The answer is to sell the Interislanders, not have an inquiry

July 19th, 2014 at 11:00 am by David Farrar

Stuff reports:

NZ First leader Winston Peters wants a full ministerial inquiry into ’s “mishandling” of the Aratere saga, after revelations the company plans to fit two new propellers to the ferry next year.

Peters said he was staggered such a scenario could even be contemplated, given that Aratere had had two prolonged visits to Singapore dockyards over the past three years, both of which included propeller fittings.

The 2011 extension of the Aratere cost taxpayers about $50 million, and this year’s refurbishment had resulted in additional across-the-board costs to KiwiRail of about $30m. “After all that money, they still have not fixed this lemon,” Peters said yesterday.

This is a classic case of why taxpayers should not own competitive companies.

If the Bluebridge makes a bad decision on a ferry, and loses money on it, and has delays – we don’t care one iota.

Likewise we should not care about the Interislander, except that we own it.

The Government’s focus should be on ensuring we have competition on the Cook Strait route, which we do. Now on owning ships, and doing a bad job of it.

 

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30 Responses to “The answer is to sell the Interislanders, not have an inquiry”

  1. flipper (4,051 comments) says:

    But J Key has ruled out any further sale of “assets”, has he not? :-)

    But that brings into focus the question as to whether it is an asset, or a hole in the sea/ground into which we pour money. No?

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  2. hj (6,991 comments) says:

    I don’t understand why they couldn’t get it right in the first place. I thought ship builders k
    new how to build ships?

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  3. publicwatchdog (2,593 comments) says:

    Yeah right.

    Like ‘competition’ in the electricity market has been such a great success for power ‘customers’.

    NOT.

    What was ‘broken’ with the Electricity Department and local Power Boards?

    Oh – that’s right – NOTHING.

    ‘Public is bad – private is good’ – BOLLOCKS!

    Kind regards,

    Penny Bright

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  4. mikenmild (11,247 comments) says:

    The interislander is an integral part of the rail network. Selling one piece of that network makes no sense.

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  5. hj (6,991 comments) says:

    Without public ownership we wouldn’t have had a rail system.
    Trucks run on public roads.

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  6. peterwn (3,271 comments) says:

    It was unfortunate in the beginning that neither the Union Company nor anyone else wanted to provide a road/ rail interisland service leaving it to the Government. And when it proved successful, there would have been reluctance to sell off the most (rather only) profitable part of NZ Rail. Interestingly Railways managers and engineers got it right with all the predecessor ferries they commissioned, the Aratere being the only troublesome one, arguably as it was procured in a different contractual environment from the earlier ones.

    The more fundamental issue is whether there is a better way than carrying railway wagons across Cook Strait. I doubt that anyone but Railways would be interested in investing in such service. Hence as long as the Government owns Railways, the Railways will want to have rail wagon capable ferries. If the inter-island rail link is broken, then the portion of freight carried by rail will plummet. As it is the decision to purchase the next rail-capable ferry will be a horrendous one as the cost will be far higher than an equivalent capacity non rail-capable one.

    I doubt a ministerial enquiry is necessary – Winston is exploiting this for electoral purposes. The Aratere shortcomings and the related background is well known, apart from the shaft failure, and even the reasons for that are known but not yet disclosed. The mystery to me is why the inability of the Aratere to keep to the proposed timetable with the original smaller propellers was not predicted when the decision making was done. Possibly the shaft configuration was found to be more marginal than estimated, this possibly being the Achilles Heel of the extended ship.

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  7. hj (6,991 comments) says:

    NZ Rail employed 25500 workers at it’s peak and unemployment was zero. Government policy was work and dignity for everyone. If you were a New Zealander you were (Maori or Pakeha) one of the family. It wasn’t for nothing that Black Power did the haka in parliament to honour Muldoon on his death. Now we value the “new citizen” over and above the family member. We have ideals that only elites see the benefits of; get the gist of.

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  8. ashishnaicker (21 comments) says:

    Competition / privatization improves productivity.

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  9. Fentex (971 comments) says:

    The interislander is an integral part of the rail network. Selling one piece of that network makes no sense.

    I don’t agree. With our governments being happy to allow heavy trucking on our roads the case for a rail network at all is severely undermined. If we’re going to pay to maintain roads we permit heavy goods vehicles to traverse then we don’t need to pay to maintain a rail network.

    We do need ferries. Bluebridge seems evidence that private provision is possible, though possibly not for a rail connection. If not, and rail does not have sufficient business to afford it itself then a compelling reason must be found to interest public support.

    Just being unwilling to mothball railways does not compel me.

