Business Breakfast Cigna House

  • Tony Ryall
State Owned Enterprises

Thank you for inviting me to speak with you this morning.

I would like to approach today with two hats on State Owned Enterprises and Minister Responsible for Housing New Zealand. There a number of issues and new initiatives in these portfolios that I'm sure will be of interest to you.

As SOE Minister, I have been concerned the Boards of Crown companies are not always as representative as they should be.

As at 5 March 1999, 88 or 33 percent of Crown company directors were women. For Maori, the figures are 29 or almost 8 percent.

While things have been improving, there is room for further improvement.

To address the issue the Crown Company Advisory Unit (CCMAU) has implemented a number of new initiatives in the way it seeks candidates for board positions. These include:

writing to New Zealand domiciled directors on boards of the "Top 50" companies";
placing an advertisement in over 20 newspapers seeking expressions of interest, the response to which has been very promising;
using a search firm to find candidates for board positions with particularly difficult skill profiles;
formalising consultation with the Minister of Maori Affairs regarding forthcoming vacancies.
Over time these initiatives will help improve the representativeness of Crown boards. Of course the bottomline remains the professional governance of Crown enterprises. Whoever is chosen must have the necessary skills to fulfil this function.

Another important component of ensuring the performance of commercial functions, such as SOEs, is the monitoring process.

Currently within Government the CCMAU has built up a body of expertise for establishing and monitoring commercial entities.

But, given the growing complexity and amount of monitoring advice required by the Government, I am seeking to have CCMAU contract out the core monitoring functions of three SOEs in the coming year.

This is a one year trial to contract out the core monitoring functions and compare the advice received from the private and public sectors.

By doing so I hope to reduce the constraints on resources which CCMAU has, allowing them to concentrate on increasing shareholder value, and their skills in corporatisation of Crown functions which are higher priority at this time.

The functions to be contracted for cover the management of the business planning process, and the reporting of performance during the year to enable shareholders to meet legislative requirements and maximise value.

I will be looking for expertise which can offer world class monitoring advice including increased performance benchmarking of entities.

The three SOEs chosen for the trial are NZ Post Limited, Asure NZ Limited, and the Waikato SOE Ltd from the ECNZ split.

These companies have been chosen as they are all in different phases of the life cycle, from a mature organisation through to newly established companies and all are in competitive environments.

Expressions of interest for this contract will be sought in the near future.

I would also like to touch briefly on the Contact Energy sale process, which has attracted considerable media interest in the last few days. I'm pleased to say it has attracted overwhelming investor interest over the last few weeks also.

The Government's new approach to publicly floating State businesses has really struck a chord with New Zealanders. The Contact Energy float has reinforced my confidence in the sale process with at least 175,000 New Zealanders registering an interest in buying shares.

The sale builds on the success of the Auckland Airport float, which included 68,000 New Zealand investors, and the Capital Properties float which attracted 31,000 New Zealand investors.

These floats have not been about a wealthy few taking huge slices of state assets. Rather they are about a whole range of New Zealanders taking an active role in the future of their country's infrastructure and economy.

In these two floats 59,000 buyers were new entrants to the sharemarket.

Introducing new investors to New Zealand business investment is another healthy spin-off of the float process.

I think it is abundantly clear, that the people of this country not only support the sale of non-core Government run businesses, but also want to be a part of those businesses in the future.

Labour's position on asset sales is considerably less clear. The Labour leader publicly stated that the 40 percent 'cornerstone' share of Contact should be retained in public ownership. But Labour's finance spokesperson, Michael Cullen, said that the cornerstone share should be publicly floated.

The Alliance, Labour's political bed-fellow, doesn't support any sales, and has in fact indicated it wants to buy some assets back. I wonder how much taxpayer money they are willing to pay to re-centralising Forestry Corp and Telecom.

Labour-Alliance policy on Housing is also unclear.

Helen Clark and Graham Kelly have both berated the Government's policy of allowing some capable charitable Trusts to take a greater involvement in the management and even ownership of some Housing New Zealand properties.

But, last night Labour organised a rally in Porirua to stop a Labour dominated charitable Trust, headed by a Labour Porirua city councillor, from conducting a feasibility study into the Trust buying or managing Housing New Zealand properties in Porirua.

This is particularly heavy handed given that discussions between the Trust and HNZ have only been at a preliminary level, and the Trust has presented no proposal to HNZ, nor has HNZ assessed the Trust's ability to professionally manage State houses.

Nevertheless, the Labour party has gone so far as to discuss expelling the Labour councillor from the party.

Labour's Parliamentarians certainly seem out of touch with the feelings of grass-roots Labour members on this issue.

The National-led Government on the other hand believes that there is scope for community based organisations, such as charitable Trusts, to be involved in the provision and management of housing.

However, before agreeing to such an arrangement the Government would first need to be assured that the community group has the necessary skills, structures and experience to manage such an important undertaking.

The Government has been selling some State houses. The sale of State houses is to enable low income families to own their own homes, provide more houses where people want to live, get rid of out-dated buildings and allow community organisations to provide local solutions to local needs.

Labour also opposes the Government's policy of income related assistance. Under this policy the Government provides an accommodation supplement, regardless of whether people are renting from the State, renting privately or paying off a mortgage.

Labour's policy is to cut the accommodation supplement and reintroduce subsidised rents. Its policy will make people far more dependant on the State to provide them with a house. Labour has admitted that the accommodation supplement will be cut but is not willing or able to say by how much.

What we do know is that currently 300,000 people receive the accommodation supplement. Around quarter of a million of those people are not living in a State owned house.

If I were one of those people I would be very worried about Labour's Housing policies.