parliament’s requirements. Such organization design which acts independently of the administrative system but still aims to implement policies has been derived in various forms in the world, e.g., the agency model[8] in the United Kingdom, or the independent apparatus in the U.S.A. Nevertheless, to act independently of the administrative system, it has to deal with the deliberation of responsible political principles at first, which arouses the difficulty in taking care of flexibility at the same time. In Taiwan, the intermediary organizations include independent agencies and administrative corporations, etc., while the former still involves the participation of the supreme administrative head in the right of personnel administration and is subordinated to the ministries/departments of the Executive Yuan and the latter aims to enforce the public missions in the capacity of “public welfare” organization. Though such design as reporting to the Parliament directly is not against the responsible political principles, how the Parliament owns the authority to supervise is the point (otherwise, theoretically, the administrative authorities are all empowered by the parliament in the country which applies the cabinet system). Additionally, why some special authorities are chosen to report to the parliament directly while other policy subjects are not is also disputable. The existence of Sitra also refers to a circumstantial evidence substantiating that Finland includes the innovation policy as one of the important government policies, and also the objective fact that Finland’s innovation ability heads the first in the world. Second, Sitra is a self-sufficient independent fund, which aims to promote technical R&D and also seeks profit for itself, irrelevant with selection of adequate investment subjects or areas. Instead, for this purpose, the various decisions made by it will deal with the utility and mitigate the gap between R&D and market. Such entity is responsible for public welfare or policy projects and also oriented toward gain from investment to feed the same back to the individuals in the organization. In the administrative system, Sitra is not directed by the administrative system but reports to the Parliament directly. Sitra aims to upgrade the national R&D innovation ability as its long-term goal mission and utilizes the promotion of innovation business and development of venture capital market. The mission makes the profit-orientation compatible with the selection of investment subjects, as an enterprise unlikely to gain profit in the future usually is excluded from the national development view. For example, such industries as green energy, which is not likely to gain profit in a short term, is still worth investing as long as it meets the national development trend and also feasible (in other words, selection of marketable green technology R&D, instead of comparison of the strength and weakness in investment value of green energy and other high-polluted energy). 2. Expressly Distinguished From Missions of Other Ministries/Departments For the time being, Sitra primarily invests in starts-up, including indirect investment and direct investment, because it relies on successful new technology R&D which may contribute to production and marketability. Starts-up have always been one of the best options, as large-sized enterprises are able to do R&D on their own without the outsourcing needs. Further, from the point of view of an inventor, if the new technology is marketable, it will be more favorable to him if he chooses to start business on his own or make investment in the form of partnership, instead of transfer or license of the ownership to large-sized enterprises (as large-sized enterprises are more capable of negotiation). However, note that Sitra aims to boost innovation activities and only targets at start-up business development, instead of boosting and promoting the start-up per se. Under the requirement that Sitra needs to seek profit for itself, only the business with positive development view will be targeted by Sitra. Further, Sitra will not fund any business other than innovation R&D or some specific industries. Apparently, Sitra only focuses on the connection between innovation activities and start-up, but does not act as the competent authority in charge of small-sized and medium-sized enterprises. Meanwhile, Sitra highlights that it will not fund academic research activities and, therefore, appears to be distinguished from the competent authority in charge of national scientific research. Though scientific research and technology innovation business, to some extent, are distinguished from each other in quantity instead of quality, abstract and meaningless research is existent but only far away from the commercialization market. Notwithstanding, a lot of countries tend to distinguish basic scientific research from industrial technology R&D in the administration organization's mission, or it has to be. In term of the way in which Sitra carries out its mission, such distinguishing ability is proven directly. 