A new ADB study on the comparative performance of State-Owned Enterprises (SOEs) in the Pacific has confirmed that the best performing SOEs are those that operate with private sector discipline and under competitive market pressures. This approach forces SOEs to focus on their core mandate of operating as successful businesses, meet their costs of capital, and undertake community service obligations on a commercial basis. Applying these principles can bring significant economic benefits to the Pacific Region, the report says.
The report, 'Finding Balance: Benchmarking the Performance State-Owned Enterprises in Fiji, Marshall Islands, Samoa, Solomon Islands, and Tonga’ was launched this weekend at a two-day Pacific Leaders Retreat in Nadi, Fiji.
At the retreat, Pacific Government Ministers and officials responsible for SOEs in each of the five countries were invited to share their respective SOE reform experiences. The ADB-sponsored event also focused on SOE reform in the countries covered by the study, and highlighted ‘best practice’ examples from the region.
SOEs are identified as public enterprises, commercial statutory authorities, government commercial companies, and public trading bodies that are mainly owned by the government. Community service obligations are typically services (water, electricity, telecommunications and transport services) which are subsidized by governments because the fees collected from users are insufficient to cover the cost of delivery. When these are delivered by SOEs without adequate compensation from the government, the financial performance of the SOEs suffers.
The purpose of the report is to assess the impact of the SOEs on the economies of the participating countries and identify the key performance drivers and reform strategies that can assist future policy development. While the report focused on SOE performance in five Pacific countries, the lessons learned are applicable throughout the Pacific Region.
“Since the ADB comparative SOE study was first done two years ago, some Pacific governments have made important progress towards placing SOEs on a more commercial footing, but much more needs to be done,” said Robert Wihtol, Director General of ADB’s Pacific Department.
Some of the recent highlights in SOE reform in the region include the restructuring of ten SOE boards in Tonga and the publication of SOE financial results in local newspapers; the privatization of the Samoa Broadcasting Corporation and Samoa Tel; the promulgation of SOE regulations in Solomon Islands; the liquidation of Fiji Ships and Heavy Industries; and the introduction of a set of commercial principles for SOEs in Marshall Islands.
“The active participation of Fiji, RMI, Samoa, Solomon Islands, and Tonga in the study must be commended as a demonstration of their governments’ willingness to identify and address key issues within their SOEs,” said Eugenue Zhukov, Regional Director of ADB’s Pacific Liaison and Coordination Office in Australia.
SOE reform is one of the key focus areas of ADB’s Private Sector Development Initiative (PSDI) which started in 2006 with cofinancing from the Australian Government. The initiative supports efforts by developing member countries in the Pacific to encourage private sector-led, sustainable economic growth.
ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, it is owned by 67 members – 48 from the region. In 2010, it approved a total of $13.8 billion in financing operations through loans, grants, guarantees, equity investments, and technical assistance projects. ADB also mobilized cofinancing amounting to $3.7 billion.
- Asian Development Bank, Nadi, Fiji, March 28, 2011