19 September 2016

Latest edition of state-owned enterprise benchmarking study released

Finding Balance 2016 cover
The fifth edition of PSDI’s comparative study of state-owned enterprise (SOE) performance in the Pacific has been published.

Finding Balance 2016: Benchmarking the Performance of State-owned Enterprises in Island Countries assess the performance of SOEs in Fiji, Kiribati, Marshall Islands, Papua New Guinea, Samoa, Solomon Islands, Tonga, and Vanuatu, as well as Jamaica and Mauritius. This is the first edition to include Kiribati and Vanuatu. Results from New Zealand and Singapore were also added to enrich the global benchmark.

As per earlier editions, Finding Balance 2016 identifies strategies to guide reforms of SOEs, highlighting the importance of balancing public and private sector roles.

The report emphasizes political commitment to reform as a key driver for commercial results, as demonstrated by the experience of each of the countries benchmarked. It finds many countries have made significant progress through commercially-oriented reforms. 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.

The report nonetheless highlights that, while improvements had been achieved, sustaining them has proven impossible in most countries, both developed and developing. It 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 productivity levels of the SOEs analyzed tend to be well below developed country benchmarks.

Drawing on the experiences of New Zealand and Singapore, the report concludes that increased private sector ownership and operation of SOEs is the only way to lock in reform gains.

The 10 participating countries were selected for their comparability and SOE reform experience. Their participation demonstrates their governments’ willingness to identify and address the core issues within their SOE sectors. This transparency is an essential precursor to successful reform.