Hard News by Russell Brown


Opening a canned worm factory

Never mind getting your message in three times in the interview -- Clayton Cosgrove seemed intent on getting his in three times in every sentence on Morning Report yesterday. How many times did he say "a slow-burning fire sale"?

And, it must be said, Bill English, the other party to the interview, did not sound entirely comfortable discussing National's plans for part-privatisation of state-owned enterprises. What kind of a rationale for National Party policy is "Labour was going to do it too"?

English had reason for discomfort: privatisations don't have a good rep in our recent history. Telecom. New Zealand Rail. Fay, Richwhite.

But I don't actually think that's the problem with this idea. The problem is that we already spend quite a lot of time bemoaning organisations with a similar cocktail of public ownership and private capital to that which English seems to be prescribing.

Aren't we all agreed that Mercury Energy is caught between two stools? Haven't we heard a bit lately about political mouthing-off with regard to Air New Zealand (not an SOE, but Labour will want to save English's statement yesterday that "Air New Zealand is a good example of this mixed ownership")?

SOEs are in a strong position to raise debt if they need to. The only strong reason for selling off minority stakes in public enterprises is as part of a staged privatisation. You could also make an argument for public-private partnership in some major new infrastructure venture.

But that's not English's reasoning. In an interview with Jose Barbosa on bFM yesterday, he explained the plan as a means of providing investment opportunities for personal KiwiSaver accounts, which he said were presently limited to "really only a handful of large companies" on the local stock market, but New Zealanders needed "some good long-term investment opportunities in New Zealand."

If I were planning to float my private company I'm not sure I'd be thrilled to hear the deputy leader of the National Party outline a plan to suck up liquidity. (But the Greens would have been happy to hear English complain that 80% of the Government Superannuation Fund is being invested overseas.)

Such an investment would have the virtue of great security, but that's about it. English was at pains to emphasise that the government would always "stay in control" of the enterprises, and would always own at least 51%. So your capital is stuck in a company where you'll never have control, and where there is always the likelihood that perceptions of the public good will trump profit. And, English seemed to say, where you will only be able to sell your shares to the highest bidder if that bidder happens to be a in New Zealand. (There seems some doubt about this: English told Agenda and bFM that only New Zealanders would be able to own the shares, but granted to the Herald that they could go overseas.)

The Herald editorial takes the opposite angle, arguing that such sales would offer "gilt-edged" opportunities to buyers and little payoff either to the public or the economy in general:

No company that will not be allowed to fail should be privatised. The economy gains no benefit from an asset sale if the asset is protected from the consequences of its bad decisions. The only beneficiaries of a partial sale of such an asset are the private shareholders of the state-assured company.

If National wants to privatise some state enterprises -- rather than just raise some spending money -- it should say which ones are on the block, put the list in its manifesto and sell them if and when it makes the Treasury benches. Because what proposes at the moment isn't so much opening a can of worms as opening a whole new factory producing canned worms.

PS: On a completely different note, I'm chairing a seminar called Media Women in Asia at the Heritage Hotel in Auckland tomorrow. It features accomplished Indian journalist Sagarika Ghose, Al Jazeera's Asia-Pacific news anchor Veronica Pedrosa, former TVNZ current affairs head (now also with Al Jazeera in Asia) Trish Carter, and Asia correspondent for the Australia Network Charlotte Glennie, with me as the Selwyn Toogood figure. It's free, but you'll need to register via this page, which has more information about the event.

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