Good afternoon
ladies and gentlemen. Thank you Prime
Minister for coming today. I take this
opportunity to congratulate you for your sweeping victory in Ialibu-Pangia.
Sir Mekere Morauta |
We are here to
welcome this new aeroplane to our country – it will be a most valuable addition
to Air Niugini’s fleet, serving on the Brisbane, Sydney, Cebu, Manila and
Auckland routes. So it’s going to be a
bit of a workhorse.
This is
exactly what Air Niugini needs – maximum use of its capital assets, maximum
profit from its investments.
I congratulate
the Chairman Mr Garth McIlwain and the Board, and the management team led by Mr
Wasantha Kumarasiri for this initiative.
The national
airline, like all of our publicly owned enterprises, can be healthier than it
currently is. The status of this
aircraft in fact is a symbol of the problems the company faces. It is leased. Air Niugini does not own it.
Now many
airlines do not own all the aircraft in their fleets – many choose not to for
good financial reasons. But in Air
Niugini’s case, it does not have the luxury of choice.
The reason, simply,
is that the national airline’s balance sheet is not strong enough to stand the
cost of outright purchase of all its aircraft, especially bigger jets like this.
There is
nothing new in this. Air Niugini has been unable to own all of its fleet for
many years.
In today’s
fleet of 22, less than half are owned by Air Niugini – four Fokker 100 aircraft, three Q400s, two Dash 8-100s and one Dash
8-200. And these are the less expensive
aircraft.
Air Niugini is
leasing 12 aircraft - three Boeing 767s, two Fokker 100s, three Dash 8-200s,
three Dash 8-300s and this Boeing 737.
The
constrictions imposed by its balance sheet do not end with aircraft – they
affect every aspect of the organisation and its operations.
We all know
the results: flights cancelled, flights delayed, passengers offloaded, and so
on.
And there are
longer-term and more fundamental consequences: Air Niugini in its present
configuration is unable to provide reliable and affordable services to all the
people, the shareholders of Air Niugini.
It is flying
on one engine, not two.
To be in a
position to provide the services that travellers need, Air Niugini requires a
large infusion of financial capital from its shareholder, the national
Government. I believe Air Niugini needs
at least K800 million to re-fleet appropriately, in type, size and number of
aircraft.
But providing
all public enterprises with the money needed to rehabilitate them and put them
onto a sound financial footing is virtually impossible. No government has ever been able to meet all
their requirements, so Public Enterprises struggle on as best they can with
what they generate or borrow.
Air Niugini is
to be congratulated for the fleet restructuring that it is undertaking at
present – it will be more efficient and it will be more profitable and it will
provide better services. It is to be
congratulated as well for its recent decision to fly into Wau-Bulolo and Daru.
But it could do
so much more if it was put on a sound financial footing.
We do have one
chance to do this – possibly our last chance – and that is through the new
Sovereign Wealth Fund.
I have
suggested that the Sovereign Wealth Fund should earmark dividend flows from PNG
LNG ‑ about K500 million per year – to be used to recapitalise our public
enterprises, and to pay for the maintenance of national infrastructure (roads,
ports, airports, universities, hospitals) and the provision of rural
infrastructure.
I hope that
the next Government sees the wisdom and practicality of that.
I also hope
that it does not succumb to the temptation of winning political popularity
contests – looking good but doing nothing and achieving nothing to solve our deep-seated
problems.
Governments
and politicians are there to make decisions in the national interest, not to
please vested interests or to entrench themselves in the comfortable seats of
Parliament House.
Most
importantly I hope that it does not listen to the ignorant, self-interested
mauswara that the opponents of reform inflict on us.
Most recently vested
interests and would-be politicians opposed NEC’s proposed solution to the constant
power blackouts that the national capital suffers.
The anonymous
arguments they put in support of their case were non- arguments. What they served up to the nation through the
media – in particular with the connivance of the Post-Courier – was politically
motivated and self-serving nonsense consisting of falsehoods, rumour, innuendo
and smear.
Facts appear
to be a non-essential item in public debate these days.
How long are we
going to allow tens of thousands of families to suffer every day because there
is no electricity for mothers to cook with or lights for children to do their
homework by?
How long are
we going to allow people – the old, the very young, the ill and the frail – to
be put at risk because there is no power or water?
Why should we
allow the job prospects of our children to be crippled because rather than
hiring more workers, business needs to spend its money on generators and fuel?
These are the
consequences of the opposition to the reforms that the nation so desperately
needs.
It is my hope
that the incoming Government will make decisions based on the fact that the
people of Papua New Guinea own Public Enterprises.
Not unions and
employees. Not directors and management. The people own Public Enterprises
through their elected representatives. And
elected representatives have a duty to make decisions in the national
interest. Elected representatives are
empowered directly by the people, and the people are the owners of these
assets.
One of the
biggest failures we have as a nation is that decision-making is often on the
basis of political convenience or pandering to sectional interests.
It is my hope
that the new Government has the determination and the wisdom to make decisions
solely on the basis of the common good.
If the new
Government does not prevent decision-making from being hijacked, we will
continue our increasingly rapid slide down a slippery slope.
Public
Enterprises are at the heart of service provision, yet they lack capital, they
lack clear and consistent direction from government, they are not fully
accountable and transparent, and they are unable to operate on fully commercial
terms.
Until my
reforms beginning in August last year, none of them had paid a dividend to
their owners, the people of Papua New Guinea, since 2007. Today’s dividend from
Air Niugini is most welcome.
In fact it is
the first paid by Air Niugini in 16 years, the first since 1996.
That in itself
shows the weak financial position of the airline. The dividend of K6.4 million represents 5% of
paid up capital, again demonstrating the shallow capital base the airline has
to work with. Air Niugini is totally
dependent on borrowed money and internally generated revenue – this will never
be enough for it to make the shift from flying on one engine to flying on two.
The lack of
capital of all public enterprises is the principal cause of their service
delivery falling far below acceptable levels.
They have not increased rural air services, reliable power, efficient ports,
competitive telecommunications or fast and affordable internet services, to
name just a few areas for which they are responsible.
Sure, we can apportion
some of the blame for this dreadful state of affairs to the Somare family’s
treatment of IPBC and its public enterprises as a personal empire, but the
problems are more deeply rooted than that.
It is
significant that since the creation of IPBC out of the former Privatisation
Commission in 2002, not one Public Enterprise has been successfully rehabilitated
and referred back to the government for a decision on its future.
That tells us
that the Government, IPBC and the SOEs have failed to do their jobs properly.
My reforms of IPBC since
August last year show that Papua New Guinea is perfectly capable of the
institutional rehabilitation that is needed.
From an organisation
paralysed by a lack of leadership and direction, and political interference and
nepotism, it has become effective, efficient and vigorous in its leadership of
public enterprises.
I hope that the new
Government continues these reforms and extends them to all public enterprises,
including Air Niugini, and that one day our national airline will be able to
provide the extent and quality of services that all Papua New Guineans require.
Thank you.
Having read the content my view is that if Air Niugini and other SOEs are to become financially sustainable and operate on a healthy financial/accounting balance sheet. I recommended 3 business models that is conducive 1) Corporatization 2)privatization and 3) Govt to gradually recapitalize public enterprise like what Barack Obama did to its failing USA business corporations until they recover from financial recapitalization suffocation. This three models are sound business/investment decisions for the long term economic sustainability of the 7 million people.
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