PITA Newsletter
Somare Goes For Partial Privatisation
Prime Minister Sir Michael Somare has announced his government’s stand on privatisation, expressing a commitment to “private/public partnership to ensure efficiency in service delivery and profitable performance of state-owned enterprises, rather than the previous wholesale disposal approach”.
Somare said an assessment would be made on a per case basis to determine appropriate action. Assessment will take into consideration the value of the state body and its importance in serving the community.
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Disregarding the idea of wholesale disposal of assets, Sir Mekere Morauta’s successor, indicated that his government would consider such options as:
- Tenders from private companies to manage state-run entities.
- Partial sale with majority ownership to remain with government.
After a lull in negotiations over the sale of Telikom PNG to Amalgamated Telecom Holdings Ltd (ATH), it’s likely to take a new twist. There’s a likelihood that the Somare government will go with the partial privatisation of PNG Telikom, opening up invitations for tenders to private companies but ultimately holding majority shares in ownership.
Chances are that the Somare-led government will invalidate the decision made by the former Morauta administration to pursue the Amalgamated Telecom Holdings (ATH) sale.
The Fiji-based ATH group, a joint venture between the Steamships Trading-owned Datec Ltd and ATH (PNG), won the bid last year to control Papua New Guinea’s sole telecommunications provider.
A February 2003 report in a Papua New Guinea newspaper, The National, said a local company Tell PNG, together with its foreign partners, have renewed their interest to buy into Telikom PNG with an investment of about US$1 billion (K4 billion) to be injected over a period of five years. The fairly new local firm had initially expressed interest last year when the privatisation process was on the burner, but was turned down by the Privatisation Commission because the firm’s submission was late.
Chaired by businessman Simon Kaiwi, Tell PNG has embarked on a joint venture with Jade Engineering (PNG) Corporation Ltd, thus allowing further association with Taiwanese interests UT Starcom Taiwan, Alcatel Taiwan and AT&T Taiwan. Numerous attempts to reach Tell PNG’s representative Kaiwi proved futile. It is expected that the Taiwanese group will soon travel to Papua New Guinea in light of the new development.
Jade Engineering will provide the capital backup, and Tell PNG’s additional foreign interests would supply the telecommunications know-how. In a statement he made to the local media, Kaiwi said: “As chairman of Tell PNG, I have the greatest honour and pleasure to confirm that both Tell PNG and Jade Engineering (PNG) Corporation Ltd. including UT Starcom Taiwan, Alcatel Taiwan and AT&T Taiwan have signed a Joint Memorandum, which establishes our partnership, which will buy into Telikom PNG Ltd as an existing business.”
Kaiwi had categorically stated that should the investment deal in Telikom PNG succeed, Tell PNG would shell out “much more...over and above” the offer made by ATH (PNG).
Morauta-led government through its privatisation policy had put up 50.1 percent of its holdings in PNG Telikom for sale to ATH, and hence the state through the Independent Public Business Corporation (IPBC) would source a sum of some US$30 million (K108 million) from it. The remaining 49.9 percent would be held by IPBC in trust for the state.
ATH had said that it would inject some US$204 million (K850 million) over a period of ten years into PNG Telikom in an effort to bail the company out of its financial woes and improve its telecommunications services.
Part of the plan would be the implementation of top-of-the-line GSM digital mobile phone network.
Kaiwi said his joint venture aims, among other things, “...to reduce costs of telecommunications by 50 percent” and provide telecom services via satellite that would benefit both the urban and rural areas.
Progress of the sale was temporarily halted by Somare for further review. Somare had stated last year that the concerns of all parties would be considered before concrete plans to further the privatisation process could be fully accounted for. Initial news of the sale was met with resistance from the Papua New Guinea Communications Workers Union.
In his privatisation policy announcement, Somare remarked that Post PNG was the only state entity that was successfully salvaged and which is now in sound operation.
“We will look at taking a similar approach with other enterprises to bring them back up to an acceptable standard of performance before considering the best approach that guarantees delivery of service and profitability for the enterprise,” Somare said.
