Rich Katherine: Supplementary Estimates — Imprest Supply Debate 
Rich Katherine: Supplementary Estimates — Imprest Supply Debate 
[Volume:632;Page:3716] 
KATHERINE RICH (National) 
: 
 In tonight’s debate I will turn my mind to some of the commercial announcements the Government has made. I would like to focus on some of the recent announcements made by the Minister for State Owned Enterprises and Minister for Economic Development Trevor Mallard. When we looked at some of the budgetary documents many of us had hoped to see some kind of indication of where the big changes would be to put in place this grand plan for economic transformation. It comes with great regret to evaluate some of those plans and to talk about some of the latest announcements—in particular the new plan for State-owned enterprises. 
I think that what the Government has attempted to do is to point to some activity in the area of State-owned enterprises so it can look as if it is doing something in the area of commercial development but of course the rhetoric does not necessarily match the activity. So some of the announcements made by Minister Mallard are cause for concern because it is very clear from comments that have been made after those announcements that policy has been made on the hoof. 
In fact the nature of the announcement in the Government’s grand plan seems to change almost on a daily basis with every interview that Mr Mallard makes. In the last interview he started discussing the issue of privatisation—not privatisation of State-owned enterprises one must understand but privatisation of subsidiaries of State-owned enterprises. So how he can start to discern a difference between not selling the silver as he would put it in one area and putting the silver in another drawer and selling that I do not know. 
But what is of concern is the total lack of analysis from those officials whom many of us put faith in. Many of us rely on their views and their knowledge in a lot of areas and the rather damning comments made by various officials—albeit in diplomatic language—about some of the changes that Minister Mallard was putting forward were of concern. The Ministry of Economic Development just as one example said that it was very concerned about governance and about the ability of State-owned enterprises to undertake some of those risky expansion plans as presented by the Minister. 
That is an interesting point which was overlooked by Cabinet I think in approving those plans and it is exactly the point we have heard discussed in the House today. As a result of research done by Victoria University we have seen today that concerns are held not just by the Opposition or the Ministry of Economic Development in relation to governance; they are held also by enterprise board directors themselves who have responded to an anonymous survey in which they have told the researcher how they felt about some of the capabilities around the board table. The results of that research today is rather telling. Board directors are saying they have real concerns about the types of skills they have around the tables of State-owned enterprises and they are concerned that some of the processes around the selection of board directors are more about political selection and the rewarding of people for party activity than about having the capabilities and skills to be able to do the job. 
Minister Mallard in the House today started talking about State-owned enterprises being training grounds for new directors. That in itself is cause for concern because if someone is going to go on to a State-owned enterprise board it should be as a result of the experience that person has had in the financial community and he or she should already have demonstrated the ability to make good commercial decisions before entering into businesses that are very complex and increasingly more risky as a result of the plans that have been announced. State-owned enterprises are not simple businesses. Over the years they have become very complex businesses and very large businesses. Frankly we do not need trainees; we need people who are at the top of their game who have the ability to make good commercial decisions and who understand the financial implications of various investments. 
It is not an area where one puts people just on the basis that they have had lots of life experience as Minister Mallard said he would like to do. Life experience is great and it counts for something but when we are talking about the governance of State-owned enterprises we need to appoint board members who are able to understand facts figures and business and who have worked at a very high level. It is not good enough suddenly to use those appointments as paybacks for those who are party-friendly. If Labour has done anything it has methodically placed on those boards people who are to the boards’ detriment as we have seen in the research released today. 
The Minister wants everybody to think he knows more than the officials who advised Cabinet in making this decision. The Ministry of Economic Development expressed huge concerns; Treasury said there were associated risks with that new plan and that those risks were significant; and the Crown Company Monitoring Advisory Unit said the same. So I think that it is the height of arrogance for the Minister to override their concerns and pretend he knows more than they do when it comes to expanding the role of State-owned enterprises. 
The Minister continued to use glowing examples of successes offshore but of course overlooked the fact that those projects had already been conducted and carried out prior to that new announcement. He pointed to Southern Hydro which was a success for Meridian Energy and which generated some $600 million but that will not be the case for many other risky projects that State-owned enterprises embark on. The Minister seems to think that if State-owned enterprise projects go belly up something quite different will happen to those enterprises that does not happen to other companies that face financially dire circumstances. He seems to think that a State-owned enterprise going belly up is OK because the Government still owns the assets—the dams the windmills etc. Well I have news for Mr Mallard: creditors do not care who owns a company; creditors just want their money back at the end and they will do anything they can to get it back. So I think it showed major commercial naivety on the part of the Minister even to make a statement of that kind. 
But as we have seen in just recent announcements that Minister thinks he is the pretender to Michael Cullen’s throne. Well I would like to think that anybody who inherits that title would at least know about risk and would at least know that assets come hand in hand with annoying things called liabilities and that the Minister who takes over would at least have a basic grasp of what is required on those boards as they look at new projects. I think the Minister will be upset to hear that the business community does not share the same faith he has in his ability to have the final sign-off on many commercial projects. 
One of the things I think we need to address is the whole governance issue and when Minister Mallard says he will deliberately continue to make placements of people on that board who do not have commercial skills that is something I think all of us should be concerned about. We need to hear more from the Minister about his reconciliation between his statements in the House last week—that he was more than happy with the skills around the board table—and today’s revelation that board members themselves are frustrated by the capabilities that as a combined board they have access to as well as the statements that have been made through that research which demonstrate that the reality is quite different for those who are actually trying to do the work. 
State-owned enterprises within their present framework have always had the flexibility to get into new projects. Some chief executives of State-owned enterprises are privately saying that very little will change—that this is more about spin than actual reality—but it concerns me that the Minister will want to come up with some pet projects he can point to and herald as being successes. That is not the way I think State-owned enterprises should conduct their business and the business community is not feeling at all confident that an ex-teacher and an ex-historian have the ability to sign off what could be complex projects put forward by those enterprises in an ever-complex business arena. 
It is not good enough for the Minister to say that he knows best when in fact all his officials have said that the contrary might be correct and that there are some real concerns. Economic transformation cannot be achieved if the Government continues to ignore the big issues like tax the Resource Management Act etc. so that is why this Budget has been a real disappointment to all of us.