Thu, Apr 26, 2012 - Page 8 News List

A suggested cure for the state-owned enterprises

By Chu Yen-kuei 朱言貴

State-owned enterprises — the target of much criticism lately — have become a byword for “inefficiency.” To change that perception and improve their efficiency, they should go back to basics, so their businesses can be run normally and rationally, and without political intervention.

On April 10, a special panel that was formed to improve the performance of state-run Taiwan Power Co and CPC Corp, Taiwan, held its first meeting. A member of the panel, General Chamber of Commerce vice chairman Wang Ying-chieh (王應傑), called for the rationalization of fuel and electricity prices. However, aside from reviewing these firms’ personnel and systems, the government should prevent elected representatives from asking the companies for money in the name of goodwill to local communities. Their requests for money may seem insignificant, but it shows the distorted business environment state-owned enterprises have to deal with.

What is needed is a clear separation of affairs. Electricity subsidies for the agricultural sector, local governments and schools should be budgeted by the respective governing authorities to avoid having representatives of state-owned enterprises obfuscating and talking about “policy factors” every time the budget is discussed. It has never been clear what part of the system of these state-owned enterprises’ poor performance can be attributed to policy factors or to human error. Annual reviews of their performance are held, but they always end in the presentation of official documents that mean nothing.

The fact is the definition of the role of legislators is seriously flawed. On the one hand, they are responsible for monitoring the government’s budget; on the other, they are also the ones who often take advantage of state-owned enterprises. This is a very contradictory state of affairs. To strictly monitor the government’s spending, they should not tolerate any waste, but then they often ask state-owned enterprises for money so they can provide services for their supporters. If this situation does not change, the ubiquity of greedy lawmakers will remain the greatest burden of state-owned enterprises.

A state-owned enterprise is established for policy reasons, otherwise there would be no need for them. Since their task is policy-related, efficiency is not a priority, while personal relationships are. That always leaves a large gray area that those good at networking can take advantage of like fish in water. They rarely get caught, because everyone does the same thing. It may not be the best job in the world, but they never have to worry about going hungry. Everyone will eventually get their chance to “fish in troubled waters.” This is a common flaw of all state-owned enterprises.

Once state-owned enterprises perform poorly, they blame it on “policy factors.” This is an effective excuse because it is difficult to find the real cause. As a result, muddling through and mediocrity have become the norm. Every time a state-owned enterprise is criticized for its poor performance, it can always blame policy and avoid responsibility.

One can only lament the shortcomings of state-owned enterprises that are the result of policy factors. The premise for transforming these enterprises is to remove their policy-related duties. However, that leaves the question of whether there is any reason for their existence without such duties. This question is the key to all their problems.

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