'Venture fever' grips Asian economies

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'Venture fever' grips Asian economies

DAVID SWINBANKS

David Swinbanks is Asia-Pacific editor of Nature.


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The economic crisis in Asia has awakened governments to the need to cultivate venture businesses to help pull their countries out of recession and compete with the West. Job opportunities in start-up ventures are likely to expand over the years ahead, first in the more nimble and dynamic economies of Taiwan and Singapore, but later in China, Korea and Japan as well.

Asian scientists trained in the West will be central in the development of these start-ups. A dynamic interaction is developing between Asia and the West, in particular with Silicon Valley in the United States, in which entrepreneurial Asian scientists are using venture capital from both local and Western sources to establish start-ups in Asia and the United States.

Last month, the Singapore government announced the creation of a US$1 billion fund to stimulate what it calls "technopreneurship" (Nature 398, 552; 1999). "Singapore is really getting to grips with the key issues surrounding the growth of high-technology businesses," says Hugh Purser of Cambridge Corporate Consultants in Britain, who formerly worked as an adviser to the National Science and Technology Board in Singapore.

"There is a good understanding of what needs to be done, and a commitment of resources from the very top," says Purser. "Some will say that, for entrepreneurial activity to flourish, the best thing is for governments to get out of the way. But in Singapore's case it is essential for government to take the lead, until a critical mass is achieved."

Japan is also beginning to realize that it has been left behind in the development of new industries, particularly in biotechnology, genomics, bioinformatics and computing. Japan's Ministry of International Trade and Industry plans to invest กอ50 billion ($400 million) in a supplementary budget this year to support venture businesses as a first step in an ambitious plan to create 1,000 biotechnology-related companies and 70,000-80,000 jobs within the next decade (Nature Biotechnology 17, 320?321; 1999). But the academic community in Japan is generally averse to getting involved in business, and the country will probably continue to lag in this area for many years.

South Korea has been gripped with 'venture fever' since the country plunged into recession in late 1997. The government has introduced laws to allow university professors to set up and head venture companies and use university facilities to make products, and there are already a few success stories. But, as in Japan, many cultural and regulatory hurdles remain.

Taiwan is a pioneer in the region in the development of venture businesses. It has made a great success of its Hsinchu science park south of Taipei, which over the past decade and a half has drawn thousands of Taiwanese scientists and engineers back from the West. Dozens of successful start-ups in information technology have been established in the park, many of them linked to Silicon Valley in the United States, where more than one-third of the engineers and researchers are said to be of Taiwanese origin. A push into biotechnology that began at Hsinchu several years ago is also beginning to show some signs of success, which should be helped by substantial new government investments in research on agrobiotechnology, medical genomics and biopharmaceuticals (see box opposite).

Since moves to develop a market economy in China began in the 1980s, hundreds of start-up companies have been established by institutes of the Chinese Academy of Sciences and universities (Nature 378, 540?542; 1995 ). Most have been failures, but a significant few have been successful and have pumped much needed funds into their mother institutions.

One example is Beida Weiming Biotech Corporation, set up by Zhang-liang Chen, vice-president of Peking University, when he was a department chairman in 1992. The corporation's joint venture company, Kerxing Biopharmaceutical, established with a US company in 1994, now controls 60% of the market for interferon in China, and the corporation will shortly be listed on the Shanghai stock exchange, according to Chen.

But Chen sees many barriers to the successful establishment of start-up companies in China. There is a lack of creativity and originality in China's nascent biotechnology industry, and a tendency just to copy the West's products. There is a need for greater protection of intellectual property rights, and venture capital is seriously lacking, particularly the long-term type required for biotech start-ups, says Chen.

Government regulations need to be eased, for example, to allow companies to donate money to universities and academic institutions free of tax. And the attitude of the academic community in China, which tends to look down on business activities, needs to change. Last but not least, Chen points to the dearth in China of scientists with entrepreneurial and Western business management skills.

But there is a growing realization in Chinese government circles and the research community that radical reforms are required for venture businesses to thrive. Tsinghua University in Beijing, one of the country's leading universities, at one time had 140 start-up companies, but this has now been slashed to about a dozen successful ones.

Similarly, the 123 institutes of the Chinese Academy of Sciences have more than 500 companies but, according to Yi Xun Yan, one of the four vice-presidents of the academy, only about a third are successful (many would say much less). The rest are a "big problem" for institute directors, says Yan, because it is difficult to close such companies, owing to social obligations to look after the employees.

Nevertheless, the academy has learnt "many important lessons" over the past decade, says Yan, and he is optimistic. He says the government is studying the need to create venture funds, and thinks there is growing awareness of the need to protect intellectual property rights.

But Yan, who established a successful thin-film optics joint venture linked to the academy's Shanghai Institute of Technical Physics, is well aware of the difficulties of bringing ideas from the lab to the market. Like Chen, he sees a great need for Chinese scientists trained in Western management skills to return to help China to develop start-ups.

Tsinghua University has recently recruited Jing Cheng from Nanogen, a biochip venture in the United States, to head its new Biochip R&D Centre. Cheng's group will receive over US$1 million research and development funds from the university, and Cheng is also setting up a biochip start-up company using offshore capital (see box opposite). This approach of seeking venture capital offshore has been adopted by entrepreneurial scientists elsewhere in the region, and it may become a widespread phenomenon as governments struggle to change the regulatory, financial and cultural environment that inhibits venture business.

For example, Sunyoung Kim at the Institute for Molecular Biology and Genetics of Seoul National University, who in late 1996 established ViroMed, South Korea's first venture business in gene therapy and diagnostics, has sought investment and strategic alliances in the United States and Europe because of the lack of long-term venture capital in Korea. And bioinformatics researchers at Singapore National University have set up a company called KRIS Technology in Menlo, California, to market bioinformatic software products.

It will take time for government initiatives to stimulate venture businesses in the region, particularly in the larger economies of Japan, China and Korea. So, in the immediate future, it is the actions of individuals, such as Cheng and Kim, and their links with venture funds, venture businesses, entrepreneurs and scientists in the West, that are likely to bear the most fruit.

 


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