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Taiwan SME Policy Formulation and SME Development

Service. Minding. Esteem. Awareness. CACCI Chambers Operation Course. Taiwan SME Policy Formulation and SME Development. Dr. Robert S. Q. Lai Director General Small and Medium Enterprise Administration Ministry of Economic Affairs Taiwan November 27, 2007. CONTENTS I. Foreword

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Taiwan SME Policy Formulation and SME Development

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  1. Service. Minding. Esteem. Awareness CACCI Chambers Operation Course Taiwan SME Policy Formulation and SME Development Dr. Robert S. Q. Lai Director General Small and Medium Enterprise Administration Ministry of Economic Affairs Taiwan November 27, 2007

  2. CONTENTS I. Foreword II.Experience of Taiwan’s Economic Development III. Government Policies IV. Role of SMEs in 2006 V. Policy Formulation for Fostering SMEs VI. Key Measures for SMEs Development VII.Conclusion and Suggestions

  3. I.Foreword About Taiwan Area: 36,000 sq. km Population: 22.87million* Per Capita Income: US$16,471* Foreign Trade: World’s 16th- largest trading nation* Number of Enterprises: 1.27 million* Number of SMEs: 1.24million* Ratio of SMEs to All Enterprises: 97.8%* *Statistics in 2006

  4. II.Experience of Taiwan’s Economic Development Sources: Statistics Indicators of Major Countries, Statistic Department, MOEA, March 2007

  5. Unit: % Sources: 1. Taiwan Statistical Data Book 2006, CEPD, June 2007 2. Statistics Indicators of Major Countries, Statistic Department, MOEA, May 2007 3. Directorate General of Budget, Accounting and Statistics, 2007

  6. 3. Policies and Strategies in Different Stages of Taiwan’s Economic Development (1) Import-Substitution / Labor-Intensive Industry : 1953-1962 (2) Export-Expansion / Light Industry : 1963-1972 (3) Import-Substitution / Heavy Industry : 1973-1980 (4) Industry Upgrade / Strategy Industry : 1981-1990 (5) Hi-Tech Industry : 1991-2000 (6) Creative R&D Industry : after 2001

  7. 4. Economic Developing Process of Taiwan (1) Economic Development Stages Admitted to WTO Jan 2002 2010 1950 1960 1970 1980 1990 2000 Labor Intensive Industry Creative R&D Industry Light Industry Heavy Industry Strategic Industry Hi-Tech Industry 2) 1950 – 2000 Economic Growth Rate : 8.1%(Average) 2001 Economic Growth Rate : - 2.18% 3) 2002 Economic Growth Rate : 4.6% 2003 Economic Growth Rate : 3.43% 2004 Economic Growth Rate : 6.07% 2005 Economic Growth Rate : 4.09% 2006 Economic Growth Rate : 4.62% 4) 2006 GDP Structure : Service Sector 71.65% Industry Sector 26.81% Agriculture Sector 1.53%

  8. 5.The Current Status of SMEs in Taiwan Source: White Paper on SMEs, 2007

  9. 6. Enterprise Ages in Taiwan units: no. of enterprises Source: Collected from Ministry of Finance Tax Data Center Business Tax statistics.

  10. 7. SME’s Development Policy Formation in Taiwan Trends of Industrial Development and Transformation Innovation Drive (Knowledge) Investment Drive (Capital) Resource Drive Current Stage Of Taiwan Years

  11. Positive Recycle of Economic Development 8. Relationship of Entrepreneurship & Economic Growth Transformation and Upgrade Economic Development & Growth Existed Enterprises Closed Straits and Predicament Moved out Enterprises and Industries Replenish Establish another new business Emergence of new SMEs with technology-oriented & high added value Start-Ups

  12. III.Government Policies 1. Challenge 2008: National Development Plan ( 336 sub-plans at NT$2.5 trillion budget ) 4 Major Investments 10 Major Plans (1) Cultivate Talent with View of Internationalization & Innovation Ability 1e-Generation HR Training Plan 2Culture Innovation Industrial Development Plan 3International Innovation and R&D Base Plan 4High value-added Industrial Plan (2) R&D and Innovation to Develop Taiwan into R&D and GlobalSupply Center of Products with High Value-added 5 Double Tourists Plan 6e-Taiwan Plan 7Operation Headquarters Plan 8Island-wide Transport Skeleton Plan (3)International Logisticsto Build Taiwan as Regional Operation Headquarters (4)High-quality Living Environmentto Build up Taiwan Barrier-free Sustained Living Environment 9Conserve Water Resources & Ecology 10 New Urban Community Construction Plan

