New side advert

27 January 2011

Resize: A A A Print


An Bord Snip’s Shock Doctrine


Colm McCarthy, Alan Matthews and Donal McNally


IN The Shock Doctrine, Naomi Klein described the “three trademark demands” which accompany IMF intervention in an economy as “privatisation, government deregulation and deep cuts to social spending”. We have already been given a taste of the third in the recent Budget; the rest are on the way.
The background for privatising state assets and deregulating the economy in the interests of the ‘free market’ was already set before the IMF formally intervened in the state finances. The first part came in the report of the Special Group on Public Service Numbers and Expenditure Programmes, more commonly known as ‘An Bord Snip Nua’.
The group was chaired by UCD economist Colm McCarthy and recommended that privatisation be one of the areas looked at in ‘improving’ the efficiency of public bodies. The report also advised large cuts in the public sector work force and lower social welfare payments.
In regard to the state forestry agency Coillte, the report recommended that the state:
“Review the operations of Coillte with a view to realising optimal return through rationalisation, asset disposal and, possibly, privatisation.”
The report did not specifically deal with privatising assets other than occasional references, as in the case of Coillte, which is of current interest.
The IMF’s likely insistence on the state off-loading companies like An Post, the ESB and Coillte ‘coincides’ with the imminent report of another group headed by McCarthy.
The new group, which also includes Professor Alan Matthews of TCD and Donal McNally of the Department of Finance, was established in July to examine “state assets and liabilities”.
Its terms of reference are far more pointed than those of the earlier McCarthy group:-

  • To consider the potential for asset disposals in the public sector, including commercial state bodies, in view of the indebtedness of the state;
  • To draw up a list of possible asset disposals;
  • To assess how the use and disposition of such assets can best help restore growth and contribute to national investment priorities; and
  • To review, where appropriate, relevant investment and financing plans, commercial practices and regulatory requirements affecting the use of such assets in the national interest.

The Interim List of Assets to Be Reviewed was as follows:-
(i) Commercial State Bodies
(with current estimated value or liability):

Dublin Airport Authority
(inc Cork and Shannon Airport) €986m
Dublin Bus
Irish Rail
Bus Eireann
Irish Aviation Authority
Dublin Port Company €238m
Cork Port Company €70.5m
Drogheda Port Company
Galway Port Company
Waterford Port Company
Shannon Foynes Port Company
Wicklow Port Company
New Ross Port Company
Dundalk Port Company
Dún Laoighaire Harbour Company
ESB €3.5 bn
Bord Gais Eireann €3bn
Bord Na Mona €190m
Eirgrid €90.3m
An Post €39.8m
RTE €250m
National Oil Reserves Agency €229m
Coillte €1.2 bn
Horse Racing Ireland
Irish National Stud Company Ltd.
Bord Na gCon

The above figures do not provide the whole picture and while RTÉ as an entity currently makes a loss, it owns considerable assets, not to mention the ‘intangible assets’ of access to broadcasting space. At the end of 2008, state companies including ESB, Bord Gáis, the Dublin Airport Authority, Coillte and RTÉ had tangible assets worth €17.4billion and combined debts of €3billion.

Valuable targets for privateers
These are clearly valuable targets for private companies, particularly if state companies are broken up with investors allowed to cherry-pick the profitable parts.
For example, An Post and Dublin Bus and Bus Éireann because they are public service providers operate loss making sections. Private companies would simply neglect them and buy the profitable parts. The implications of this for rural postal and transport services, for example, are clear.
In effect then, what is on the agenda is the consideration of a wholesale off-loading of the state sector. They were also to look at so-called ‘intangible assets’ which include “radio spectrum allocated for broadcasting and telecommunications; carbon emissions permits; and mineral, hydrocarbon and other licences issued by the state”.
In terms of what the current Government has done in agreeing to the IMF, privatisation is clearly going to be part of the immediate future agenda and will also have to be taken on board by any new administration that agrees to work within the parameters of the IMF programme.
It may also be worthy of note that the Postal Services Bill, which was passed by the Seanad and was to have been passed by the Dáil before the end of the last term, has not been passed into law. That bill was designed to ensure that An Post complied before January 1st with an EU directive on the ‘liberalisation’ of postal services. If the McCarthy group recommends that An Post be broken up and parts of it sold to private companies then the directive no longer has the same urgency.

