Deputy Treasury Secretary Anthony Yauieb on the PNG State-Owned Enterprises report

Opening Remarks on the occasion of the launch of the PNG SOE Benchmarking Report by Anthony Yauieb

Treasury Deputy Secretary (Economic and Financial Policy)

Thursday, September 13, 2012

Crowne Plaza Hotel

Distinguished guests, ladies and gentlemen,

It is my privilege to offer a few remarks on behalf of my Secretary on this occasion of the

launching of the PNG SOE Benchmarking report.

Anthony Yauieb

Our SOEs play an important role in the provision and delivery of the essential services that contribute to economic growth and the achievement of the development goals of this country. 

Such services include water, power, telecommunications, and port and airline services. 

At the same time, SOEs are key State assets therefore the Government expects a return on its investment.

I have had the benefit of skimming through the PNG SOE Benchmarking Report and we will take time to digest and carefully consider some of the report’s findings on how certain policy, legal and regulatory areas could be reformed to improve SOE’s delivery of infrastructure services.

We will look forward to this report as a resource that we can draw upon as we progress our

own SOEs reform agenda. 

This is particularly important for SOEs to be competitive whilst making positive contributions to the economy by improving service delivery and providing a reasonable rate of return to the state as a shareholder. 

For SOEs, it is now time to start thinking about different ways of doing business to achieve better results if current systems and processes do not allow us to perform better.

Over the past years, the PNG Government has recognised the need to improve the performance of its SOEs. 

This has provided impetus for the Government to increase its assistance to SOEs, both in terms of capital injection and important SOE policy reforms to lift their performance.

Although the pace and the extent of the policy reforms have been slow due to varying political commitments of successive governments, the reality is that the benefits are encouraging for our growing economy. 

We need to build on from this and start thinking about better and innovative ways of doing business.

As detailed in the 2012 Budget Paper, the SOE policy framework has shifted significantly since late 2011.

The Budget identifies a number of key SOE reforms – a Dividend Policy setting out the government’s expectation as a shareholder for the SOEs; a Community Service Obligation (CSO) policy framework to ensure SOEs operate commercially and deliver CSOs without undermining their commercial principles, the development of a Public Private Partnership (PPP) legislation to complement the existing and planned Public Private Partnership arrangements; an On-lending policy tries to ensure that the SOEs are treated similarly to private sector borrowings through appropriate risk sharing between State as the shareholder/lender and SOEs as borrowers.

As stated earlier, the Government, like any shareholder, expects a commercial rate of return on its investments. 

To avoid confusion, it is critical that the Government clearly communicates its expectations of, and clarifies the policy settings for, the public enterprises and its commercial investments.

A key aspect of the policy settings involves communicating that the Government expects SOEs to operate as commercial and professionally-managed businesses. 

Consistent with this primary objective, they should be as profitable as a comparable business not owned by the State.

The Government will reflect this desire that public enterprises operate with a commercial focus via the finalisation of Dividend, Community Service Obligation (CSO), Public Private Partnership (PPP) and the On -lending policies in 2012.

We successfully completed the PPP Policy in 2008 while the On-lending policy has been finalised in 2011. 

We are now focusing on finalising the Dividend and CSO policies (in close consultation with IPBC). 

The draft PPP law has been finalized and will be submitted to Parliament during the Budget session. 

Over the past 12 months, the Government has made substantial progress in increasing the

transparency with which the SOEs and IPBC are managed.

 As ADB's Finding Balance Study has found, PNG has gone from having one of the least transparent SOE governance and accountability frameworks in the Pacific to one which is increasingly robust, with the preparation of annual plans and publication of IPBC accounts.

 We look forward to seeing a continued increase in transparency and accountability.

We still have much more work to do in order to place our SOEs on a fully commercial footing, and Treasury is pleased to see that IPBC's business plan for 2012 reflects the same priority actions: 

•   Ensuring compliance with the planning and reporting requirements contained in the IPBC Act;

•  Establishing stronger links with the Independent Competition and Consumer Commission (ICCC) in the defining and enforcing service standards and financial performance outcomes for relevant SOEs;

•  Publicly reporting on service standard outcomes and financial performance of SOEs;

•   Reviewing and reporting on opportunities for greater private sector involvement through mechanisms such as Independent Power Producers (IPPs), PPPs and possible divestment of shares in public enterprises; and

•  In consultation with Treasury, contribute to the finalisation of the CSO and dividend policies for government consideration.

In conclusion, I would like to thank ADB for its quick response to our request and for conducting this SOE Benchmarking Study. 

Let me also not neglect to thank AusAid for the co-funding for this study.

I would also like to thank the ADB for their ongoing efforts to help us finalise the CSO policy and PPP legislative framework, both of which will be vital to improving the quality of our infrastructure service delivery and financial performance of our SOEs.