A good Kiwi Party policy

September 6th, 2008 at 11:30 am by David Farrar

is in the Dom Post saying the advocates floating 20% of ’ shares to release about $5 billion for infrastructure.

As reported yesterday, the public are getting sub-standard information on SOEs, because they are 100% Government owned.

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19 Responses to “A good Kiwi Party policy”

  1. PhilBest (5,125 comments) says:

    Lesson from Horowitz: it’s not “assett sales”, it’s “getting rid of millstones around the taxpayers neck”.

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  2. Bob (497 comments) says:

    I don’t think that is such a bad idea. The devil though would be in the detail. Would investors be able to sell their shares? I suspect probably on a very restricted basis such as having to sell back to the SOE. That is if Labour are in control.

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  3. getstaffed (9,186 comments) says:

    Excellent idea. Of course investors (particularly and ‘rick prick’ ones) should be wary about co-investing with a ‘partner’ that will legislate for political expediency at the expense of shareholder value. I’d like a side order of bananas with my AIA shares please.

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  4. Bob (497 comments) says:

    To getstaffed: you have a point. There was no apology to airport or Telecom shareholders for the value lost by shareholders due to government interference.

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  5. PhilBest (5,125 comments) says:

    An interesting point. One tinpot regime after another has discovered to their cost, or failed to discover, even more to their cost, that scaring off foreign investors has much worse unintended consequences than even any perceived good that the populist anti-investor measures were intended to achieve in the first place.

    Now it’s Putin’s Russia:

    http://online.wsj.com/public/article_print/SB122039907604792875.html

    WALL STREET JOURNAL: “The Market Will Punish Putinism”

    “……Moscow is already feeling the consequences in fiscal terms. Foreign investment capital — the lifeblood of Russian equity and credit markets — is draining out as the world recoils.

    Group of Seven leaders should take particular note of this spontaneous market phenomenon — and also take heart. Because no matter what sanctions the European Union might choose to impose, no matter how severely the world’s leading industrialized nations jointly condemn their “fellow G-8 member” — nothing will punish Russia more than to watch the dream dissolve yet again…….

    “………The irony of the story, and the tragedy, is that Mr. Putin needs little assistance from the U.S. and its trans-Atlantic allies to destroy Russia’s own standing in the international political and economic order.

    The rout in Russian stock markets actually began before the invasion of Georgia, prompted by Mr. Putin’s rumblings of despotic displeasure in late July. The shares of Mechel, one of Russia’s leading mining and metals companies, plunged 38% on the New York Stock Exchange after Russia’s prime minister publicly accused the company of selling raw materials to foreigners at lower prices than those charged domestically. Perhaps it was Mr. Putin’s ominous advice (widely viewed as a sinister threat) to Mechel’s owner and director, who was hospitalized at the time — “I think Igor Vladimirovich should get better as quick as possible, otherwise we’ll have to send him a doctor” — that chilled investor sentiment, wiping out $6 billion in shareholder value in one day.

    Only hours earlier, Robert Dudley, president of the Anglo-Russian energy company TNK-BP, was forced to flee Moscow after systematic harassment by government authorities. Locked in a power struggle for managerial control, the joint venture is Russia’s third-largest oil producer; its Russian principals want to wring maximum cash payments out of the business while the British side argues for capital investment to increase future production. Analysts suspect the Kremlin is fully complicit in the effort to oust the foreigners — denying visas to the company’s British employees, launching tax investigations, tapping residential phones.

    Since the attack on Georgia began in early August, the decline in Russian financial markets has accelerated sharply. The benchmark RTS Index of leading Russian stocks has slumped to its lowest level in two years. The ruble has registered its biggest monthly decline against the U.S. dollar in more than nine years as foreign investors rush to retrieve their capital — some $25 billion in the last three weeks, according to French investment bank BNP Paribas. The amount of debt raised by Russian companies in August has fallen 87% from July levels. The issuance of new equity has come to a virtual halt — a mere $3 million was raised in August compared to $933 million in July.

    To combat the alarming magnitude of capital desertion, officials at Russia’s central bank have scrambled to raise interest rates, allowing the yield on domestic ruble bonds to increase by 150 basis points. But complaints about the tightened credit situation have already begun among Russia’s powerful industrial oligarchs. One of them, Vladimir Potanin, paid a recent visit to Mr. Medvedev to let him know that Russian companies’ restricted access to world financial markets was causing difficulties. The billionaire businessman suggested that the government tap state reserves to ease the liquidity crisis. Mr. Medvedev quickly acquiesced, promising to unveil a new program of easy credit before the end of September.

    It is part of the continuing pattern for Russia — forever trying to have it both ways with “private” companies in cahoots with the Kremlin, entrepreneurial ambition subject to Big Brother’s approval, and capitalism without democracy. It’s a pattern that has consistently led Russia to blame outsiders for woes incurred as the result of its inherent dissonance, and to petulantly abandon earlier aspirations for global integration.

    And it has always led to the financial abyss. Even now, the outlines of the old command-style economic blueprint are emerging as Mr. Putin promotes his 12-year development plan for the country. The foreign capital required to fund it is disappearing by the minute, however, which means the plan must be altered. Expect the nastiness to ratchet upwards as Mr. Putin wields his stick against his purported enemies. On Friday, he threatened to cut supplies to Europe of “oil, gas, petroleum chemicals, timber, metals, fertilizers” should it align with the U.S. in confronting Russian aggression against bordering nations. In Moscow, reports are circulating that Lukoil executives have been notified by the Kremlin to be prepared to restrict oil deliveries to Poland and Germany through the Druzhba pipeline. (In Russian, druzhba means “friendship” — a perfect tribute to Orwellian doublespeak.)

