Public sector management: lessons from state-owned enterprise reforms in Kiribati and Tuvalu

The efficiency and effectiveness of a country’s public sector is vital to its development, where poorly performing state-owned enterprise (SOEs) absorb large amounts of scarce capital, on which they provide very low returns. This paper shows that Kiribati and Tuvalu (two Pacific states) both have SOEs that were established to provide essential infrastructure services, but their SOE losses had mounted over several years.

The paper, nevertheless, reveals that despite initial conditions which made SOE reform exceedingly difficult, considerable progress has been registered in both states. In this framework, it notes that good starts have been made at SOE reforms, and there are signs that financial performance is improving. Yet, it notices that external ongoing support will be required in the future to help the governments keep rationalising their roles and put retained SOEs on a sound commercial footing.

Lessons from the SOE reform experience of Kiribati and Tuvalu include:

• a strong and active SOE reform advocate is a key factor in achieving success
• giving SOEs a clear commercial mandate is a fundamental basis for improving their performance
• reform needs to focus both on improving the immediate financial performance of key SOEs and on strengthening the rules and regulations under which all SOEs operate
• formal plans for business improvement need to be realistic and have their implementation closely monitored by both the SOE board and external monitors
• subsequently, an SOE monitoring and advisory unit is essential if government is to provide arm’s length management and oversight of SOEs

Furthermore, the author indicates that when donors are involved, an agreement on an SOE policy framework needs to be secured, including criteria for identifying which enterprises should be government-owned and how obligations will be handled.