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Subject: Re: another foreigned owned company takes hold

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Date Posted: Fri, Jun 29 2007, 04:20:19pm
In reply to: - 's message, "another foreigned owned company takes hold" on Wed, Jun 27 2007, 05:36:05pm

Support Home Grown, i do agree with your statement to revamp and encourage local businesses to take over service delivery. My point was; history has shown that Governments run businesses always result in inefficiency. So, Government should stay out of businesses. Prime responsibility of the government is to bring services to the people. No matter how much money is pumped into this state run enterprises, it will always be inefficient and non-profitable. Just look at the current state-owned businesses, heads of CEO's roll everytime a new government comes in. Some governments use this state run enterprises as own family business, with the type of influence they have on this enterprises. Now, such actions makes such government run institutions as failed businesses.

As for encouraging and supporting home-grown businesses, i cant agree with you more. However, in such investments like telecommunication, initial capital cost is huge and local people dont have the capacity to enter into such venture. We cant depend on the government to pump in money to revamp telecom. Governments basically depend on tax money to bring services like health, education, roads.. etc. If government spends money on non-performing inefficient enterprises, then health, education, road maintenance has to miss out. So you see, there are costs associated with the governments decision to operate inefficient state run enterprises.

If government focuses only on providing service to the people and let business to the businessman. Then, all i am saying is that, government will increase its tax base, with the inclusion of a new company and its employees and services. So government does not loose, it gains from foreign direct investment.

As for locals saving capacity, its not that sufficient to fund big project like this. If you have high propensity to save in a nation, then that nation is capable of investing in their home country. For PNG, saving propensity is minimal, and to raise funds in the millions to set up a telecommunication faclity is obviously nil.

In simple economics, competition results in price wars. Bettelnut prices in Port Moresby goes up because of few supplies controlled by few suppliers. When supply is high, prices drop. There are many people selling the same product so there is competition to get clients. The same economic concepts applies to all state run monopolies. If competition is allowed, business will strategically set up price wars to attain a client base. Competion allows prices to move down, services are of top quality and provided efficiently. My prediction, is that, digicel will bring in the much needed competition, consequnetly leading to a price war.

For your information, it takes guts from a multi-national company to start up business in PNG. I have heard that, initial capital cost will be some hundreds of millions of US dollar. Thats definitely a plus for Papua New Guinea.

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Date Posted: Fri, Jun 29 2007, 06:51:40pm

I hope Digicel wins the court case currently pending and launch its mobile service in PNG.



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