Business Irish

Wednesday 13 December 2017

Privatising semi-states 'will not cure problems in companies'

Forfas warns that assets will be worth less than €10bn

Emmet Oliver Deputy Business Editor


Non-cash assets of semi-state companies

Government moves to potentially privatise a large number of the semi-states will not "cure'' the problems in those companies, Forfas has claimed. It also pointed out that the net assets of the semi-states amount to less than €10bn.

"The sale of state-owned assets cannot solely be guided by how much revenue they will raise,'' said Forfas, which is responsible for promoting enterprise and science.

"It is important to develop clear criteria to select appropriate assets. It is essential that infrastructure users' interests are protected i.e. by not selling natural monopoly assets (e.g. electricity transmission lines, gas pipelines, broadband ducting, key airports, etc.) or assets to dominant competitors.''

It also stressed the importance of regional development.


Forfas said privatisation was not an "automatic solution'' to problems in the sector. "It appears from the empirical evidence both internationally and in Ireland's specific case that a change of ownership from public to private is not necessarily a cure for an under-performing organisation.''

The government has appointed economist Colm McCarthy and two other experts to review the entire sector, with companies as diverse as ESB, RTE and An Post under review.

The state-owned agency Forfas, which is not among the bodies being reviewed, said the semi-states have significant assets and liabilities. Non-cash assets amount to €17.44bn, which equates to 9.5pc of the economy's output, it pointed out.

But when debt and pension liabilities are subtracted from these assets, the value of the companies reduces down to below €10bn. Forfas said that the level and scale of semi-states in the economy is quite low.

"While there are statistical challenges in comparing the role of state-owned enterprises across countries, Ireland is one of the countries with the lowest levels of state ownership in the OECD across the entire economy,'' it said.

"However, the Irish State remains highly involved in the provision of infrastructure and related services. State-owned enterprises are responsible for delivering a significant part of Ireland's National Development Plan 2007-2013 and are taking on significant liabilities to enable them deliver on this,'' it said.

Its comments on privatisation may jar with Mr McCarthy and his fellow experts, among them senior Department of Finance official Donal McNally.

Mr McCarthy is a big critic of many practices in the semi-state sector and is concerned about the overlaps between many of the companies.

"Privatisation is not an automatic solution to improving the quality of goods and services available to the wider enterprise sector in Ireland or performance of state-owned enterprises,'' said Forfas.

Irish Independent

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