Business Irish

Monday 23 October 2017

Maeve Dineen: Sale of semi-state companies must be handled carefully

Maeve Dineen

IT'S a case of 'once more into the breach dear friend' as Finance Minister Brian Lenihan calls on the services of economist Colm McCarthy to again draw up a report on how to save money in the midst of recession.

This time the minister is looking to flog off any bits of the State's asset pile that private firms might be interested in.

The privatisation of our semi-state sector poses enormous opportunities and dangers but flogging relatively obscure assets smacks of desperation.

You only gave to look at Eircom or Aer Lingus here and at privatisations across the water to see how badly it can go wrong. The major lesson from Britain seems to be that selling off utilities where competition will not exist does not work.

The sale of Railtrack has been a disaster in the UK and I would guess that the sale of organisations such as national grid operator Eirgrid would prove equally dangerous, creating a company where management could well chose to sweat the asset rather than invest.

The Government needs to be very wary about replacing one monopoly with another, which seems to me to rule out Eirgrid, the National Oil Reserves Agency, Bord na gCon or Horse Racing Ireland, which are all worth relatively little anyway.

There are other assets that could easily be sold because a sale would boost competition. The airports and the 10 port companies to be considered by Dr McCarthy are one obvious example.

The Dublin Airport Authority would have to be broken up but it could make sense to sell the three airports and even to break up Dublin Airport's two terminals and sell them to different owners.

Another group of companies that appear to be monopolies but actually compete against one another are Bord na Mona, Coillte and Bord Gais which are all vying to become serious suppliers of renewable energy.

Privatisation would create an interesting opportunity here and these companies would attract a lot of interest.

Although flogging off our national forests and bogs may help the public finances, we would be selling our souls and it would make this country immeasurably poorer.

The privatisations which would mean most to Irish business are undoubtedly the ESB, the airports and the State's various transport companies.

I don't see the point of selling off Dublin Bus and Bus Eireann but I do see virtue in dismantling the entire sorry system and allowing transport companies to offer rival services under controlled conditions.

Several canny coach operators are already giving Bus Eireann a run for its money and the same thing should be allowed to happen with Dublin Bus, the semi-state that probably has the least claim to survive any shake-up.

The joker in the pack of the 28 semi-state bodies is RTE, which should be part-privatised. While there are good reasons to continue to keep RTE 1 and RTE Radio 1, it makes almost no sense to keep Network 2 or 2FM, when many other stations do a perfectly good job of supplying light-hearted entertainment.

While Colm McCarthy and his team look at what to privatise, we need to begin a debate about how to privatise. Eircom and Aer Lingus have hardly been inspiring examples, with both indebted companies struggling to provide adequate services and flirting with bankruptcy.

While the country could survive without either of these companies indefinitely, it could not last more than a few hours without some of the companies on Mr Lenihan's new list such as the ESB. We must move cautiously but with determination.

Irish Independent

Also in Business