Click here for printer friendly page
Voices for reform: institutional changes are on the horizon as calls for reform gain momentum11/06/2008. Source: Asia Private Equity Review (APER).
 A new era is in the making as Asia’s institutions seek to liberalise their investment programmes, with private equity and venture capital expected to benefit from such reforms, according to Asia Private Equity Review (APER).
Ms Wu Xiaoling, former deputy governor of the People’s Bank of China and currently a member of the finance and economics committee of the National People’s Congress, has recently voiced her suggestions to Beijing at a public event. She argued that China’s banks ought to be allowed to invest in private equity funds, in order to promote the domestic private equity industry. At the same time, she suggested that measures ought to be taken to promulgate private equity guiding funds that have been established by a string of local government bodies.
Ms Wu’s comments came as Beijing passed a series of laws in favour of the domestic venture capital industry. However, local authorities are encountering difficulties in promoting them. One of the impediments is the lack of clear guidelines as to how deployment could be exercised in order to benefit from the newly-implemented laws. Thus, it hampered local officials from accepting applications from local venture capitalists. Since the beginning of the year, China has witnessed a growing list of local government bodies that announced the launch of their respective venture capital funds.
In an uncanny coincidence, Ms Franceska Banga, chief executive of the New Zealand Venture Investment Fund (‘NZVIF’), also recently aired her concerns at the lack of government’s commitment to venture capital investment activities. In a survey conducted by NZVIF, it revealed that nearly NZ$50 million (US$39.4 million) of early stage investments had been deployed to 63 companies in the 24 months between February 2006 and February 2008, with over 80% of the companies receiving less than NZ$1 million. Ms Banga noted that, although early-stage investment activity in New Zealand is growing, the deployment rate in fact is a far cry from international levels.
The daunting challenge facing New Zealand is the lack of institutional investor support for not just venture capital but across the full spectrum of private equity, according to Ms Banga. She added that it would be ideal for New Zealand to receive NZ$100 million of private equity investment each year.
The NZVIF is sponsored by the New Zealand government. Through the VIF Venture Capital programme and Seed Co-Investment programmes, NZVIF has already committed NZ$111 million to 61 companies and six venture capital funds (fig. 8).
The New Zealand government is taking measures to promote private equity in the country. In early May, the country’s Limited Partnership Act 2008 came into force with the goal to “facilitate sustainable growth” for New Zealand’s venture capital and private equity industry. Part of the Act embodies the Overseas Limited Partnerships that is designed to assist New Zealand’s businesses to compete internationally for venture capital funding on a level playing field.
However, the change that could redefine Asia’s institutional scene would only come when Tokyo agrees to overhaul its Government Pension Investment Fund. The latter is the biggest public pension scheme in the world, with over US$1.5 trillion in assets. Japan’s Council on Economics and Fiscal Policy (‘Council’), which advises Prime Minister Yasuo Fukuda, is reportedly seeking an overhaul of the Government Pension Investment Fund, including replacing existing officials managing this fund. Yet, market sentiment has been cautiously optimistic. However, the country’s powerful industry association Keidaren, a staunch guardian of its club members, are expected to object to such a radical movement.
The road ahead for institutional reforms in Asia’s financial world will not be smooth, as newer concepts seek footholds in such an archaic world (fig. 9), but such voices that call for reforms are encouraging first steps.
Asia Private Equity Review (APER) is the foremost voice on matters related to private equity/venture capital in the region. Well-recognised as being the singular source for accurate and timely news, in-depth analysis and global perspectives, APER is published by the Hong Kong-based Centre for Asia Private Equity Research. For further information please visit their website at www.asiape.com or email them at info@asiape.com
|
