SoEs drive cost of doing business high

Business, Normal

The National, Thursday July 4th, 2013

 SIMPLE reforms to state-owned enterprises (SOEs) in Papua New Guinea (PNG) could lower the cost of doing business and create new opportunities for the country’s private sector, the Asian Development Bank (ADB) told the small and medium enterprise summit on Tuesday.

Speaking at the summit which is  a national forum to review government plans to stimulate and reform the SME sector, ADB Adviser Chris Russell presented key findings from the ADB’s Finding Balance report, which show that  the high cost of doing business is constraining economic growth in the country. 

“High costs are holding back all businesses, both large and small,”   Russell told the summit. 

“And one of the drivers of this is the relative inefficiency of PNG’s state-owned enterprises.”

SOEs dominate key sectors such as power, water, ports and aviation, providing services which almost all private businesses use.

“When these services are provided at high cost, business suffers especially the export-oriented sector whose competitors operate in countries with lower input costs.”

Lower costs resulting from SOE reform would benefit all businesses, and if markets currently dominated by SOEs were opened to competition, it would create new opportunities for PNG’s private sector across the board.

One immediate opportunity for SMEs could be found in the community service obligations (CSO) currently provided by SOEs. 

These services, which are subsidised by government to ensure service delivery reaches poor or remote communities, could in many cases be provided more cost-effectively by SMEs. 

The Government is currently finalising a CSO framework to facilitate the contracting of these services to the private sector.

The Manila-based ADB is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth and regional integration. 

Created in 1966, the bank is owned by 67 members – 48 from the region. Last year, ADB assistance totalled US$21.6 billion (K47.5 billion) , including co-financing of US$8.3 billion (K18 billion.).