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Ang Lee attended an emotional preem of his controversial pic “Lust, Caution” at the end of September in Taipei and was subsequently rewarded $600,000 by the Government Information Office (GIO), which regulates the local film biz, for winning the Venice festival’s Golden Lion. Lee handed back the money, promising to use it to help young talent in Taiwan. “It is difficult to accept the award, because so few Taiwanese directors are able to make a living by pursuing their art,” Lee said.

The Taiwanese movie industry craves support of government to get it out of its current malaise. Public sector says it is helping, but progress is painfully slow.

The GIO’s generosity goes as far as offering its top filmmakers $1.2 million in production subsidy if they make another film in Taiwan within two years of a major festival win. When the prize system was set up in 2005, helmer Lin Cheng-sheng criticized the government for “shouting out slogans” rather than solving the local movie industry’s real problems.

Taiwan’s film production has plunged from 30 or 40 a year to just 14 in 2004. At the B.O., local market share hovers around 2%.

Despite such total indifference from hometown clientele, the territory is the base for a handful of world-renown auteurs including Tsai, Lin, Hou Hsiao Hsien and the late Edward Yang. They are largely dependent on a combination of government subsidies and international co-production or presale coin.

Government policies toward the industry have been more congratulatory than consistent.

In 2003, following the rare B.O. success of Columbia-backed thriller “Double Vision,” GIO said funding would favor bigger-budget and commercially oriented pictures and that it would open its Domestic Film Guidance pool to films that were international co-productions. Later, GIO minister Pasuya Yao switched the emphasis to quantity, setting out plans for 100 movies a year. More recently, another GIO minister, Cheng Wen-tsan, said the focus should be on big-budget pics and TV series.

In 2004, GIO talked of creating a tax-funding scheme similar to ones on offer in Europe (businesses producing films with one-third of the cast Taiwanese and using Taiwanese locations for one-third of screen time would qualify for income tax credits). But to date, the system has proved unwieldy.

Wang Ying-hsiang, who heads producer-distrib Long Shong Pictures and is also prexy of the Chinese Movie & TV Union Federation, says that, despite the muddles, the government is trying to help.

He adds that under the latest structure, the government has allocated a total of NT600 million ($18.2 million) over a five-year period for productions. Of this, $3 million will be given as grants with evaluation based on script quality. The remainder will be provided as loans with very soft repayment terms and no upper limit to the size of the advance. Co-productions will be eligible with funding provided through the Taiwanese shingle.

Some 500 projects have been submitted for funding approval, but a new hurdle is the ankling of GIO’s Dept. of Motion Pictures director Peggy Chou, who has yet to be replaced.

“Our problems have much to do with the legacy of Taiwan’s entry into the World Trade Organization,” Wang says. “Our movies are classified as services, which limits the way that government can aid the sector. Our battle must be to have them reclassified as cultural goods in the way that they are in some other countries.”