Abe: No more free lunch for SOEs

Business, Normal

The National, Wednesday 19th September, 2012

INDEPENDENT Public Business Corporation (IPBC) managing director Thomas Abe says there will be no more “free lunch” for state-owned entities (SOEs).
In a media statement he said:
n At the start of 2002, Post PNG had only just been rescued from insolvency. It is still reliant on IPBC for life support;
n bemobile is also being kept alive by cash injections from its shareholders, including the government through IPBC;
n PNG Power has been using its borrowings not to generate revenue but simply to keep operating;
n Telikom has been borrowing illegally; and
n Motor Vehicle Insurance Ltd (MVIL) has invested funds illegally and its investment portfolio is under-performing.
“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,” Abe said.
“That is an extraordinary fact.
“We as taxpayers have tipped hundreds of millions of kina into public enterprises for no net benefit.
“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 each and every public enterprise required capital injections over and over again.
“Every kina that we provide to non-performing public enterprises is a kina that brings negligible benefit,” he said.
“The Asian Development Bank  survey estimates that every kina invested in our public enterprises produced seven times less output than the same kina invested in the rest of the economy.
“Furthermore, every kina that we provide to non-performing public enterprises is a kina that does not go to where it is needed most – to hospitals, aid posts and clinics, to schools and universities, to crime prevention, to agricultural extension and so on.
“And because the impact of funds spent on public enterprises is low compared to, say the education or health sectors, public enterprises are actually a drag on economic growth and national development.”