[stop-imf] Papua New Guinea privatisation update

[Robert Weissman]

News from Papua New Guinea, where anti-IMF protests recently left several
dead:

from The National, Port Moresby, 4 July

Court ruling may halt entire privatisation process
COMMENTARY by FRANK SENGE KOLMA

WITH the nation's eyes riveted on the University protest and the related
tragic events of last week, few may have taken notice of the court
decisions relating to the Privatisation Commission.

The implications of these decisions on the Government's privatisation
program, a subject at the centre of the protests, are substantial.

They may go as far as halting the entire process of privatisation, a
cornerstone policy of the Morauta Government.

The National Court last month decided that the liabilities of the
State-owned Papua New Guinea Banking Corporation were transferred,
together with its assets to the Privatisation Commission, which is the
agent preparing the bank for eventual privatisation.

In the process of preparing the bank for privatisation, the Government had
initially organised for the transfer of only the bank's assets to the
Privatisation Commission and left behind the liabilities with the bank.

In the case of Kenneth Bromley vs the Privatisation Commission, the former
bank employee contested that contractual obligations owing to him to the
tune of K1.6 million plus interest were now the responsibility of the
Privatisation Commission, arguing that the liabilities of the bank were
now inherited by the Privatisation Commission. The National Court agreed
this was so and ruled in his favour.

The Privatisation Commission last week failed in its bid to stay the court
order and on Friday paid K1.7 million into the National Court registry to
stop itself from being placed under receivership.

The payment removes the injunction on the sale of PNGBC but the entire
privatisation process may now be halted because of the precedent this
decision sets.

Every other State-owned enterprise earmarked for privatisation will now
transfer both assets and liabilities to the Privatisation Commission and
some of those liabilities are in the millions of kina.

The Commission has neither the budget and manpower nor the mandate to deal
with the liabilities of these entities.

As an example, the National Court ruled on Monday, July 2 that the Motor
Vehicles Insurance Limited is responsible for damages and liabilities
incurred while it was operating under a trust. The court further ruled
that all its liabilities and damages claims amounting to millions of kina
are the responsibility of the PNGBC, which owns MVIL through its holding
company. This clearly means that the MVIL liabilities at over K100 million
might also be transferred to the Privatisation Commission.

The deed of Settlement and Indemnity signed between the liquidator and
MVIL makes it absolutely clear and inescapable for the bank to meet all
MVIL liabilities. If it were to dispose of MVIL liabilities, MVIL would be
left with assets totalling a mere K4.971 million.

Such is the magnitude of the decision that the privatisation process might
never get under way.

This is an area where even the World Bank and IMF cannot intrude unless
they want to fund the massive liabilities of all the statutory
organisations.

In the first place, it was farcical to even contemplate that you can
separate the assets of a company and dispose of it and leave the
liabilities alone.

The University student protest may not now even be an issue as the central
tenet of their contention may be halted as a matter of course.

It is also as good a time and as divine an opportunity as any for the
Government to use this court case to review the privatisation program
under its present format.