Taking MoF’s advice of keeping Kuensel for ‘political, social, strategic’ reasons new govt decides to not privatize Kuensel

The Cabinet in a decision on 4th December 2013 has decided not to privatize Kuensel, which will mean that the government will continue to hold on to its 51 percent majority share in the paper and can have the final say on management issues.

The decision sent to the Ministry of Finance (MoF) from the Cabinet says, ““The govt has decided not to divest government shares of Kuensel Corporation Limited. However, the government of the day must not use the paper for its political gains in any way except for the larger interest of the nation as may be required.”

The Cabinet decision is based on a strong push by the Finance Ministry which is the parent owner of the Kuensel’s 51 percent shares to not divest the shares for privatization.

The Ministry of Finance’s views of keeping its shares in Kuensel, shared through an internal report is more direct. It says, “The loss in term of revenue to the government would be negligible, but maintaining governments ownership in Kuensel would be desired for other political, social, strategic reasons and public interest.”

The MoF in another section of the report helpfully points out that Kuensel is the oldest and most dominant newspaper in the country being the daily with the highest circulation. It is also pointed out that Kuensel subsidizes the coverage of important government functions.

“The issue of privatization had come up as the new government was concerned that there is no level playing field for the media if the government owns a major media house,” said a senior policymaker explaining the background of the issue.

The cabinet in a letter on 28th August 2013 had directed the MoF and Ministry of Information and Communications (MoIC) to carry out a feasibility study of divestment of government’s shares in Kuensel Corporation. The MoF accordingly carried out the study and submitted its report to the cabinet on 22nd November.

The Finance Ministry which directly owns the majority share in Kuensel has shown a strong disinclination towards private ownership of Kuensel.

The MoF report says that Section 79 of the Public Finance Act 2007 provides for dissolution or divestment of a state enterprise once there are enough manufacturers and providers of the same goods and services in the market. The ministry in its view states “However, the MoF is of the opinion that divestment of Kuensel might not serve the desired purpose, but may lead to concentration of shares and ownership in the hands of a few individuals and commercial houses undermining the growth of an independent fourth estate in the country.”

Under a sub-heading titled ‘Impact of Divestment’ the MoF goes to greater lengths to expand on this point. It says “The media industry is still in a fledgling stage and it would be in the long term interest of the country to hold on to a print media industry, till such time the media industry attains desired maturity.”

Contrary to the popular view in Bhutan that the private media is freer the MoF says, “Under the private ownership, maintaining the editorial independence would not be possible, thus defeating the very essence of an independent fourth estate.”

This is a view which the Kuensel’s Managing Editor, Ugyen Penjor is in agreement with. He said, “I feel that the current situation of 51 percent ownership by the government is not a problem as the government has never interfered in editorial content even though they have the majority share.”

He said that private media anywhere in the world may, under pressure from their owners, compromise on their editorial content. “My worry is that if we are privatized, we don’t know who will have the majority share and if a big business house owns most of the shares then there is a possibility of being asked to toe their line,” he said.

On the question of how Kuensel’s Editorial section would guard its editorial independence given 51 percent government ownership the Managing Editor said that Kuensel has a strong Editorial Policy.

“We are hoping that as governments come and go, any government that comes to power will respect that policy. It is a very professional one. In the end we would appreciate a government that respects the independence of the newspaper,” said Ugyen Penjor.

He pointed out that Kuensel does not take any subsidy from the government.

However, private newspaper editors, professionals and the Journalists Association of Bhutan (JAB) have a different take on the issue of privatization of Kuensel.

JAB General Secretary Kinley Tshering said, “The government’s statements, on one hand saying that they would want to retain ownership of Kuensel for political or strategic reasons and on the other hand saying that private ownership would harm editorial independence are contradictory.”

He said, “Government controlled media is never independent. What the government wants to do is use Kuensel as a mouthpiece to the end when in fact the Kuensel editorial has been making efforts to break away from this tag.”

