With Chunghwa Telecom's recent sale of shares both here and abroad, the government has now sold 52 percent of its stake in the company, thus realizing the goal of privatization. This is an important milestone in the liberalization of our telecommunications industry.
But the Chunghwa Telecom labor union's constant protests over the past few years make one wonder whether privatization is a godsend or a nightmare. The protests fill Taiwanese society with distrust, adding to the atmosphere of social unrest. A neutral and objective debate on this issue is clearly needed.
First, the purpose of having state-owned enterprises (SOE) is to avoid giving private enterprise a stranglehold on essential industries and ensure that the country's citizens are adequately provided for. An SOE is defined as an enterprise in which the government, whether central or local, is either the sole shareholder and manages the concern directly, or holds a controlling stake of more than 50 percent of the shares. Taiwan's central government currently has a stake in 27 SOEs including Chunghwa Telecom.
SOEs have been an important tool for the government in economic development and maintaining financial stability. Since the 1990s, policies for privatizing SOEs have been carried out in response to the global economic development trend toward competing free markets.
Privatization is not only a matter of decreasing the proportion of state-owned shares to less than 50 percent. It also includes opening up markets for competition (eg, the deregulation of the financial sector), relaxing regulations and adjusting industrial structures. The heart of privatization lies in its removal of bureaucratic attitudes and embrace of the vitality and management methods of private enterprises. It leads to increased management efficiency and improvement in the SOE's operations.
Because the status of SOEs has long been unclear (Are they policy-driven or market-driven?), their operational structure is rife with contradictions and inefficiency. Second, employees in SOEs are both civil servants and company employees. They fall within the scope of criminal responsibility for public servants under the criminal code. It's not strange to discover, then, that SOE employees are very careful and passive.
Third, the management of SOEs is torn between their firms' status as public institutions and the demands of market competition. Fettered in this way, how can SOEs compete against private enterprise?
The bizarre logic of this system means that unless SOEs profit from a protected monopoly, they lose money. The government may have to sell property to keep loss-making SOEs operational. After privatization, however, it is difficult to know what will happen. Therefore, it's understandable why SOE employees fear privatization and want the protection of the state umbrella.
But it can't be denied that privatization is a way for SOEs to leave protectionism behind and strive for long-term, healthy development. More importantly, it is necessary to bring about a reform of rules and regulations prior to privatization. It's also necessary to ensure that SOEs truly adopt corporate management principles and stop fearing the challenge and pressures of market competition. This is the only fundamental and thorough solution. It is also the only way to establish sustainable development for SOEs.
If this really can be done, privatization will no longer be opposed by employees. Rather, they will see it as an opportunity to cast off their fetters and start anew. Isn't this what happened with China Steel?
Liu Chi-hsiao is a planning specialist at the Ministry of Economic Affairs' Commission of National Corporations.
Translated by Perry Svensson
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