Coillte – Bertie Ahern’s woodlands trail
The possible sale of Coillte has attracted the most attention recently due to the persistent efforts of groups like the not-for-profit, community-based Woodland League, the raising of it in the Dáil by Sinn Féin TD Martin Ferris and a number of newspaper articles focusing in particular on the role of former Taoiseach Bertie Ahern. Ahern is chairperson of the International Forestry Fund, which has expressed an interest in buying Coillte lands should they come on to the market. The land under Coillte’s control was valued by a state agency at €1.2billion.
Coillte seems to exist in a netherworld immune to scrutiny.
It claims to be a private company but its two shareholders are the Ministers for Finance and the Minister for Agriculture. All of the lands under its control, amounting to some 7% of the land area of the 26 Counties, are state lands which passed to from the Land Commission when Coillte was established in 1989.
It has performed quite well until recently when losses have been attributed to the downturn in demand for timber due to the recession in the construction sector. It has made profits of €300million since 1989 but has only paid €2.5million back to the Exchequer and continues to enjoy considerable lending rights backed by the state. Indeed, Coillte was allowed to borrow €400million in 2009 but have a debt of €179million.
Coillte’s claim to be a ‘private company’, most recently reiterated by Agriculture Minister Brendan Smith in a Dáil reply to Martin Ferris, was rejected in an EU judgement.
In Case C-339/00, Ireland v. Commission of the European Communities [2003] ECR I-11757, the Court (Fifth Chamber) held that “as a public undertaking” Coillte was not able to receive grant-aid (as a private entity) under the EU afforestation programme.
And in defending the case the Irish state itself claimed:
“Coillte Teoranta is and always has been a public undertaking wholly owned by the state.”
The pretence that it is a ‘private company’ was based on the state’s claim that it does not intervene in the company’s management.
The EU concluded:
“The company is wholly owned and controlled by the State . . . It follows that Coillte Teoranta is not private-law legal person for the purposes of Article 2(2)(b) of Regulation No 2080/92.”
Despite the judgement, both Coillte and the state continue to claim that it is a private company.
In June 2005, the Freedom of Information Commissioner, Emily O’Reilly, described Coillte’s conduct as “egregious” and that it had failed in its defence of its immunity from the Freedom of Information Act to mention the fact that the European Court of Justice had rejected Coillte’s view of its status as a private company.
Coillte stated:
“Coillte is not an extension of a Government department neither is it an agency, nor under the control of, any Government department . . .
In this context, the lands owned by the company are, in law, private property. “
That is clearly a ludicrous claim but it is a fiction that may have future implications if and when it is put up for auction.
The fiction that Coillte is a private company has given it immunity from requests made under the Freedom of Information Act. That has allowed it to maintain secrecy over its inventory of lands, a geological survey of those lands, and a request to discover how much had been paid by the Corrib Gas consortium to Coillte for 400 acres at Bellanaboy, the site of the gas refinery.

Free market myth
Naomi Klein also referred to the fiction that privatisation leads to the restoration of some mythical Adam Smith vision of a ‘free market’. Far from it. What has happened in fact is that where the state has sold off its assets, often under the auspices of the IMF, what has happened has been that state companies have become private monopolies but without any onus on them to adhere to any criteria regarding the public good.
What has also been notable is that where a wholesale off-loading of state assets has taken place - for example, in Russia - that existing elites have in effect used their political influence to buy (some would claim effectively steal) vast areas of the economy including mineral resources like oil and gas.
But surely that could not happen here?
Enter the Bert.
In November 2009, former Taoiseach Bertie Ahern was appointed Chairperson of the International Forestry Fund, a joint venture between Irish forestry group IFS Assets and the Swiss-based Helvetia Wealth. IFS Assets was established in 1997 and currently has more than €100million in forestry assets, somewhere in the region of 18,000 acres.
IFS have been critical of Coillte and have called on the Government to open up ‘land banks’ to private investors. They have been aggressive in buying up forestry in private lands but clearly Coillte is a major obstacle to expansion. In forming a joint venture with Helvetia Wealth, IFS has accessed considerably more funds than would be available to it should Coillte come on the market.
While the International Forestry Fund told Ken Foxe of The Sunday Tribune during the summer that they would be interested in acquiring Coillte, the recent spotlight on this issue has brought denials. Government ministers and the Taoiseach have also denied it, albeit qualifying that denial by stating the fact that Coillte is not currently on sale.
Bertie was also part of an International Forestry Fund delegation that visited China in early September where they met with the Chinese Investment Corporation. That body is responsible for investing massive amounts of Chinese funds overseas and has expressed an interest in buying Greek railways which are being sold off as part of the Greek ‘restructuring’.
Paul Brosnan, marketing director of IFS Asset Managers and a director of the International Forestry Fund, in a recent interview said the International Forestry Fund only invests where there is availability of freehold and that it is actively interested in forestry acquisitions here. It is clear then that the International Forestry Fund does have an interest, indeed an expressed interest in acquiring Coillte lands. The presence of Bertie demonstrates the nexus between the political elite and the privateers.
The recommendation made by the McCarthy group and how the Government acts upon it are issues of urgent national importance.
The impact of the IMF surrender have only just begun.

Follow us on Facebook

An Phoblacht on Twitter

Uncomfortable Conversations 

uncomfortable Conversations book2

An initiative for dialogue 

for reconciliation 

— — — — — — —

Contributions from key figures in the churches, academia and wider civic society as well as senior republican figures

An Phoblacht
44 Parnell Sq.
Dublin 1

Powered by Phoenix Media Group