The recent increases in fuel and electricity prices have not only upset the public, they have also brought the problems of long-standing irregularities and lack of efficiency in public enterprises to its attention.
We have all seen the many problems of operation, investment, management, finances and personnel that exist within public enterprises. The employees’ attempts to enrich themselves and others, lack of efficiency and corruption have left people dumbfounded and the public has to pick up the tab for all these problems.
A source of even more public anger and frustration is that public enterprise reform has been promised for years. President Ma Ying-jeou (馬英九) has now said he will give everyone an answer on this issue before the end of June. However, judging from the government’s actions, not a lot is being done to reform public enterprises and all that talk is just a way to try to deflect attention and stop public outrage.
The existence of public enterprises may have been defensible in the early stages of the nation’s post-war economic reconstruction. Back then, not only were private enterprises very few in number, but the former authoritarian regime that kept talking about “the people’s livelihoods” also had to take control of key industries. This, coupled with the fact that the regime also took over industries left behind by Japanese, meant that public enterprises for many years played a major role in the country.
Today, public enterprises still have a relatively strong standing in industries like finance, water and electricity, energy and mining, and account for approximately 5 percent of total industrial output.
However, after private enterprise started to develop and the tide of economic liberalization advanced, the government had no reason to be directly involved in business anymore. The experience of other advanced countries has shown us that privatization normally increases efficiency and lowers costs. The government should act only as a monitor and create the environment required for liberalized economic activity and fair competition.
However, after taking steps to promote privatization, only limited progress has been made on reforming public enterprises in recent years. Together with the interference of vested interests, this has created all the problems that we have seen in connection with the increases in fuel and electricity prices.
There are too many problems in public enterprises to enumerate. These companies operate using other people’s money: the taxpayer’s. They suffer from a lack of profit motive and are not too concerned with business performance.
In countries the world over, public enterprises have become synonymous with inefficiency because of this basic attribute. In such a corporate culture, senior members of the government give their friends high-ranking positions, and employees enjoy the “iron rice bowl” guarantee. They end up becoming lax and lazy, and waste and corruption hold sway.
In addition, the operation of public enterprises is plagued by many restraints, and attempts to pursue profits are restrained. Public enterprises must sometimes also take on policy-related tasks, such as suppressing prices, because the government needs it for electoral concerns, which of course affects business performance.
Of all the people interfering with public enterprises, elected representatives are the worst. In the past, special loans from state-run banks, guarantees to win construction bids, personnel lobbying and representatives asking for money in the name of goodwill to local communities have all hurt public enterprises.