Parliament

Gordon Campbell | Parliament TV | Parliament Today | Video | Questions Of the Day | Search

 

Change of policy for State Owned Enterprises

2 June 2006

Change of policy for State Owned Enterprises

---------------------------------

State Owned Enterprises and Economic Development Minister Trevor Mallard today announced a change in policy for State Owned Enterprises, which will encourage them to get into new business areas to help build New Zealand's wealth.

"This new policy means that State Owned Enterprises will be a part of our work to transform the New Zealand economy. What I am announcing today is that from now on, State Owned Enterprises will be encouraged to expand into new areas of business that are linked to what they already do," Trevor Mallard said in a speech to the Otago Chamber of Commerce in Dunedin.

"To do so they will have to meet strict conditions, and their new business must have good spin-offs - for communities but also potentially for private firms.

"New Zealanders have agreed that we should keep state assets in public hands. But that does not mean that they should not be put to work for us.

"They're big commercial operations and that's why they're perfectly placed to play a key role in helping to change New Zealand into an innovative, high-wage and high-value economy.

"Essentially Cabinet has agreed to consider proposals from SOEs that broaden their scope of business by diversifying their technological, product and market portfolios and that extend the time horizon over which they seek to capture a return on investments. Yesterday I wrote to SOE chairs to outline this new approach.

"While the government is now actively encouraging SOEs to consider this opportunity, ministers don't intend to tell them how they might do this. It will be up to SOEs to come up with robust business plans that can preferably be funded off their own balance sheet and that meet the criteria.

"Each proposal will be considered on a case-by-case basis. There must be broader spillover benefits to the economy such as giving other companies opportunities to input into the new business with research and development or technology.

"There are risks, and the government is not about to play fast and loose with taxpayer assets. That's why certain criteria must be met before the okay is given to make sure that the focus on core activity is not lost.

"SOEs might start to think of putting up proposals for amended scope of business when they are developing their Statements of Corporate Intent for the 2007/08 or even the subsequent financial year. But I will not rule out favourable consideration of opportunistic investments outside of the planning cycle," Trevor Mallard said.

The criteria for diversification follows and are on www.beehive.govt.nz/mallard/ along with the cabinet paper.

Criteria for State Owned Enterprises diversification Diversification must be based on an effective utilisation of existing core competencies and it must be into adjacent technologies, products and markets. New activities should have a demonstrated potential to enhance the competitive competencies of other firms and industries, or - to use the jargon - that have spillover benefits. Other than in very rare circumstances, the diversification should be able to be financed off the existing balance sheet of the SOE. Any revised scope of business must be accompanied by robust evaluation processes using explicit performance indicators, leading to a clear exit route for ventures that are not going anywhere.

What are the State Owned Enterprises and how big are they? AgriQuality, Airways Corporation, Animal Control Products, Asure NZ, Genesis Power, Landcorp, Learning Media, Meridian Energy, MetService, Mighty River Power, NZ Post, ONTRACK, Quotable Value, Solid Energy, Timberlands, Transmission Holdings and Transpower.

They vary in size, but the largest are very big in the New Zealand context. The five largest by asset value - Meridian Energy, Transpower, Mighty River Power, NZ Post and Genesis - have assets in excess of $2 billion each, and the three largest are likely to rank among the top 20 biggest firms in New Zealand.

When and how does the initiative take effect? Immediately. SOEs are encouraged to review their existing scope of business and start to consider options for diversification based on their existing core competencies. However, any proposals for expanded scope are unlikely to be formally considered until the next business planning round, and be reflected in their draft statements of corporate intent (SCIs) for 2007/08.

SOEs will be responsible for suggesting new initiatives and/or lines of business, which may need to be reflected in amendments to their SCIs. The government will also amend the Owner's Expectation Manual to reflect the change in approach.

In the criteria that SOEs must meet in order to diversify, what is meant by spillover benefits? Spillover benefits are benefits that flow to other companies as a result of the SOE diversification. It is difficult to predict the specific types of spillover benefits that may be generated. However, in a general sense, examples could include opportunities for other companies to provide R&D or other specialised contracting services associated with a new SOE investment (egs. CRIs, university research departments), or opportunities to manufacture new products used as an input to a new SOE business venture.

ENDS

© Scoop Media

 
 
 
Parliament Headlines | Politics Headlines | Regional Headlines

New Reports: Flood Risk From Rain And Sea Under Climate Change

One report looks at what would happen when rivers are flooded by heavy rain and storms, while the other examines flooding exposure in coastal and harbour areas and how that might change with sea-level rise.

Their findings show that across the country almost 700,000 people and 411,516 buildings worth $135 billion are presently exposed to river flooding in the event of extreme weather events...

There is near certainty that the sea will rise 20-30 cm by 2040. By the end of the century, depending on whether global greenhouse gas emissions are reduced, it could rise by between 0.5 to 1.1 m, which could add an additional 116,000 people exposed to extreme coastal storm flooding. More>>

ALSO:

 
 

Gordon Campbell: On The Commerce Commission Fuel Report

The interim Commerce Commission report on the fuel industry will do nothing to endear the major oil companies to the New Zealand public... More>>

ALSO:

Emergency Govt Bill: Overriding Local Licensing For The Rugby

“It’s pretty clear some clubs are having difficulty persuading their district licensing committees to grant a special licence to extend their hours for this obviously special event, and so it makes sense for Parliament to allow clubs to meet a community desire." More>>

ALSO:

Leaving Contract Early: KiwiBuild Programme Losing Another Top Boss

Ms O'Sullivan began a six-month contract as head of KiwiBuild Commercial in February, but the Housing Ministry has confirmed she has resigned and will depart a month early to take up a new job. More>>

ALSO:

Proposed National Policy Statement: Helping Our Cities Grow Up And Out

“We need a new approach to planning that allows our cities to grow up, especially in city centres and around transport connections. We also have to allow cities to expand in a way that protects our special heritage areas, the natural environment and highly productive land." More>>

ALSO:

Ombudsman's Report: Ngāpuhi Elder 'Shocked' By Conditions At Ngawha Prison

A prominent Ngāpuhi elder is shocked to find inmates at Ngawha Prison are denied water and forced to relieve themselves in the exercise yard... Chief Ombudsman Peter Boshier has released a report highly critical of conditions at the Northland prison. More>>

ALSO:

Promises: Independent Election Policy Costing Unit A Step Closer

The creation of an entity to provide political parties with independent and non-partisan policy costings is a step closer today, according to Finance Minister Grant Robertson and Associate Finance Minister James Shaw. More>>

ALSO:

School's In: Primary And Intermediate Principals Accept New Offer

Primary and intermediate school principals have voted to accept a new settlement from the Ministry of Education, which includes entrenched pay parity with secondary principals. More>>

ALSO:

IPCA On 'Rawshark' Investigation: Multiple Police Failings In Hager Searches Confirmed

The Independent Police Conduct Authority has found that the Police's unlawful search of Nicky Hager's property in October 2014 resulted from an unwitting neglect of duty and did not amount to misconduct by any individual officer... More>>

ALSO:

Broadcasting Standards: Decisions On Coverage Of Mosque Attacks

The Authority upheld one of these complaints, finding that the use of extensive excerpts from the alleged attacker’s livestream video on Sky News New Zealand had the potential to cause significant distress to audiences in New Zealand, and particularly to the family and friends of victims, and the wider Muslim community. More>>

 
 
 
 
 

LATEST HEADLINES

  • PARLIAMENT
  • POLITICS
  • REGIONAL
 
 

InfoPages News Channels