Finance Minister Defends NZ Partial Privatization Plans

    2012-02-23 13:29:01     Xinhua       Web Editor: Liuyuanhui

New Zealand Finance Minister Bill English Thursday defended the government's plan for partial privatizations of state-owned assets, saying it is better than borrowing more from overseas lenders. The government is being increasingly challenged on its proposals to sell up to 49 percent of four state-owned energy companies and to sell down its majority stake in Air New Zealand to just 51 percent. In a published speech to a business meeting in Auckland, English said opponents needed to explain to New Zealanders why it would be better to borrow an extra 5 billion to 7 billion NZ dollars (4.14 billion to 5.79 billion U.S. dollars) from abroad. "Taxpayers own 245 billion NZ dollars of assets, and this is forecast to grow to 267 billion NZ dollars over the next four years. So we are not reducing our assets. Our challenge is how we pay for their growth, while getting on top of our debt," said English. He gave three reasons for the government's commitment to its " mixed ownership" model of partial privatizations. "First, the government gets to free up 5 billion to 7 billion NZ dollars -- less than 3 percent of its total assets -- to invest in other public assets like modern schools and hospitals, without having to borrow in volatile overseas markets," he said. "We would rather pay dividends to New Zealanders on shares they own in the energy companies than pay interest to overseas lenders on more borrowing. "The fact is, the government is spending and borrowing more than it can afford into the future. So it makes sense to reorganize the government's assets and redeploy capital to priority areas without having to borrow more. The second reason was that New Zealanders would be able to invest in big New Zealand companies and diversify their savings away from property and finance companies. "Counting the government's controlling shareholding, we're confident 85 to 90 percent of these companies will be owned by New Zealanders, who will be at the front of the queue for shares." Thirdly, he said, mixed ownership would benefit the companies themselves. "Greater transparency and oversight from being listed on the stock exchange will improve their performance and the companies won't have to depend entirely on a cash-strapped government for new capital to grow. "We already have a living, breathing and successful example of mixed ownership in Air New Zealand, which is 75 percent owned by the government and 25 percent by private shareholders." English also played down the risk to New Zealand of an economic crisis in Europe, saying it had to be kept "in perspective." "New Zealand's exports to Europe, the UK and the U.S. amount to just over 20 percent of our total exports. The other 80 percent of our exports go to faster-growing economies the bulk of them to Asia and Australia. "Second, the track record of European politicians so far is that, in the end, they generally take the measures needed to stabilize their immediate problems once they realise that doing nothing will make things much worse. "And finally, I think New Zealand is in better shape, and our banks are better placed now than they were in 2008, to withstand a crisis in world financial markets." If "a meltdown in Europe" sent the world into recession, the government would need to look carefully at public finances and take the appropriate steps, "but I don't expect things will get that bad," he said. The New Zealand economy would keep expanding this year, and the rebuilding of earthquake-stricken Christchurch was expected to add 1.25 percentage points to annual growth every year from 2012 to 2016. "In addition, our two largest trading partners, Australia and China, are forecast to maintain relatively high growth rates," said English. "And our terms of trade will remain elevated on the back of demand for our major export commodities from emerging markets. "So we have a sound longer-term outlook. We're making progress, despite the headwinds." A 3 News Reid Research poll of 1,000 New Zealanders on Tuesday showed 62 percent disagreed with the government's partial privatization plans, 35 percent agreed and 3.5 percent were unsure. It followed an admission from English that the officially estimated 6 billion NZ dollars in revenue from the sales was "a guess."