Thu, Jun 08, 2000 page8

• Let's rethink privatization of SOEs

  • By Chiu Yu-bin 邱毓斌
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  There are opinions from every corner regarding whether or not the new government will postpone the privatization of state-owned-enterprises (SOEs). This is a great opportunity to reevaluate the privatization program.

  First of all, it needs to be admitted that SOEs have had many problems in the past. Too many policy directives hampered business efficiency, as seen at Taiwan Motor Transport (台汽) and China Shipbuilding (中船). Too much political intervention also caused business efficiency to drop -- including the practice of appointing directors and supervisors as a way of securing political favors, as well as influence-peddling by powerful people.

  Moreover, the lack of an evaluation system to analyze efficiency also gave management "power without responsibility." There have been numerous examples of companies operating at a loss while their managers continued to get promotions.

  But is it necessary to put these enterprises into the hands of private capitalists to solve these problems?

  However, the policy of privatizing 42 SOEs within five years -- an idea proposed by the KMT government at the 1996 National Development Conference -- is simply ridiculous. A total of NT$4.1 trillion would be needed for such a sale. National Sun Yat-sen University's Management Studies Center has warned that privatization efforts need to be careful about squeezing market capacity and capital.

  As expected, this rash privatization policy will not be completed on schedule. The reality is very clear: business performance does not depend on ownership. Private companies lose money and go bankrupt all the time.

  The problem with SOEs lies mainly in the fact that many of their managers are shackled by the layers of laws and regulations that limit their competitiveness. Internally, SOEs lack business management systems that strike a balance between and power and responsibility, and thus encourage creativity. Rarely do SOEs produce professional managers.

  Given the above, eliminating SOEs should not be the only solution. The government has the power to change the existing laws and mechanisms. Why don't we take a more active approach in tackling the issue?

  Look at Singapore. SingTel started selling its stock in 1992. Now, eight years later, only 12 percent of the shares have been released. The point is that SingTel was not shackled by layers of laws and regulations and as a result took off from its very first sale of shares.

  We hope we won't see the new government again treading the path of limitless privatization. Perhaps a more practical way will be to return to President Chen Shui-bian's (陳水扁) election promise to "review the privatization policies and set up a transcendent supervisory committee."

  However, we would still like to remind the government of the following points:

  First, the planning and evaluation of the privatization process should not be left to different government agencies. Recently, problems at SOEs under the Ministry of Economic Affairs have come under the spotlight, while the Ministry of Transportation and Communications and the Ministry of Finance have been busy privatizing their companies.

  A good example is Chunghwa Telecom (中華電信), where fierce debates are continuing on everything from share prices to assets evaluation. We hope that a cross-ministerial supervisory committee will be set up as soon as possible to integrate the issues.

  Second, do not view labor unions with hostility; instead include them in the consulta-tions. The hundreds of thousands of employees of SOEs rightfully feel insecure when they see the working rights of dockyard workers going nowhere at Taiwan Machinery Manufacturing and the workers without a place to air their grievances.

  More important is building reform efforts on grassroots opinion. Given the hard work done by the unions at Chinese Petroleum (中油), Chung-hwa Telecom and Aerospace Industrial Development (漢翔) over the past few years, it may not be fair to describe SOE employees as a selfish aristocratic labor class "eating well and working light."

  Finally, an evaluation mechanism must be set up to gauge the efficiency of SOEs. In a recent book titled New Government Movement (新政府運動), the author points out that even the US -- where even prisons can be privatized -- knows that privatization is not the only way out.

  The key is to set up a mechanism to ensure a balance between power and responsibility and to evaluate the efficiency of SOEs. The evaluation should include efficient use of capital and manpower, profitability and public acceptance. Managers who perform well should be allowed to stay, while those who do badly should be asked to leave. This will not only help the corporatization of SOEs, but will also boost the morale of grassroots employees.

  Chiu Yu-bin is executive secretary of the Taiwan Federation of Trade Unions.
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