Wed, Jan 16, 2002 page18

• Government hopes to sell off firms

  • BLOOMBERG
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  The government plans to sell 60 percent of Taiwan Salt Industrial Corp (台鹽) in the stock market this year as it tries to jumpstart stalled sales of more than NT$300 billion of shares in state-run companies.

  The salt maker, which employs 550 people, will write down the value of its land holdings before the sale, reducing its capital to about NT$7 billion from NT$23.1 billion, Yang Kuan-chang, head of privatization at the Commission of National Corporations, said in a phone interview.

  A 60 percent rise in stock prices since early October, reflecting hopes that Taiwan will rebound this year from its worst economic slump since the 1970s, has increased talk that President Chen Shui-bian's (陳水扁) government will try to push the sale of companies overseen by the commission.

  "They're talking about share sales again because the market's hot now," said James Liu, who helps manage NT$3.6 billion at ING CHB Security Investment & Trust. The government should seize the moment, he said, because if the market cools again it "wouldn't dare" go ahead.

  The government wants to sell companies such as Chinese Petroleum Corp (中油) and Taiwan Power Co (台電) to help repay debt and prepare Taiwan for tougher competition following its recent entry into the WTO, which is expected to bring a flood of cheaper imports.

  Sales would also help reduce a government budget deficit forecast to be NT$195 billion last year, just shy of a constitutional limit of 15 percent of revenue.

  Still, political issues could delay the sales, as in the past. While the ruling DPP increased its presence in the 225-seat legislature in December to 87 seats from 65, it still lacks a majority.

  Officials will also want to avoid a repeat of its failed efforts to sell half of Chunghwa Telecom Co (中華電信), the nation's biggest phone company. In two attempts, the government managed to sell only 4.6 percent of the company. A sale last June raised NT$10 billion, little more than a third of the target, as investors concerned that tougher competition would hurt Chunghwa Telecom's profit, making the shares expensive.

  The Commission of National Corporations oversees 10 companies. Chunghwa Telecom and other firms that may sell additional shares in the future, such as China Airlines Co (華航), the nation's main carrier, are supervised by other arms of the government.

  Taiwan Salt is the smallest of the sales the commission is trying to arrange. Yang said he expected the sale before year-end, without being more specific. Revaluation of land holdings is the final preparatory step.

  The commission is awaiting legislative approval for a sale of shares in Chinese Petroleum, the nation's dominant oil company, possibly as early as the fourth quarter. The company said last month it will sell the shares for no less than its net asset value, now NT$260 billion.

  Legislative battles -- amid a market liberalization aimed at allowing imports of oil products and construction of a rival refinery -- delayed the sale beyond its target of last June.

  Taiwan Power, which has capital of NT$330 billion, is likely to be the biggest of the commission's share sales. Yang said the agency hopes to receive legislative approval "by the end of the year" for a sale of more than half of the company. That suggests a sale won't happen until next year at the earliest.

  The commission plans to sell other companies on its slate by negotiating directly with corporate buyers or by breaking them up and selling individual assets.

  Last year, the government sold all of Taiwan Machinery Manufacturing Corp (台灣機械) and Taiwan Chung Hsing Paper Corp (中興紙業) to corporate investors for about NT$3.6 billion.

  It's still seeking buyers for controlling stakes in Aerospace Industrial Development Corp (漢翔航空), maker of parts for the Indigenous Fighter Jet; Kaohsiung Ammonium Sulfate Co (高雄硫酸亞); and Taiwan Agricultural & Industrial Development Corp (台灣農工).

  To prepare the firms for sale, the commission has been paring their costs and firing staff to make them more competitive and more attractive to investors.

  Chinese Petroleum, Taiwan Power and Taiwan Sugar Corp (台糖) will collectively cut about 1,900 workers this year, said David Chen (陳智宏), a liaison officer at the commission. Last year, the agency fired 5,461 workers, two-fifths of them at China Shipbuilding Corp (中船).
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