CHINA - Taiwan's Ministry of Economic Affairs (MOEA) has decided that the privatization of state-owned oil and gas company CPC Corp. will move ahead, following a backlash over fuel price hikes, allegations of mismanagement, and a corruption investigation into CPC's former chairman that have sparked calls for an end to state control of the company.

Minister of Economic Affairs Shih Yen-shiang announced on June 29 that the government would file a proposal for the privatization of CPC with Taiwan's legislature before the end of 2014.

A representative from the MOEA told Interfax on Friday that a first phase of reviewing the feasibility of privatization was expected to be completed by June 2013. This would be followed by discussions with trade unions and a finalization of a revised privatization plan by the end of 2014.

The MOEA also noted there would be deliberations over a possible spin-off of CPC's gas distribution unit, and that shares of CPC were likely to be made available in batches once the process began.  CPC management has previously indicated that the privatization could be completed by 2016.

The decision stems from the recommendation of a committee formed by the MOEA to address the problems facing CPC, which has come under widespread criticism over recent price hikes for gasoline and gas to cover the increasing costs of imported oil and liquefied natural gas (LNG) that saddled the company with a $1.3 billion loss for 2011.

CPC is also dealing with the fallout from a corruption probe involving its former chairman Chu Shao-hua, who is currently under investigation for suspected bid-rigging in relation to a CPC tender in 2006.

Cho Chun, director of international relations for the Gas Association of the Republic of China (Taiwan), told Interfax on Friday that the move towards the privatization of CPC was primarily aimed at improving the performance of the embattled company.

"The privatization [of CPC] is mainly to solve the problems of efficiency and profit," Cho said, adding that downsizing and cutting back on some of the benefits of public enterprise such as high salaries and generous welfare schemes were all means towards to this end.

An initial plan to privatize CPC approved in 2002 outlined that the government would sell 51 percent of its shares in the company.

A resolution the following year, however, made it obligatory for CPC's Taiwan Petroleum Workers' Union (TPWU) to be consulted on the matter, and along with concerns from the TPWU, a lack of impetus on the issue saw it slip off the radar.

The extent of public dissatisfaction over the fuel hikes and alleged mismanagement at CPC over the last few months have now pushed the privatization debate back into the spotlight, and appears to have changed the government's tone towards the issue.

The TPWU was not invited to participate in the recent discussions that recommended the privatization of CPC move forward, according to a report by the China Post, and union representatives interrupted an inauguration ceremony for new chairman Lin Sheng-chung on July 2 to voice their firm opposition to the MOEA's decision to privatize the company.

"Unions [in Taiwan] have been getting stronger in recent years, and have a significant influence on the operation of businesses," Cho said.

CPC is Taiwan's sole upstream developer, and also owns and operates the country's two LNG receiving terminals, which imported 11.9 million tons (mt) of the fuel in 2011.