The government's plan to privatize many of Taiwan's state-owned enterprises is running into resistance from the work force. Do labor unions have any clout? And how does the government intend to keep the program on track?
"I don't know what the future holds for me," says Chang Shu-sen (張樹森), an employee of the state-run Chinese Petroleum Corp. "I'm fifty now. If I lose my present job, I really don't know where I'll go. Twenty years ago, with a master's degree, I had plenty of options, but security was important to me, so I decided to enter the state sector. People said that if you had a job there, you had an iron rice-bowl, and I never thought that would change--I'd just soldier on until I was sixty-five." She falters, and her face clouds. "It doesn't look that way now."
The pending privatization of Chinese Petroleum has cast a pall over its entire staff. "Jobs in the state sector should be guaranteed by the government," Chang claims. "But so far we've heard nothing. How are we supposed to concentrate on our work and go on supporting the privatization policy?"
Rumors are rife. Many employees believe that the company plans to lay off at least one-third of its existing work force. People like Chang, with considerable seniority and generous pay envelopes, feel themselves to be the most likely targets for early dismissal, and their fears may be justified: there is no "first in, last out" rule in Taiwan, where senior, and therefore more expensive employees are often the first to go when companies downsize. Chang and her colleagues see this becoming a potentially serious social problem as more and more households face substantial cuts in family income. There is little doubt, however, that the tide of history is flowing against them.
In recent years the government has made extensive efforts to transform Taiwan's state-owned enterprises (SOEs) into private companies, aiming to boost operational efficiency and curb public waste. State employees understandably feel threatened: their jobs--traditionally higher-paying and with better working conditions and lighter workloads than those in the private sector--are coming under attack.
Many big enterprises are affected. For example, if the government keeps to its present timetable, 10 percent of its shares in the Taiwan Power Company (Taipower) will be sold off in 1999, with another 18 percent the following year. The aim is to complete the privatization of Taiwan's electricity-generating industry by the end of the year 2001. Tung Chung-hsiung (董忠雄) is president of the Taiwan Power Workers' Union (TPWU). "Privatization is the issue that worries our members the most," he says. "It's the hottest topic in the office. People are worried about being laid off and the possibility of salary cuts."
Yet Tung is adamant that his union is also concerned about the broader picture--not only seeking to safeguard the interests of employees, but also keen to test the feasibility of the planned policy to see if it really benefits the nation as a whole. "The government's privatization program is actually its way of bowing to international pressure over Taiwan's bid to enter the World Trade Organization (WTO) [with its emphasis on liberalization and uninhibited competition], rather than a genuine move to bolster operational efficiency, as it claims," he says. "It looks as though this plan is being implemented simply to replenish the government's coffers, with no regard to its long-term consequences."
But Chi Schive (薛琦), vice chairman of the Council for Economic Planning and Development (CEPD) takes a different view. He regards pressure from countries concerned to drive a hard bargain with Taiwan over its accession to the WTO as essentially positive, because it can only stimulate the island to press ahead with a whole slew of beneficial economic reforms, which naturally include privatization. "The process may be painful, but we can expect to reap the benefits afterwards, in the shape of a promising future for Taiwan's more resilient economy," he says.
Change, in other words, is good for the soul. "If any company president sees his business losing its competitive edge, or detects a decline in performance, he's obviously going to make changes, either by reorganizing his corporate structure or by changing his sphere of operations and branching into other fields," Schive says. "That's the way all business works."
Another major problem noted by Tung Chung-hsiung is that the government has so far failed to devise a set of convincing guidelines for safeguarding staff rights. "There is no consensus between the government agencies most directly concerned--the CEPD, and the Ministry of Economic Affairs," he says. "The contents of the package are in a state of constant flux, and the privatization bill has been held up in the legislature for more than two years now."
Tung and his members are worried that such uncertainty will have an adverse effect on staff morale, which in turn could blight the island's power supply, thus slowing economic development. The TPWU is accordingly looking for ways to persuade the government to put the program on hold, pending a review of the results of previous privatizations. "We hope to provide government authorities with practical analyses, based on our years of experience," Tung says. "We are also pushing for the right to participate in the CEPD's screening process, which will determine the ultimate content of the privatization package."