  13. 2. New 10 Construction Projects Innovation, R&D, HR Investment At Least 15 Departments and Institutes Rank No.1 in Asia in 5 Years. At Least One University Ranks Top100 Worldwide within 10 Years 1 Top-ranked Universities & Research Centers (NT$50Billion) Sites in Northern, Central, Southern & Eastern Taiwan 6,000km Seamless Broadband Twin-nets Held Taiwan Expo 2008 Cultural Innovation, Knowledge Industry 2 International Arts & Popular Music Center(NT$33.4B) 3 M Taiwan Plan(NT$37B) 4 Taiwan Expo(NT$30.1B) 5 Convert Taiwan Railway Into High Speed Railroad System (NT$39.9B) 6 Third-stage Highway Program(NT$43.9B) 7 ConvertKaohsiung Harbor into Continental Container Shipping Center(NT$24.2B) Turn in 8 Phases and Develop 3 New Branches Develop Ilan-hualien-taitung-Nantou Tourism Area Facilitating Daily Living Circles of Residents Construction of Deep-water Harbor, 15,000TEU Container Yard International Competition, Global Logistics Construct 10 Rapid Transit Systems Pipe Rate of Waste Water Sewerage from 10.7% to 27.3% 4 Great Lakes in Taoyuan, Yunlin, Tainan, Kaohsiung-pingtung. Desalting Plant In Kinmen, Matsu, Penghu & Hsinchu Science-based Park Sustained Environment, Convenient Living 8 Rapid Transit Systems for Northern, Central & Southern Taiwan(NT$142B) 9 Waste Water Sewerage System(NT$39.4B) 10 Ground Reservoir & Desalting Plant(NT$31.5B)

  14. 3. Develop Service Industry to Enhance Employment & Upgrade of Living Quality Target & Focus Annual Growth of Service Industry at 6.1% Annual Growth of Knowledge Intensive Service Industry at 8.0% Industry Assistance 1. Finance 2. Logistics & Transportation 3. Communication & Media 4. Medical Service & Care 5. Personnel Training, Dispatch & Property Management 6. Tourism, Sports & Amusement 7. Culture Innovation 8. Design 9. Information 10. R&D 11. Environment Protection 12. Engineering Consultancy strategies 1. Deregulation 2. Infrastructure Environment 3. Industrial Policy 4. Incentives for Investment 5. Releasing Public Resources 6. Human Resource Development 7. Instigation of Vitality of Private Sector 8. Expansion of Demand 9. Mechanism of Innovation, R&D Ministry of Economic Affairs is the Principal Government Sponsoring Agency for Such Service Industries as Logistics, Cultural Innovation, Design, Information, and R&D

  15. 4-1 National development goals and vision The Executive Yuan has reviewed and overhauled the country's socioeconomic framework and developmental direction in response to the rapidly changing socioeconomic environment, both in Taiwan and overseas. With a "prosperous, just, sustainable, and beautiful Taiwan" as its new vision for national development, the government plans to implement a National Development Package Program in three stages, each lasting three years. This program is the government's systematic development blueprint for the period of 2007 to 2015. Accordingly, the MOEA has formulated the "Stage I: Three-Year Sprint Program－ Industrial Development Package Program" in accordance with the Executive Yuan's two administrative priorities of “big investments" in Taiwan and caring for the disadvantaged through a policy of “big warmth." The MOEA will focus its efforts on the two flagship programs of "Building a Superior Investment Environment " and "Initiating a New Era in Industrial Development," and hopes to achieve the per-capita GDP goals of US$20,000 by 2009 and US$30,000 by 2015.

  16. A prosperous, just, sustainable and beautiful Taiwan National development goals and vision • Development goals for 2015 5% average annual economic growth & US$30,000 per capita GDP Goals Vision Manufacturing * Note: The growth rates of industries in 2015 are the average growth rates from 2006 to 2015.

