Canberra Goes Private: Selling off state-owned enterprises benefits Australians

Canberra Goes Private

Selling off state-owned enterprises benefits Australians.

Feb. 13, 2014 12:01 p.m. ET

Finance ministers from the G-20 converge on Australia next week, and they might learn something from their host government in Canberra. Prime Minister Tony Abbott’s government has set out to privatize public assets worth up to 130 billion Australian dollars ($117 billion).

Joe Hockey, Mr. Abbott’s treasurer, floated that number and pressed the case for privatization in an interview with the Journal’s Rob Taylor and David Winning this week. The government views the proceeds from asset sales as a way to manage debt levels while funding new public-works projects. “We are going to free up the capacity to get on with the job of building things,” Mr. Hockey said. His statement is the latest development in a policy drive that’s been gaining speed since January.

Australians already know a thing or two about privatization. The first tranche began in earnest in 1991 when Canberra sold off the Commonwealth BankCBA.AU +0.32%and since then the federal and state governments have spun off electric utilities, insurance companies, airport operators, former flag-carrier Qantas QAN.AU +2.53%and a large chunk of the former telecom monopoly TelstraTLS.AU +0.97% These earlier moves provided a fiscal shot in the arm for the government and freed taxpayers of the burden of supporting inefficient enterprises.

They have attracted foreign investors to Australia while locals enjoyed a return from these assets too. That explains why managers at the so-called superannuation funds that manage the country’s government-mandated individual retirement accounts are so enthusiastic about the latest privatization proposals. They appreciate the benefits for ordinary Australians both of putting the government’s finances on a more stable footing and of creating a broader and deeper capital market via new share issues.

Targets in Mr. Hockey’s round could include electric utilities still owned by some states, health insurer Medibank, Australia Post, the air-traffic-control system, the company that provides housing to members of the military, and public-works operators such as the one that maintains railroad tracks.

The idea of more asset sales already is drawing criticism from the usual quarters, as did the previous rounds in the 1990s and 2000s. Messrs. Abbott and Hockey deserve credit for pushing ahead despite the inevitable controversies. If they succeed, they’ll set a positive example for their G-20 peers.

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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