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Economic Daily News: Get serious with privatizing state-run firms

2012/04/29 21:39:35

The government move to raise fuel prices and its plan to hike electricity rates have again exposed the long-standing issue of CPC Corp., Taiwan, and Taiwan Power Co.'s lack of efficiency, in addition to provoking anger from the general public.

In the case of state-run oil refiner CPC Corp., its low efficiency becomes even more striking when compared with that of private-run Formosa Petrochemical Corp. (PFCC). When CPC had a big loss, FPCC managed to make a small profit; when CPC had a small profit, FPC enjoyed a bumper year.

No matter how the CPC management tried to explain away its responsibility for the state-own company's poor performance, this society has since long time ago come to a consensus that the only solution to solve this problem is to privatize it.

And yet this common sense solution is easier said than done. As early as in 1998, when the Ministry of Economic Affairs, which supervises CPC operations, began to push for its privatization, it was the Legislature that, in 2003, adopted a resolution that effectively blocked the MOEA move -- by demanding that CPC's labor union must give consent to this program.

CPC workers, who were used to fat salaries and lax work requirements, certainly opposed the privatization plan. Because they are a big number, controlling a considerable amount of votes, no economics minister has ever dared to offend them.

CPC had another chance to transform itself into a "real business entity" when it played a leading role in trying to launch the Kuokuang Petrochemical Project. The project was aborted after green activists fiercely objected to it.

Taiwan Power Co. (Taipower) is another case of the needs to privatize a major energy supplier in this country. Its long-standing deficits originate from two sources: the low and cheap electricity rate and a contract duty to spend over NT$100 billion (US$3.34 billion) yearly to buy electricity from the private sector at high prices.

Because of the complicated intertwining of interests involving various lobby groups and government agencies, the government can show its determination to reform by privatizing Taipower,

For instance, Taipower can cut its huge deficits by reducing its capitalization before inviting private investors to increase its operating capital. This would be a huge first step for Taipower as it seeks to turn itself into a private company.

People are expecting President Ma Ying-jeou to privatize CPC first, if he cannot privatize both CPC and Taipower at the same time. If he is serious about privatizing the nation's two major energy suppliers, he should do it quick, before a new round of local government elections turns the subject into a taboo two years from now. (Editorial abstract -- April 29, 2012)

(By S.C. Chang)