Thu, May 17, 2012 - Page 8 News List

Tired sector needs new energy

By Lu Hsin-chang 盧信昌

Over the last decade, loose monetary policy has come to be seen as an effective measure for resolving financial crises, but now we are seeing the downside in the form of rising consumer prices. Even if the economy is growing, this wave of inflationary price hikes is adding to people’s woes.

Of course, it is good to save energy and the environment, but doing so still does not make price rises reasonable; less so can it justify the government picking up the public tab. In an age of high oil prices, apart from buying oil from more diverse sources and paying for it in installments, another way to reduce the impact would be to get more added value out of the energy sources we use.

The motivation for economic growth comes from a determination to break with the “status quo,” a creative imagination and aspirations for a better life. Economic policies should help incubate business ideas, guide private capital in the right direction and encourage the involvement of talented people. Policies should encourage behavior based on long-term perspectives to allow investment synergy and avoid short-term investment behavior that stifles social goodwill and mutual trust.

President Ma Ying-jeou (馬英九) says he wants to have an honest and capable government and the Cabinet says it wants to streamline the management of state-run petroleum giant CPC Corp, Taiwan, and electricity provider Taiwan Power Co (Taipower). Structural reform of oil and power companies should include the following concrete measures:

First, networks of complicity must be broken down by employing a new generation of managers and technical personnel. Second, the powers of administrative guidance should be reduced and intercessions should be made public. Third, support should be sought within these companies for turning plants and factories into profit centers. Fourth, competitive systems should be established for contract negotiation on technology transfers, pricing and purchasing. Fifth, the many layers of subcontracting need to be reduced to flatten out engineering projects and their oversight. Sixth, we need to encourage overseas petrochemicals firms to come to Taiwan and make the country’s energy sector more competitive.

Making power stations and oil refineries into profit centers, transforming Taipower into a public corporation and allowing individual plants to conduct their own purchasing negotiations on the international market would be an effective way to meet temporary needs and hedge against fuel price fluctuations. Leasing out CPC’s oil storage tanks and allowing overseas petroleum companies to enter the local market would make Taiwan’s power industry more competitive. These suggested reforms would change the accounting system in state-run enterprises, whereby the indices by which a company’s performance are evaluated would clarify the responsibility for past and present policy decisions. For example, capitalizing the costs of the salaries of surplus personnel would allow the company’s current profits to reflect the effectiveness of reform and competition.

For the economy to grow further, we do not need any more investment in infrastructure. What we need is to use more efficiently the infrastructure we have and raise people’s expectations about quality of life. Even more important is to overcome the self-limitation of government policy that has for a long time been at the service of an elite few. The government’s limited budget should be used to reward those who put forward creative proposals to increase the investment synergy of private capital. Also, information about the cost of living should be carefully analyzed to reduce panic and speculation.

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