A typical stalking-horse article for privatisation of assets:
Partial listing of some state-owned enterprises deserves a closer look.
Potential benefits include better performance – it is thus an opportunity to improve New Zealand’s lacklustre growth and productivity.
Potential benefits of stabbing my hand with a pen include a leprechaun wanting trade my blood for rubies, doesn’t mean it’s going to happen. Where is the evidence that partial privatisation would improve performance? And what do we mean by ‘improved performance’? Is it just higher prices for the consumers (us)?
Treasury advised in 2008 that the performance of SOEs has “eroded over time” and that the model, while sound “needs to be reinvigorated”.
Treasury also advised that we should sell SOEs back in the 1980s and 1990s and that worked out just great didn’t it? Billions have flowed offshore in profits, private monopolies were created, and we’ve spent billions undoing the damage of asset-stripping.
First, partial listing of some non-essential SOEs could increase their value.
Not if the government just takes the capital raised by way of a special dividend which it uses to fund tax cuts for the rich, like it is about to force Meridian to do.
The scrutiny of the market would lead to improved monitoring of their performance. A market share price is a transparent measure of performance and value that currently does not exist for SOEs.
Yeah stock-markets are fantastic, eh? They never have bubbles or crashes, they’re just these amazing clockwork value deciders, which is really good to have for some reason.
The New Zealand share-market would benefit. At a time where there is a dearth of new listings, deepening and broadening the market by the partial listing of SOEs would clearly be welcome.
Why is that a good thing? I can see it’s good for people buying stocks to have more to buy, but why is it good for the country?
Few would disagree that the capital market in New Zealand offers limited investment options. Do we want another generation attempting to grow wealth through dubious investments or through continued reliance on bricks and mortar?
Is the alternative for us to take companies we already collectively own and sell them to stockmarket players? How does that increase New Zealand’s wealth at all? Why aren’t the vaunted ‘wealth creators’ up to creating their own companies worth investing in? Why is it that the largest company on the NZX is an ex-SOE?
I agree there needs to be more investment in New Zealand in productive assets but selling off existing assets to the rich isn’t the way. We need a New Zealand Future Fund combining Kiwisaver, the SOEs, the Cullen Fund, and private savings deposits with a mandate to invest in New Zealand innovation, economic sovereignty, and strategic assets.
Third, considering partial listing would force us to identify those businesses Government owns more through inadvertence and inertia than intention. It is the former group that could be partially listed. Examples that could be considered include Quotable Value, and Learning Media, an educational publishing business. Is either core government business? How many New Zealanders know that there is an SOE – Asure New Zealand – that provides an export red meat inspection service? The acid test may be to ask if we think the Government should buy these businesses if it did not already own them.
Quotable value provides the only non-commercial valuation of New Zealand homes, which means people can rely on its impartiality. It is utterly vital that it not fall into the hands of people with a profit motive. The Americans are already threatening to ban our meat exports because freezing companies want to do their own inspections, how do you think export markets would react to us selling of Asure?
There may be sound strategic reasons for government to hold stakes in commercial enterprises. Air New Zealand is an example: there is good evidence that national airlines provide more direct flights to their home market and invest in promoting their home country, which is important for our prosperity as a small, remote country with a large tourism sector.
And, New Zealand is enjoying those strategic benefits while holding less than a 100 per cent share in Air NZ.
Air NZ should never have been sold in the first place. Labour was forced to step in and save it when the private buyers screwed up. Hardly a poster child for asset sales.
Is the reason we hold 100 per cent of Meridian Energy – valued by its board at about $6.7 billion – security of energy supply or to subsidise consumers or for financial return or other reasons? Do any or all of these objectives require a 100 per cent stake? Clarifying what these SOEs are supposed to deliver is a prerequisite to holding them accountable for delivering it.
Just what we need, more privatisation in the energy sector – can we rename the partially privatised Meridian as Enron and save the time?
One objection even to partial privatisation of SOEs is that all New Zealanders already “invest” in SOEs through their government ownership, and that the share of SOEs partially privatised would be scooped up either by a few wealthy interests or by overseas investors.
Pretty strong objection.
A response to this objection is that if done right, partial listing of SOEs could lead to an increase in asset value of the entities – increasing the size of the pie. Some have proposed that the money raised by SOE floats could be used to inject fresh capital into other SOEs, or to fund the acquisition of stakes in new, internationalising Kiwi ventures. All New Zealanders would continue to own a share of that pie through the Government’s continued holding.
But we all know from experience that the government just uses the new capital to fund tax cuts for the rich. If there are private investors wanting to invest in growing an SOE’s business, let them crate a jointly-owned subsidiary for specific projects – this already happens.
Many New Zealanders may also end up holding stakes in these companies through their KiwiSaver scheme or through investment by the New Zealand Superannuation Fund.
But most of us wouldn’t and most of the profit stream would flow to a wealthy few.
Look forward to more of these stalking-horse pieces on privatistion. National has a few objectives in government: keep Labour out (that’s why it was created), reduce wage costs and other business ‘costs’ like regulation, lower taxes for the rich, fund that by cutting spending and selling assets, and divvy up the public wealth among the wealthy elite. Privatisation is a core part of its agenda and it will have to push for it in some form at the 2011 election. Articles like this one are all about softening us up for that campaign.