Proposed by Legislative Speaker Wang Jin-pyng with support from the Executive Yuan and after detailed discussions with Academia Sinica, the nation's top research institute, the new legislation aimed to provide advantageous environments for manufacturers of new medicines and advanced medical equipment.
Article 8 of the act, for example, stipulated that executives of biotech companies would be exempt from paying income tax derived from company shares before they were transferred to new shareholders. This was intended to encourage more experts to participate as investors in this field, Liang Chi-ming, director of the Office of Public Affairs at the Academia Sinica, said June 23. "Some investors were reluctant to launch new ventures given the losses they might suffer before profits could be made," he said.
John Chiu, CEO of Tainan-based Firstep Bioresearch Inc., cited his own experience when a group of U.S. biotech scholars visited Taiwan last year. The academics declined to exchange their technical know-how for shares in Taiwanese companies because it would mean transferring advanced technology without clear future value while still having to pay taxes on the shares, Chiu said in a June 23 commentary in the Chinese-language China Times. The new legislation could resolve that problem, he said.
Article 6 of the act stated that up to 35 percent of biotech companies' expenses for personnel training and research and development could be offset against enterprise income tax for five years once they started to pay the tax. It also provided that, should a company's investment in personnel training and R&D exceed average amounts for the previous two years, half of the additional investment costs could be deducted from enterprise income tax.
Article 12 stipulated that workers in government research institutions could serve as biotech company executives. Liang said this would enable more biotech experts to enter the sector, thus making it easier for companies to attract investor capital.
Chiu, on the other hand, suggested that further regulations regarding implementation of the act were necessary to prevent government workers collaborating with businesspeople to make illegal profits.
Domestic investment in this sector totaled US$767 million in 2005, according to the 2006 White Paper on the Biotechnology Industry in Taiwan published by the Ministry of Economic Affairs. Health food, medicines and medical facilities represented the core of the sector, the White Paper stated, adding that the global market for this industry would be worth an estimated US$180 billion in 2009.
The government's "Challenge 2008 National Development Plan," initiated in 2002, listed biotechnology as one of the key industries to be developed. The Executive Yuan's National Development Fund drew up a US$606 million budget to invest in this industry, Ho Mei-yueh, minister of the Cabinet-level Council for Economic Planning and Development, said in a June 19 report in the Chinese-language China Times. To date, US$110 million had been invested directly in biotech companies and US$130 million in domestic companies through venture capital, she said.
This sector, Ho explained, was different from the electronics sector--the nation's leading industry--due to biotechnology's need for longer-term investment and its higher risks. The industry would be developed with a base in the Hsinchu Biomedical Science Park following implementation of the legislation which will run through 2021, she said, pointing out that the National Development Fund still had US$366 million to be invested in the sector.
Academia Sinica President Wong Chi-huey saw the legislation as "important and timely." Instead of repeatedly amending existing regulations, the act represented a new foundation that would rapidly boost the industry, he said in a June 16 press release. Wong added that biotechnology, as a knowledge-intensive industry based on creativity and innovation, usually required five to 10 years of R&D before a new product was invented but could return higher profits and be sold over a longer period than products of other sectors. Wong expected the regulations would help move local businesses' focus from processing and manufacturing to R&D.
Write Annie Huang at shihyin@mail.gio.gov.tw