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Privatization! Curb best future for PNG ..

May 2 2005 at 11:36 PM
Pro Privatization 

Our wonderful, unique and resourceful PNG will all be eaten by cynical, selfish and vicious politician of us .The moon has already shine in the north and set us a way to go.But, yet the politician/Parliamentarian of today's are so indulged in the death system of political power.Many third worlds has already stepped up to the second and first world, where as we stepping back to the fourth world.Fourth world is non-existent and PNG is no longer in that third world anymore , we are now down to fourth world country because of world class corruption and mismanagement.It is just because people see politics as the best solution and a quicker way to get rich. Let me introduce to you a new way so called "market power" .I would like you to spend some time think about it.To tell you the fact that "privatisation"is a system that actually shifting the political power to the business level or market sector.Althought, the government do make certain political decisions, such as passing bills. But not to that extent where by many so-called (SAVEMAN) will be interested to bulid their lifelong career. However, shifting of power to market base leverage will benfited many . The power will be centralised and subsequently reduces many political related issues, such as fighing and anti-social behaivours. Having siad that, in PNG ,being a politician or Parliamentarian is the life everyone would always wanted.We must think outside the square to shift the political power down to the business sector through privatisation, and privatisation alone..The only solution will be to privatise all the state entities, so that the upcomming Parliamentarian will see that all the grain of rice on the plate is all gone.To be a parliamentarian will mean nothing them.The younger generation will have less interest in politic ,than business.Therefore, if you think of having a baby or already had one, I would like you to say that privatization is the only way to go.Your kids will see that my father or mother had come through that economic and political phase. They will be proud of you.

Thank you for reading this piece of note.If you have any objections to this , it just a public domain so post your views on the board. Please, be sensible and give insight of your argument.

Pro-Privatisation.

 
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AuthorReply
SA

Re: Privatization! Curb best future for PNG ..

May 4 2005, 11:04 AM 

I agree. The state should be more concerned on Governing than managing commercial entities and as evident, the State just cant run a profitable business.

Over the years these run down SOEs require further capital injection from the government and where does the government get its funds, obviously through taxes therefore the costs of keeping these unprofitable SOEs (which should be profitable if properly managed) are borne by the public at large. Basically the costs to the economy significantly outweights any benefits, therefore the move to privatise these SOEs is simply long overdue.

SA

 
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Pro Privatization

Re: Privatization! Curb best future for PNG ..

May 4 2005, 1:11 PM 

Thanks for posting your supportive thread, but your view seems superficial and vague.Let me give some clarity in of your views , so that others can understand the benefit and importance of privatsiation.

When the SOEs privatized , the government will have absolutely no control over the decision making , and thus ,the SOE will never and ever need any financial support from government in their operations. The privatised SOEs will run by the seperate organised groups , may be the group of shareholder, whose managerial principles based on profit making and customer satisfaction. This will obviously bolded down to transperancy, accountability and scrutiny,as oppose to the golden quality lack by presence management of SOEs, which are our MPs. However, the government span of control will manifest itself in certain areas of its privatised entities, such as tax, health and safety standards for its workers and other complaiency taxes.On the other hand, the cost of goods and services provided by those privatise SOE , initially expensive but will gradually decline as a result of competitive of similar entities. Of course, the people will groan and grudging about the sky-rocket prices ,but they will get used to it in a long run.The beauty of privatisation will be the quality of the goods and services, and we will be more satifying in little we purchase. As the saying goes "sadness for today, happiness for tommorrow" .Our sons and daughters will live a happy life tommorrow, if today we say privatisation is the only way to go. I just can't imagine how the life would be for our kids if you can't change the current sick regime of polical cronnies and malfunction system. The established system has proven to us that it is NOT feasible and applicable for PNG situation. We need a radical change, and this change can only come from the educated elites " human capital" so called themselves "SAVEMAN" (reemphasised).To tell you the fact, PNG has the that capacity to change and huge potential to adapt new system , and change for the betterment for everyone, including our kids , grandchildren. The most important thing would be to change our mineset and pattern of thinking inorder to create laughters for our children's rather than live in a hatred and desolated states.Finally, privatisation is the ONLY way to go for a start , and the end of the tunnel their always light of prosperity and hope of our kids.