  17. US$20,000 per capita GDP • Development goals for 2009 * Note: The listed growth rates of industries in 2009 are the average growth rates from 2006 to 2009.

  18. Concepts • Promoting high-value output in all industries; • upgrading industries across the board. • 2. Promoting Taiwan brands; creating profit via product differentiation. • 3. Integrating manufacturing and services, boosting industrial capacity. • 4. Improving energy efficiency, pursuing a win-win situation for energy, industry, and environmental protection. • 5. Emphasizing social justice and balanced industrial development.

  19. Building a superior investment environment Initiating a new era in industrial development 4-2 Current major economic policies ◎ Providing land on preferential terms ◎Ensuring an ample labor supply ◎Providing funding assistance ◎Improving efficiency of the environmental impact assessment (EIA) process ◎Establishing mechanisms for encouraging private investment ◎Development of emerging industries ◎Industrial upgrading and transformation ◎Balanced industrial development

  20. IV. Role of SMEs in 2006 1. Criteria for Identifying SMEs SMEs Micro Business SECTORS Basic Exception Manufacturing, Construction, Mining, Quarrying Capital < US$2.3 Million Employees < 200 persons Employees < 20 persons Commerce, Service Preceding year revenue < US$2.9 Million Employees < 50 persons Employees < 5 persons

  21. 2. Statistics of SMEs inTaiwan Source: White Paper on Small and Medium Enterprises in Taiwan, MOEA

  22. 3. The Age of Most SMEs is 10 to 20 Years, which Shares 23.32% inSMEs. The Age over 20 Years Shares 18.73%. And the Ownership Structure is mostly of the Single-owner Type（ 58.33% ） 4. The Number of newly Start-up SMEs is 108,320 in 2006. SME Maintains its Vitality and Spirit of Entrepreneurship 5. Average Number of Persons Employed by SMEs is 6.23 (27.16 in Manufacturing Sector)

  23. 6. Government Assistance (1) After getting the assistance measures of management, financing & credit guarantee, etc., many SMEs become large enterprises. (2) Among them, 226 enterprises listed on Taiwan Stock Exchange market, 276 listed on GreTai Securities market, 141 listed on Emerging Stock Securities market. (3) For example, acer and Foxconn are the benchmark enterprises.

  24. Award Strategy Top SMEs, Incorporation Co., 1~3% 1. National Award 2. Rising Star Award 3. R&D Award Middle Layer of SMEs, Limited Co., 27~34% mechanism for supporting entrepreneurial activity & innovation Guidance Strategy 11 Guidance Systems Start-up SMEs Enterprises Grouping Strategy 1. Mutual Cooperation 2. Industry Cluster 3.Local Featured Industry 4.Financing Programs Foundation of SMEs 65~70% V. Policy Formulation for Fostering SMEs 1. Philosophy – Service, Minding, Esteem, Awareness

  25. 2. Vision and Strategies Create Sound Developing Environment of SMEs Set up A Platform of Entrepreneurship and Incubation for SMEs Enhance the Application Ability of Information Technology of SMEs Entrepreneur Park for the Growth and Development of SMEs Strengthen the Guidance Function of Management for SMEs Implementation of Financing Support Mechanism for SMEs

  26. Business Model/Quality National Awards of SMEs Market Share Rising Star Award R&D • SME Innovation Research Award • Excellent SBIR Creation/ R&D Alliance/ Industry Upgrade/ R&D Achievement/ Industry Contribution Awards Innovation Business Start-up Award 3. Award and Commendation

  27. 4. Measures in Strategies (1) Creating a Healthy Environment for the Development of SMEs a.Advocating the fair laws for SMEs b.Research on and analysis of SMEs’ business environment c.Promotion of general planning affairs

  28. (2) Building a Platform for Enterprise Start-up and Incubation a.Establishment of a mechanism for supporting entrepreneurial activity and innovation b.Strengthening the SME innovation and incubation function c.Strengthening SME Manpower Resource Development d.Participation in international activities and cultivation of international SME talent

