Case Studies

The Pacific Private Sector Development Initiative (PSDI) is working with the Ministry of State Enterprises, Kumul Consolidated Holdings (KCH), and Papua New Guinea (PNG) Power Limited to strengthen state-owned enterprise (SOE) governance and performance, including through policy and legal reform, support for SOE planning and monitoring, and public–private partnership (PPP) transaction support.

The Government of PNG requested PSDI support for a comprehensive SOE reform program to restructure PNG’s SOE governance and management frameworks. The objective of the program is to place SOEs on a more sustainable financial footing by strengthening key governance arrangements and increasing private sector participation, reducing debt, interest, and operating costs.

Policy and legislative amendments to strengthen governance

Since beginning this work in fiscal year (FY) 2020 (ended 30 June 2020), PSDI has developed (i) the SOE Ownership Policy, which was endorsed by the National Executive Council in April 2020, and (ii) amendments to the KCH Authorisation Act, 2002 that are necessary to implement the ownership policy. The KCH Authorisation (Amendment) Act, 2021 was passed by Parliament and published in the National Gazette in FY2022. The policy and amended act returned the responsibility for SOE oversight to KCH from the National Executive Council, enabling SOEs to develop and implement restructuring strategies more efficiently. PSDI has also supported KCH to enhance its governance and operations by improving director selection processes and developing a new 3-year corporate plan and statement of corporate objectives for all SOEs. These new guidelines are also included in the KCH Authorisation (Amendment) Act.

Increasing private sector involvement in service delivery

PSDI is also supporting the strengthening of PNG’s SOEs by establishing a framework aimed at identifying opportunities for private sector investment, allowing PNG to expand and improve infrastructure service delivery. PSDI supported the development and implementation of the PPP Act, 2014, including the development of an implementation strategy, preparation of regulations and guidelines, and drafting of amendments to the existing PPP Act. The PPP framework was activated by the publication of the PPP Regulations 2023 and the PPP (Amendment) Act in the National Gazette in late 2023.

The completed framework requires new infrastructure investments to be assessed for their potential to be procured as PPPs. Project risk assessments and competitive tendering processes are also legal requirements for all PPPs, enhancing transparency and competition. A PPP center is being established with support from the Asian Development Bank’s Office of Markets Development and PPP. The PPP center will work with relevant public bodies to assess infrastructure investments or their suitability to be procured as PPPs. This aims to improve SOEs’ capacity to seek partnerships with the private sector, improve value-formoney outcomes, and reduce risk for private investors through predictable and transparent tendering.

Using the process outlined in the PSDI-supported PPP (Amendment) Act and PPP Regulations, PSDI is working with PNG Power Limited and KCH to develop and tender a 5-megawatt solar independent power purchase on the Gazelle power grid. PSDI’s support has included a feasibility study, development of expression of interest documents, support for tender structuring and evaluation, and support for securing suitable land for the project. The tender process resulted in multiple submissions, and PSDI is supporting negotiations with short-listed bidders as the project moves toward the signing of a power purchase agreement. PSDI expects the contract with the successful bidder to be signed in late 2024.