Liberalization policy, production and cost efficiency in Taiwan’s telecommunications industry

Abstract

Many economists, policy-makers, and corporate managers have long believed that the operational performance of private enterprises is much more efficient than that of public utilities. However, some researches on changes in efficiency before and after privatization contradict this. The purpose of this paper is to analyze changes in technical and cost efficiency in Chunghwa Telecom Company (CHT) before and after partial privatization. The input-orientation Data Envelopment Analysis (DEA) and Cost-DEA were the research tools used in this study, and the findings showed that the technical efficiency, allocation efficiency, and cost efficiency become worse after partial privatization. Additionally, we found that CHT cannot achieve any significant improvement in cost management under its partial privatization environment. CHT is still restricted by government policies and regulations, thus undermining its ability to achieve any significant improvement in its cost management. In order to improve efficiency for CHT, the government needs to eliminate some regulations and relax its control over CHT, thus creating a completely privatized environment.