IPBC Act amendments

Speech by the Minister for Public Enterprises
Rt HON MEKERE MORAUTA, KCMG MP
On the occasion of the Second Reading of the
IPBC ACT (Amendment) Bill 2012

Introduction,

Mr Speaker, in November last year I delivered a statement to Parliament on the
‘State of PNG’s Public Enterprises’.

I described the mess that had been created at the IPBC and among the Public
Enterprises by the previous minister; the deals that made no commercial sense;
and the wasted investments that delivered little or no benefit to the public.

Mr Speaker, today I would like to update the House on how we are breaking away
from the past poor performance.

I would also like to present Amendments to the IPBC Act that will support the
ongoing task of rehabilitating Public Enterprises.

Break with the past

Mr Speaker, cleaning up the mess left by the suspended Member for Angoram has
been a huge task.

The new IPBC team has made a break with the past poor performance.

The old IPBC locked out Transparency International and the private sector from
the Board and was run by the Somares’ crony Glenn Blake. The new IPBC has a
full Board comprising committed and capable Papua New Guineans. And it has a
professional management team that has been appointed on merit.

The old IPBC had become a secretive, unaccountable organisation that
disregarded due process. The new IPBC has opened its books to public scrutiny
and published plans for fixing public enterprises. Boards and managers are being
told to follow the law or face the consequences.

The old IPBC allowed public enterprises to waste public funds and failed to collect
dividends. The new IPBC has reintroduced commercial discipline. It has already
paid 77 million Kina in dividends to the State.

The old IPBC allowed infrastructure and services to deteriorate. The new IPBC has
begun making inroads on Port Moresby and Lae ports, our water and sewerage
systems, and the national telecommunications network. The new IPBC is also 2
driving forward NEC decisions to fix up the power supply to the Highlands, Lae,
Madang and Port Moresby.

The O’Neill-Namah Government’s reforms started with this much-needed
overhaul of IPBC; we plan to continue them through this Bill to restore the
strength, independence and accountability of IPBC and its Public Enterprises.

Amendments to the IPBC Act

Mr Speaker, the amendments involve:

1. Reinstating Section 6.5 of the IPBC Act, which expressly
guarantees IPBC’s independence from political interference and
requires IPBC to operate on sound business principles.

This section had been removed by the Somare regime.

2. Adding a new provision allowing the responsible Minister to issue
directions to IPBC only after consultation with NEC and the
directions being published in the National Gazette.

This section allows IPBC to respond to government policy, but also ensures
that any directions are transparent.

3. Replacing Section 9A with a provision enabling NEC to directly
appoint directors to Public Enterprises on the recommendation of
the Minister. (At present directors are appointed by the IPBC
Board, with NEC having the right to object to the IPBC Board’s
nominees.)

The current system gave the previous Minister virtually the sole power to
appoint directors of his choice.

Under the proposed changes, NEC would be required to take into account
a candidate’s commercial experience and qualifications, the suitability of a
candidate for a particular enterprise, and the home province of a candidate
to ensure a good spread of directors from all provinces and districts.

At least one director of each Public Enterprise should have extensive
knowledge and experience of the industry in which the enterprise
operates, and at least one director should be a suitably qualified woman
with a professional or industry background.

A person should not be appointed to the Board of more than one Public
Enterprise, except in special circumstances or for ex officio director
appointments.

Directors should have similar statutory qualifications and other conditions
(for example no entitlement to separation or termination benefits) as
apply to IPBC directors.

4. Amending Section 29.4 to remove the IPBC Managing Director
from coverage under the Salaries and Conditions Monitoring
Committee Act, in line with other IPBC and Public Enterprise staff.

No staff of IPBC or any other enterprise is a member of the Public Service.
All CEOs and staff of IPBC and Public Enterprises are required to work on a fully commercial basis.

5. Amending Section 38, which at present enables IPBC to lend
money to any Public Enterprise in which the State or IPBC has any
level of ownership.

The amendment will confine IPBC to lending only to majority-owned Public
Enterprises. If the IPBC wants to lend money to an enterprise in which
IPBC has only a minority stake and does not control, it must first get NEC
approval.

6. Strengthening the transparency of Public Enterprises by changing
Section 44, which provides for the auditing of IPBC and its trusts
by the Auditor-General.

The proposed change would require all majority-owned Public Enterprises
to be audited by the Auditor-General. This would restore a requirement
that was repealed by the Somare regime.

7. Amending Section 46B, which requires majority-owned Public
Enterprises to get Ministerial approval, on the recommendation of
the Managing Director of IPBC, for all commitments in excess of K1
million.

The proposed change would give more flexibility to enterprises by allowing
urgent expenditure of up to K10 million if it is in accordance with the
enterprise’s annual plan approved by the IPBC Board, and if it has been
approved in principle by the Managing Director of IPBC.

8. Strengthening the requirement of Public Enterprises to follow due
process and for directors to comply with the law.

There have been problems with some majority-owned enterprises

  • not submitting annual plans to IPBC or not getting the plans approved by IPBC (section 46E);
  • not getting capital expenditure outside the annual plan approved by IPBC (section 46G); or
  • failing to comply with directions issued by IPBC (section 46I), because the Act contains no sanctions for non-compliance.

Therefore a new section (46J) is to be added, to deem non-compliance
with section 46E, 46G or 46I by a majority-owned Public Enterprise to
be a breach of the IPBC Act and a breach of directors’ duties under
company law and punishable as such, together with dismissal from
their position of director if IPBC so desires.

The failure of Public Enterprises to obtain legally required approvals
has played a significant role in their financial decline and in substantial
costs to the taxpayer.

This will no longer be tolerated. Compliance will be enforced to the
maximum extent of the law.

Mr Speaker, previous Governments have promised a lot to Papua New Guineans,
but have not put in place effective methods of delivery or provided the necessary
resources.

What this Bill will do is help IPBC rehabilitate Public Enterprises and ultimately to
make possible infrastructure maintenance and development that is not possible
now.

The result will be a great improvement in the national economy and the living
standards of all Papua New Guineans.

Mr Speaker, I commend the Bill to the House.

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