One for competition

This is old hat. Blame too much summer travel. It is worth highlighting nonetheless.

The High Court ruled in favour of a private bus company, trying to compete with Dublin Bus. The judge said the regulator was wrong to allow the subsidized, state-owned incumbent to share a route with a private operator. The judge berated the consultant to the regulator. The judge also ruled that the regulator wrongly delayed the processing of an application for a second license.

This is good news in itself, and it sets a precedent for future cases (although the legislation is about to change).

Note that the High Court implied that, for urban bus transport, competition should be for the market rather than in the market. That is right for all but the busiest routes.

Establishment of the Review Group on State Assets

As has been widely reported the Minister for Finance has established a Review Group on State Assets that is chaired by Colm McCarthy.

The terms of reference are:

  • 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.
  • To review where appropriate, relevant investment and financing plans, commercial practices and regulatory requirements affecting the use of such assets in the national interest.
  • While most comments in the media have interpreted the focus on asset disposals to refer only to privatisation, it is perfectly possible that the various state companies hold assets that might not be essential for the efficient running of these businesses and thus could be disposed of without privatisation.

    In relation to privatisation it will be important not only to consider the short-run gain in funds through the sale of assets, but the longer-run impact on the competitiveness of the economy. Long-run considerations should include the loss of control of national strategic assets that would result from a sale. This might be addressed by keeping the key infrastructures such as networks in public ownership.

    In some cases it might also be useful to consider a long-term lease as an alternative to an outright sale of assets, which will also yield revenue up-front but avoids the ‘selling off of family silver’. Joint ownership is another option.

    Looking through the list of assets to be reviewed it is hard to ignore the differences in ownership patterns with many other countries. Electricity generation, ports and airports are private in many countries.

    Relative Food Prices Across Europe

    Yesterday Eurostat released their annual comparison of food prices. It shows that the prices in Ireland are the second highest in the EU after Denmark. What is more worrying is that instead of coming down faster in Ireland than in other countries food prices were actually relatively higher in 2009 than in 2008 or 2007. Irish consumers pay 29.2% more than the EU average. While Italy and Finland improved their relative price levels all other Euro members disimproved. The biggest relative improvement was recorded by Iceland, followed by Sweden and Poland.

    Ireland not so “networked ready”

    The World Economic Forum has released its latest Global Information Technology Report, highlighting the “Networked Readiness Index”. I do not know what that means, but it probably has something to do with the Smart Economy, the government plan that is mentioned in the introductory chapter of the report. Ireland ranks 24th, towards the bottom of the rich countries and at par with the best of the middle-income countries.

    The index consists of 3 subindices, each consisting of three subsubindices, derived from a total of 68 indicators.

    As everything depends on the arbitrary weighting of the indicators, it is more instructive to look at the bottom level indicators.

    Ireland is 24th out of 133 assessed countries. What is dragging us down? I’ll list the indicators on which Ireland is 48th or lower:

    • Burden of government regulation: 74th
    • Intensity of local competition: 49th
    • Time to enforce a contract: 60th
    • Residential telephone connection charge: 92nd
    • Residential telephone subscription: 118th
    • Fixed telephone line tariffs: 52nd
    • Business telephone connection charge: 76th
    • Business telephone subscription: 92nd
    • Availability of new telephone lines: 53rd
    • Government prioritization of ICT: 63rd
    • Government procurement of ICT: 59th
    • Importance of ICT to government vision: 56th
    • Government success in ICT promotion: 64th

    There is no need to comment on the above.

    Ireland scores well on a number of things (12th or higher):

    • Judicial independence: 9th
    • Number of procedures to enforce a contract: 1st
    • Level of competition: 1st
    • Quality of education: 8th
    • ICT imports: 1st
    • ICT exports: 10th

    Hangar 6

    This topic has found its way onto another thread, and given that it has occupied lots of newspaper space and airtime over the last few days it is probably useful to discuss it here in terms of the economic issues. This has been a bit like a tennis match with the ball going back and forth for some time so it is hard to keep track of all the points.

    On the one side we have Michael O’Leary who claims he wants to (re)create 300 jobs, but needs Hangar 6. On the other side we have Mary Coughlan and the DAA who say Hangar 6 is not available, as Aer Lingus has a lease on it.

    While Michael O’Leary appears happy for other airports to build a facility for him, he does not seem to want the DAA or, given that he appears to prefers not to deal with them, the IDA to build a new hangar for him at Dublin airport. It would appear that the reason for this is cost – he claimed on radio that hangar 6 would be available at a low cost. No doubt Aer Lingus is also getting it at a low cost. In the debate some have argued that Ryanair is pursuing a different agenda – to open Hangar 6 as a terminal. Ryanair say they would be happy to sign a legal agreement preventing them from doing so. So what is this all about??

    In a letter to the Irish Times the chairman of Aer Lingus, Colm Barrignton, makes the point that hangar 6 is the only hangar at Dublin airport capable of accommodating wide bodied planes, and that it is extensively used. Could the ability to accommodate wide bodied planes be the key to this scrap? At the moment Ryanair do not have any such aircraft, but might Ryanair have plans to get into the medium- and long-haul business? Aquiring hangar 6 would allow them to build a base in Dublin while at the same time discommoding Aer Lingus, which would be a competitor in that market?