fbpx Sustained Reform Agenda can Improve State-Owned Enterprises – ADB Report | Asian Development Bank

Sustained Reform Agenda can Improve State-Owned Enterprises – ADB Report

News from Country Offices | 22 September 2016

PORT MORESBY, PAPUA NEW GUINEA – Continued efforts are needed to further reforms of state-owned enterprises (SOEs) across the Pacific, according to an Asian Development Bank (ADB) report launched today in Port Moresby.

Finding Balance 2016: Benchmarking the Performance of State-owned Enterprises compares the financial performance of SOEs in Fiji, Kiribati, Marshall Islands, Papua New Guinea (PNG), Samoa, Solomon Islands, Tonga, and Vanuatu, as well as Jamaica and Mauritius.

The report finds SOE portfolios in the eight Pacific countries examined contributed only 1.8% to 12% to gross domestic product, despite very large asset bases, ongoing government cash transfers, and monopoly market positions. It also finds that the productivity levels of the SOEs analyzed tend to be well below developed country benchmarks.

The report nonetheless finds many countries have made significant progress through commercially-oriented reforms. The Solomon Islands’ SOE portfolio’s return on equity jumped from -11% in 2002-2009 to 10% in 2010-2014. In Tonga, portfolio returns have increased to 6% from a low of 0% in 2009. Overall, seven of the 10 countries examined had seen improved SOE profitability since 2010.

“Although improvements in SOE performance have been achieved in many countries, sustaining them has proven difficult,” said Laure Darcy, SOE Expert with ADB’s Pacific Private Sector Development Initiative (PSDI), which produced the report. “Committing to a reform agenda that increases private sector participation in SOEs and service delivery is the most effective way to lock in gains.”

The report finds that between 2010 and 2014, PNG’s SOE portfolio produced an average return on assets of 1.3% and an average return on equity of 2.4%, down from 4% and 7%, respectively, between 2002 and 2009. PNG Ports, PNG Power, and Air Niugini delivered a net profit of K510 million during this time, while Telikom PNG accumulated net losses of K129 million.  

Finding Balance 2016 was launched at an event hosted by the Port Moresby Chamber of Commerce and Industry. It is the fifth report in the Finding Balance series, which identifies strategies to guide reforms of SOEs, highlighting the importance of balancing public and private sector roles.

PSDI is a technical assistance facility cofinanced by the governments of Australia and New Zealand, and ADB. It supports ADB's 14 Pacific developing member countries to improve the enabling environment for business and to support inclusive, private sector-led economic growth. The support of the Australian and New Zealand governments and ADB has enabled PSDI to operate in the region for almost 10 years and assist with more than 280 reforms.

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, ADB in December 2016 will mark 50 years of development partnership in the region. It is owned by 67 members – 48 from the region. In 2015, ADB assistance totaled $27.2 billion, including cofinancing of $10.7 billion.