The sale and rehabilitation of Sasape Marina, formerly a state-owned enterprise, highlights some of the real benefits that can result from privatization.
Tulagi, Solomon Islands─Robert Sikua, chief machinist at Sasape Marina, oversees a team of eight that repairs and maintains boats. They fix engines, make propellers, straighten propeller blades, and balance propeller shafts. Sikua has worked at the marina on and off since 1986.
Sikua says that before new investors took over Sasape, the old marina was run down, workers were poorly paid, and there was no job security.
"Conditions are much better here since the new investor came in," says Sikua.
In fact, Sasape Marina faced certain closure. Lack of investment and years of mismanagement meant that by 2008 the company was insolvent, and both of its slipways were inoperable.
The Government of the Solomon Islands turned to the private sector for assistance, recognizing that it did not have the expertise or resources to rehabilitate and operate the marina, which mostly services vessels used for fishing - a crucial economic activity for Solomon Islands. It was decided that an asset sale would be the best way for the government to expedite the transaction, maximize sales proceeds, and develop the business.
Regional repair hub
"Sasape Marina was an attractive prospect for us, as there were no operating large slipways in the region and there was high demand for one."
- Glenn Bennett, CEO, Silentworld
The government asked ADB for technical assistance, which was provided under the Pacific Private Sector Development Initiative (PSDI), a project cofinanced by AusAID. ADB helped the government hold an open, competitive tender, ultimately won in 2010 by a joint venture between Silentworld Shipping and Logistics (an Honiara-based company), and the National Provident Fund.
The new owners have invested an estimated $SI21 million ($3 million) to date, and as of July 2012 employ over 100 workers in a rehabilitated site that is finally fully operational. Eventually, the site will employ 150 workers and be capable of repairs and servicing for vessels of up to 750 tons for the Solomon Islands shipping industry, as well as neighboring Pacific island countries such as Vanuatu.
"Sasape Marina was an attractive prospect for us, as there were no operating large slipways in the region and there was high demand for one," says Glenn Bennett, chief executive officer of Silentworld. "The closest one was in Papua New Guinea, so effectively there was nowhere to maintain large vessels."
With the proceeds of the sale, the government was able to make severance payments for all staff and repay Sasape Marina's debts. The company recruited workers to help with the modernization of the slipway facilities. Since most of the workers come from Tulagi, Sasape Marina is the largest private sector employer on the small island of just 1,200 people.
Benefits of privatization
Isaiah Vitore, manager of the marina's stores department, is one of the Marina's new recruits.
"The work is enjoyable and the good salary has made it easier for me to support my family," says Vitore.
Sasape Marina is a good example of the real benefits of state-owned enterprise (SOE) reform and privatization.
"As SOE reform initiatives come to fruition, the foundation for private sector-led growth in Solomon Islands continues to strengthen," says the Prime Minister of the Solomon Islands, Gordon Darcy Lilo. "The government has made some important progress towards placing SOEs on a more commercial footing, and we will continue to work tirelessly to pursue this goal."
"Conditions are much better here since the new investor came in."
- Robert Sikua, chief machinist, Sasape Marina
"Our focus on SOE reform is part of the government's firm commitment toward improving the overall business environment and increasing the ease of doing business in Solomon Islands," the Prime Minister adds.
It is a commitment that appears to be paying off. SOE reform and other business reform efforts over the past year have resulted in an improvement in Solomon Islands global ranking in the "Doing Business Indicators Report": the country ranked 74th in 2012, compared with 81st in 2011, and 106th in 2010.
Senior SOE expert to PSDI, Laure Darcy, says, "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 and delivering public services on a commercial basis. When this focus is lost and SOEs are not held accountable for results, performance deteriorates, as it did at Sasape Marina."
The rehabilitation of the 500-ton slipway at Sasape is now complete with plans to build a second, 750-ton slipway that will be able to handle larger vessels.
"The benefits of the new rehabilitated Marina are many," says Silentworld's Glenn Bennett. "It has created employment in Tulagi and economic activity on the island is picking up."
Sasape Marina store manager Isaiah Vitore agrees.
"There is confidence about jobs and future prospects here," he says.