Chinese Petroleum Corp's (中油) sale will be a priority for the Taiwan government, which is opening its oil market and seeking ways to help pare its budget deficit, Finance Minister Lin Chuan (林全) said.
The government faces an estimated NT$291 billion (US$8 billion) budget deficit this year and a record NT$3 trillion of national debt. It plans to forge ahead with plans to sell stakes in Chinese Petroleum, First Commercial Bank (第一銀行) and other companies to help shrink the deficit to NT$238 billion next year.
"The urgency exists because of the liberalization of the oil-products market, so Chinese Petroleum needs to be privatized," Lin said at a foreign media briefing. "I do not want to see the deficit widen. We want to accelerate the sales of stakes in state companies." The government, which first proposed selling part of Chinese Petroleum in 1998, can't afford to keep the plan in limbo after parliament gave approval last month to sell a 45.7-percent stake.
The company faces more competition since Taiwan allowed the imports of oil products such as diesel and gasoline last December. Taiwan's Formosa Plastics Corp (台塑), which started a rival refinery in Taiwan in 2000, ended Chinese Petroleum's monopoly on oil refining and the distribution of fuels.
Taiwan also has earmarked shares in First Commercial Bank, the nation's largest publicly traded lender, Chunghwa Telecom Co (中華電信), Taiwan's biggest phone company, and other state-controlled companies for sale to the public and other investors.
The government will take "special consideration" in reducing any market impact from the sales, Lin said, without giving a specific schedule for the sales.
On Dec. 18, Taiwan's debt rating was cut one level to AA- by Standard & Poor's, which cited slow banking reforms. It was the second downgrade by S&P since President Chen Shui-bian (陳水扁) took office in May 2000. The latest downgrade would provide an important reference for policy-making, Lin said, without elaborating.
Lin said Taiwan has about NT$40 billion left in its NT$140 billion financial restructuring fund, which the government uses to buy distressed banking assets. The government is seeking parliament's approval to increase the fund to NT$1.05 trillion.
Lin said he's "optimistic" approval would be granted. He declined to give a target timeframe and said that reforms will continue, with or without the extra funds.
The government still needs to clean up and consolidate its 52 banks and more than 300 farmers' and fishermen's credit associations in an industry saddled with NT$1.5 trillion of bad loans. Taiwan still anticipates finishing the job by July 2005.
That's when the restructuring fund will be scrapped, Lin said.
Taiwan last month halted lending restrictions aimed at cutting bad loans at community lenders after protests by farmers and fishermen.
The protests led to the resignation of Lin's predecessor, Lee Yung-san (李庸三), Chen's third finance minister. The delay triggered investors' concern that financial reforms were stalled for political reasons.
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