Chinese Petroleum unable to privatize by end of the year

By Jessie Ho, Taipai Times, Saturday 31 May 2003, Page 10

Chinese Petroleum Corp (CPC, 中油), the nation’s state-run oil company, cannot complete privatization by year’s end as scheduled due to disputes with its union members, a CPC official said yesterday.

We need another eight to nine months to resolve disagreements with the union as well as work out the privatization process, said deputy president Chiu Chi-hsiung (邱吉雄).

The CPC was set to completely privatize by the end of this year, according to a proposal sent to the Legislative Yuan last November.

Opposition to the plan triggered discontent among CPC employees who launched a 2,000 person-strong protest in front of the legislature demanding worker interests be protected.

The legislature then added a provision to the proposal stipulating that the company needs to find common ground with the union before carrying out the privatization.

That may prove a tough task to achieve.

We don’t want to see salary and job cuts as part of the privatization plan, said Taiwan Petroleum Worker’s Union (台 灣石油工會) secretary general Chi Ting-pang (吉廷邦) yesterday.

In fact, Chi says he opposes privatization outright.

I don’t see any reason to privatize the company and impact the job interests of over 16,000 CPC staff, Chi said, adding that the company has proved its efficiency by bankrolling huge profits each year.

CPC is one of the most profitable state-run businesses, generating more than NT$400 billion in revenue per year with assets totaling some NT$500 billion.

In response, Chiu said any pay and job guarantees made by the current managment team may be short-lived as post-privatization decisions will be made by market forces.

Many details of the request, such as retirement policy and salary calculations will be decided by the legislature, Chiu said.

To avoid having to lay off workers, the company has proposed transfering parts of the workforce to four new businesses to be opened by the CPC after privatization, including transportation and bottled water ventures.

Chiu asserts many employees have no interest in changing jobs. That may stem from the lack of a detailed proposal on the job transfer plan, Chi said.

Although the union disagreement is a setback, Chiu said the privatization plan will continue and hopefully be finished within a year.

Initially, the CPC will release 66 percent of its stocks to investors and put the remaining shares up for sale once the operation is stable.

A market watcher suggested the privatization should be proceeded as soon as possible.

The CPC should speed up the privatization, or it may lose its edge in the market, said Simon Tu (杜立生), an energy stock analyst at SinoPac Securities (建華證券).