So far, however, the union is not having much luck. Instead, the CEPD has commissioned academics and consultants to map out what Tung describes as an impractical plan riddled with problems. He says flatly that he does not hold out much hope for the future of Taipower after it is privatized. "The result will be a mixture of layoffs and wage cuts."
A gain, this is hardly how CEPD Vice Chairman Chi Schive sees it. He is frankly dismissive of the notion that union leaders should be invited to participate in the CEPD-organized screening process. "Unions ought to be talking about privatization with management on the company's premises, where company policy is formulated," he contends. "But when dealing with the outside world, it's the directors of the company who have to represent its interests and those of its employees."
In accordance with this policy, the CEPD invites only presidents and chief executive officers to attend its planning meetings. "The council is in no position to debate privatization policy with union leaders, because the government has already laid down what that policy is to be," Schive says. "The relevant debates will take place in the legislature and will involve both the executive and the legislative branches. We have to go by the standard procedures. The alternative is chaos."
What the CEPD is prepared to do is continue its existing dialogue with union leaders and the employees they represent as a means of educating them about the ways in which privatization can benefit the work force. The relevant statutory framework actually entitles them to preferential treatment, rather than the reverse, and with a view to emphasizing this, the council has organized several seminars in recent months at which union leaders and SOE employees have been urged to express their concerns. Despite opposition from some labor unions, Schive believes that many employees support privatization, because they recognize that it is for the good of Taiwan's industrial environment as a whole, quite apart from benefiting individual enterprises.
Despite this, Tung is resolute in his hostility to privatization. Any union in the power-generation industry has a number of tricks up its sleeve, and the TPWU is no exception. "We have about 30,000 members, or 97.8 percent of the Taipower work force," he points out. "We don't rule out the possibility of large-scale protests."
Tung is reluctant to go into detail, but he hints that union members may refuse to work overtime or on public holidays, even if it means neglecting emergency repairs necessitated by typhoons or other calamities. "That will surely have a huge effect on the island," he says. "Electricity is an essential part of people's lives. We don't want to see that happen, but if we're left with no other choice, we may be forced into it. Having said that, our basic position is still to get involved in the decision -making process."
Other labor unions have similar notions. "The government says it's determined to press ahead with privatization be cause SOEs are inefficient and employ too many people," says Huang Ching-hsien (黃清賢), president of the Taiwan Petroleum Workers' Union. "We don't deny that private firms are more efficient, but that's not the fault of SOE employees, it's the fault of poor systems that put management under too many constraints."
When pressed for examples, Huang cites the requirement of legislative approval for major investment projects, and the tight grip of concerned government agencies on senior appointments. He also believes that the same inadequate top management is being given far too big a say in privatization discussions with the executive and legislative branches of government.
The problem, as Huang sees it, is that currently the people at the top of many SOEs got their jobs as a reward for political service, rather than in recognition of their (frequently lacking) performance. Without competent executives, how can any company operate efficiently? "It's unfair to accuse the work force of being inefficient," he argues. "We're determined to safeguard the dignity and interests of our members, and we plan to fight the government's privatization plans tooth and nail."
Like many other union members, Huang feels that privatization is no cure-all. The government should first examine the island's overall industrial structure and identify those features that are peculiar to individual public enterprises, rather than just go all out for across-the-board privatization. The petroleum industry provides a good example of what he means: it is a high-pollution, capital-intensive, high-risk industry, closely tied in with the needs of national defense and impinging on the daily lives of just about every inhabitant. Once it falls into the hands of just another business conglomerate, problems are bound to arise. Who, Huang asks, will supervise the quality of oil products and be responsible for industrial safety?
His arguments might bear greater weight were it not for the extraordinary number of accidents, many of them fatal, that beset Chinese Petroleum every year under its present management. He is on stronger ground when he points out that it is fiendishly expensive to build oil refineries, explore potential oil fields, purchase advanced machinery, and devise environ mental protection policies. Whoever buys the company may be faced with an annual investment bill that outstrips revenues --or so the argument runs. Faced with that problem, the new owners will likely seek to import more oil-based products and close existing refineries, using their sites to build lucrative property investments. The end result will be that Taiwan becomes increasingly reliant on foreign suppliers--bad for customers and for the nation as a whole. Jobs, inevitably, will be lost.
