Finding Balance | 1 August 2014 | Cook Islands, Fiji, Kiribati, Marshall Islands, Federated States of Micronesia, Nauru, Palau, Papua New Guinea, Samoa, Solomon Islands, Timor Leste, Tonga, Tuvalu, Vanuatu

Finding Balance 2014: Benchmarking the Performance of State-Owned Enterprises in Island Countries

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Reforming state-owned enterprises in the Pacific is vital to creating private investment opportunities, reducing the costs of doing business, and improving service delivery in the local economies.

State-owned enterprises (SOEs) continue to constrain Pacific economies. They absorb scarce capital, suffer low productivity, and often provide high cost and low quality services. SOE reform is vital to create private investment opportunities, reduce the costs of doing business, and improve service delivery.

Policy makers around the world are aware of SOEs’ chronic underperformance, fiscal costs, and negative impact on growth and poverty alleviation. Consequently, efforts to reform SOEs have been ongoing for decades. This experience demonstrates that privatization, supported by robust regulatory arrangements, is the most effective mechanism for long-term improvements in state assets’ productivity. However, full privatization is not always politically feasible nor the most suitable reform mechanism; partial privatization [public listings, joint ventures, and public–private partnerships] can also help improve SOE performance.