Study recommends reform of PNG’s state enterprises
A recently concluded study of Papua New Guinea’s state owned enterprises (SOE), in which its performance was compared with SOEs from five other Pacific Islands nations – Fiji, Marshall Islands, Samoa, Solomon Islands, and Tonga – says placing the SOEs on a fully commercial and transparent footing would enable them to make a positive contribution to inclusive economic growth.<!--more-->
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The Manila, Philippines headquartered Asian Development Bank (ADB) conducted the study titled Finding Balance, Benchmarking the Performance of State-Owned Enterprises in Papua New Guinea at the request of the Independent Public Business Corporation. It is the first time that PNG has participated in a SOE benchmarking study.
The study reveals that while PNG’s SOEs have produced profits, they have done so at high cost to the government in terms of continuing fiscal transfers and other subsidies, and to the detriment of the rural population, who continue to have limited access to basic social services.
This is mainly because governments subsidising 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. Service delivery with inadequate compensation from the government adversely affects the financial performance of the SOEs. 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.
The study also suggests that significant economic benefits may be gained if SOEs are managed more transparently and held accountable for results. PNG has made “important progress” over the past 12 months in placing the SOEs on a more commercial footing, the study notes.
SOE reform is part of ADB’s Private Sector Development Initiative (PSDI), which began in 2006 with joint funding from the Government of Australia. The initiative supports efforts by developing member countries in the Pacific to encourage private sector-led, sustainable economic growth.