Privatization should occur only when it can be demonstrated that the private sector can manage the asset more efficiently than the public sector, as advised by ANZ Group senior economists Dr. Kishti Sen, Catherine Birch, and Tom Kenny in their research publication, Pacific Insight. The economists highlighted the need for effective regulation in cases where monopoly characteristics exist, particularly for assets such as ports, water, and electricity networks. This regulation is crucial to prevent excessive pricing that could burden consumers while allowing asset owners to make supernormal profits.
The economists stressed that any projects financed through privatization should yield clear net economic benefits. They cautioned that without careful adherence to these conditions, capital recycling—the practice of selling assets to fund new infrastructure—might become an inefficient approach to raising finance. Potentially, it could result in assets being sold that are equally efficient in public hands, while funds could be allocated to projects that offer minimal economic returns.
In the context of Fiji, they suggested that asset recycling or privatization does not necessarily imply a loss of Fijian ownership if pursued in partnership with the Fiji National Provident Fund or local investors through long-term leases. There is a need for a thorough review of government-owned infrastructure to identify which assets may be suitable for privatization. The proceeds from any sales could then be reinvested to either fund new infrastructure projects or rehabilitate existing ones.
The call for reassessment of public sector assets aligns with a broader perspective on the management of State-Owned Enterprises (SOEs) in Fiji. Recent comments from Dr. Kishti Sen emphasize the importance of government investment in capital projects to stimulate economic growth, especially in anticipation of the upcoming 2024-2025 National Budget. With a slow private sector and declining tourism, there’s a pressing need for the government to spearhead economic activity.
Amid these discussions, Fiji’s National Development Plan aims to enhance private sector engagement by restructuring underperforming SOEs. This involves divesting entities like Energy Fiji Ltd, Pacific Fishing Company, and Airports Fiji Ltd to iTaukei investors. Such initiatives aim to reduce bureaucratic constraints and operational costs, ultimately making room for private sector participation that could drive economic growth.
Overall, with a strategic focus on effective public-private partnerships and careful regulation, Fiji can leverage asset recycling to promote economic advancements and improve infrastructure resilience, harnessing the benefits of both public and private sectors to foster a more robust economy.
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