Solomon Islands’ State Owned Enterprises portfolio’s return on equity jumped from minus 11 percent in 2002-2009 to 10 percent in 2010-2014.
This is according to a new Asian Development Bank (ADB) report, the Advance copies of Finding Balance 2016, the latest edition of ADB’s landmark assessment of Pacific SOEs’ performance.
The report assesses the performance of SOEs in Fiji, Kiribati, Marshall Islands, Papua New Guinea, Samoa, Solomon Islands, Tonga, and Vanuatu,
It says SOE portfolios in the eight Pacific countries examined contributed only 1.8 to 12 percent to gross domestic product, despite their very large asset base, ongoing government cash transfers, and monopoly market positions.
It says Solomon Islands’ SOE portfolio’s return on equity jumped from minus 11 percent in 2002-2009 to 10-percent in 2010-2014.
Meanwhile, SOE Expert with ADB’s Pacific Private Sector Development Initiative (PSDI), Christopher Russell says, low SOE returns are not unique to the Pacific but are common throughout the developing and developed world.
He adds they reveal a fundamental flaw in the SOE model: it is not an effective long-term ownership structure as politicians will avoid commercial decisions that may have short-term political costs.
‘Finding Balance 2016: Benchmarking the Performance of State Owned Enterprises in Island Countries’ will be published next month.