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Ownership, governance and reform

Ownership, governance and reform. Doug Andrew douglasandrew@btinternet.com. My experience. NZ SOE policy UK CAA regulating Government-owned Manchester airport 50:50 air traffic control PPP Privately owned BAA London airports. Key messages. RG objective

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Ownership, governance and reform

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  1. Ownership, governance and reform Doug Andrew douglasandrew@btinternet.com

  2. My experience • NZ SOE policy • UK CAA regulating • Government-owned Manchester airport • 50:50 air traffic control PPP • Privately owned BAA London airports

  3. Key messages • RG objective • Suggest 1. adoption of an economic efficiency objective, given • efficiency/fiscal trade-off • 2. Develop/implement SOE policy • 3. Consider PSP to maintain & boost efficiency and improve government BS • But reforms usually driven by fiscal rather than efficiency imperatives

  4. Efficiency objective • Productive: least cost • Allocative: value-for-money • Dynamic: profitable investment • De-regulation, industry structure, competition, CP and regulation => better allocative efficiency • Ownership, using governance, key for PE and DE

  5. An SOE policy • Clear core SOE commercial objective • Competitive neutrality • SOE autonomy and accountability • Appropriate incentives • SOE mission, max. gearing, dividend policy • Need hard budget constraint • Role of board versus • Role of government e.g. owner, policymaker

  6. PSP • Given SOE policy, why “hold” or why “sell”? • SOE policy implementable/sustainable? • Broader government management issue • PSP superior? • Empirical evidence • Fiscal benefits? • Evidence => NPV(PSP)>NPV(SOE)? • Government share of increment?

  7. PSP part 2 • Credible policy environment necessary • Range of options and degrees • Polar position, sell all SOE shares to highest bidder via open sound process (FDI) • Capture any control premium • Necessary to capture expected efficiency gains and improve government BS • Intermediate options => smaller BS gains • Risks: govt. process, winner’s curse, excess leverage

  8. Conclusion • Ownership/governance important for efficiency • Sound policy/regulatory environment • MoF-led SOE policy necessary • PSP via sound process, with OK political economy, offers gains • Communication important

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