Finding Balance 2023: Benchmarking Performance and Building Climate Resilience in Pacific State-Owned Enterprises

By Asian Development Bank

This publication reviews the financial performance of state-owned enterprises (SOEs) in nine Pacific island economies and assesses policy mechanisms that could improve the resiliency and sustainability of state-owned power utilities in the context of climate risk. It shows how commercializing and partnering with the private sector is helping SOEs to respond to climate change and facilitate inclusive economic growth. It is the seventh in a series of comparative studies of SOEs in the Pacific.

• Language: English
• Publisher: Asian Development Bank
• Release date: Mar 1, 2023
• ISBN: 9789292700591

Book preview

FINDING BALANCE 2023

BENCHMARKING PERFORMANCE AND BUILDING CLIMATE RESILIENCE IN PACIFIC STATE-OWNED ENTERPRISES

MARCH 2023

Creative Commons Attribution 3.0 IGO license (CC BY 3.0 IGO)

© 2023 Asian Development Bank

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Some rights reserved. Published in March 2023.

ISBN 978-92-9270-058-4 (print), 978-92-9270-059-1 (electronic), 978-92-9270-060-7 (ebook)

Publication Stock No. TCS230063-2

DOI: http://dx.doi.org/10.22617/TCS230063-2

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Notes:

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Contents

Tables, Figures, and Boxes

Foreword

Pacific island countries recognize the importance of trade, investment, and private sector development to achieve inclusive economic growth. Central to the region’s development efforts is the commercialization of state-owned enterprises (SOEs), which remain a dominant feature of Pacific economies and provide core infrastructure services, such as airports and ports, power, water supply, and sanitation.

Reforms to date have improved SOE performance in the Pacific by strengthening the legal, regulatory, and governance frameworks under which they operate. Reforms have also encouraged SOE partnerships with the Pacific private sector, stoking investment and innovation. However, as governments in the Pacific work to improve the financial sustainability of their SOEs, they also must incorporate strategies that address emerging risks, such as climate change. Climate scientists expect that the Pacific will confront more intense and frequent natural hazards, such as cyclones, floods, and coastal inundation, as global temperatures increase. SOEs will thus be obligated to mitigate the financial risks associated with climate change, and to protect their assets—many of which are critical for the functioning of society—from climate-induced physical damage.

This is the seventh benchmarking study in the Finding Balance series, first published in 2009, which aims to track the progress and impact of SOE commercialization in participating Pacific countries. Commercialization is measured by the financial performance of the SOEs and their supporting legal, regulatory, and governance environment; the study does not benchmark technical performance. In addition to its survey of SOE financial performance, this edition has a special focus on the risks posed by climate change, and how governments and their state-owned utilities are acting to mitigate its effects and build resilience.

Finding Balance 2023 posits that Pacific state-owned utilities that are more commercialized may be more inclined to respond to incentives to decarbonize and invest in protecting their assets. However, to optimize these choices, SOEs must operate in a policy environment conducive to commercialization. The study also shows that government ownership and management of SOEs are not essential for public service delivery. As the experience of Fiji, the Marshall Islands, Papua New Guinea, Samoa, and Vanuatu demonstrate, partnerships with the private sector can expand the capacity of governments to deliver public services efficiently. A key theme of this study is finding the balance between the roles of the public and private sectors.

The surveyed countries—Fiji, Kiribati, the Marshall Islands, Palau, Papua New Guinea, Samoa, Solomon Islands, Tonga, and Vanuatu—were chosen for their willingness to identify and address the core issues within their SOE sectors, including in relation to climate change impacts. I thank the governments of all participating countries for their input and support.

I also wish to thank the authors of the report, Laure Darcy, Arjuna Dibley, Brent Fisse, and Christopher Russell, analysts David Ling, Alma Pekmezovic, and Minh Vu, and editor Angelo Risso for their efforts, as well as the governments of Australia and New Zealand, which provide cofinancing under the Pacific Private Sector Development Initiative (PSDI).

I am confident Finding Balance 2023 will provide thought-provoking insights and stimulate useful discussions on the role that SOEs can play in building resilience to climate change in the Pacific.

Leah Gutierrez

Director General, Pacific Department

Asian Development Bank

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