As the CEO of a dynamic company with expansive, successful distribution channels in more than 130 countries, I know poor infrastructure can cause headaches and extra costs for business. Trying to run a First World business using Third World roads, for example, can be a nightmare.

Although most of us think of roads first, the definition of "infrastructure" favoured by the Government seems to be "everything the state takes responsibility for". Listing infrastructure spending recently, Finance Minister Dr Michael Cullen included prisons, defence force equipment, replacing hospitals, building new schools, recapitalising the national airline, installing new electricity generating capacity, upgrading the electricity transmission grid, road building and even "saving rail".

Defence and prisons are genuine "public good" activities for which the state must be responsible, although there is no reason the private sector cannot manage prisons under contract. By contrast many infrastructure industries, such as ports and airports, can be run as normal businesses.

Dr Cullen's broad definition provides a ready excuse for increased state involvement - think of Air New Zealand and rail. Asking himself whether the private sector should have greater freedom to build, lease, own, operate or toll parts of infrastructure, Dr Cullen said: "As a general rule, the answer is no." His reason - and that of Economic Development Minister Jim Anderton - is that they are dealing with the aftermath of "decades of infrastructure neglect" due to the "failed policies" of deregulation, corporatisation and privatisation.

Yet ask most New Zealanders what they think of our national infrastructure and you will hear complaints about roads, electricity, water and sewerage - all state-dominated.

In most areas where deregulation, corporatisation and privatisation have been fully introduced, infrastructure has been strengthened. Consider the ports, bus networks, or telecommunications market. Anybody old enough to remember state control of New Zealand's telephone lines knows how difficult it was even to get a telephone connected. Today we have a marketplace with competing private operators. Compare the investment that telecom companies have put into their networks with the under-investment in our state-controlled infrastructure.

Complicating matters is local government involvement. Last year, the Auditor-General warned that smaller local authorities found it particularly tricky to meet requirements imposed by laws such as the Resource Management Act.

Most policy changes needed to promote efficiency can be summarised simply: more private enterprise and less government. This raises the same fears expressed when the privatisation of Telecom was suggested. Yet few people would argue that Government provision of goods and services is generally more efficient than private provision. As has happened overseas, private sector involvement in infrastructure provision will grow - the question is how long we can afford to delay it.

This approach is only part of the answer, though. With electricity, the problem is business does not know what the Government will do next. Since corporatisation yielded major benefits, we have had interminable meddling - Max Bradford's forced separation of lines and energy trading, more regulation, and now an electricity commissioner. We have ended up halfway between central control and a privatised market - a recipe for ongoing trouble.

A looming problem is the provision of water and wastewater services. Local government is struggling with deferred maintenance and under-investment in facilities. The Parliamentary Commissioner to the Environment two years ago said local government had made "limited" progress even focusing on the issue. Few councils have introduced usage-based pricing despite its environmental and economic benefits and widespread adoption in Australia. Little reform is likely unless directed by central government, which is ideologically opposed to the measures that would help.

Today's political hot potato is rail. Proponents of state intervention miss two points. First: for all its faults Tranz Rail has done a better job than when it was under Government control. Second: deregulation of road and rail transport has delivered huge benefits to users.

Dr Cullen said recently he had "asked Government officials to think about imaginative ways of financing specific elements of the infrastructure". Imagination is not required. There is clear evidence of the benefits of commercial operation and private enterprise in the provision of infrastructure.

For more information, contact:

David Young
Communications Manager
Ph: 04 499 0790
Email: dyoung@nzbr.org.nz

Web: www.nzbr.org.nz