ADB urges SOE reform

By MALUM NALU
REFORMING state-owned enterprises (SOEs) in Papua New Guinea – by placing them on a fully commercial and transparent footing, – will enable SOEs to make a positive contribution to inclusive economic growth, a study released yesterday by the Asian Development Bank (ADB) said.
The new ADB study, Finding Balance, Benchmarking the Performance of State-Owned Enterprises in Papua New Guinea assesses the impact of the SOEs on the PNG economy as well as those of five other Pacific countries Fiji, Marshall Islands, Samoa, Solomon Islands, and Tonga).
“ADB conducted the benchmarking study at the request of the Independent Public Business Corporation and it is the first time that PNG has participated in a SOE benchmarking study,” according to an ADB statement.
“The analysis identifies the key SOE performance drivers and reform strategies that may influence future policy action.
 “SOEs are identified as public enterprises that are majority-owned by the government.
 “This study confirmed that the best-performing SOEs are those that operate with private sector discipline and under competitive market pressures.
“Governments typically subsidise SOEs to deliver community service obligations such as water, electricity, telecommunications and transport services, because the fees collected from users are insufficient to cover the cost of delivery.
“When these services are delivered by SOEs without adequate compensation from the government, the financial performance of the SOEs suffers.
“This approach forces SOEs to focus on their core mandate of operating as successful businesses, meet their costs of capital and undertake community service obligations on a commercial basis.
Andrea Iffland, regional director of ADB’s Pacific liaison and coordination office in Australia, said: “The active participation of Papua New Guinea in the study must be commended as a demonstration of their governments’ willingness to identify and address core issues within their SOE portfolio, as transparency is an essential precursor to successful reform.