United Nations

Thank you, Mr Jin, for the opportunity to open the debate on the public-private partnership in developed countries.

I want to focus on two aspects: the private sector's role in economic policy; and the value of private sector discipline in public sector management systems.

Partnership between the public and private sectors in New Zealand has been a fundamental part of economic, social and public sector reform in the last decade.

Restructuring, with responsible fiscal management, has more than doubled our sustainable growth rate, and generated a large fiscal surplus.

Ultimately, governments in developed countries are responsible for a few simple things -- macroeconomic policy, the protection of property rights, and for the funding and delivery of social services.

But how should those responsibilities be exercised?

Positive economic and social outcomes clearly involve working with private and voluntary sectors. In our experience, the partnership works best if each partner focuses on what it does best.

The Government's role is to set the framework within which business operates -- the legal system, economic environment, an appropriate level for government involvement in the market, and so on.

The goal is a framework which helps the private sector to work effectively and maximise the wealth of the nation.

Governments face a range of choices in setting this framework, and those choices determine the success of the partnership.

In New Zealand two decades ago, for example, the Government fixed exchange rates, heavily regulated the capital market, and set high levels of trade protection and subsidy. It was a major owner and player in most sectors of the economy.

The partnership was therefore heavily tilted towards the Government. The result was a failing economy characterised by low productivity, weak growth, high inflation and plummeting incomes relative to other nations.

Today, by contrast, we have an open internationally competitive economic environment. Most State commercial operations have been privatised. The Government's trading roles have been heavily reduced.

The result -- much higher levels of sustainable low-inflationary growth, our highest ever level of employment, major tax reductions and, in addition, on-going fiscal surpluses of around 3 per cent of GDP.

The partnership with the private sector is now much more balanced.

Each party now does what they do best. The private sector creates wealth. The Government maintains an environment that helps them to do so.

The Government has taken important steps to put its own house in order by running fiscal surpluses, and reducing public debt to sustainable levels.

A new Fiscal Responsibility Act, the first of its kind in the world, requires the Government to follow a legislated set of principles of responsible fiscal management.

The Act imposes high standards of financial disclosure. Governments are required now to be very transparent about their short- and long-term fiscal intentions.

As a result of this legislation, Parliament and the New Zealand public have more information about the Government's financial position, and the risks surrounding that position, than shareholders of most publicly-listed companies.

Fiscal transparency encourages better decision-making. It helps to focus public debate on the virtues of good fiscal performance -- an important element of our partnership with the private sector.

Significant further gains have been achieved by adopting proven private sector management practices in the public sector.

The Government has divested itself of any functions we don't consider to be the core business of government.

Where we do continue to own commercial activities, they have been corporatised.

They now operate outside the budget sector, subject to disciplines and obligations identical with those of comparable private sector businesses.

Their Boards of Directors comprise competent business people, and employ private sector managers.

Where possible, we contract out activities to the private sector, including some formerly regarded as core public sector functions -- maintaining electoral rolls, for example, and conducting public sector audits.

For the remainder of the public sector, other reforms have also been based on proven private sector concepts.

We now focus on outcomes, not inputs. Managers have clear, measurable goals. They decide how to allocate their resources to achieve those goals, and are personally accountable for the outcome.

Performance is monitored by a quality reporting regime including regular financial statements prepared along private sector lines.

Much of the public sector has been re-organised on these lines.

In the health sector, for example, we have separated funders, purchasers and providers of public health services. This reduces producer capture, encourages efficiency, makes true costs more transparent, and focuses attention on the best way to improve health outcomes.

Even policy advice -- the heart of the public sector -- has benefited from clearer performance definition and enhanced private sector-type accountability arrangements.

In most cases, such arrangements require Ministers to stand at arm's length from day to day decisions -- a crucial and sometimes politically difficult discipline.

But the gains are large. Let me give one simple example. It used to take six weeks to have a telephone installed by our State-owned Post Office in the mid-1980s.

Today, following privatisation, it takes less than 24 hours.

Good outcomes require commitment, clear strategy, strong political will, and a desire to seek continuous efficiency gains. But this broad approach is the right foundation for a very successful partnership between public and private sector.

I am, Mr Jin, more than happy to take questions from the audience in any time we have left