Transcript Long term Fiscal Challenges Conference

THE PUBLIC FINANCE DEBATES:
“The New Zealand Government should
sell 100% of its SOE stake, not 49%”
Proponent:
Paul Dyer
Outline
1. The NZ debate to date.
2. Why public vs private ownership matters.
3. How have NZ SOEs actually been
operating, and will anything change?
The VUW-GEN Public Finance Debates
October 24, 2012
Growth of the Crown
Balance Sheet
2003
2008
2012
Property, Plant &
Equipment
52.7
103.3
108.6
Securities, Shares, Deposits
and Derivative Gains
21.3
43.1
62.8
Other
25.9
54.4
68.9
TOTAL ASSETS
99.9
200.8
240.3
% GDP
74%
110%
116%
Source: Budget 2012 and FY2012
Financial Statements
The VUW-GEN Public Finance Debates
October 24, 2012
NZ’s equity investment with the
world is essentially balanced
As at March, $bn
2011
2012
Equity
Assets
Liabilities
Net
66
62
4
61
66
-5
Debt
Assets
Liabilities
Net
117
254
-136
111
252
-140
-132
-68%
-146
-72%
NIIP
% GDP
Source: Statistics NZ, Balance of Payments, Table 11
The VUW-GEN Public Finance Debates
October 24, 2012
Public v private ownership turns
on three questions:
• Does competition matter more than
ownership?
• Are SOEs subject to welfare reducing
interventions?
• Are SOE governance problems intractable?
Mary M. Shirley and Patrick Walsh, “Public vs Private Ownership: The
Current State of the Debate”, World Bank Research Paper 2420, Mar 2001.
The VUW-GEN Public Finance Debates
October 24, 2012
Studies of operating efficiency, public
vs private ownership
Issue
Number Private
of
performed
studies better
No clear
winner
SOE
performed
better
Comparing efficiency of
private/privatised firms
with SOEs
52
32
15
5
When comparing firms
within the same industry
31
18
8
5
Comparing performance
before and after
privatisation
21
14
7
0
Mary M. Shirley and Patrick Walsh, “Public vs Private Ownership: The
Current State of the Debate”, World Bank Research Paper 2420, Mar 2001.
The VUW-GEN Public Finance Debates
October 24, 2012
How large are the gains?
Measure
% Change
Significance
(Z scores)
+47%
3.15 ***
3.16 ***
3.92***
Profitability
Income/Sales
Efficiency
Real sales /
employee
+20%
3.66 ***
4.79 ***
4.87 ***
Investment
Capex / Sales
+36%
2.35 **
2.28 **
0.80
Output
Real Sales
+83%
4.77 ***
5.19 ***
7.30 ***
Employment
Total employees
+1.2%
0.96
1.48
-1.62
Dividends
Divs / Sales
+224%
4.63 ***
4.37 ***
4.98 ***
William Megginson and Jeffry Netter, “From State to Market: A
survey of Empirical Studies of Privatisation””, J. Economic
Literature, June 2001
The VUW-GEN Public Finance Debates
October 24, 2012