Unions the world over are of course fond of constructing these pessimistic scenarios, even though experience has generally shown that good workers who know what they are doing and understand the industry often end up being employed by the new enterprise on terms at least as good as those they enjoyed before. The downside, of course, is that post-privatization they actually have to become competitive themselves, by showing serious regard for the consumers who buy their goods and services and thus indirectly pay their wages, and by doing all they can to generate a profit for stockholders.
Wu Shen-yi (吳慎宜), a professor in the Labor Relations Department of Chinese Culture University, has had a lot of contact with union leaders. She has found that, deep down, they are well aware that privatization is here to stay and that there is not much they can do about it. Her own observations and research have convinced her that SOEs are substantially less efficient than their private-sector replacements, and she would like to see unions divert their focus to safeguarding their members' rights when the inevitable happens.
Wu notes that unions are attracting more and more members and are becoming better organized, so that they can have some real influence on the way things are going--but only if they behave responsibly and accept that privatization is a global trend that cannot now be reversed. She is particularly concerned at the prospect of any threat to public order, the result of over-enthusiastic demonstrations.
Unfortunately, the message seems not to be getting through to everyone, and the Chinese Petroleum Corp. is a case in point. In 1999, 18 percent of the company will be sold off. "So far, we've been offered no guarantees about job security or maintenance of salary scales," says Taiwan Petroleum Workers' Union President Huang Ching-hsien. "This is substantially affecting morale and performance." According to him, that is one of the main reasons the number of industrial accidents has increased in the recent past. "After privatization, staff have no future to look forward to, " he says. "In such an unstable situation, how can they concentrate on their work?"
At present, the union is less concerned to negotiate a comprehensive compensation package for their members, which would be Wu Shen-yi's solution of choice, than to protect job security. "We will spare no effort to block or at least delay implementation of the privatization program by obstructing the legislation's progress through parliament," Huang says. "That way, we'll have more bargaining chips when we come to negotiate with the company and the government, which are going to get increasingly anxious about the program's progress." This tactic has met with some success, in that Chinese Petroleum was originally scheduled to be privatized in 1997.
Union leaders are also pushing management to make structural changes in the interests of increased efficiency, because without them the problems will still be there even after privatization. "The best guarantee of the right to work is the sustainable operation of the company's existing business," Huang says. "We're confident about what we can achieve, particularly since other unions are allying themselves with us. But if the government continues to turn its back on us, we don't rule out escalating our protests."
Escalation is becoming something of a buzzword in this field. Chang Hsu-chung (張緒中), president of the Chinese Telecommunication Workers' Union, points out that the number of management-labor disputes has been on the rise recently. According to him, some employers are following a deliberate policy of dismissing domestic workers and replacing them with foreign laborers for lower wages. Others simply shut down their plants and leave their workers stranded without severance pay or pensions.
A particularly notorious example of this occurred two years ago, when the owner of a garment manufacturing company called Lien Fu closed it down overnight and went to live abroad, leaving some three hundred workers without jobs or compensation. The staff launched a series of protests against what they perceived as government indifference, and the dispute remains unresolved to this day.
"No law prevents these practices," Chang argues. "Workers are victims who have to fight for their rights all by themselves." According to him, Taiwan's entrepreneurs for the most part lack any sense of social responsibility, so implementation of the privatization program is bound to put SOE employees at a disadvantage.
The union leader also ridicules the notion that privatization equals increased efficiency. "Most of the former public enterprises that owned a lot of land were eventually taken over by business conglomerates with an eye to property speculation," he explains. "Those groups closed down the original business and concentrated on seeking ways to have the land rezoned from industrial to commercial use, all in the name of increased profits." He points to the case of the Taiwan Machinery Manufacturing Corp., which was sold off to a business conglomerate that included President Enterprises, one of Taiwan's largest companies. Many of its factories were closed, and the sites given over to industrial and commercial projects.
Such behavior serves only to widen the gap between rich and poor, and also results in massive layoffs. "How can I tell my workers that after privatization at least half of them will be dismissed, and still ask them to support the program?" Chang asks.
