Run SOEs transparently: Exec

THE Institute of National Affairs says the governance of state-owned enterprises (SOE), authorities and departments should be more transparent and subject to scrutiny.
Executive director Paul Barker said scrutiny must come from independently-appointed board members, and by the watchdogs, notably the Auditor-General, Parliament, media and the public.
“Appointment processes for boards and management must be cleaned up and transparent, but where good managers are in place, they need to be respected and not cursorily dismissed,” he said.
“They must be able to clearly present the situation, (such as) impediments they’re facing, including from vested interests or interference or excessive debt, overheads or inherited excessive supply contracts.
“Many have observed over the years that politicians around the world, but especially in PNG, are plentiful, but capable and experienced managers, in public sector organisations are rare.
“Capable, experienced and accountable managers are even rarer. Therefore, one would imagine that government would recognise, nurture and support those who meet these criteria.”
Barker said the private sector around the world, including in PNG, respected such talent by supporting and retaining them.
“However, sadly, the PNG public sector tends to by-pass them, whether in the public service, statutory authorities or the state-owned enterprises,” he said.
“The politicisation of the public service, including statutory authorities and state corporations in PNG over the years not only sideline many professionals these organisations desperately needed, but the lack of transparency and accountability, and exclusive loyalty of some of their successors to their political patrons, encourages corruption, also in business transactions, awarding over-priced contracts to crony businesses resulting also in poor standards and failing to account for public funds.”
Barker said back in the 1970s and 80s, even though the state-owned corporations had limited capital, they largely managed to make do, partly thanks to skilled and dedicated management and staff and a commitment to managing their scarce resources wisely.
“Government generally did the right thing in the early days when making appointments to boards and management,” he added.
“The State-owned corporations largely reported to the Finance and Treasury departments, through its Commercial Investments Division, and were overseen and had to adhere to standard rules.
“But, as Sir Mekere Morauta highlighted as prime minister, while in those early years due processes were largely followed, by the late 1990s processes, including board and management appointments to statutory authorities and State-owned corporations, were widely being abused.
“He proposed privatising SOEs, not so much because he had a fundamental belief in the private sector, but, as he said: ‘If we’re unwilling or unable to follow due process as ministers or as the Government, then it’s better that the responsibility is taken away from us, and that these corporations, which are subject to the tougher requirements of the market and their shareholders should take over the function’ (or words to that effect).
“He established Independent Public Business Corporation to improve the coordination and oversight of the SOEs.”
Barker said Petromin was then established to manage the State’s equity in mining and petroleum/gas.
“Oddly, a further National Oil Company was subsequently established to manage petroleum and gas interests. In the 2010s, the administration of the SOEs was shifted to a series of successor-holding companies – Kumul Mining, Kumul Holdings and Kumul Consolidated.
“Instead of being registered as state entities with clear reporting responsibilities to Treasury, some of these new entities were registered with a single ministerial shareholder, although clearly intended to be representing the State, rather than as a personal asset, the transparency over functions, duties and responsibilities was becoming shakier, including reporting responsibilities.
“These entities, including some statutory authorities, became increasingly autonomous of Government, almost operating as parallel fiscal entities, despite the Treasury’s effort to claw back some control over the proceeds of non-tax revenue, at least with respect to the authorities with the Money Management Regularisation Act (albeit rejected by the Court in its initial form).”