THE Independent Consumer and Competition Commission (ICCC) has reaffirmed the recent statement made by the Minister for State Owned Enterprises, Hon. William Duma about the ultimatum given to the Heads of some of the non-performing State-Owned Enterprises (SOEs).
ICCC Commissioner Paulus Ain said the ICCC as the regulator of some of these SOEs reaffirmed Minister Duma’s position.
“Whilst its crucial to note the current progress and impact of the SOE’s commercial performance in terms of their respective financial, legal and governance
environment, it is equally important to put on record the regulated SOEs’ monopolies’ performance from a regulatory perspective and how effective the current regulatory oversight by ICCC, has contributed to the high performance of some of the state-owned entities to date,” said Ain.
On the onset, the ICCC in the past has provided regulatory oversight on five (5) of the SOEs; Telikom PNG Limited, PNG Power Limited, PNG Ports Corporation Limited, Post PNG Limited and the Motor Vehicle Insurance Limited (MVIL).
Mr. Ain said these SOEs’ monopolies were performing very well until after they were removed from the ICCC’s regulatory oversight, for instance, Telikom PNG Ltd and PNG Power Ltd.
He said PNG Power was unable to recover its cost of investments due to the tariff freeze back in 2013 and it continues to face challenges to date.
Commissioner Ain said the ICCC currently regulates three (3) of the current five SOEs monopolies; PNG Ports Corporation Limited, Motor Vehicle Insurance Limited and Post PNG Limited through regulatory contract for a five (5) year period.
He said the Regulatory Contracts offer a number of advantages to consumers, the regulated SOE, and to the wider PNG economy.
“Chief among these are advantages offered to the regulated SOE in that the Regulatory Contract provides a degree of certainty as to the way in which maximum prices and minimum service standards are to be set and the price path that will apply over a period of time.
“Provided the price path has been set in such a way as to encourage greater
efficiency from the regulated SOE, the greater certainty allows the regulated SOE to plan its investment and efficiency improvements in such a way that it achieves over time a better level of efficiency and standard of service delivery,” said Mr. Ain.
The Commissioner said, a case in point relates to PNG Ports Corporation Limited and Motor Vehicles Insurance Limited and the industries or sectors in which they operate.
Consistent with the objectives of the ICCC Act, the ICCC has strictly required PNG Ports and MVIL to reduce costs and improve their service levels to the benefit of all provinces in PNG.
The incentive provided to these entities under the ICCC regulatory arrangement is an opportunity for these entities to earn a return commensurate with their risk profiles and returns that are available in the economy.
This framework has encouraged both MVIL and PNG Ports to pursue efficient managements strategies that optimise their service output and maximise revenues (through efficient prices).
Mr. Ain said, today it is evident that both MVIL and PNG Ports are amongst the best performing SOEs who continue to generate considerable profits to the government annually and are at most relied upon in terms of public debt restructuring or refinancing.
He believes, in essence, the importance of the current regulatory arrangement and the positive impact it has had on the respective regulated SOEs commercial performances.
Therefore, Commissioner Ain said it is equally important to put on record how effective the regulatory oversight by ICCC has contributed to the healthy annual returns enjoyed by the Government to date.
