Far Eastern Group's announcement on Friday that it would unconditionally donate its 56.5 percent stake in Far Eastern Electronic Toll Collection Co -- an interest worth NT$1.4 billion (US$43 million) -- to the government could keep the ill-fated toll collection project from imploding. At the moment, policy pundits and the government are deliberating on the wisdom of accepting the offer.
If the government chooses to accept it, becoming the largest shareholder in the company, then the electronic toll collection (ETC) system will either be sold off to the public on an operate-transfer basis or retained in perpetuity as a publicly run company. The rights of the 220,000 motorists who have already brought into the ETC system, purchasing sensor units and user credit, would in principle be assured under either alternative.
While the attitude of the three other private shareholders in the cooperative venture -- Teco Electric & Machinery Co, Systex Corp and Mitac Inc -- remains unclear, any move by the government to assume majority control over the ETC system will likely imply an increase in fiscal risk. And this at a time when the budget is already uncomfortably in deficit.
Accepting the offer could also force the government to violate the Law for Promoting Private Participation in Public Infrastructure Projects (
There are, however, a couple of things that we can count on. The first is that the ETC issue is unlikely to be "solved" with a government takeover -- indeed, it will fuel more political noise as opposition legislators and the media cash in on the chance to point to yet another example of dysfunctional government policy.
The message is also coming through loud and clear that business is not satisfied with the way this BOT project has been handled. They are concerned about the capacity for increased political risk that such ventures obviously bring. Both the business sector and government must be worried about the future viability of the BOT model, and possibly all public-private cooperative ventures.
And it's this that is of most concern -- the fragile state of public-private relations in Taiwan and the capacity for mutually beneficial partnerships. When trust between the government and business sector breaks down, local and foreign investment in the nation will surely suffer.
Many governments around the world count on business to help invest, construct and operate major infrastructure projects which are cost-prohibitive for the government alone. In Taiwan, however, this well-intended model has become such a matter of controversy that it now appears cursed -- consider the Beitou cable car project, the north-south high-speed rail system and the Kaohsiung mass rapid transit system, just to name a few.
There are some good examples of BOT projects -- the construction of Taipei 101 went off without a hitch. But with poor knowledge of the potential risks and inadequate understanding of the details of any BOT deal, the public-private partnership is easily brought under stress.
No matter what the government does to address the ETC mess, businesses should always be encouraged to join in the nation's infrastructure development. The risk of leaving them out is too high -- higher unemployment and lower economic growth. It is to be hoped that the debate that has accompanied the latest BOT imbroglio will encourage all parties to reconsider the true essence of the BOT model -- a healthy public-private partnership.