27 April 2015

State-owned enterprise reform and public-private partnerships

SOEs continue to play an important role in many Pacific island countries. 
Many absorb large amounts of scarce capital on which they provide very low returns. While some provide essential public services, many others operate as purely commercial ventures and crowd out the private sector.

Reforming SOEs and implementing public-private partnerships (PPPs) creates opportunities for private investment, reduces the costs of doing business and improves basic services by introducing private sector discipline and competitive market pressures into the SOE sector.

Through a combination of legal, regulatory and monitoring reforms and the introduction of increased private sector participation, the performance of SOEs and infrastructure service delivery is improving in the Pacific.  PPPs expand the capacity of SOEs to deliver infrastructure and related services and also allow governments to contract directly with the private sector without the involvement of SOEs.

ADB, along with its PSDI cofinance partners Australia and New Zealand, have been working with Pacific island countries on SOE reform and PPPs for more than a decade. Key in driving this agenda has been publishing PSDI’s Finding Balance series: in-depth, analysis that tracks the challenges, achievements and best practices in SOE reform in PDMCs, providing a unique benchmark with which to measure progress and share lessons learnt. Finding Balance has proved a valuable advocacy tool in driving SOE reform.