3. Well-Founded Technology Foresight-Based Investment Business The corporate investments, fund investments and project funding launched by Sitra are all available to the pre-designated subjects only, e.g. ecological sustainable development, energy utilization efficiency, and social structural changes, etc. Such way to promote policies as defining development area as the first priority and then promoting the investment innovation might have some strength and weakness at the same time. First of all, the selection of development areas might meet the higher level national development orientation more therefor, free from objective environmental restrictions, e.g. technical level, leading national technology industries and properties of natural resources. Notwithstanding, an enterprise’s orientation toward innovation R&D might miss the opportunity for other development because of the pre-defined framework. Therefore, such way to promote policies as defining development areas or subjects as the first priority will be inevitably based on well-founded technology foresight-based projects[9], in order to take various subjective and objective conditions into consideration and to forecast the technology development orientation and impact to be faced by the home country’s national and social economies. That is, said strength and weakness will be taken into consideration beforehand for foresight, while following R&D funding will be launched into the technology areas pre-designated after thorough analysis. 4. Self-Interested Investment with the Same High Efficiency as General Enterprises Sitra aims to gain profit generally, and its individual investment model, e.g., DIILI, also permits marketing managers to involve business operation. The profit-sharing model enables Sitra to seek the same high efficiency as the general enterprises when purusing its innovation activity development. The investment launched by Sitra highlights that it is not “funding” (which Tekes is responsible for in Finland) or the investment not requiring return. Therefore, it has the system design to acquire corporate shares. Sitra participates in a start-up by offering its advanced technology, just like a general market investor who will choose the potential investment subject that might benefit him most upon his personal professional evaluation. After all, the ultimate profit will be retained by Sitra (or said DIILI manger, subject to the investment model). Certainly, whether the industry which requires permanent support may benefit under such model still remains questionable. However, except otherwise provided in laws expressly, said special organization standing might be a factor critical to Sitra profit-seeking model. That is, Sitra is not subordinated to the administrative system but is under supervision of the parliament independently, and how its staff deal with the conflict of interest issues in the capacity other than the public sector’s/private sector’s staff is also one of the key factors to success of the system. 5. Investment Model to Deal With Policy Instruments of Other Authorities/Agencies Sitra decides to fund a start-up depending on whether it may gain profit as one of its priorities. As aforesaid, we may preliminarily recognize that the same should be consistent with funding to starts-up logically and no “government failure” issue is involved. For example, the funding at the pre-seed-initiation stage needs to tie in with Tekes’ R&D “funding” (and LIKSA service stated herein) and, therefore, may adjust the profit-seeking orientation, thereby causing deviation in promotion of policies. The dispute over fairness of repeated subsidy/funding and rationality of resource allocation under the circumstance must be controlled by a separate evaluation management mechanism inevitably. 6. Affiliation with Enhancement of Regional Innovation Activities Regional policies cannot be separable from innovation policies, especially in a country where human resources and natural resources are not plentiful or even. Therefore, balancing regional development policies and also integrating uneven resource distribution at the same time is indispensable to upgrading of the entire national social economic benefits. The Finnish experience indicated that innovation activities ought to play an important role in the regional development, and in order to integrate enterprises, the parties primarily engaged in innovation activities, with the R&D ability of regional academic research institutions to upgrade the R&D ability effectively, the relevant national policies must be defined for adequately arranging and launching necessary resources. Sitra's approaches to invest in starts-up, release shares after specific period, integrate the regional resources, upgrade the national innovation ability and boost the regional development might serve to be the reference for universities’ centers of innovative incubator or Taiwan’s local academic and scientific sectors[10] to improve their approaches. For the time being, the organization engaged in venture capital investment in the form of fund in Taiwan like Sitra of Finland is National Development Fund, Executive Yuan. However, in terms of organizational framework, Sitra is under supervision of the