Papua New Guinea State Enterprises Minister William Duma says the PNG governments interferences are killing the State owned Enterprises (SOE), the National Newspaper reports. Mr.Duma says the National Executive Council should stop appointing the chairmen, directors or chief executive officers of State-owned Enterprises (SOEs) to ensure there is less political interference.
Duma made the bold political statement yesterday during a Pacific islands SOEs report presentation which revealed that PNG SOEs had been performing at very low levels of profitability from 2010 to 2020.
Duma said: “The appointments of chairmen, CEOs and directors should be left to KCH (Kumul Consolidated Holdings).
“There should be no more excuses when a SOE does not perform.”
It was revealed during the event that 11 SOEs had cumulative losses of K1.2 billion from 2010 to 2020.
Laure Darcy, one of the authors of the report on the SOEs, said as portfolio profitability deteriorated from 2015 to 2020, SOEs took on an unsustainable amount of new debt.
“An estimated K4.3 billion in new projects were approved, generating an additional K3.2 billion in debt, 44 per cent of which was taken on directly by the SOEs at commercial rates,” she said.
“At the end of December 2020, SOEs including Kumul Consolidated Holdings interest-bearing debt totalled K5.15 billion, of which K1.85 billion was owed to commercial lenders and K3.65 billion to concessional lenders via Treasury.
“Some SOEs were already in technical default as of 2019, before any of the K3.65 billion in debt held by Treasury is transferred to them.
“Asset utilisation in the SOE portfolio dropped from 43 per cent in 2015 to 28 per cent in 2020.” Duma said there were many instances where the State or the National Executive Council had to intervene at a SOE board level to ensure stability.
“Take Air Niugini for example, without Government intervention, we would not be able to save Air Niugini,” he said.
“In recent times, there has been increased public criticism of SOE performance, especially in power (PNG Power) and aviation (Air Niugini).”
He said this yesterday during the presentation of the Asian Development Bank (ADB) study produced by the Pacific Private Sector Development Initiative, the series – Finding Balance 2023.
Duma said PNG had participated in the Finding Balance studies since 2012, but there were still many issues faced by SOEs in terms of finding the right balance between corporate social responsibility (service delivery) and profitability.
Duma said 2023 was the fifth year of the implementation of SOE reform in collaboration with the ADB. “As a result of deterioration in good governance, between 2015 and 2022 we saw an unrestrained rise in SOE debt, revenue falls and an increase in unaudited SOE accounts,” he said.
“The KCH Act in 2021 which I initiated in 2021 provide a clear definition of ministerial, board and management roles.
“SOE reforms are challenging, reflecting the magnitude and complexity of the problems that have been allowed to fester, a lack of financial capacity, resistance to change by vested interests.”
The National / Pacific Business News
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