Asia Watch, Oct. 30, 2006

PE, VC firms to pay lower taxes

China is expected to launch a new policy within the next couple of weeks to reduce the taxes paid by venture capital and private equity firms, according to a report in the Shanghai Daily.

The newspaper cited Liu Jianjun, an official from the National Development and Reform Commission’s finance division, who said that the new policy aims to encourage international firms to invest in Chinese companies, especially in small- and medium-sized tech startups.

The commission’s new tax incentive policy should help to boost the already heated venture capital sector in China, which has struggled with how best to regulate outside investors coming into the country.

Liu noted that many of the country’s tech companies in need of capital find it difficult to acquire bank loans. He declined to discuss the particulars of the tax rate.

“The policy aims to solve the problems that promising companies can’t get enough capital to expand in the initial period,” Liu said at a venture capital forum in Pudong New Area.

In the first nine months of the year, VC firms have invested $1.21 billion in the country, compared to $775 million in the same period last year, according to Zero2IPO Ltd, a Beijing-based consultant for the VC and private equity industry.

Intel, TPG invest in Vietnamese software developer

FPT Corp.

, a Vietnamese information and communication technology provider, received a $36.5 million investment last week from Texas Pacific Group and Intel Capital.

The funding is considered one of the largest foreign investments in a company in Vietnam. FPT plans to use the money to develop new products and services. The IT market in Vietnam has grown by about 20% annually and is now worth more than $800 million, according to a company press release announcing the investment.

Vivek Paul, a partner with Texas Pacific Group, will serve as a special strategic advisor to FPT. Paul cited several strengths about the Vietnamese market, including a literacy rate of over 96%, a rapidly growing middle class, and Asia’s second-highest annual gross-domestic-product growth rate. Vietnam is also one of Southeast Asia’s fastest growing markets for users of the Internet and mobile phones.

“This first-of-its-kind investment is a milestone for Vietnam, and reflects Intel Capital’s confidence in the market and its business climate,” said Varun Kapur, managing director of Intel Capital Asia Pacific. “Venture investing has the potential to contribute significantly to the growth of Vietnam’s IT industry.”

Earlier this year, Intel said it would build a $605 million microchip assembly and testing plant in the commercial hub of Ho Chi Minh City.

Singapore venture to tap hedge funds

A joint venture of Singapore-based asset management firms aims to tap the new hedge funds market in Asia, planning to invest $10 million to $15 million over the next six months.

Singapore-based GCI Investment Management and Opes Prime Asset Management (OPAM), which is majority owned by an Australian financial holding company, plan to pool their resources to create Go Capital, which allow institutional investors to participate in startup hedge funds.

Jay Moghe, managing director of OPAM, told Reuters that Go Capital would act as an investment vehicle for new hedge funds as returns of hedge funds are generally at their strongest in the early stages.

Hedge funds had more than $100 billion invested in Asia at the end of 2005, with about $12.1 billion of that managed from Hong Kong, $10.7 billion from Japan and $5.1 billion from Singapore, according to the research firm Eurekahedge.

Citigroup offices raided


’s South Korean offices were raided by South Korean prosecutors earlier this month, as part of an ongoing investigation into Lone Star Funds. Citigroup had been involved in Lone Star’s controversial 2003 acquisition of a control stake in Korea Exchange Bank. —PE Week staff