He said that the government needs to understand that the whole meaning of an independent media is not one which is controlled by the state. He said the cabinet needs to understand the importance of private media and independent media.

He said that people had elected in the new government to also bring in a diverse and independent media. Kinely Tshering said that the government wanting to have more control in Kuensel will impact the editorial independence of the Kuensel newspaper.

Namkhai Norbu, the Editor of Bhutan’s first private paper Bhutan Times also disagreed with the government’s move.

He said, “Given Kuensel’s resources and infrastructure and the poor state of the private media it is only Kuensel that can get into the role of an effective watchdog media. But if the government is against the privatization of Kuensel then it may not be able to fulfill that mandate.”

He said the role of the media is to check abuse of power and authority as governments everywhere are fallible.

He said, “There is no difference in the government trying to own a paper and a private company trying to own a paper when both parties are bent on promoting their vested interests.”

Bhutan Observer Editor Needrup Zangpo said, “The bureaucracy trying to maintain the ownership of the biggest newspaper for “political, social and strategic reasons” sounds unsettling for a journalist. Privatization wouldn’t mean loss of independence just as government ownership doesn’t guarantee independence.”

Adding in a management perspective the MD of Bhutan Today, Tenzin Dorji said, “The whole initial idea of creating a level playing field by privatizing Kuensel has been defeated. Kuensel as a government owned company enjoys the advantage of many government jobs and advertising going to them without any question. If this continues the private media will never rise up and there never will be any healthy competition with only Kuensel dominating.”

He said that if the government was against the privatization of Kuensel then it should look at other means to create a more conducive environment for the healthy growth of media. He also said that the country may suffer in the future if political parties misuse Kuensel.

The MoF has also expressed fears that if Kuensel is privatized shareholders looking for higher return would make the unprofitable Dzongkha paper only a formality. The report also says that Kuensel under private ownership may not continue Human Resources Development which would impact the quality of media in the country.

MoF also says that private ownership may lead to closure of a printing press in the east that distributes papers in remote areas and is not profitable. However, here private newspapers commented that Kuensel by having monopoly of a press in the east commands much higher advertisement rates. In fact to discourage private papers from printing in the East Kuensel’s demands exorbitantly high rates akin to publishing small books.

Another MoF reason is that Kuensel with its printing press participates in tenders for major works and prevents collusion among private printers. However, Kuensel staff themselves admit that the ground reality is that anyhow most printing jobs go to private printers who quote lower rates and print in India.

The MoF has also stated that Kuensel is the only security printer for emergency confidential printing works.

The MoF has calculated that the net worth of Kuensel is Nu 211.529 mn. Earlier in 2005, 49 percent of Kuensel shares were divested at a face value of Nu 100 each.

This is, however, not the first tussle for Kuensel. In May 2010 Druk Holdings and Investment (DHI) based on cabinet instructions studied the possibility of transferring state-owned enterprises like Kuensel, Wood Craft Center, Bhutan Agro, Bhutan Post, and the BDBL all under the Ministry of Finance, to DHI.

DHI mentioned Kuensel as one of the profitable companies that could be transferred to DHI. However, given the sensitivity around Kuensel the former Prime Minister announced that ‘DHI is not the place where Kuensel belongs and what the government should do is to divest its holdings in Kuensel and completely privatize it.’ Even the then Kuensel MD supported privatization as it would mean more efficiency. The former government, however, later abandoned any plans of privatizing Kuensel.

Kuensel has a total of 233 shareholders with the government owning 51% while 20 other shareholders own 42.25% of the company. The largest of the private shareholders is the radio company, Kuzoo FM, owning 20% followed by the NPPF with 7.35%. Among private individuals, Wangcha Sangay and his family members own 6.38% followed by Ashi Kesang W. Wangchuck, MoIC Secretary Dasho Kinley Dorji, Dasho Tenzin Yonten, Phub Zam, Tobgyal Dorji, Wangchuk Dorji each holding between 1% and 1.47% of the shares.

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