    I suspect that for the near future rail just isn’t worth it and won’t be until air travel and/or heavy trucking becomes too expensive. And of those two I don’t really expect heavy trucking to become too expensive (it is easier to imagine air travel in the future becoming expensive if fuel becomes a problem).

    And I think that implies that the land occupied by rail should be kept available and in public ownership (to avoid issues of right of way through private encroachment) should rail become economic in the future but only leased to wholly private enterprises until such a time as compelling national interest requires rail service be re-established.

    In the meantime mothballing of rail could allow networks of bicycle paths or other diversions to make use of underutilised lands.

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  10. hj (6,991 comments) says:

    It is an interesting topic public versus private ownership. Too often it gets mashed due to conflicting ideologies.

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  11. David Farrar (1,894 comments) says:

    John Key has ruled out further sales, yes. I am advocating my view of what should happen, which often is different to his.

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  12. mikenmild (11,247 comments) says:

    Fentex
    I don’t think there is any compelling case to ‘mothball’ rail altogether. Kiwirail has retreated from uneconomic services and seems to be holding its own at present.

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  13. Fentex (971 comments) says:

    Competition / privatization improves productivity.

    No, it doesn’t always. The interest in private profit can be a barrier to the provision of service where effective service provision removes demand from the market thus an active incentive for non-productivity and frustration of demand can exist in private markets.

    Competition is supposed to provide the incentive privatisation can smother, but where entry to a market is restricted by obstacles such as large capital costs, limited expertise or cartel organization competition cannot be guaranteed.

    Furthermore one cannot make claims against platonic ideals, they will seldomly be realised. Unfettered competition is rare anywhere because anarchy is routinely constrained by regulation and regulatory capture inevitably erects protections for incumbents. Thus any decision of what competition will exist must be tempered by what degree of failure will be tolerated.

    The publicly owned is accountable to the public and provides levers for the public interest to lean on. It makes sense to choose that on occasion.

    Health care is a great example. Public health care works and is cost effective, it creates an environment in which private health care can co-exist and provide extra benefits to those who invest in it. Private health care does not appear to work – though we’ve bugger all examples to examine because it is largely absent from the world as the only option for people in wealthy countries. Do not think this is an argument about the U.S health care system – that is not a free market, it is a oligarchic arrangement where insurance companies have corrupted the transaction between patient and doctor.

    Competition for private profit is excellent where failure to provide is acceptable. It may not be where failure is unacceptable.

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  14. you reap what you sow (35 comments) says:

    Forget the ferry build a bridge

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  15. wikiriwhis business (3,996 comments) says:

    Mr Farrar is trivialising.

    The Interislander is an SOE so no surprise an MP is asking relevant questions about problems that should not be occurring because of recent upgrades. We would complain if our vehuicle needed an upgrade so close to a previous one so why not an SOE??

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  16. Fentex (971 comments) says:

    I don’t think there is any compelling case to ‘mothball’ rail altogether. Kiwirail has retreated from uneconomic services and seems to be holding its own at present.

    I have no idea, I’m not arguing it be done just that an unwillingness to do it is not a compelling reason to subsidise the ferries.

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  17. mikenmild (11,247 comments) says:

    How are the ferries subsidised?

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  18. tom hunter (4,809 comments) says:

    NZ Rail employed 25500 workers at it’s peak and unemployment was zero.

    If your endless hammering of Asian immigration had not already confirmed you as a Winston First diehard that statement should seal the deal. Utterly pig ignorant of history and economics.

    Zero unemployment at the time? Not even close, even with 25,500 workers at the Department of Railways!

    Of those 25,500 workers most were simply not needed. They were hired to do nothing except try and reduce the unemployment numbers. Once there they had nothing productive to do and the most eloquent testimony to this is the fact that railways were able to shift the same amount of freight with about 1/5th as many people just a few years later.

    There’s no such thing as dignity when you’re doing a job you know is just make-work.

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  19. Mobile Michael (451 comments) says:

    My morning routine is to have a coffee and catch up on the news in a quiet corner of the building I work in. From there I can see the Bluebridge being loaded and prepped for its 8am sailing. Or 7.50am sailing usually.

    The inquiry should be focused on my Rail practices are so inefficient.

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  20. Paulus (2,626 comments) says:

    I had a yacht once and with it came the largest shovel available to shovel the money into it.
    Over the years cost me a fortune.
    The Aratere now has the original propellers it had prior to being lengthened in 2011.

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  21. scrubone (3,099 comments) says:

    The Interislander is an SOE so no surprise an MP is asking relevant questions about problems that should not be occurring because of recent upgrades. We would complain if our vehuicle needed an upgrade so close to a previous one so why not an SOE??

    That’s an impressive comment. You’ve put your finger on the issue, while at the same time missing the point entirely!

