The Ministry of Finance on Friday surprised many with its lack of a decision on the auction of its 28 percent stake in Taiwan Business Bank (
If the ministry thinks it needs more time to evaluate the case because the offers by potential bidders were lower than shares' floor price, and that any decision to sell its holdings based on such low offers would only invite strong criticism for selling state assets too cheaply, the ministry is justified in its actions. But if it regards the delay of a decision as simply a technical issue or a matter of procedure during the auction, it should think twice, because the delay has triggered speculation of under-the-table deals and created unwanted side effects.
Privatization of government assets, especially state-run banks, is always a sensitive issue. The market needs accurate information to make a judgment about the deal. As Taiwan Business Bank is currently experiencing a nationwide work stoppage as employees protest privatization plans -- similar to what happened when Chunghwa Telecom Co (
As it became clear that the ministry was being questioned thoroughly about its postponement, Minister of Finance Lin Chuan (
Thus, the market is full of rumors. Some said that E.Sun Financial Holding Co (
Some have argued that the ministry opened the bid at a time when the legislature is in recess because the ministry didn't want lawmakers to step in and politicize the privatization process. That strategy seems reasonable. What appears beyond the ministry's expectations, however, was that the union's action, said to be the first strike by bank employees in this country, has had an impact on the bidding prices.
This would make Taiwan unlikely to meet its deadline for financial industry consolidation if the government is unwilling to sell its stakes in lenders at prices that will attract bids. Therefore, what the ministry must do to help comfort the market and rebuild investor confidence is to show its determination to privatize state-run banks and resolve the Taiwan Business Bank fiasco as quickly as possible.
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