KOROR, 05 JUNE 2023 (PSDI/ADB) — The absence of a clear commercial focus and monitoring framework for Palau’s state-owned enterprises (SOEs) has complicated efforts to improve their financial performance, a new Asian Development Bank (ADB) report has found.

Finding Balance 2023: Benchmarking Performance and Building Climate Resilience in Pacific State-Owned Enterprises compares the performance of SOEs in nine Pacific island countries—Fiji, Kiribati, the Marshall Islands, Palau, Papua New Guinea, Samoa, Solomon Islands, Tonga, and Vanuatu—and tracks the progress of SOE commercialisation in the region. 

The report’s findings were discussed by government, business, and civil society representatives at a Finding Balance 2023 launch event today in Koror.

“Palau’s government is prioritising the commercialization of its largest SOE, the Palau Power Utility Corporation, which is an important step in improving services and the performance of the portfolio as a whole,” ADB Pacific Liaison and Coordination Office Regional Director Shane Rosenthal said. “The government could consider extending these reforms to the remaining three SOEs to facilitate monitoring and establish clear lines of accountability.”

Palau is one of two countries in Finding Balance 2023 that does not yet have an SOE law to govern the relationship between the country’s legislature, minister of finance, SOE boards, and SOE management, resulting in a lack of clarity on roles and responsibilities.

The average return on equity for Palau’s four SOEs from 2015–2020 was –three percent per annum, while the average return on assets was –one percent over the same period. This was among the lowest portfolio returns of Finding Balance 2023’s nine study countries.

Finding Balance 2023, produced by the Pacific Private Sector Development Initiative (PSDI), has a special focus on the risks posed by climate change, and how Pacific governments and state-owned utilities can manage its effects and build resilience. 

The report finds that state-owned utilities that are more commercialized may be more inclined to respond to incentives to decarbonise and invest in protecting their assets. It also shows that SOEs in the Pacific have improved their returns, but are still failing to cover their cost of capital…. PACNEWS

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