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  22. Warren Murray (311 comments) says:

    Contemplating selling the assets or the whole Company is a good way of avoiding answering questions of accountability. While it is a SoE questions ought to be asked and answered about the millions that have been spent (lost).

    From what appeared in the Dom yesterday Kiwirail is just starting to wake up to the need to think about its future inter island capabilities and capacity. Given this debacle, it is well overdue. It is a shame that they have given a platform to Winston to exploit.

    IMO an efficient, safe and effective inter island service is of strategic importance to the country’s economy. Something for Brownlee to look at. Sure we don’t need to own it, but that is not the issue of moment.

    I dont agree with Winston that Brownlee is somehow responsible for the hopeless mess that is Kiwirail.

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  23. PaulL (5,981 comments) says:

    I think it’s similar to the purchase of new locomotives for KiwiRail. In a private company you’d probably look at the Spanish shipyards and say “yeah, lowest price, but not sure I want to buy from them.” Or you might look at the purchase of locomotives that have German bits and are made in China, and ask why you wouldn’t buy one with German bits made in Germany. In a lowest cost tender environment, you just tick the boxes and buy whatever’s cheap. In the “good old days” where there was less scrutiny of govt, the engineers who ran the tender process could also do that, but it’s no longer possible in govt to skew the outcome towards a favoured product.

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  24. peterwn (3,271 comments) says:

    PaulL

    Interesting, when the Railways bought the original Da (now branded Dc I think), they were a standard design developed by General Motors for narrow gauge railways. The purchase was criticised as parts of the network were ‘out of bounds’ to them especially Wellington – Paekakriki as the tunnels were too small. Being a ‘standard’ item they would have been cheaper than specially built locomotives. Railways lowered the floors of the ‘offending’ tunnels and they could run straight through to Wellington. Then containers came along and voila they could fit through the modified tunnels! So it all came out OK!

    Technically, the Railways people got things right most of the time, ferries included. Interestingly they operated the country’s second largest telecommunications network and AFAIK NZ was the second country after USA to use Centralised Traffic Control for remote operation of points and signals on single track lines.

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  25. Southern Raider (1,829 comments) says:

    A cousin works for KR and says it is the biggest mess of a company you will ever find. Muppets on the exec, muppets in senior management and muppets on the ground.

    In summary no strategic direction, no business plan, no one held responsible for mistakes and unions trying to sabotage the company at every corner.

    He said the problems with the inter islander start with the fact that the guy running that business unit has no strategic plan to work to. How can you make large investment decisions like that?

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  26. Southern Raider (1,829 comments) says:

    HG even today there is workers who do nothing and are unproductive. Imagine what it was like twenty years ago.

    Some examples of KR
    – couple of years ago my dad went to visit a customer at a rail yard. He meet with his customer the manager who needed something. He asked one of the workers who basically told him to fuck off and do it himself
    – my cousin when into a warehouse about two years ago. Was completely empty except for two guys at a table at the end. One was reading out a list and the other was entering data one key stroke at a time

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  27. Southern Raider (1,829 comments) says:

    Peterwn

    Would that be the fibre optic network which has about 10Mbits of traffic running across it? Yes not 1G, 10G, 100G but KR built and operates their own network so they can send three parts of fuck all up and down the country instead of paying a telco a small monthly fee.

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  28. PaulL (5,981 comments) says:

    @Southern Raider: to be fair, when they built that network it was probably the ducks guts. Not so much any more, and probably a good decision not to waste money upgrading it.

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  29. flipper (4,051 comments) says:

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    PaulL (5,865 comments) says:

    July 19th, 2014 at 2:58 pm

    @Southern Raider: to be fair,

    ************

    The reality is that NZ Rail always needed a virtual prohibition on long distance road transport to survive. The added handling costs of rail/road made for a cost plus operation that fitted nicely in a cost plus economy. That was then. Today is today.

    Rail is best for high volume long distance point to point bulk transport. Anything other than that is substantially cost burdened.

    The comm net work… Yes it was also justified, as I recall it, on the grounds that it provided an alternative emergency communications link …. forgetting, I suspect, that it also traversed much the same ground as the P & T’s microwave links, but with less sophistication and capacity.

    And … DPF …. agree that rail ferries should be sold. They can no longer be considered an “asset”.

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  30. igm (1,413 comments) says:

    Anything operated by unionised public servants is a potential disaster. They are devoid of work ethics, responsibility, and ability, being protected by their respective unions to the point of lunacy. It is not hard to see these latest problems occurred at the end of school holidays when the effect was at its optimum. These irresponsible jerks do not deserve consideration . . . this enterprise must be sold so it can be operated efficiently.

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