Private Sector Engagement Boosts Performance of State-Owned Enterprises – ADB

APIA, SAMOA – Engaging the private sector through public-private partnerships and privatization improves the performance and service delivery of state-owned enterprises (SOEs), according to a new report by the Asian Development Bank (ADB).

Finding Balance 2014: Benchmarking the Performance of State-Owned Enterprises in Island Countries, was launched by ADB Vice-President Stephen Groff in Apia, Samoa, ahead of the Third International Conference on Small Island Developing States, which opens tomorrow. It was produced by the Pacific Private Sector Development Initiative (PSDI), a regional technical assistance facility cofinanced by the Government of Australia, the New Zealand Government, and ADB.

“The study reflects ADB’s ongoing commitment to economic development in our member countries, an important element of which is continued thought leadership on SOE reforms,” said ADB Vice-President Stephen Groff, at the report’s launch. “Reforming the SOE sector is vital as it improves basic service delivery, reduces the costs of doing business, and creates opportunities for private investment.”

The study says SOE reforms can bring immediate benefits, as in the Solomon Islands where SOEs showed an average 10% return on equity in 2010-2012, compared to a return of -11% from 2002-2009. The remarkable turnaround is attributed to increased privatization, public-private partnerships, financial restructuring and efforts to place SOEs on a sound commercial footing.

In Samoa, SOE privatization has delivered much-needed investment and competition, with notable improvements to service delivery particularly in the telecommunications and broadcasting sectors.

Despite these gains, most SOEs continue to be a drag on growth in island economies. The ADB report identifies key strategies to guide future policy on SOEs, highlighting the importance of finding the right balance between public and private sector roles.

The report, the ADB’s fourth comparative study of SOE performance, involves nine countries — Cabo Verde, Fiji, Jamaica, Marshall Islands, Mauritius, Papua New Guinea, Samoa, the Solomon Islands, and Tonga — selected for the breadth of their SOE reform experience. The study was expanded to include countries in the Atlantic and Indian Oceans and the Caribbean, at the request of Pacific countries, to provide global benchmarks.

The report’s preliminary findings and recommendations were discussed in March with ministers and heads of departments of each participating country at a Leaders Seminar in Sydney, Australia. The seminar provided a unique opportunity to share experiences and identify effective reform strategies.

Vice-President Groff launched the report at the Samoa Companies Registry, which installed a modern online company registry in 2013 with assistance from PSDI. PSDI is working with ADB's 14 Pacific developing member countries to improve the enabling environment for business and support inclusive, private sector-led economic growth.