Sun, Jun 02, 2002 page3

• Some question airline's privatization

  STATE-RUN VS PRIVATE As the Cabinet pushes through plans to sell off all of its shares of China Airlines, analysts debate the wisdom of fully privatizing the company

  • By Ko Shu-ling / STAFF REPORTER
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  Following the fatal crash of a China Airlines passenger jet off the Penghu archipelago last Saturday, the Cabinet was quick to order the full privatization of the firm.

  Political observers, however, have said that privatization would be no cure-all for the 50-year-old firm, in which the government-controlled China Aviation Development Foundation (CADF) holds a 72 percent interest in the company.

  "Privatization is a double-edged sword. It has a good and a bad side," said Jan Chung-juang (詹宗源), a public administration professor at National Chengchi University.

  Its good side is to increase the efficiency of production and diminish the cost of output. Its bad side, however, may outweigh the advantages, Jan said, because at least a state-run company is under the supervision of a legislative body while a private company is much more autonomous.

  "It's a myth that private enterprises are always better than state-run enterprises," Jan said. "A state-run business doesn't necessarily require privatization if it is managed with professionalism and good corporate practice to guarantee both greater efficiency and lower bills for consumers."

  Following the Cabinet's announcement, the CADF made public its new board yesterday.

  Minister of Transportation and Communications Lin Lin-san (林陵三) will chair the new board and six of the directors are government appointees.

  They are Ho Mei-yueh (何美玥), vice chairwoman of the Council for Economic Planning and Development; Gordon Chen (陳樹), administrative vice minister of the finance ministry; Oliver Yu (游芳來), vice minister of transportation and communications; and Lu Chi-cheng (呂桔誠), vice chairman of the Commission of National Corporations under the Ministry of Economic Affairs.

  Two board directors are scholars and government officials. They are aerostatics expert Kuo Ching-chiang (郭清江), who is also vice chairman of the Public Construction Commission; and legal expert Hsieh Wen-ting (謝文定), who is also vice minister of justice.

  The remaining two board directors are Lee Yun-lin (李雲寧), the airline's chairman, and Wei Hsing-hsiung (魏幸雄), the airline's president.

  Lin Chuan (林全), the Directorate General of Budget Accounting and Statistics, will remain as the board's supervisor.

  The appointments are to be completed by June 10.

  The job of the new board is to pursue the sale of all of the foundation's stock by next year in order to reach the ultimate goal of fully privatizing the firm and eventually dissolving the foundation.

  Before the airline is fully privatized, the foundation will not be allowed to interfere in the airline's management.

  Proceeds from the sale of the foundation's stock will go to an aviation fund set up by the Ministry of Transportation and Communications.

  The premier has also announced that beginning next month, the presidents of state-run enterprises will be appointed by public recruitment in a bid to stamp out the impression that under the old system for appointments are merely rewards for political service.

  Commenting on the premier's plan, Jan said that although it sounds like a good idea, he doubts it would be feasible in Taiwan.

  "His idea is similar to that trumpeted by former British prime minister Baronness Margaret Thatcher after she was elected in 1979," Jan said. "The UK has changed remarkably during her 20-year reign and the collapse of Railtrack marks the end of more than two decades of Thatcherism, in which the prevailing view was that companies are always better off in the private sector, seeking to maximize returns for shareholders."

  Jan said he is not saying that Thatcherism is a bad idea, but that it has its flaws and he doubts that it's feasible here because Taiwan has a very different social and political culture from the UK.

  Since privatization seems inevitable for China Airlines, Jan worries that the airline could be sold off at a very low price, especially in the aftermath of the crash.

  "Over the years, we've seen many state-run companies rely too heavily on selling their land to balance their asset statements," Jan said. "Many state-owned lands were sold at unreasonably low prices to particular, favored buyers."

  Chin Heng-wei (金恆煒), a political observer and editor in chief of the Contemporary magazine, however, held a more optimistic view.

  "In politics, the so-called deadline is not necessarily unchangeable," Chin said. "It can be extended if the trading price is too low or the trading isn't going well."

  Although critics have said that the Cabinet should have waited until the cause of the crash becomes clear before it lays the blame on the foundation, Chin said the government's move was necessary.

  "No matter what the cause of the crash, it's true that the airline has a management problem and that it has an embarrassing aviation safety record," Chin said. "As the biggest shareholder of the company, the government has to do something to change the status quo."

  Jan expressed the same opinion.

  "In addition to investigating the cause of the crash, the government should at the same time quell the anguish of the victims' families and tell them that hey, someone has to be responsible for causing this calamity," Jan said.

  Critics have also questioned the Cabinet decision that the sale of the foundation's stock go to an aviation fund.

  Many feel this was done because the government would hate to see the money end up in the coffers of Taipei City, since the foundation is registered in the city.

  Jan, however, dismissed the talk as "politicized."

  "One of Taiwan's problems is that many things are way too politicized," he said. "The society desperately needs more constructive thinking."

  Chin said it is only natural that the government designate the flow of the proceeds generated from the sale of the foundation's stock.

  "As long as it's legal, why not?" Chin said.
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