State Owned Enterprise Reform infographic

REFORMING STATE-OWNED ENTERPRISES AVIATION

State-owned enterprises (SOEs) are businesses owned in part or in full by Pacific governments. They generally operate in the areas of infrastructure, utilities, and banking. Because they are often inefficient, they place a significant strain on these small economies. Recently, these governments, together with the Asian Development Bank, have been working toward reform of SOEs to improve their performance and reduce the burden on Pacific Island countries.

BANKING

POWER

PRINTING

SHIPPING

TELECOMS

WATER

THEY ARE CREATED TO PROVIDE A SERVICE TO THE PUBLIC, BUT THEY MOSTLY HAVE A NEGATIVE IMPACT ON GROWTH AND SLOW THE ECONOMY DOWN

THE THREE PRIMARY ISSUES WITH SOEs ARE $0.27

FOR EVERY

LOW RETURNS ON INVESTMENT: ABSORBING LARGE AMOUNTS OF CAPITAL, BUT GENERATING LITTLE REVENUE

$1

Tonga

Solomon Islands

$0.21

INVESTED BY GOVERNMENTS ON SOEs, GROSS DOMESTIC PRODUCT (GDP) IS ONLY IMPACTED BY: $0.13

$0.19

Fiji

Samoa

SOEs

Marshall Islands $0.04

SOEs CROWD OUT THE PRIVATE SECTOR WITH THE BACKING OF GOVERNMENT FUNDING, LIMITING PRIVATE SECTOR OPPORTUNITIES

SOEs ARE UP TO 8X LESS PRODUCTIVE THAN THE PRIVATE SECTOR

PRIVATE SECTOR

PRIVATE SECTOR

TAX FUNDS

SOEs

GOVERNMENT BACKING TAX FUNDS

% RELATIVE TO HEALTH BUDGET SPENT ON SOEs

GOVERNMENTS SPEND MONEY ON SOEs THAT COULD BE BETTER ALLOCATED TO SOCIAL SECTORS

33%

Marshall Islands

60%

42%

Samoa

Solomon Islands

48% Tonga

WHAT IS PSDI DOING TO HELP IMPROVE SOE PERFORMANCE? 1. REFORM OF POLICY AND LEGAL FRAMEWORK NEW AND SAMOA SOLOMON ISLANDS PAPUA NEW GUINEA AMENDED TONGA MARSHALL ISLANDS LAWS IN: THE LAWS NOW PROMOTE EFFICIENT, COMMERCIALLY DRIVEN SOES, ENSURING BETTER CORPORATE PLANNING, FULFILLMENT OF COMMUNITY SERVICE OBLIGATIONS, AND GREATER INDEPENDENCE 2. STRENGTHENING GOVERNANCE OF SOEs REDUCING POLITICAL ENHANCING DOMINATION OF DIRECTORS’ BOARDS SKILLS

LEADING TO BETTER ACCOUNTABILITY

PROMOTING GENDER DIVERSITY OF BOARDS

% OF SOE DIRECTORS THAT ARE MINISTERS OR CIVIL SERVANTS IN SAMOA

% OF ACCOUNTS SUBMITTED ON TIME

% OF DIRECTORS ON BOARDS THAT ARE WOMEN

49% 6% 2010

2012

250 DIRECTORS TRAINED IN CORPORATE GOVERNANCE

65%

87%

2007

15%

2011

PSDI ADVOCATES REDUCED REPRESENTATION OF MINISTERS AND CIVIL SERVANTS ON SOE BOARDS, TRAINS UP POTENTIAL FUTURE DIRECTORS, INCLUDING WOMEN, AND ENCOURAGES TIMELY REPORTING TO IMPROVE CORPORATE GOVERNANCE 3. HELPING SOEs OPERATE AS COMMERCIAL BUSINESSES

SASAPE MARINA CREATION OF AN INTERNATIONAL SHIP REPAIR FACILITY CREATION OF NEW JOBS REVITALIZATION OF THE TOWN

TONGA MACHINERY

SOLOMON ISLAND PRINTERS

EMPLOYEE OWNED

FREEING UP GOVERNMENT RESOURCES

INCENTIVES CREATED TO OPERATE COMMERCIALLY

OPENING MARKET FOR GOVERNMENT PRINTING

MORE COMPETITION IN THE SECTOR

IMPROVING SERVICE QUALITY

IN CONCLUSION OVERALL, SOE REFORMS ARE REDUCING THE DRAIN ON PACIFIC ECONOMIES THROUGH BUT SIGNIFICANT EFFORT TO REFORM SOEs IN THE PACIFIC IS STILL NEEDED

Pacific Liason and Coordination Office Level 18, 1 Margaret Street, Sydney NSW 2000, Australia Tel +61 2 8270 9444 Fax +61 2 8270 9445 [email protected]

1. REDUCED GOVERNMENT FINANCIAL SUPPORT FOR SOEs 2. INCREASED PRIVATE SECTOR INVESTMENT 3. HELPING SOEs OPERATE AS COMMERCIAL BUSINESSES 19 135

ONLY 19 OUT OF 135 SOEs HAVE BENEFITED FROM ADB SUPPORT FOR PRIVATIZATION AND COMMERCIALIZATION

The Pacific Private Sector Development Initiative (PSDI) is jointly funded by the Asian Development Bank and the Australian Agency for International Development.