XN000022-1987-01-14 — Page 14

WEDNESDAY, JANUARY 14, 1987

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CHANNEL VENTURE CAPITAL INTO MANUFACTURING

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THERE IS A NEED TO CHANNEL VENTURE CAPITAL INTO THE MANUFACTURING SECTOR TO ENABLE INDUSTRIES TO SPREAD THEIR RISK CAPACITIES IN RETURN FOR TECHNOLOGICAL INNOVATIONS AND PRODUCT ENHANCEMENT.

THE HON KIM CHAM SAID THIS IN THE LEGISLATIVE COUNCIL TODAY (WEDNESDAY) DURING THE ADJOURNMENT DEBATE ON DEVELOPMENT OF INDUSTRY.

HE GAVE SOME EXAMPLES OF HOW VENTURE CAPITAL COULD REALISE BOTH COMMERCIALISATION OF TECHNOLOGY AND PRODUCT IMPROVEMENTS BY TRANSFERRING RISKS TO INVESTORS WHO COULD AFFORD HIGH RISKS FOR HIGH RETURNS.

WITH GROWING INTERNATIONAL PROTECTIONISM, MR CHAM BELIEVED HONG KONG MUST SEEK TO INCREASE ITS DOMESTIC EXPORTS BY DIVERSIFYING THROUGH TECHNOLOGICAL IMPROVEMENT OR PRODUCT ENHANCEMENT.

IT COULD NOT RELY ON DUPLICATING ESTABLISHED PRODUCTS AND MARKETING GOODS THROUGH LOW COSTS AND CUT-THROAT COMPETITION.

HE SAID VENTURE CAPITAL SUITED THE NEEDS OF INDUSTRY IN HONG KONG AS MANY INDUSTRIES WERE MEDIUM-SIZED AND FAMILY-OWNED.

+FURTHERMORE, VENTURE CAPITAL MAY PROVIDE MANAGERIAL, TECHNOLOGICAL OR PROFESSIONAL SUPPORT WHICH MAY BE LACKING IN A BUSINESS CONSISTING ONLY OF FAMILY MEMBERS.

+FOR THESE COMPANIES IN HONG KONG, VENTURE CAPITAL WILL PROVIDE AN OPPORTUNITY FOR THEM TO GROW AND EXPAND FOR A RETURN WHICH IS COMMENSURATE WITH THE RISKS INVOLVED, HE SAID.

TURNING TO THE FINANCING REQUIREMENTS IN A VENTURE CAPITAL ASSESSMENT, DR CHAM NOTED THAT THE MOST DIFFICULT FINANCING WAS FOR A NEW COMPANY AT ITS SEEDING STAGE WHEN EQUITY INVESTMENT WAS USUALLY NEEDED.

FOR START-UP FINANCING IT WOULD NOT BE EASY FOR A COMPANY TO BE LISTED EVEN ON AN OVER-THE-COUNTER (OTC) MARKET AS THE PUBLIC WAS NOT ABLE TO ANALYSE THE INVESTMENT RISKS INVOLVED.

MR CHAM SUGGESTED THAT A NEW CATEGORY OF INVESTMENT DEALERS. KNOWN AS VENTURE CAPITAL INVESTMENT DEALERS (VCID), SHOULD BE CREATED.

+WITH KNOWLEDGE OF VENTURE IMVESTORS' PROFILES AND CAPABILITIES, THESE DEALERS WILL ACT AS MEDIA TO PUT COMPANIES IN NEED OF VENTURE CAPITAL IN TOUCH WITH WILLING TAKERS.

/+THEY SHOULD