    What Mr. Putin has yet to learn is that capital does not respond well to extortion. Global investors are not impressed by economic threats to cut off supplies to vital customers. Indeed, they abhor the elevated “country risk” associated with political adventurism…….”

    OK, NZ is too small, and maybe not as bad as that yet, for Helenism to actually get a Wall Street Journal Op-Ed written about it……..

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  6. virtualmark (1,536 comments) says:

    I think National have made the right political decision to commit to no sell-downs like this in their first term of Government. I agree with Bill English’s rationalisation that you have to win the trust of the electorate first.

    Right now if National went into this election campaigning to list 20% of the shares in each SOE then Labour would be all over them shouting about privatisations. And many voters are spooked by the P word. They’re probably the same voters that struggle to balance their chequebook and have no idea about basic economics. But they each have a vote so National has to treat them carefully.

    Much better for National to get into Government, get more influence over the media agenda, and then release this sort of policy openly and in a more controlled manner.

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  7. PhilBest (5,125 comments) says:

    That is a good point, virtualmark. Roger Douglas was more able to get away with selling off NZ Rail in the 1980’s when the taxpayer/voter understood that it was costing a billion dollars a year, when we needed the money for health and education. ACT’s recent leaflet with a tick list of policies and their cost/benefit was the right idea. Another point about the early 1980’s was that excuses from one socialist administration after another that public ownership of Railways was an essential public benefit and that anyway, we will turn it around this time so that it is a net contributor to revenue instead of a drag; all these excuses just did not wash after decades of swallowing up taxpayer money and what’s more, losing half the stuff you’d send with them, and taking days to get something from Wellington to Auckland at a cost about three times as much as a decent courier would do it overnight for today.

    FAAAAAAACK, the lack of memory on the part of a democracy is so depressing.

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  8. PhilBest (5,125 comments) says:

    In the early 1980’s the message actually got THROUGH to voters for the first time in history, that governments only ever run anything at a net drain on your, the taxpayers, resources, and that it is not so much the “family silver” as the “family cancer”.

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  9. kaya (1,360 comments) says:

    Why would we sell assets that actually generate a profit? That doesn’t make any economic sense. Buying back Railways was a dumb move and obviously political but I can’t see the point in selling an asset, especially core infrastructure like power, comms, water etc?

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  10. Viking2 (11,544 comments) says:

    Don’t forget we already have companies majority owned by the Govt. and partially privatized. e.g. Air NZ. Nothing new in that formula and would be a good idea for a lot of reasons. Better for NZer’s than paying money to Kiwisaver to be ripped off by fund managers so called. Better than putting your money in Bridgecorp,and 26 other finance companies.
    Helps NZ companies and infrastructure. No need to borrow more from oversea’s. Wll save the stock exchange from becoming extinct.
    A bit of thought to this and we could probably make a list of 50 reasons why it should be done.

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  11. stephen (4,063 comments) says:

    Philbest, state owned assets can now make profits because they passed Acts like the SOE Act, it’s deceptive to say state owned enterprises are run like they were in 1980 – just not true. I’m just saying.

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  12. stephen (4,063 comments) says:

    kaya, if consumers got a better product as a result, wouldn’t that be a good reason?

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  13. getstaffed (9,186 comments) says:

    stephen – You’re correct about profits & SOE Act. The problems arise when the government interferes with the planning (eg TVNZ charter) or the operation (AIA Sale).

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  14. Viking2 (11,544 comments) says:

    Kaya, wouldn’t you like to own a few thousand shares in several companies for the longterm? Much better that you have some dividends than the money is passed to the socialists to waste like they do. At least you will spend the money on something that matters to you rather than more Wine for the minister etc.

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  15. James (1,338 comments) says:

    Kaya….the States core reason for being is the protection of individual rights,nothing else.There is no good reason for SOE’s.

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  16. kaya (1,360 comments) says:

    stephen, I understand the concept but personally cannot see the logic in selling an asset which is difficult if not impossible to replicate, especially a monopoly, duopoly or oligopoly. You expose yourself to the negative side of business – greed. In these circumstances there is no incentive to provide a better product or service because their is not enough competition. Would you sell your family home and pay rent if you thought you could not afford to buy another home? Would you expose your family to rent increases at the whim of new owners? Maybe not the greatest analogy but you get the drift. Maybe the organisational structure can be modified but ultimate control and ownership should not be relinquished. At the least very those decisions should be made via referendum. Those assets are bought and paid for by all taxpayers.
    Viking2, No I wouldn’t. The assets should be run efficiently and profitably for the benefit of the country, not certain individuals. There are plenty of business opportunities, core infrastructure is not one of these. Would you sell our water infrastructure? Also it is not just socialists who will get to waste the money, whoever is in power will have that option. They all seem to be rather good at it!
    James (181) I see the State’s core reason for being as different to you. Business is good at running many things but not everything. If power generation is such a good business then let private enterprise raise the capital to build it’s own infrastructure rather than trying to get bargain basement publicly owned.
    I’m a fan of business, I’m self-employed and believe in reward for risk and effort. Buying state monopoly infrastructure has neither element.

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  17. stephen (4,063 comments) says:

    getstaffed, yup. I think there’s another Act out there too…

    kaya, yeah, monopolies are a different issue. But say, the government decided to sell Meridian Energy to a new competitor in the market – would increase competition, certainly. On greed, I would argue that greed is the reason anyone gets into business in the first place, but perhaps thats another story.

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  18. kaya (1,360 comments) says:

    stephen (1599) yes, metinks me too much of an idealist, my favourite movie is stiill The Princess Bride………..nuff said :)

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  19. stephen (4,063 comments) says:

    lordy

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