Finding Balance 2016 - Benchmarking the Performance of State-Owned Enterprises in Island Countries

This study assesses the financial performance of state-owned enterprise (SOE) portfolios in 10 developing island economies; reviews their legal, institutional, and governance frameworks; and draws lessons from their efforts at reform. This is the fifth in a series of SOE benchmarking studies launched by the Asian Development Bank (ADB) in 2009. The study reveals that while SOEs are often established to address perceived market failures or increase accountability in public service delivery, these goals are rarely achieved. Only one of the 10 SOE portfolios produced a return sufficient to cover capital costs from 2010 to 2014. Four produced average returns on assets (ROA) and/or return on equity (ROE) below zero over this period. In most countries, these low returns are achieved despite subsidized capital, monopoly market power, and ongoing government cash transfers. The poor financial performance of the SOEs is corroborated by low productivity levels. A detailed analysis of 25 infrastructure SOEs in the Pacific confirms that productivity is well below developed country benchmarks but is improving in those countries undertaking reforms.