  29. (3) Enhancing SMEs’ Information Technology Capabilities a.Strengthening SMEs’ information management capabilities b.Promotion of knowledge management applications c.Strengthening SMEs’ quality management capabilities

  30. (4) Strengthening the SME Management Guidance Function a.Strengthening management quality and promoting upgrading and transformation b.Helping SMEs to secure business opportunities of government procurement c.Development of industries with local characteristics d.Promotion of mutual assistance between enterprises e.Helping small enterprises to survive and develop

  31. (5) Integrating the SME Financing Mechanism a.Strengthening the functions of the One-stop Service Center b.Holding various SME Joint Services to help SMEs solve financing problems c.Encouraging the development of sound financing and accounting systems d.Promoting Credit Guarantee Fund, Joint Assistance Fund to offer SMEs various diagnosis, financing and credit guarantee e.Establishing trust investment account for start-up enterprise and incubation

  32. (6)Balanced industrialdevelopment  SME development vision Vision, strategies and goals for 2009 1.35 million SMEs in Taiwan earn over NT$13.8 trillion and employ more than 7.99 million persons 1.24 million SMEs in Taiwan earn over NT$10 trillion and employ more than 7.75 million persons Goals 2006 2009

  33. Specific measures • Developing and diffusing common technologies and materials. Examples: Application of new functional materials in bamboo carbon textiles and germicidal, odor-reducing textiles. • Promotion of MIT certification; enhancement of image of products with common marks. Examples: Taiwan-made “Shoe Mark," “Towel Mark,” “Sock Mark,” etc. • Strengthening product labeling to prevent poor-quality foreign goods from damaging local markets. Examples: Requiring that imported towels bear labels and shoes bear brands; strengthening inspection. • Use of a trade relief mechanism to assist ailing industries. Examples: Towels, shoes Assisting weak industries • Guidance for distinctive local industries • Establishing special zones for specific traditional industries; promoting the formation of clusters. Glass zone: Expected to attract 25 companies and investment of NT$6 billion; will generate annual sales of NT$12 billion and create 1,000 jobs. Sock zone: Guidance is being provided to 1,000 companies with a total annual production value of NT$3.12 billion. Guidance for local industries • Incubation of innovation and value-added Establishment of four incubation support centers and provision of assistance to 2,000 innovative, globally competitive enterprises. • Narrowing the digital gap among industries Assistance for the development of 120 industrial e-communities and the use of e-commerce by 75,000 SMEs. • Helping SMEs improve quality Guidance for the establishment of 120 industrial quality clusters (with more than 1,200 companies), and assistance for more than 60 enterprises in passing international quality certification. Guidance for SMEs

  34. VI. Key Measures for SMEs Development 1. Eleven Guidance Programs to Assist SMEs (1) Finance and Credit Guidance System (2) Management Guidance System (3) Production Technology Guidance System (4) Research & Development Guidance System (5) Information Management Guidance System

  35. (6) Industrial Safety Guidance System (7) Pollution Control Guidance System (8) Marketing Guidance System (9) Mutual Support & Cooperation Guidance System (10) Quality Enhancement Guidance System (11) Business Startup & Incubation Guidance System

  36. 2. Advocacy of SMEs --the Fair Legal Environment (1)Undertake Research and Collect Information on SME- related Legislations. The Statue Governing the Development of Small and Medium Enterprises Is Revised frequently in Line with Changes in the Overall Environment. (2)Work with SMEs and SME Associations to Draw up Legislations Relating to SMEs, then Making Decisions in Small and Medium Enterprise Policy Review Committee. Advocacy of SMEs Legal Rights for their Healthy Development.

