According to senior economists from ANZ Group, Dr. Kishti Sen, Catherine Birch, and Tom Kenny, the concept of privatization should be undertaken only if it is clearly demonstrated that the private sector can manage the asset more efficiently than the public sector. Their recent research publication, Pacific Insight, underscores the importance of effective regulatory frameworks, especially for assets exhibiting monopoly characteristics, such as ports, water, and electricity networks. Proper regulation is vital to prevent inflated pricing that could harm consumers while allowing asset owners to reap excessive profits.
The economists emphasize that projects financed through privatization must provide tangible net economic benefits. They warned that without adhering to these essential conditions, the practice of capital recycling—selling public assets to fund new infrastructure—could lead to inefficiencies, potentially resulting in the sale of equally effective public assets as well as funding projects that yield minimal economic returns.
In the case of Fiji, they noted that pursuing asset recycling or privatization does not necessarily mean a loss of Fijian ownership, particularly if it involves collaboration with the Fiji National Provident Fund or local investors through long-term leases. There is a pressing need for a comprehensive assessment of government-owned infrastructure to determine which assets may be suited for privatization, with the expectation that proceeds from any sales could be reinvested into new infrastructure projects or the repair of existing ones.
This call for reassessment of public sector assets resonates with a broader perspective on managing State-Owned Enterprises (SOEs) in Fiji. Dr. Kishti Sen recently highlighted the need for robust government investment in capital projects to stimulate economic growth, especially with the impending 2024-2025 National Budget on the horizon. Given the slow progress in the private sector and the decline in tourism, it becomes critical for the government to take the lead in driving economic initiatives.
Additionally, Fiji’s National Development Plan aims to foster increased private sector engagement by restructuring underperforming SOEs. This includes divesting companies such as Energy Fiji Ltd, Pacific Fishing Company, and Airports Fiji Ltd to iTaukei investors. Such measures are anticipated to reduce bureaucratic hurdles and operational expenses, ultimately creating opportunities for private sector growth and facilitating economic recovery.
With a clear strategy focusing on effective public-private partnerships and sound regulatory practices, Fiji has the potential to harness asset recycling as a means to advance economic growth and enhance infrastructure resilience. This collaboration between the public and private sectors could lead to a more dynamic and robust economy.
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