(Adds industrial bureau & analyst comment)
By Michael Gold
TAIPEI May 14 (Reuters) - Taiwan's National Development Fund said on Tuesday it has agreed to spend T$20 billion ($666 million) to encourage companies of strategic importance to the economy to merge.
A spokesman for Taiwan's Industrial Development Bureau said that the fund will be targetted at companies with long-term development potential and that will most likely benefit the island's overall economic growth.
He did not mention any specific companies, but said firms involved in green energy development, manufacturing and other technical fields would likely fall under the definition.
He did not give an exact definition of "strategic," but said that companies in fields such as national defence have not as yet been considered for inclusion in the plan.
Andrew Tsai, a Taipei-based economist at KGI Securities, said he would expect the government to encourage mergers among companies at different ends of the manufacturing chain in the same industry, such as solar energy, which has faced overcapacity in recent years.
"It would make sense for them to encourage this kind of upstream-downstream cooperation among companies that complement each other," Tsai said.
He mentioned solar firms Sino-American Silicon Products Inc and Solartech Energy Corp as two possible candidates.
A spokesman for Sino-American said the company is considering cooperation possibilities but would not comment on specific merger targets, and did not have any comment on the government's new plan.
Representatives for Solartech could not be reached.
The Taiwan government's investment promotion website said the Fund's key priorities historically "focused on industries such as petrochemicals and semiconductors to promote Taiwan's economic development plans. Recent investment has focused on 10 emerging industries, including information, telecommunication, aerospace and biotechnology." (Additional reporting by Faith Hung and Jeanny Kao; Editing by Eric Meijer)