the public finance debates: “the new zealand government should sell 100% of its soe stake, not...
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THE PUBLIC FINANCE DEBATES:
“The New Zealand Government should sell 100% of its SOE stake, not 49%”
Proponent:
Paul Dyer
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Outline
1. The NZ debate to date.
2. Why public vs private ownership matters.
3. How have NZ SOEs actually been
operating, and will anything change?
The VUW-GEN Public Finance Debates October 24, 2012
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Growth of the Crown Balance Sheet
2003 2008 2012
Property, Plant & Equipment
52.7 103.3 108.6
Securities, Shares, Deposits and Derivative Gains
21.3 43.1 62.8
Other 25.9 54.4 68.9
TOTAL ASSETS 99.9 200.8 240.3
% GDP 74% 110% 116%
The VUW-GEN Public Finance Debates October 24, 2012
Source: Budget 2012 and FY2012 Financial Statements
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NZ’s equity investment with the world is essentially
balancedAs at March, $bn 2011 2012EquityAssets 66 61Liabilities 62 66Net 4 -5
DebtAssets 117 111Liabilities 254 252Net -136 -140
NIIP -132 -146% GDP -68% -72%
The VUW-GEN Public Finance Debates October 24, 2012
Source: Statistics NZ, Balance of Payments, Table 11
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Public v private ownership turns
on three questions:• Does competition matter more than
ownership?
• Are SOEs subject to welfare reducing
interventions?
• Are SOE governance problems intractable?
The VUW-GEN Public Finance Debates October 24, 2012
Mary M. Shirley and Patrick Walsh, “Public vs Private Ownership: The Current State of the Debate”, World Bank Research Paper 2420, Mar 2001.
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Studies of operating efficiency, public vs private ownership
Issue Number of studies
Private performed better
No clear winner
SOE performed better
Comparing efficiency of private/privatised firms with SOEs
52 32 15 5
When comparing firms within the same industry
31 18 8 5
Comparing performance before and after privatisation
21 14 7 0
The VUW-GEN Public Finance Debates October 24, 2012
Mary M. Shirley and Patrick Walsh, “Public vs Private Ownership: The Current State of the Debate”, World Bank Research Paper 2420, Mar 2001.
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How large are the gains?Measure % Change Significance
(Z scores)
Profitability Income/Sales +47% 3.15 ***3.16 ***3.92***
Efficiency Real sales / employee
+20% 3.66 ***4.79 ***4.87 ***
Investment Capex / Sales +36% 2.35 **2.28 **
0.80
Output Real Sales +83% 4.77 ***5.19 ***7.30 ***
Employment Total employees +1.2% 0.961.48-1.62
Dividends Divs / Sales +224% 4.63 ***4.37 ***4.98 ***
The VUW-GEN Public Finance Debates October 24, 2012
William Megginson and Jeffry Netter, “From State to Market: A survey of Empirical Studies of Privatisation””, J. Economic Literature, June 2001