7. State-Owned Enterprises
According to the NDC, there are 17 SOEs with stakes by the central authorities exceeding 50 percent, including official agencies such as the Taiwan Central Bank. Please refer to the list of all central government, majority-owned SOEs available online at https://ws.ndc.gov.tw/001/administrator/10/relfile/0/1295/374a165c-c930-461e-bb5b-07893b3e5ea2.doc . Some existing SOEs are large in scale and exert significant influence in their industries, especially monopolies such as Taiwan Power (Taipower) and Taiwan Water. MOEA has stated that Taipower’s privatization will not take place in the near future but plans to restructure it as a new holding company under Electricity Industry Act revisions passed in January 2017 that will gradually liberalize power generation and distribution. CPC Corporation (formerly China Petroleum Corporation) controls over 70 percent of Taiwan’s gasoline retail market. In August 2014, the Aerospace Industrial Development Corporation (AIDC) was successfully privatized through a public listing on the TWSE, and MOEA’s stake in AIDC declined to 35.2 percent by the end of 2019. The Labor Insurance Bureau ceased to be an SOE in 2014 but remained under the Ministry of Labor (MOL). Taiwan authorities retain control over some SOEs that were privatized, including through managing appointments to boards of directors. These enterprises include Chunghwa Telecom, China Steel, China Airlines, Taiwan Fertilizer, Taiwan Salt, CSBC Corporation (shipbuilding), Yang Ming Marine Transportation, and eight public banks.
In 2018 (latest data available), the 17 SOEs together had net income of NTD 347 billion (USD 11.6 billion), up 1.5 percent from the NTD 342 billion (USD 11.4 billion) in 2017. The SOEs’ average return on equities continued to decline from a recent peak of 11.13 percent in 2015 to 9.83 percent in 2018. These 17 SOEs employed a total of 118,359 workers.
Taiwan has not adopted the OECD Guidelines on Corporate Governance for SOEs. In Taiwan, SOEs are defined as public enterprises in which the government owns more than 50 percent of shares. Public enterprises with less than a 50 percent government stake are not subject to Legislative Yuan supervision, but authorities may retain managerial control through senior management appointments, which may change with each administration. Public enterprises owned by local governments exist primarily in the public transportation sector, such as regional bus and subway services. Each SOE operates under the authority of the supervising ministry, and government-appointed directors should hold more than one-fifth of an SOE’s board seats. The Executive Yuan, the Ministry of Finance, and MOEA have criteria in place for selecting individuals for senior management positions. Each SOE has a board of directors, and some SOEs have independent directors and union representatives sitting on the board.
Taiwan acceded to the WTO’s Agreement on Government Procurement (GPA) in 2009. Taiwan’s central and local government entities, as well as SOEs, are now all covered by the GPA. Except for state monopolies, SOEs compete directly with private companies. SOEs’ purchases of goods or services are regulated by the Government Procurement Act and are open to private and foreign companies via public tender. Private companies in Taiwan have the same access to financing as SOEs. Taiwan banks are generally willing to extend loans to enterprises meeting credit requirements. SOEs are subject to the same tax obligations as private enterprises and are regulated by the Fair Trade Act as private enterprises. The Legislative Yuan reviews SOEs’ budgets each year.
There are no privatization programs in progress. Taiwan’s most recent privatization, of AIDC in 2014, included imposition of a foreign ownership ceiling of 10 percent due to the sensitive nature of the defense sector. In August 2017, Taiwan authorities identified CPC Corporation, Taipower Company, and Taiwan Sugar as their next privatization targets. Following passage of the Electricity Industry Act amendments in January 2017, the authorities planned to submit a Taipower privatization plan within six to nine years after successfully separating Taipower’s power distribution/sales business from its power generation business.