|Subject: Re: another foreigned owned company takes hold
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Date Posted: Fri, Jun 29 2007, 09:16:58am
In reply to:
's message, "another foreigned owned company takes hold" on Wed, Jun 27 2007, 05:36:05pm
kattmeow, to answer your question, let me put it this way. Studies have shown that, Government owned enterprises operate in-effciently. Their internal cost structures are high and provide inefficient services. You answered that question yourself, when you got the gave the example of the arrangement between Telstra and Telecom. Since, telecom is a state owned enterprises, inefficiency and blow-up of cost is a major defect that you can find in such state owned agencies.
Proponents of privatisation claim that, private owned firms operate with cost conciousness and provide service efficiently to lure new clients and hold onto existing clients. The world is moving towards that kind of stage, where most services like roads, telecommunication, electricity, water etc.. are privately owned. Why do you pay toll in Australia, when you drive through a road. Those roads are privately owned roads, hence a toll has to be paid to the private owners.
In this era, the government has to serve the people by providing much needed service and not get its hands dirty in running business. Businesses that are run by governments are inefficeint and poor. I think in PNG we have seen a lot of this failed state owned enterprises, like Air Niugini, Post PNG, Telecom.. etc. These enterprises if allowed to run like a private firm would make a big difference in the country. Costs would come down, and prices would be fair to those who use this services. So, i'd say, bring in the competition in the telecommunications industry and we will see competition.
Now to your next question, why allow foreign owned firms to operate in this country? Take a look at whats happening in China and Russia. Both we communist countries and they never allowed any foreign firms to operate in their country. Most businesses were run by nationals. What happened? Russia had a crisis and humantarian assistance had to be brought into the country, even the IMF stepped in and rescued Russia. This days, Russia has a open door policy. They allow Foreign direct investment into their country. The same is true for China, they allowed foreign direct investment to come into their country. When they did that, the story has turned around. China is one of the worlds fastest growing economy. At the moment, the world economy, commodity prices, inflation, interest rates etc seem to correlate with the developments in the chinese economy. Why do you think China has accelerated it development status from a third world nation to becoming a first world nation? It is because of Foreign Direct Investment.
Yes, repartriation of profit does occur once in a year, but the greater benefit goes to the host nation of that Foreign Direct Investment. Studies have shown a positive correlation between Foreign Direct Investment and Economic growth. How does Foreign Direct investment effect growth? When Foreign Direct Investment is allowed freely with no impediments, then, it provides job for the host nation, knowledge spill-overs take place etc. It also has spill over effects on other businesses in the country. Benefits by far outweigh nay costs associated with Foreign Direct Investment.
Say for instance Digicel is allowed to operate. What happens? PNG people will be recrutied then trained - knowledge spillover. Local and foreign owned companies have a choice to either hook up with digicel or telecom. They choose the best price. Due to competition, we might see decline in prices, hence benefiting the welfare of the nation. So, in the long run, Foreign Direct Investment is good for the country. Media reports have blurred this countries image and many outsides think that PNG is full of hooligans, thieves and cannibals. Thats why there is not many tourist, there is not enough foreign direct investment in the non-mining sector.. etc..
Countries all around the world are removing all impediments to lure foreign direct investment, because they see the impact of it on economic growth.
The other point is, local capacity to invest in such capital intensive project is minimal. Mark my words, PNG is moving in the right direction by allowing competition in monopolised state enterprises.
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