S.O.E.s ‘should be privatised’

Press, 1 June 1989, Page 3

S.O.E.s ‘should be privatised’

Political reporter

State-owned enterprises should be privatised to prevent future political interference in their management, the chief executive of the Electricity Corporation, Dr Rod Deane, said last evening. While the present Government had pursued reform in spite of criticism from many quarters, there was no guarantee this would always be so. “Statements by various spokespersons from the Parliamentary Opposition indicate that they do not see the functions of S.O.E.s in the same light as currently serving Ministers,” he said in a speech in Napier. "The possibility of a change in the monitoring procedures and operating environment for S.O.E.s cannot be ruled out in the event of a change in Government,” Dr Deane said.

Changing policies could create big costs for corporations. “As long as S.O.E.S remain in public ownership, Governments will be

tempted to use them to deliver benefits to interest groups at the expense of over-all community welfare,” Dr Deane said.

This was particularly so where “the costs of such actions are not apparent to those who are disadvantaged.” Dr Deane also argued that corporatisation should only be a half-way house to privatisation because of the implicit Government guarantee standing behind State corporations.

This made a truly competitive environment virtually impossible, he said.

“The possibility of a major New Zealand S.O.E. defaulting on its debt is often considered remote because of the undesirable political consequences of such an event for the Government,” Dr Deane said.

The threat of possible company failure would be permitted by privatisation, and this would improve incentives for managers, and lenders to a corporation, he said.