Parliament directly, while National Development Fund is subordinated to the administrative system of Taiwan. Though Sitra and National Development Fund are both engaged in venture capital investments primarily, Sitra carries out its missions for the purpose of “promoting innovative activities”, while the National Development Fund is committed to achieve such diversified goals as “promoting economic changes and national development[11]” and is required to be adapted to various ministries’/departments’ policies. Despite the difference in the administrative systems of Taiwan and Finland, Sitra system is not necessarily applicable to Taiwan. Notwithstanding, Sitra’s experience in promotion and thought about the system might provide a different direction for Taiwan to think when it is conceiving the means and instruments for industrial innovation promotion policies in the future. [1] Bart Clarysse & Johan Bruneel, Nurturing and Growing Innovation Start-Ups: The Role of Policy As Integrator, R&D MANAGEMENT, 37(2), 139, 144-146 (2007). Clarysse & Bruneel analysis and comparison refers to Sweden Chalmers Innovation model, French Anvar/Banque de Developpement des PMEs model and Finland Sitra PreSeed Service model. [2] id. at 141-143. [3] id. at 141. [4] id. at 145-146. [5] id. at 143. [6] The loan to be repaid is not a concern. For example, the competent authority in Sweden only expects to recover one-fourths of the loan. [7] Clarysse & Bruneel, super note 26, at 147-148. [8] 彭錦鵬，〈英國政署之組織設計與運作成效〉，《歐美研究》，第30卷第3期，頁89-141。 [9] Technology foresight must work with the innovation policy road mapping (IPRM) interactively, and consolidate the forecast and evaluation of technology policy development routes. One study case about IPRM of the environmental sustainable development in the telecommunication industry in Finland, the IPRM may enhance the foresighted system and indicates the potential factors resulting in systematic failure. Please see Toni Ahlqvist, Ville Valovirta & Torsti Loikkanen, Innovation policy road mapping as a systemic instrument for forward-looking policy design, Science and Public Policy 39, 178-190 (2012). [10] 參見李昂杰，〈規範新訊：學界科專辦法及其法制配套之解析〉，《科技法律透析》，第23卷第8期，頁33（2011）。 [11] National Development Fund, Executive Yuan website, http://www.df.gov.tw/(tftgkz45150vye554wi44ret)/page-aa.aspx?Group_ID=1&Item_Title=%E8%A8%AD%E7%AB%8B%E5%AE%97%E6%97%A8#(Last visit on 2013/03/28)
Executive Yuan Promotes Free Economic Demonstration ZoneI.Background To promote more liberal and internationalized development of Taiwan economy, Premier of Executive Yuan approved the “Free Economic Demonstration Zone Plan” on April 26, 2013. Meanwhile, an Executive Yuan Working Group on Promotion of Economic Demonstration Zone is set up to accelerate the mapping out of the promotion programs as well as detailed action plans. The first phase of the Free Economic Demonstration Zone is to be officially initiated in July. According to the “Free Economic Demonstration Zone Plan”, the relevant laws and provisions regarding the flowing of human and financial capitals, and of logistics, will be loosen up to a great degree, based on the core ideas of liberalization, internationalization, and forwardness. Other related measures such as offering of lands and taxation would also be made, in order to attract capitals from both the inside and outside of the country. In addition, the Free Economic Demonstration Zone will first develop economic activities such as intelligent computing, international medicine services, value-added agriculture and cooperation among industries, to accelerate the transformation of the industrial structure of Taiwan. In order to construe an excellent environment for business of full liberalization and internationalization, the promotion strategies will be focused on “break-through of legal frameworks and innovations of management mechanisms”. II.Content of the Plan To accelerate the promotion process, the Free Economic Demonstration Zone will be conducted in two phases. The first phase is centered on the existing free trade port areas, including five ports and one airport, incorporated with the nature of “being inside the country border but outside the tariff zone”. All the industrial parks in the near counties and cities will also be integrated. The promotion will be set out simultaneously in the north, middle and south of Taiwan. The effects of the promotion are expected to be magnified by fully utilizing the resources and the unique characters of industries of each region. Moreover, the promulgation of a special legislation on the Free Economic Demonstration Zone would be facilitated in the future. After this special legislation is passed, the set-ups of demonstration zones can be applied by authorities either of central or of local government and the related promotion works of the second phase will be unfolded immediately. According to the Executive Yuan, the Free Economic Demonstration Zone will be beneficial in terms of creating positive conditions for Taiwan to participate in regional trade organizations and attract both local and foreign investment, injecting new movement into the economic growth of Taiwan. III.Recent