NZ Herald on SOEs

The NZ Herald editorial:

The labour Party’s finance spokesman, David Cunliffe, raised some eyebrows last Thursday when he spoke favourably of allowing state-owned enterprises to form subsidiaries in partnership with private shareholders.

Could it be that Labour is relenting on the stern anti-privatisation stance it adopted under Helen Clark?

Alas, no. Mr Cunliffe was talking strictly of subsidiaries. It would be an enlargement of the state’s role in the economy, not a diminution of it.

Even the Clark Government was open to this idea. Trevor Mallard, urged it upon the SOEs when he was minister of state-owned enterprises, though nothing happened.

Mr Cunliffe, in his speech at Victoria University, cited Kiwibank as an example of a subsidiary that had added value to its state-owned parent, NZ Post. The next day he made it clear Kiwibank would be excluded from the envisaged private partnerships.

So alas, it is a policy from the Clark Government.

This policy will not answer the Stock Exchange’s prayers for blue chip listings of public utilities. But unless the National Party leadership has more gumption on that subject in a second term, there is not much prospect of SOE share floats from either of the main parties.

The bipartisan policy on no asset sales is I suspect unique in the developed world. And that is not unique in a good way.

Labour probably wants to sound more moderate and reasonable on a subject such as privatisation, even if its real motive is to increase state participation in the economy.

This is true, but they may find it hard to explain why they are pro-private sector investment in “new” assets ut 100% against in existing ones.

At least the policy Mr Cunliffe has revived, and the Government can readily endorse, opens the way for private enterprise to propose projects to SOEs and tap their resources. That sort of investment could be better for the country in the long run than passive private holdings in the parent utility.

No company should need additional capital unless it has something new to do. In that event, it is sensible to set up a subsidiary to do it.

With the benefit of private investors’ assessments of value, and the discipline of sharemarket accountability, the foal would outshine the horse. The state should open its stable and let all its enterprises reach their potential.

I agree.