24 November 2016

Finding Balance 2016 and regional ports pricing study presented in Solomon Islands

Laure Darcy, PSDI's SOE Reform Team Leader, presents findings and recommendation relating to Solomon Islands from Finding Balance 2016
Solomon Islands-related findings and recommendations from Finding Balance 2016, PSDI’s regional state-owned enterprises benchmarking study, were presented to government and private sector representatives in Honiara today.

Laure Darcy, PSDI’s SOE Reform Team Leader and co-author of the report, explained how a reform program that incorporated financial restructuring, tariff increases and improved collections, privatization and liquidation, and compensation for providing non-commercial community services had made Solomon Islands’ SOEs the best performing in the region. The reform program led to a 21% turnaround in Solomon Islands’ SOE’s return on equity, turning an average loss of 11% between 2002–2009 into an average return of 10% during 2010–2014.

“The reduced costs, higher returns, improved service delivery, and increased private investment opportunities found in Solomon Islands show what a commitment to SOE reform can achieve in a relatively short time,” said Laure. “However, sustaining these gains and improving the performance of all Solomon Islands SOEs will require continued implementation of, and compliance with, the SOE Act.”

Findings and recommendations from a regional study of port pricing were also presented at the event. PSDI Port Expert Adrian Sammons presented analysis from his study, which compared port charges and basic productivity data for ship and cargo handling at a range of Pacific islands ports and found Solomon Islands ports were the most expensive in the region. Adrian also presented recommendations on how to improve Solomon Islands’ ports’ pricing and efficiency.

The ADB has supported a number of SOE reform initiatives in Solomon Islands, including the privatizations of Sasape Marina, Home Finance Limited, and Solomon Island Printers, and the implementation of a community service obligation framework.

Finding Balance 2016 compares the financial performance of SOEs in Fiji, Kiribati, Marshall Islands, Papua New Guinea, Samoa, Solomon Islands, Tonga, and Vanuatu, as well as Jamaica, Mauritius, Singapore, and New Zealand. 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.

The report nonetheless finds many countries have made significant progress through commercially-oriented reforms. Solomon Islands’ leads this group—as it did in the 2014 edition of the report—followed by Tonga, where portfolio returns have increased to 6% from a low of 0% in 2009. Overall, seven of the 10 developing countries examined had seen improved SOE performance since 2010.

Finding Balance 2016 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.