The Sale of Public Companies

Minister for Finance, Sir James Ah Koy. I have learnt a lot from that experience as the Permanent Secretary for Finance in charge of implementing these reforms.

A good example was the reform in telecommunications, which opened up the sector to competition. We are now enjoying the fruits of those reforms with better services at reduced prices.

There are several motivations for the divestiture of the ownership of public companies to the private sector.

The first and perhaps the most logical is that the company is better run by the private sector than Government. As we have seen in the telecommunications reform, this ultimately leads to better services to the people at lower prices. The people benefit directly from these reforms.

The second is that the sale of public companies reduces the need for Government to prop up these companies in the form of subsidies, grants, and tax concessions. These amounts can be huge. Government will be able to channel these savings to the many priorities that it faces. I therefore support the principle that Government first sell the companies that are not making money. The people benefit from the re-prioritisation of Government spending. However, Government is selling public companies that are making money. They sold the ports and is now selling the power. These compa- nies are making profits. So why sell? The major reason is that Government needs more and more revenue to fuel its insatiable expenditure plans. The proceeds from the sale of the ports have all been spent. The sale of the power will be spent as well. These are bad economics. Good economic management dictates that we should not spend these one-off revenues. Instead, we should use them to retire our ballooning debt. This is what we did from the sale of ATH, which resulted in a surplus budget which Fiji has not achieved since then.

The third motivation of selling public companies is to remove the monopoly to help keep prices down and the quality of services up. Again, this was the case in the telecommunications reforms.

But it is unlikely that we will get a competitor to our ports company. Apart from small independent power producers, there would be little competition to the new power company. Without this competition, the new power company continues to be a monopoly, which will not keep tariffs down. This defeats the purpose of privatisation.

The process of selling our family jewels is as important as the outcomes themselves. First and foremost, the process must be transparent. These companies are where they are today from the use of taxpayer’s monies. Government must therefore let the people know how the sale of the then FEA (now known as Energy Fiji Limited) is going to happen.

The debate in Parliament on the sale of the then FEA was through emergency procedures. What was the emergency? Government was talking about strategic partners for the then FEA. Who are these partners? What nationalities are they? What benefits will these strategic partners bring that Government cannot? Why does Government need capital for the then FEA? A good Government will answer these questions. The people need to know.

It is also important that people receive value for their assets. The valuations of the companies help benchmark the asking sale price. Do we know the valuation of the then FEA? What was the valuation of the ports compared to the sale price? The sale of public companies must be through open competitive bidding. While competitive bidding is transparent, more importantly, it helps us procure the best price. ATH was sold through competitive bidding. But we are not told of how the the then FEA is going to be sold. How are the strategic partners chosen or have they been chosen already?

Selling the ports is different from selling the power. Power is an essential commodity. This is a crucial difference. The price of power directly affects people. The issue of affordability of essential commodities like power is very important. Profit will drive private sector owners who are bound to argue that the cost of electricity generation is low in Fiji so there is room for tariffs to increase. There is therefore a real possibility that tariffs will rise rapidly. Consumers will pay for the higher profit of the new power company.

Another important issue is sovereignty. There are merits in the argument that the ownership of essential commodities like power and water should remain with Government. Fiji is small. We must therefore protect our national assets from foreign ownership.

The people have every right to know. Government should not use the selling of shares to the FEA consumers as a smokescreen to mask the transparency of the sale process and to lessen the value of our hardearned money.

It is also important that people receive value for their assets. The valuations of the companies help benchmark the asking sale price?