Government business units miss target

Who in their right mind would want to purchase a business unit off the Government?
The Cook Islands Government’s Investment Corporation (CIIC) annual report for the year ending 2006 was tabled in Parliament at the last sitting.
It sets out the report on the performance of the corporation’s statutory corporations, or business units as they are known, and also various companies owned by Government.
It is the performance of the business units that attracts attention as these are the big public assets that are usually up for sale when government wants to “cash up” and get out of the commercial sector.
In their report (p 6) the Directors make the statutory obligations in regard to efficient management, privatization and social responsibility clear. However, the narrative in these areas is somewhat lacking and the Finance Minister should ensure the public is more “wholly” informed about the CIIC’s concerns and future direction.
For example, the directors do not indicate whether they were happy with the performance of the business units.
So what is the public to make of the results? Are they poor, fair, good, excellent? What factors hindered performance? What measures if any, were implemented to lift performance?
CONCERN
Some years ago, this writer noted the concern of a former CEO that the business units were consistently failing to achieve government’s benchmark of 5% against equity. Only Te Aponga Uira achieved a result above 5%.
The former CEO advised that business units were to look at measures to lift performance. From the results in the report for 2006, it appears they are still struggling. There is no comment in the directors’ report of achievement against Government expectation although the writer understands from the current CEO that the figure of 5% against equity is still used as a guide.
Granted some of the units have taken on extra unprofitable responsibilities. For example, Ports Authority now has the unprofitable Aitutaki port under its wing.
Likewise, the Airport Authority now has Aitutaki airport to bolster up. The Airport Authority made a loss in 2006 of $716,000. Te Aponga Uira still has “social responsibilities” and provides items such as street lighting.
Given that annual inflation is reported by the Ministry of Finance and Economic Management to be around 2% Te Aponga Uira’s result for 2006 is respectable, although they will have interest to pay on the loan of $1 million. They took this out from the Bank of Cook Islands in 2006
ONLY
When surplus after tax is compared to equity, only Te Aponga Uira exceeds 5%. The Ports Authority net surplus after tax of $52,000 fails to draw any explanation in the report from the directors. Surely the public deserves some explanation.
As a document of financial record the annual report is very detailed. That’s fine for accountants. However the general public is lost without any clarification or explanation as to what it all “means.”
Someone in the Finance Minister’s office needs to tell us if we can be truly satisfied with the 2006 performance or whether we should be concerned.
The challenge for new CIIC Chairman Tapi Taio will be to seek ways to lift the performance of the business units otherwise the shareholders, (the public) will start asking some serious questions.

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