The Ministry of Audit’s latest report shows that the nation’s 23 state-owned enterprises (SOEs) posted a combined revenue of NT$3.716 trillion (US$118.7 billion) and expenditure of NT$3.477 trillion last year, leaving an annual surplus of NT$239 billion for the year. The report indicates that only three SOEs reported losses last year and that the combined surplus of the 23 SOEs was about 29 percent higher than the NT$184.3 billion estimated surplus in the government’s budget approved by the legislature.
Employees and union representatives of state-run businesses are asking for higher wages, which, they suggest, might encourage their peers in the private sector and benefit the nation’s economy.
The corporatist model in Taiwan’s economy has long endorsed that companies, whether state-run or privately owned, distribute bonuses and pay raises when they are making enough money to share their earnings with employees. The SOEs’ scorecard for last year seemed fantastic and almost everyone would have agreed that a pay raise is accordingly the next move.
However, the public knows this will not happen soon because Cabinet officials last month said that civil servants and SOE employees would not receive pay raises until wage increases were implemented for employees of private enterprises. Several lawmakers are putting enormous effort into pushing for the passage of amendments to four related laws that provide tax incentives to publicly traded companies that share their profits with employees and raise wages.
However, who actually contributed to the national coffers? From the ministry’s report, the central bank made the most money among the 20 profitable SOEs last year. Without its NT$198 billion — 83 percent of total profit — which the bank gained through its forex investments and interest income, Taiwanese SOEs would have made a much smaller contribution.
State utility Taiwan Power Co (Taipower) was next with profits of NT$14.1 billion, compared with the NT$17.5 billion loss it made in the previous year. Although it was Taipower’s first profitable year since 2006 — thanks to falling international prices of some key raw materials for electricity generation — the firm still faced an accumulated deficit of NT$208.4 billion as of the end of last year. In other words, last year’s profit was tiny compared with the firm’s accumulated losses over the years.
In contrast, the ministry’s report shows that refiner CPC Corp, Taiwan (CPC), the Taiwan Railways Administration (TRA) and BankTaiwan Life Insurance Co were the three SOEs that remained unprofitable last year. CPC led the pack with a loss of NT$33 billion, a stark contrast with the NT$17.2 billion in earnings it had forecast for the year. BankTaiwan Life Insurance registered a loss of NT$842 million, a reversal of its previously projected profit of NT$252 million for the year. Meanwhile, the TRA registered losses of NT$3.7 billion last year, after predicting a loss of NT$6.2 billion. What is clear from their lackluster performances is not only heavy deficits, but also persistent inefficiency.
The perennial issue of state firms’ lack of competitiveness is not new. Over the years, the government has repeatedly vowed to reform SOEs, but its pledges are nothing but empty words. The biggest problem facing the government is an inability to overcome obstacles posed by strongly vested interests in state companies, especially with top management positions filled with political appointments to reward government supporters and loyal party figures.
Therefore, without any real action being taken to improve the supervision of SOEs and reform the state firms’ ownership structure and management, Taiwan will have to continue relying on its central bank to make contributions to the treasury every year.
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