Analysis of Data

Christopher Russell

Pacific Update ConferenceSuva,

18-19 July 2016

Participating & Survey CountriesCountry Population GDP GDPperCapita GDPperCapita

Growth

2014Total 2014($million) ($) (Average2010–2014)

Fiji 886,450 4,069 4,590 5%

Jamaica 2,721,252 14,101 5,182 7%

Kiribati 110,470 167 1,509 2%

MarshallIslands 52,898 193 3,649 4%

Mauritius 1,260,934 13,082 10,375 6%

PapuaNewGuinea 7,463,577 18,874 2,529 13%

Samoa 191,845 823 4,288 3%

SolomonIslands 572,171 1,169 2,043 10%

Tonga 105,586 424 4,020 3%

Vanuatu 258,883 966 3,732 8%

New Zealand 4,509,700 191,585 42,483 4%

Singapore 5,469,700 307,937 56,299 7%

Benchmarking portfolios

Infr

astr

uctu

re S

OE

s

0%

20%

40%

60%

80%

100%

Fiji PNG RMI Samoa Solomons Tonga Jamaica Kiribati Vanuatu Mauritius NZ SG

% o

f To

tal A

ss

ets

20

14

Utilities Ports/AirportsCommunications Non Mutual Financial InstitutionOther Commercial

Average Return on Equity / Assets2010-2014

(15%)

(10%)

(5%)

-

5%

10%

15%

Average Return on Equity of all SOEs Average Return on Assets of all SOEs

SOE contribution to GDP vs Total Fixed Assets, 2014

-

10%

20%

30%

40%

50%

60%

70%

80%

-

5%

10%

15%

20%

25%

SOE Contribution to GDP (LHS) SOE % of Total Fixed Capital in Economy (LHS)Ratio Contribution:Fixed Asset (RHS)

Fiscal StrainGovernment transfers > SOE Net Profits in 5 of 10 countries

(1,500)

(1,250)

(1,000)

(750)

(500)

(250)

-

250

500

750

1,000

Fiji Tonga Solomons Kiribati Vanuatu Samoa RMI PNG Mauritius Jamaica SG

US

$ m

illi

on

Cumulative Net Profits After Tax 2010 - 14 Government Transfers to SOEs 2010-14

20,000

(12,000

)

Cumulative Government transfers to SOEs as a % of Total Health Expenditure 2010 - 2014

(40%)

(30%)

(20%)

(10%)

-

10%

20%

30%

40%

(55%)

Portfolio Return Assets 2002-2014

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Large Island Economies

Fiji PNG Mauritius Jamaica NZ SG

Portfolio Return Assets 2002-2014

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Small Island Economies

RMI Samoa Solomons Tonga Kiribati Vanuatu

SOE model is not sustainable

• Fundamental flaw

• Political and commercial risks

• Commercial risk can be managed in the short-term, but increasingly difficult in medium-term

• Political risk cannot be fully mitigated

Cracks in the SOE structure

Game playing

Undermine commercial mandate

• Politicians struggle to make commercial decisions with political cost

New Zealand SOE performanceReturn on Equity

RO

E

-20.00%

-15.00%

-10.00%

-5.00%

0.00%

5.00%

10.00%

15.00%

20.00%

2000 2001 2002 2003 2004 2005 2006 2007 2009 2010 2011 2012 2013 2014

Singapore

0%

2%

4%

6%

8%

10%

12%

2009 2010 2011 2012 2013 2014

Singapore SOEs

ROE ROA

Singapore Gearing

SOE Debt to EquityAccounts Payable to

Equity

Debt & Accounts Payable

to Equity

Neptune Orient Lines 147.2% 49.1% 196.3%

Singapore Technologies 62.9% 116.9% 179.9%

Singapore Power 147.1% 21.3% 168.3%

STATS ChipPAC 93.2% 15.8% 109.0%

SMRT 48.2% 51.1% 99.3%

PSA International 61.4% 12.8% 74.3%

Singapore

Telecommunications33.1% 20.3% 53.4%

Mapletree Investments 36.9% 5.4% 42.3%

Singapore Airlines 9.6% 31.1% 40.7%

Private sector participation needed to lock in commercialization gains

SOE Commercialization

• Commercial mandate

• Accountability framework

• CSO delivery on commercial terms

• Professional boards

• Transparency / disclosure

• Competitive neutrality

Private Sector Participation

•Full Privatization

•Partial Privatization

•PPPs

•Contracting out

Competition

Finding Balance 2016: Benchmarking the Performance of State-owned Enterprises in Island Countries will be published and available in August 2016.

Please let me know if you would like a copy emailed

When published – copies available on ADB website

Limited draft advance copies are available at this conference upon request