ELEVEN YEARS OF SOES -- BENEFITS AND RISKS

Eleven years on from the establishment of the first State Owned Enterprises on April 1st 1987, the value taxpayers can expect to extract from continued ownership of government businesses is showing some signs of maturing, State Owned Enterprises Minister Tony Ryall said today.

`Clearly, corporatisation has been very successful in transforming government departments that once lost millions of the taxpayers' dollars into companies operating on a commercial footing,' Mr Ryall said.

`That transformation continues into the late 1990s with the establishment of two new SOEs from MAF Quality Management planned for November 1st this year.

`However, taxpayers should be aware that ongoing public ownership of their $10.3-billion investment in the 14 existing SOEs also carries significant business risks.

`Half year results tabled recently in Parliament show total net profit after tax for the 14 SOEs as a group down 3 per cent on expectations.

`However, removing one-off capital gains shows a net profit result down 10 per cent on expectations. This is largely due to the increasing competition faced by many SOEs.

`This is significant given that a number of SOEs currently require considerable capital investment to expand and maintain their competitiveness.

`The Government has clearly stated that it is reluctant to fund these investment demands -- some of which amount to several hundred million dollars. We would rather invest in new hospital wards, new schools, and fighting crime.

`Nor do we wish to see SOEs borrowing extensively from the private sector to fund business ventures that could fail, leaving taxpayers to foot the bill.

`But without capital investment, or the ability to expand their businesses to meet increased competition or technological advances, the competitiveness of many SOEs may well be eroded, reducing the value of the public's $10.3 billion investment.

`In last year's Budget, the Government announced its intention to review, on a case by case basis, whether continued public ownership of commercial businesses would best serve the welfare of New Zealanders.

`Of course, this review excludes the six SOEs the Coalition agreement lists as `strategic'. These six companies are not for sale, so don't go kicking the tyres,' Mr Ryall said.

The six strategic assets are: ECNZ; Contact Energy; Trans Power; New Zealand Post; TV One and Radio New Zealand.