PNG Government embarks on privatisation path

Transcript

Papua New Guinea's Prime Minister says there's a growing need for private sector participation in the management of state-owned enterprises.

The government has announced the privatisation of Air Niugini, with 49 percent of the national airline to go on sale, the first in a series of privatisations.

Peter O'Neill told Johnny Blades that there is a clear need to raise capital to expand state enterprises and meet growing demand for their services.

PETER O'NEILL: So, government does not have enough resources and funds, that is extra funds, available for us to invest in those companies so that they can improve their efficiencies and expand their services. We need to get into the private sector.

JOHNNY BLADES: Air Niugini has been doing pretty well, hasn't it, in a pretty challenging industry?

PO: Yes, we all know that globally the aviation industry hasn't been doing too well. Air Niugini has managed to keep its costs under control and been able to maintain a high level of customer service that is internationally acceptable. So we think it has a good story to tell, close to forty years of reliable service to the nation, and I think that will also give comfort to potential investors, that they're investing in a company that is going to give them a fairly good return over a period of time. So we're encouraging our own citizens to take the first chance to purchase the initial issue of shares that are going to be done. If they are not fully subscribed, then we are going to turn to some of our own companies within the country, including the superannuation and others, give them the opportunity to purchase the additional capital through issue of shares that's going to be raised. We will maintain  close to  50 percent shareholding by the state so that they also feel comfortable that the state will continue to have a significant presence in the company.

JB: What other state-owned assets to you consider potentially up for partial privatisation?

PO: The next in line is our electricity company which is PNG Power. We are now talking with all our stakeholders, including the management, the employees, the board, and of course some of the industry participants, that we will also stage a partial sale of shares to raise capital in order for us to again expand our services in providing electricity to our citizens and businesses in a growing economy. Many of us know that to invest in energy generation facilities and infrastructure is quite an expensive exercise. And again, government does not have additional or extra funds that it can invest into maintaining these services. It's important that we encourage the private sector to participate. Again it's not only about raising capital but it is also about trying to bring private sector efficiency and management skills into managing the state-owned assets. The state-owned enterprises have been mismanaged for quite a while. As a result, we have not fully been able to realise its potential and its ability to deliver world class services. And I think with the encouragement of bringing private sector and other individual shareholders, especially our own citizens, into these enterprises, we'll boost our ability to continue rolling out services for our people to enjoy.

JB: Is it guaranteed though that these sorts of processes will make the assets operate more efficiently?

PO: I know that with the additional funds they are able to get more upgraded and more recent infrastructure which will be better, with better technology. And again with better management skills. And I know that will produce some efficiencies in many of those businesses, which will mean the consumer and the travelling public, and of course the consumer of electricity will have a better service rendered to them. So I think it will make a significant improvement to what we are presently offering to our consumers, where we are giving them almost sub-standard level of service while maintaining 100 percent by the state. We are not able to provide that level of efficiency that our people now start to expect from us.

JB: With PNG Power, could there be a danger of the prices going up?

PO: Prices of electricity have been controlled by our consumer commission, independent consumer commission, the ICCC. They set the basis on which any increases in tariffs and of course in pricing by all these organisations where there is a monopoly position within the market and that will continue to happen. So I don't believe that the prices will rise, in fact I believe prices will decline.

JB: When do you expect these partial sales to proceed?

PO: Air Niugini has done substantial work. We have left the agenda, cabinet has given approval but the process has been left to the Air Niugini management and board to handle, and they are coming back to cabinet now for its final endorsement. And then they will go out to the market. And they've got consultants and experts in the industry to come in and help them prepare for that floating of additional shares to raise capital for Air Niugini. Air Niugini, is, through the previous government, placed substantial orders in the market for new aircrafts and this float will certainly be raising the capital to purchase those new aircrafts. So that is why we are doing it, and hopefully we will conclude it and before the end of the year, towards the beginning of the year, we will start the process with PNG Power.

JB: Air Niugini will be kind of like a template, see how it goes, and it could be the template for future sales?

PO: Precisely. And I think we are doing it in a structured manner where the board and the management and the employees of each of these organisations are fully participated in the process so there is a good visibility which in turn protects their own individual positions within those companies like employee benefits are protected during the process.