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 psdi@adb.org

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.