THE GOVERNMENT has been playing for time with regard to the sale of State assets, in the hope that a rapid economic upturn might increase their value. Now that such an eventuality appears unlikely, it is coming under increasing pressure from the EU-IMF troika to get on with the process. The amount to be raised is still under discussion – figures ranging from €2 to €5 billion have been mentioned – as is the purpose to which funds will be put. There are encouraging signs, however, of some innovative thinking on the issue.
The Government wishes to invest a portion of the money in job creation and infrastructural development. Representatives of the European Commission and the European Central Bank favour an immediate reduction in Ireland’s rescue package debt while the IMF is said to be more flexible. An interdepartmental report has identified a number of commercial State companies that would be suitable for partial or complete privatisation, including Dublin Port, the ESB, Bord Gáis, Coillte and Aer Lingus. The Government’s Economic Management Council has discussed the report but the document has not yet received Cabinet approval.
The potential for industrial disruption is very real. A strike against partial privatisation has been threatened within the ESB. Because of that and concerns about a possible “fire sale” of valuable resources the Government has established NewERA, an agency that will advise on possible capital investment, restructuring of State companies and the sale of assets. It will eventually act as a holding company – an idea favoured by Ictu – owning the shares of all commercial State companies.
The sale of State property raises many issues, not the least of which involves securing an appropriate return. Other factors include protecting existing employment, safeguarding terms and conditions and, where possible, encouraging future growth. In a limited number of cases, long-term national interests may be involved. Privatisation of the telephone network more than a decade ago provided a brutal lesson in what can go wrong. A lack of investment there inhibited development and economic growth.
Pension schemes within commercial State companies are currently insolvent, thereby reducing their parent’s value. It is the same across much of the industry. Because of that, legislation has been passed providing for the creation of Irish sovereign annuity bonds as a means of keeping investment funds at home while allowing pension schemes avail of high-yielding Irish debt.
The Pensions Board is expected to provide regulations and guidance shortly, after which the National Treasury Management Agency (NTMA) will issue new bonds. In addition, the NTMA has been authorised to use part of the National Pension Reserve Fund to invest in job creation and also to buy State assets when they are offered for sale. Such assets might also be used in connection with sovereign annuity bonds. There are risks involved, but nothing like those posed by rapacious hedge funds.