Asian Development Bank pushing for SOE efficiency

Source: The National,Wednesday, February 13, 2013 

By MALUM NALU

THE Asian Development Bank (ADB) is pushing for efficiency in state-owned enterprises (SOEs) and not privatisation, according to the bank’s vice-president Stephen Groff.
Groff, who is in the country on a three-day visit, told The National in an interview yesterday that SOE reforms were important in many countries, and not just PNG.
“I think one problem when we talk about SOE reforms is people often equate SOE reforms with privatisation,” he said.
“We’re not advocating privatisation in all instances.
“We’re advocating corporatisation, we’re advocating increasing efficiency and increasing the efficiency and effectiveness of the institutions because the challenge is if state-owned enterprises are operating ineffectively, they drag on limited resources that the government has.
“If government has a chance in investing its limited revenues in high productivity areas and low productivity areas, if given the chance, all governments would invest in areas where the return for the activity is highest.
“Problem is in many SOEs, productivity is very, very low.
“Return on the investments is very, very low, which in turn drags on the economy in general because you take away scare resources away from education investments, health investments, and put them in some SOEs that are not functioning pretty good.
“So you’re not translating the investments into better activity and better returns.
“Since many SOEs are involved in provision of services, that is almost a double whammy, because not only is the government going to spend its money instead on investing in infrastructure, you invest these resources in an SOE that is not only inefficient but also providing poor services at the end of the day.”
Groff said the people, who ultimately should be the beneficiaries of revenue, were instead getting a poor deal.
“They (people) are not getting the kind of services they need in order to function as effective members of society and effective contributing members of the economy,” he said.
“This is why we think that SOE reform is incredibly important.
“Again, I stress that this is not just PNG.
“PNG is just one country through the Pacific and through Asia.
“I think the controversy last year was around our Finding Balance report, and again, Finding Balance was a very accurate title.”
Groff said the report focused on making individual SMEs more efficient and more effective.