What exactly is PSDI?
PSDI is a regional technical assistance facility co-financed by the Asian Development Bank and the Governments of Australia and New Zealand. In operation since 2007, PSDI entered its third funding phase in 2013, when New Zealand became a co-finance partner.
What problems and issues does PSDI address?
PSDI focuses on analysing and removing the key constraints to doing business in the Pacific. Doing business in the Pacific is hard due to outdated company laws, underdeveloped financial markets, inefficient state-owned enterprises, inadequate competition, and barriers that prevent women from participating fully in the economy.
How does PSDI help?
PSDI helps Pacific countries to reform the business environment, to remove the constraints to doing business, to foster entrepreneurship and new business models, to remove barriers to women's participation in business, and to help the private sector to formalise and grow their businesses. When firms are in the formal economy, they create more jobs, pay taxes for public services, lifting people and communities out of poverty.
Since 2007, PSDI has been helping Pacific countries to…
- Develop better financial markets and services
- Modernize business laws
- Reform state-owned enterprises (SOEs)
- Encourage public-private partnerships
- Promote competition policy and protect consumers
- Advance the economic empowerment of women
Where does PSDI work?
PSDI works with ADB's 14 Pacific developing member countries.
What are PSDI's key goals?
The central goal of PSDI is to reduce the excessive costs of doing business in the Pacific, and foster the dynamism needed to assist economies in the region fulfill their potential. PSDI concentrates on strengthening the institutions that are the foundation of business and entrepreneurship, and which promote productivity and growth. Increased productivity improves the competitiveness of firms, thereby allowing them to pay higher wages and increasing their rates of return on capital, which in turn attracts more of the investment needed to increase productivity.
PSDI also promotes the economic empowerment of women to advance social justice and remove the losses and unleash the productivity that stems from the constrained participation of half the population in Pacific economies. Women in the region constitute an enormous economic resource, which if allowed to fulfill their potential can greatly enhance prosperity.
Why are institutions important to private sector development in the Pacific?
No country in the world has achieved sustainable growth and poverty reduction without the private sector playing a central role. A dynamic private sector is necessary to promote inclusive growth that results in formal employment, investment, and entrepreneurship. The quality of countries’ institutions is the most important determinant of prosperity and growth. Institutions consist of commercial laws governing business activities, contracting, property rights and governance.
These are the “rules of the game” for economic activity. They influence the incentives and transactions costs that determine how business is organized, the return to investment, entrepreneurship and competitiveness.
Many Pacific island economies now view private sector development as the principal channel through which to promote inclusive growth. At the regional level, the Pacific Islands Forum Economic Ministers have named promoting private sector development, improving access to finance, state-owned enterprise reform, the economic empowerment of women, and, increasingly, competition policy as priorities.
What is PSDI's approach?
PSDI experts conduct in-depth analysis of the Pacific business environment. We identify business constraints and opportunities and publish independent multi-country and country-level private sector assessments. This evidence-based approach feeds into a policy dialogue with both Pacific governments and the private sector, resulting in policies targeted at overcoming challenges and improving the business climate to support inclusive economic growth.
A key feature of PSDI is rapid response to reform opportunities when they arise. Committed to country-led development, PSDI's flexible program design allows us to quickly mobilize expertise in response to requests for assistance -- and to demobilize should political commitment wane. This allocates resources to where both the need and political will for reform is greatest and can be most effective. PSDI also maintains strong partnerships with key bilateral and multilateral partners to ensure that PSD-oriented reform interventions are coordinated and harmonized.
Since its inception, PSDI's core team of highly qualified, deeply experienced experts has built the trust and confidence of Pacific governments, a pre-condition to a successful partnership undertaking reform.
What successes has PSDI had?
In seven years of operation, PSDI has a strong track record of achievement. PSDI owes its success to the flexibility of its operating model, its continuity, strong technical expertise, ability to work at all levels of government, the emphasis placed on research and analysis, and the coherence of its focus on institutions. It is able to marshal support and resources rapidly when needed, or to reduce involvement when reform enthusiasm wanes. These include:
- Improved access to finance in FSM, Palau, RMI, Solomon Islands, Tonga and Vanuatu through reform of outdated personal property securities laws (PPSA). As a result of the new secured transactions frameworks, financial institutions in the countries where they have occurred have made over 10,000 new formal sector loans.
- Assistance to microfinance institutions in PNG, Timor-Leste and Vanuatu has resulted in a significant growth in savings accounts, particularly in remote areas, with women being the majority of beneficiaries – over 50,000 new savings accounts have been opened since 2010. In addition, PSDI is assisting financial institutions improve rural outreach through the adoption of new mobile and "branchless" banking systems using phone technology.
- In Business law reforms, PSDI has assisted Samoa and Solomon Islands to establish online business registries, leveraging the digital revolution to make it easier to start formal businesses. PSDI facilitated a new innovative Company Act and business registry, which provides for the formation of Community Companies that empower local communities and women’s groups to incorporate.
- When the Solomon Islands installed its “Company Haus” online registry in 2010, it slashed the time it takes to license a business from 45 days to 1.5 days, doubling the rate of business formation. In Samoa, the rate of business registrations doubled after launching its online companies registry in 2013.
- PSDI has a large program of ongoing assistance to help Pacific governments improve their outdated commercial laws. This work also contributes to bringing more businesses into the formal sector, with corresponding improvements in productivity, and wages.
- PSDI has helped a number of countries improve the governance and efficiency of State-owned Enteprises (SOEs). The Finding Balance series of publications highlight the very substantial drag on growth SOEs enact throughout the region. PSDI is helping to enhance the efficiency and accountability of SOEs in the region. PSDI has assisted with a number of privatizations that have resulted in improved efficiency and the creation of new jobs. PSDI’s work has led to the reduction of political influence on SOEs through the removal of politicians and civil servants from SOE boards.
Find out more:
Asian Development Bank.
Level 20, 45 Clarence Street, Sydney, NSW 2000, Australia.
Tel +612 8270 9444 • Fax +612 8270 9445
Visit us online:
- twitter: @ADB_Sydney_PSDI