  37. 3. SME Credit Guarantee Fund (1) Established in 1974, Provide Credit Guarantees to SMEs which Are Promising but Short of Collateral. Help Obtain Finance from Financial Institutions (2) Credit Guarantee Service Statistics Unit: No., NT$billion * Statistics from 1974 to the End of August, 2007

  38. 4. Platform of Entrepreneurship and Incubation for SMEs Vision: To Foster Taiwan as an Entrepreneur Society Incubation Services To Develop the Asia Entrepreneurial Development Center (AEDC) Financing Support for Start-ups Knowledge and Information providing

  39. 4-1 Incubation Services (1) Purpose A. Help SMEs Access Resources of Innovation and Entrepreneur B. Enhance SMEs Ability in R&D and Start-up New Business C. Facilitate More Competitive SMEs and Promote Economic Development

  40. (2) Goals of the Policy • Creating a Learning Mechanism for Starting New Business. • Building up a Society of Knowledge-based Entrepreneurship • (3) Strategies of the Policy • Building the Mechanisms of Knowledge and Information Provision for Entrepreneurs. • Enhancing the Function of Incubation Service. • Assisting the Acquirement of Financing for Start-Ups.

  41. 78% (4) Enhancing the Function of Incubation Service(1/6) • A. Definition & Type of Incubation Center • 1) Definition: • Incubation centers are locations for the cultivation of innovation businesses, products and technologies, and for helping SMEs to upgrade and transform themselves. By providing start-ups with office space, instruments, equipment, R&D technology, helping them to secure financing, and by providing management consulting and other business services, they facilitate the effective integration of resources, helping to reduce the costs and risks that start-ups have to bear in the early stages of business development, and increase the possibility of new businesses successful rates. • 2)Type: 9% 9% 4%

  42. (4) Enhancing the Function of Incubation Service(2/6) 3)Number of Incubators in Taiwan

  43. (4) Enhancing the Function of Incubation Service(3/6) B. Function of Incubators • To reduce risks and expenses of investment and increase successful rate of start-up enterprises. • To foster new products, new business-model and new technology. • To provide guidance in commercializing R&D achievements. • To provide a location for cooperation of academia and industries. • To provide testing services and speed up the development of products. • To provide training courses, information and consultation.

  44. (4) Enhancing the Function of Incubation Service(4/6) C. Incubating Domain in Taiwan

  45. (4) Enhancing the Function of Incubation Service(5/6) D. Performance of Incubation Services

  46. (4) Enhancing the Function of Incubation Service(6/6) NatureWise Biotech & Medicals Corporation (Nan-kang Biotech Incubation Center) • Established in 2000.12.29 • Joined in Nan-Kang Biotech Incubation Center in 2004.12 • Major Technology of NatureWise： R&D in biotech, selling medicine, Chinese herbal medicine and health food. • Achievements： • Main product “LipoCol Forte” had earned the first license of the Committee on Chinese Medicine and Pharmacy, Department of Health, Executive Yuan. 2. Won the 2005 Taipei Biotech Award-Technology Commercialization. E. Case of Incubation Center

  47. (5) Since 1996, Have Set up 98 Incubators Spread over Taiwan. Among Them, Universities Share 78%, Research Institutions Share 9%, Government 9%, Private Sector 4% (6) Have Incubated over 2,000 SMEs, Created Investment Amount NT$28.9billion (US$920million) (7) Successfully Incubated Paradigm Enterprises Include Electronics, Information Technology, 3D Animated, Communication, Bio-tech Industries, etc.

  48. (8) Regional Distribution of Incubators in Taiwan • Northern Taiwan 46.3% • Central Chinese Taipei 21% • Eastern Taiwan 5.4% • Southern Taiwan 27.3% Source: Calculated based on data from SMEA

  49. Strategies Measures Guidance and assistance programs for incubators Expanding service capacities of incubators • Legislation • Compiling the guidelines of • operation for incubators Building up fine-quality incubating environment Training the professional managers of incubators • Training programs • exchanging incubation experiences • Fairs • Visit tour of incubators • NBIA、AABI、APEC Meetings Facilitating the cooperation and inter-action of incubators Popularizing the incubation information and Service • Year Book of incubators • Incubation Journals • Bi-monthly Publication • Evaluation Mechanism of • Performance for incubators Evaluating the performance of incubation services (9) Measures for Enhancing the Function of Incubation Service

  50. 4-2. Financial Support for Start-Ups(1/4) (1)Sources of Financing Incubation Fund Account Invest (15%) SME Investment Companies invest Private Funds invest SME Development Fund SMEs & Start-ups Capital Markets Domestic Banks Loans VC National Development Fund Reward invest Guarantee invest SME Credit Guarantee Fund Government Agencies

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