The Native Iowan

SOLOMON Islands government incurs a loss of over $180 million in state owned enterprise (SOE) investment in the country between 2002 and 2008.The startling figure was revealed in the new study report undertaken by Asian Development Bank (ADB) on SOE in five pacific island countries including Solomon Islands.

The study report called, “Finding Balance: Benchmarking the Performance of SOEs in Fiji, Marshall Islands, Samoa, Solomon Islands, and Tonga” was launched in Honiara on Tuesday by the Minister of Finance Gordon Darcy Lilo.

The study highlighted that Solomon Islands government made the loss in its owned public enterprise during the period.

It is believed the contributing factor was the ethnic crisis.

The report said this is despite millions of dollars being pumped in by the government.

“The Government of Solomon Islands contributed over $200 million to the SOEs in the form of cash contributions, debt forgiveness and asset donations over the 2002 – 2008 period, yet despite this support the SOEs generated losses of over $180 million,” the report said.

The ADB report investigated performance of the 11 SOEs in the Solomon Islands.

Some of the SOEs in the country are Solomon Airlines, Solomon Islands Printers, Solomon Islands Ports Authority (SIPA), Solomon Islands Water Authority (SIWA), Solomon Islands Electricity Authority (SIEA), Solomon Islands Postal Corporation (SIPC), Solomon Islands Broadcasting Corporation (SIBC), Soltai Fishing Processing Limited and Investment Corporation of Solomon Islands (ICSI).

Some of the SOEs which have been privatized at Home Finance Corporation and Sasape Marina Limited.

The report further highlighted that over the six year period Solomon Airlines incur a huge loss compared to other SOEs.

Only the Ports Authority is the only SOE which continue to generate revenue for the government during that period.

Meanwhile the study report has also highlighted that investment in SOEs contributes to negative economic growth.

“In many pacific island countries, however this growth is hindered by generally low investment rates and productivity.

“In Fiji, Marshall Islands, Samoa, Solomon Islands, Tonga, ongoing investment in large public enterprise sectors has the dual impact of limiting the opportunities for private sector investment and generating low returns on the significant amount of scare capital stock that they absorb.

“Combined, these factors serve as a heavy drag on economic growth,” the report said.

The study highlighted that while some of these SOEs in these countries provide essential public services, many do not.

“Many SOEs are purely commercial undertakings that compete with the private sector, often with an unfair advantage due to the preferred sector, often with an unfair advantage due to their preferred access to markets and discounted capital.

“In some countries, SOEs offer higher salaries for skilled managers than the private sector and as a result divert these scarce resources into less productive economic activities,” the study report said.

In these circumstances, the SOEs effectively crowd out the private sector.

The report noted that investing in underperforming SOEs has opportunity costs by absorbing funds that could be better spent on such high-yielding social investment as health and education.

The report,  shows Solomon Islands’ SOE portfolio is among the poorest performing in the region, returning an average of -14 performance on invested equity in the period 2002 -2008, compared with 6 percent in Tonga, 0.2 percent in Samoa, 0.7 percent in Fiji and -13 percent in the Marshall Islands.