State entities must turn a profit

 STATE-owned enterprises (SOEs) are generally considered liabilities rather than assets for the Government and people of Papua New Guinea.

These government-owned and operated businesses have been dogged by management issues and plagued with financial problems for much of their existence.

Some have been more successful than others and justified their existence and continuity with random dividend payments to the Government. The ailing entities continue to plow on, year in and year out, without really knowing what the future holds for them.

Thus, the Government is their only lifeline and their only hope of survival lies in the fact that they have a business monopoly. SOEs or government-owned corporations around the world are common with natural monopolies and infrastructure such as telecommunications, strategic goods and services, natural resources and energy, politically sensitive business and broadcasting.

In PNG, state entities have the monopolies on telecommunications, electricity and public water and sewerage systems. At the turn of this century, the Independent Pub­lic Business Corporation was hatched by the Government to revamp these ailing SOEs and put them on the path to profitability.

The IPBC laid out its road-map for the entities to follow and for a short while it seemed the Government’s business woes were a thing of the past. Not so, as IPBC became entangled in the politics of Waigani and was virtually controlled by the former regime, which severely affected its ability to steer government’s SOE ship.

With the change of political leadership, the O’Neill Government has started to knock some business sense into IPBC and the SOEs by making changes to their top management and scrutinising their financial operations.

Recent changes in the top management of IPBC and Air Niugini highlight the Government’s efforts to make SOEs less reliant on the public purse and start making profits for the state.

It is a commonly held view that business activities are best left to the private sector while the Government should concentrate on the affairs of the nation.

One of IPBC’s initial tasks was to privatise some of these government business assets by placing them in the hands of the private sector to own and operate. It was a commendable initiative that would have lessened the Government’s financial burden and other problems associated with SOEs.

However, the proposal to fully privatise certain state entities, especially those that had monopolies, drew stiff opposition from some sectors of the community and some political leaders.

Little has been heard of the privatisation proposal since then but there are murmurings within the corridors of power that certain SOEs may be partially privatised to keep their core businesses afloat. One of them is PNG Power Ltd which is likely to privatise its power generation business. 

The electricity provider has been deeply troubled by management and operational problems and issues for much of its existence. 

PNG Power has just completed a major debt collection exercise to recoup millions of kina owed by consumers throughout the country. It is not known how much was collected during the so-called proclamation of emergency but it is understood a report was presented to the National Executive Council last Thursday.

Cabinet has yet to announce its decisions on the other PNG Power issues, including outstanding payment claims by workers.

Hopefully, these contentious issues will be resolved so that PNG Power can get back on track and start providing its consumers with reliable and affordable electricity supplies.

In the meantime, Public Enterprises and State Investments Minister Ben Micah is adamant that all SOEs lift their game and start operating as viable and profitable businesses. 

“There is no secret formula to success in the Government and private sector,” Micah said recently.

We couldn’t agree more with the minister. 

The onus is therefore on the board chairmen and chief executive officers of all state-owned entities to prove their worth and start making money consistently for the Government and people of PNG.