State-owned Enterprise Reform Key to Boosting PNG Private Sector - ADB

MADANG, PAPUA NEW GUINEA – Simple reforms to state-owned enterprises (SOEs) in Papua New Guinea (PNG) could lower the cost of doing business and create new opportunities for the country’s private sector, the Asian Development Bank (ADB) told a major business summit taking place today.

Speaking at “SME Summit 2013,” a national event to review Government plans to stimulate and reform the Small to Medium Enterprise (SME) sector, ADB Advisor Chris Russell presented key findings from the ADB’s Finding Balance report, which show the high cost of doing business is constraining economic growth in the country.

“High costs are holding back all businesses, both large and small,” Mr. Russell told the summit. “And one of the drivers of this is the relative inefficiency of PNG’s state-owned enterprises.”

SOEs dominate key sectors such as power, water, ports and aviation, providing services which almost all private businesses use. When these services are provided at high cost, business suffers, especially export-oriented businesses whose competitors operate in countries with lower input costs.

Lower costs resulting from SOE reform would benefit all businesses, and if markets currently dominated by SOEs were opened to competition, it would create new opportunities for PNG’s private sector across the board.

One immediate opportunity for SMEs can be found in the Community Service Obligations (CSO) currently provided by SOEs. These services, which are subsidized by Government to ensure service delivery reaches poor or remote communities, could in many cases be provided more cost-effectively by SMEs. The Government is currently finalizing a CSO framework to facilitate the contracting of these services to the private sector.

ADB continues to work with the Government to improve the performance of the country’s SOEs through the Pacific Private Sector Development Initiative, co-financed by AusAID, ADB and, as of June 2013, the New Zealand Aid Programme.

“SME Summit 2013” was convened by the Minister for Trade, Commerce and Industry and was attended by more than 300 delegates drawn from government, industry and business, including the Indigenous Business Council.