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PORT VILA, VANUATU—Vanuatu’s policymakers and private sector representatives will learn this week how a broad-based state-owned enterprise (SOE) reform program is crucial to improving the poor performance and service delivery of the country’s SOEs.

It is one of the key findings of a new Asian Development Bank (ADB) report, Finding Balance 2014: Benchmarking the Performance of State-Owned Enterprises in Island Countries, to be presented in Port Vila this week as ADB continues to work with the Government of Vanuatu to reform the country’s SOEs, known in Vanuatu as “Commercial Government Business Enterprises” or CGBEs.

“Reforming the SOE sector is vital as it improves basic service delivery, reduces the costs of doing business, and creates opportunities for private investment,” said Andrea Iffland, Regional Director of ADB’s Pacific Liaison and Coordination Office in Sydney. “The study provides valuable guidance for the Government of Vanuatu in addressing the challenges in the SOE sector with the support from ADB.”

Finding Balance 2014 identifies key strategies to guide policy on SOEs, highlighting the importance of finding the right balance between public and private sector roles. This year’s study is the fourth in the Finding Balance series produced by the Pacific Private Sector Development Initiative (PSDI), a regional technical assistance facility cofinanced by the Government of Australia, the New Zealand Government, and ADB.

The report compares SOE performance across nine countries, including six from the Pacific—Fiji, the Marshall Islands, Papua New Guinea, Samoa, Solomon Islands, and Tonga. The analysis shows that while some countries have been able to make great gains, others struggle to enact reform.

Success stories include the Solomon Islands where SOEs showed an average 10% return on equity in 2010–2012, compared to a return of -11% from 2002-2009. The remarkable turnaround is attributed to increased privatization, public-private partnerships, financial restructuring and efforts to place SOEs on a sound commercial footing.

In Vanuatu, SOEs continue to represent a significant drain on the economy. Between 2008 and 2012, government equity in eight of 11 CGBEs fell from Vt2,840 million to just Vt111 million—a decline of 96%. ADB is supporting the government to reform these eight CGBEs under a technical assistance (TA) project financed by the Japan Fund for Poverty Reduction. The TA commenced in April and key deliverables include reform and restructuring plans for the CGBEs; CGBE director training; CGBE monitoring capacity development, and a CGBE Bill.

PSDI is working with ADB's 14 Pacific developing member countries to improve the enabling environment for business and support inclusive, private sector-led economic growth.