Pro-Privatisation.

 
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Re: Privatization! Curb best future for PNG ..

May 4 2005, 5:05 PM 

Dear Pro-Privatisation,

Thank you for your comments in relation to my rather “superficial” views. In fact, I never really had the time to draft up a detailed response in supporting your views on the positive benefits privatization will yield for the PNG economy going forward. Hence my views were restricted more so in the context of the cost of SOE rehabilitation on the public purse and the opportunity cost of using these funds in other priority areas of health and education than rescuing business which should at best be profitable.

Privatisation has been a catch cry for most economies in the third world and some of which has been enforced by multinational donor organizations as a precondition to vital funding. Nonetheless, there are as you mentioned many benefits of privatization which includes:

• Eradication of government influence and corruption:
• Realization of operational and financial efficiencies for the SOEs;
• Greater rate of return for government (ie. Dividends and cost savings); and
• Improvement in the quality of goods and services rendered.

However notwithstanding, as there are many benefits so are the mishaps and pitfalls of this process particularly as evident in certain countries in Africa and South America. When we talk about privatization, it is important that we tailor this process to reflect and work within the current context of PNG.

In your response you mentioned as I quote “When the SOEs privatized , the government will have absolutely no control over the decision making , and thus ,the SOE will never and ever need any financial support from government in their operations”. Whilst this statement maybe true, in the current context of PNG, for the Government to sell out a controlling interest (100% equity trade sale) would be disastrous going forward. Such is the case because:

• We need market penetration and infrastructure expansion. That is, most of the services provided by the SOEs are restricted to the major centers where only 5% of the population is. Whilst the bulk of the population are in rural areas and are in dire need of this services. For Eg. In December 2004 about 2% of the total population of PNG utilized PNG Power sourced electricity which is very low compared to other comparable jurisdictions. Therefore we need the government to at least own about 49% of the shareholding in order to provide the funding via dividend re-investment or fiscal incentives (tax credit scheme) for the service provider to expand its infrastructure, let alone the services. When left alone, the Monopoly service provider will downsize its operations and operate only in the commercially viable areas hence service and market penetration will be non-existent. In the case of electricity, the most profitable operations of PNG Power at present are in Port Moresby and Lae. Other centres are at best “loss making”. In the absence of a national grid system linking the country, most of these centres are on remote standalone diesel systems. Given these losses in economies of scale, any private operator will surely abandon all the other centres and concentrate on Lae and Moresby which would be in the best interest of its shareholders. That means we are heading back to the stone ages. Therefore it is essential that Government should have a major holding (preferably limited to 49%) in any of these privatized SOEs and that service/infrastructure expansion funding or incentives should be provided as the privatized company itself will not have the incentive to do so.

• Ongoing regulation and price setting/monitoring. Going forward, these entities if privatized have to be properly regulated to balance commercial interest against social and consumer interests. At present the PNGICCC is vested with this mandate. You mentioned that prices will be “, initially expensive but will gradually decline as a result of competitive (competition) of similar entities”. With due respect, while this statement maybe academically sound, it is incorrect and needs to be qualified in the PNG context. Some industries in which the current SOEs operate are simply natural monopolies particularly the utility industries. Barriers to entry are significant particularly the sunk costs required for the initial investment outlay. It is therefore imperative in such cases that economic regulation be instigated to force the monopoly service provider to mimic competitive market behavior. Hence in structuring these tariffs, it is usual practice that service providers are compensated for the “efficient costs” of operations plus a reasonable rate of return based on rigorous financial modeling to reflect the risks faced in the industry. Hence the setting of the unit price to achieve this revenue requirements. The point is that efficient costs entail movements in general prices in the economy (CPI), the relative exchange rates and other unavoidable costs like fuel prices for the sake of PNG Power. Therefore, if economic circumstances do not improve, prices will increase in nominal terms, however the real issue will be the trade-off between what is and would be an affordable level of tariffs against the sustainability of industry going forward and the resulting costs and benefits.

I agree with your initial point that privatization is the way forward, it is important that we tailor this process to reflect the current circumstances in PNG and only in such a case shall we, in my humble opinion, realize tangible benefits going forward otherwise the experiences of Mexico and Nigeria are worthy lessons.


SA

 
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