Under clear instructions both not to let Chang Hua Bank fall into the hands of Taishin Financial Holdings, and not let Taishin Financial Holdings suffer, after 17 years, the Chang Hua equity case has finally ended. The parties finally found a mutually acceptable solution, allowing both to set off on their own paths. Looking back at this process of privatization, the staff and shareholders of the government and Taishin all paid high costs. After this settlement, hopefully Taiwan will be able to clarify the gains and losses of privatization, and also better position its huge public stock businesses. If so, this case can be regarded as a valuable social lesson, bought at a huge cost.

For a long time, state-owned business was inseparable from inefficiency and corruption. Corporatization and privatization were the intuitive antidotes for these problems. The US and Europe began a wave of privatization around the 1980s, providing an international basis for Taiwan’s reforms, including establishment of the Public Sector Privatization Promotion Committee of the Executive Yuan and revision of related laws and regulations. Many privatized companies did respond to market competition more efficiently and provided better services to the public after adjustments to their shareholding structures.

But not everything has worked so well over the past 20 years. Besides protection of the rights of the original civil servants – which still has implications to this day – there is also the issue of operating efficiency, which has led to public controversy. Especially when considering the poor performance of other private operators, the public sale of equity may not be enough. The government must completely withdraw from the shareholding, thereby completely privatizing public stock companies.

Does the government need to maintain control over public equity undertakings? Looking back at the background of these cases, they are mainly market monopolies (telecommunications, water and electricity), or in areas with strong national purpose (such as banks). The purpose of public ownership is to prevent monopolies from controlling markets or asset valuation.

Just imagine, if Taiwan Railways is corporatized and pursues cost efficiency in competition with the market, it would need to increase fares and reduce rural transportation. Would this really serve the public interest? Would rail safety and service sustainability, despite their current problems, really be improved? In particular, the rigid personnel system of Taiwan Railway, which is criticized today, was designed in a different era to encourage employees to stay for a long time, considering the characteristics of transportation services before the introduction of national highways. This also shows that the operational challenges of the public stock companies are often not just a matter of privatization or not, but require more comprehensive thinking.

In light of the pitfalls of privatization that have emerged everywhere in the world, such as privatization of state assets by consortia, or sharp rises in water and electricity rates, which have affected people’s basic livelihoods, Taiwan’s experience in privatization of public equity over the past 20 years has been relatively successful. Perhaps because of its two political party rotations and free media supervision, many misdeeds have been exposed, and the harm caused by unscrupulous people to corporate governance has also been reduced. Recently, outstanding performance brought about by internal promotion of corporate leaders, such as by China Airlines and Chunghwa Telecom, has also demonstrated that Taiwan’s democratic accountability is helpful in guiding a path for privatization.

After all, DBS Bank of Singapore, with the majority of shares held by the public, has turned itself into a leader in Asia through professional and effective corporate governance. If we can establish the scope of public interest, and then improve the management strategies of public businesses in line with the times, perhaps we can also expect our own privatized corporations to create world-class performance. Despite their large bodies, elephants can also dance when properly trained.