History of Public-Private Partnerships Dictates Caution

There's a strong sense of déjà vu in the current debacle surrounding Labour's enthusiasm for public-private partnerships, ACT New Zealand Commerce Spokesman Deborah Coddington said today.

"Like all touchy-feely language, a partnership between private and public sounds innocuous. There is nothing more euphemistic than using the words "prime mover status" in place of "insider trading".

"When reading reports about the Government's plans I knew I'd come across them somewhere before.

"And I have - in my own book, `Turning Pain Into Gain: The Plain Person's Guide to the Transformation of the Economy' which I wrote in 1993.

"In a chapter on Think Big and the Energy Markets I wrote:

The Government set up a deal with Mobil, in which the Government (read taxpayer) took all the financial risks for the project's development while Mobil was paid a fee by the Government (read taxpayer) for processing the gas. Moreover, Mobil was guaranteed by the Government (taxpayer) a 16 per cent return on its investment in the plant. This was when the average New Zealand corporate return was around 10 per cent.

Meanwhile, oil prices around the world began to fall. Similar international synthetic fuels projects were cancelled (including some of Mobil's). The cost of the project was estimated in 1980 to be $886 million. The final cost, spread over the period of construction, was $2.3 billion. While Mobil made a profit, every New Zealander took the loss. As one energy consultant remarked after the event, `Big companies are very astute at picking banana republics which are keen to gain prestige from innovative technology'.

"The Prime Minister, Michael Cullen, Paul Swain and other Ministers could do worse than read up on New Zealand's disasters of the past when similar public-private partnerships were launched. I'm happy to lend them copies of my book.

"New Zealand must never again go down the treacherous path to near bankruptcy that Robert Muldoon and Bill Birch once upon a time so merrily led this country. A Transport and Industrial Relations Select Committee Inquiry must examine Ms Clark, Dr Cullen and Mr Swain's eagerness to embrace public-private partnerships and discover whether the outcome could be banana republic status," Miss Coddington said.

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