Development In addition, on August 8, 2013, relevant discussions on “Furtherance Plan for Free Economic Demonstration Zone Phase One” are further unfolded in the Executive Yuan conference. In addition, the Premier also indicates, that the furtherance of the Free Economic Demonstration Zone (hereafter: FEDZ) is divided into two phases. The first phase starts from the moment that the Plan is approved till the related special legislation is passed and promulgated. In this phase, the relevant tasks can be achieved through the ways of promulgation of administrative orders. On the other hand, the tasks concerning taxation benefits and other parts that involve legislation will not able to be initiated till the second phase of the Plan. For those tasks, the Council for Economic Planning and Development is asked to complete the drafting of this special legislation and related procedures for registering it into the Executive Yuan, together with the Ministry of Economic Affairs and other concerned agencies, in the hope that the related legislation works of the Executive Yuan can be completed before the end of this year. In respect of “Furtherance Plan for Free Economic Demonstration Zone Phase One”, Premier Jiang further points out, that FEDZ is a model incorporates the concept of “being inside the country border but outside the tariff zone” and the idea of “combining the stores upfront and the factories behind, outsourcing manufactures”. In this way, the hinterland of a port can be expended and magnified effects to be achieved through using the resources provided by the factory in behind. Under this pattern, the expansion effects that cities and counties such as New Taipei City and Changhua Country fight for, can be further extended by this concept of “factories in the back”. As for Port of Anping, over which Tainan City government has proactively fought for, can be listed as a demonstration zone once the Executive Yuan approved it as free trade port zone. In the future, other places that are with forward-looking industry and suitable can still be enlisted. Premier Jiang further expresses that, there are four demonstration industries in the first phase, including intelligent computing, international medicine services, value-added agriculture and cooperation among industries. Yet, he also points out that the demonstration of liberalized economy is a concept of “4+N”. It means that the demonstration will not be limited to the scope of these four industries. Other industries that match up with the idea of liberalization, internationalization and foresight can all be incorporated into FEDZ through continuing examination. Moreover, Premier Jiang later mentions on August 14th, that FEDZ is a crucial task for the government at this moment. He thus requests the Ministry of Economic Affairs, Ministry of Transportation and Communications, Ministry of Health and Welfare, and the Council of Agriculture, to enhance the training and service quality of staffers of the single service window of furtherance of FEDZ. Moreover, Premier Jiang additionally indicated in November, that the scope of the FEDZ will include Pingtung Agricultural Biotechnology Park and Kaohsiung Free Trade Port Area. The combination of the two will facilitate adding value to the agriculture in Taiwan and put momentum into quality agriculture, making the high-quality agricultural products of our country being sold to all over the world with swift logistic services. Premier Jiang also mentioned, that in order to avoid Taiwan being marginalized amid regional integrations of global economies, the government is facilitating industries of potentials by proactively promote the FEDZ. The current approach is to expend the original free trade port area with legislative bases, creating the demonstration zones of free economy by combing original establishments such as Pingtung Agricultural Biotechnology Park. If this approach and system is proved feasible, the next step would be promoting it to island-wide, making the whole nation open-up. IV.Conclusion In the past decade, the economic development in Taiwan, compared to neighboring economic zones such as Hong Kong, Korean or Singapore, was indeed stagnant. It is thus a positive move for the government to put great efforts in promoting FEDZ, in the hope that the liberalization and internationalization of the economy of this country can therefore be significantly improved. Yet, some commentators are of slightly more skeptical opinions, reminding that in terms of the tax relaxation in the Plan, similar approach was already taken by the government before, which did not lead to the expected outcome. In sum, it still remains as a continuing task for us and for the administration as well, to ponder on how Taiwan can find out its own unique strength in the face of global competition. How we can attract more international partners, to create mutual economic benefits. The FEDZ is undoubtedly a first step. Nevertheless, challenges are still ahead of the government, as to how to take many more steps in the future, in order to make Taiwan to march on the stage of the world again.
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