Abe: Millions spent on SOEs for nothing

Business, Normal

The National, Friday 14th September 2012

PAPUA New Guinea taxpayers have paid hundreds of millions of kina into public enterprises for no net benefit, according to Independent Public Business Corporation (IPBC) managing director Thomas Abe.
Speaking at the launch of Asian Development Bank’s new publication, Finding Balance, Benchmarking the Performance of State-Owned Enterprises in Papua New Guinea, he said the achievements of  PNG’s state owned entities (SOEs) “hide a multitude of sins”.
Abe said the ADB estimated that in the period covered by the survey, from 2009-10, the government had made cash infusions across all public enterprises totalling about K700 million,  this money had not brought any substantial improvement – “in fact, things have gone from bad to worse”.
“The cost of funds for Papua New Guinea’s public enterprises is artificially low at 4.5% compared to an average commercial rate of 11.4% over the financial year 2002 financial year 2009 used for the survey,” he said.
“The reason for the low cost of funds is the high proportion of advances from the government and the use of concessional loans from multilateral and bilateral development partners.
“If real-world interest rates had been used, our return on equity, for example, would have been halved.
“Continuous financial support from the government comes at its own cost, of course – as they say, there is no such thing as a free lunch.
“The most important thing to say about these handouts is that in no case did they result in better services or a faster rate of provision of services to rural areas.
“In fact, service delivery standards have declined and the extension of services into rural areas has proceeded at the usual snail’s pace.”
Abe said as an example that at the start of 2002, Post PNG had only just been rescued from insolvency. It was still reliant on IPBC for life support.