Chunghwa Telecom is scheduled to complete its privatization program by June 2001. "This is a hard battle, and we're running out of time," Chang says. "Sometimes we feel it's hopeless, but we mean to fight on." His union has set up an information center to coordinate research and analysis into the problems, and its work is periodically distributed to legislators, scholars, and officials. "We would rather rely on facts and persuasion than resort to confrontation," he says. "We feel sure that we can make a difference."
Chi Schive, the CEPD's vice chairman, is well aware that SOE employees and members of the public do not see eye to eye where the government's privatization plans are concerned. "The reason is very simple--privatization is bound to impinge on the privileges that workers in the state sector are used to," he says. "Their opposition to privatization is a perfectly natural human reaction."
Which is not to say that he agrees with it, however. There is no way the government will undertake to guarantee continued job security for SOE workers, along with all their other benefits. "Times are changing," Schive says. "Employees want security. But there are two sides to every coin, and putting the emphasis on job security means avoiding the pressures of healthy competition [which may well necessitate streamlining the work force]. How can a company prosper, if its employees think that way?"
According to Schive, liberalization and the privatization of public enterprises are now part of an irreversible global trend, and they are set to be major planks in the government's platform for sustained economic growth. "The key to the private sector's rapid development and outstanding performance is its ability to spot a changing environment and adjust to it quickly," he says. "We simply can't afford to let our state-run enterprises just cling to their old ways."
Schive also has some scathing comments to make about workers' rights, a term that he would like to see more tightly defined. "If employees are serious about safeguarding their rights, the first thing they should do is try to raise their own competitiveness, rather than merely ask for some sort of government guarantee," he says. "If you're personally competitive, you've nothing to fear from privatization."
The CEPD vice chairman is emphatic that the compensation package drawn up by the government is better than those adopted in most other countries that have privatization programs. The regulations give SOE employees the option of transfer ring to the newly privatized entity, and accordingly their right to work is safeguarded to a large extent, although it is left up to the new management to decide on any subsequent streamlining or restructuring. Alternatively, staff may take vocational courses and receive employment counseling designed to help them change careers.
SOE employees who opt to leave may take severance payments based on seniority, in line with the relevant retirement provisions of the Labor Standards Law. Furthermore, they can be entitled to as much as seven months' salary in additional compensation, and they enjoy priority when it comes to subscribing for shares in the newly privatized concerns. Up to 35 percent of an enterprise's total capital may be purchased by staff in accordance with a formula that allocates them stock at a value equivalent to four years' salary, and if the entire allocation is taken up, employees will have a real say in choosing and supervising the new board of directors. Schive compares that favorably with recent privatizations in the United Kingdom, in particular British Telecom, where fewer than 10 percent of the shares were made available to employees on a similar basis.
Chi Schive does acknowledge that there have been cases where employees left after privatization, but he maintains that the majority of them did so voluntarily, either because they found better jobs elsewhere or because they applied for early retirement. For instance, between 1994 (when the company was privatized) and 1997, BES Engineering Corp. saw a total of 1,234 employees leave their jobs, but of those, only fifteen were actually required to do so. China Petrochemical Development Corp.'s situation was similar. During the 1994-97 period, an estimated three hundred employees left their jobs but only seventy-four did not work again, with most of the latter taking early retirement packages.
Schive notes that after an SOE has been privatized, its investment decision-making processes become substantially quicker, typically shrinking from two years to two months, thus allowing the new management to seize business opportunities before they disappear. Companies are also freed from many regulatory constraints--for example, the requirement that key personnel pass a difficult government exam before they can be hired--which means that they can operate more flexibly and plan reasonable adjustments in their financial, personnel, and wage structures.
As a concrete example, Schive again points to China Petrochemical Development, which has seen annual revenues per employee surge 106 percent since privatization. "I think the majority of residents support the government's program, which is designed to bolster national competitiveness by reinvigorating the economy," he says. "A sound policy can always with stand investigation. The experience of other countries makes it perfectly clear that privatization is worth doing. Yes, there are differences of opinion, but we believe that with sincerity, patience, and determination, they can all be ironed out."