PACIFIC PRIVATE SECTOR DEVELOPMENT INITIATIVE

FIJI

COUNTRY OVERVIEW | AUGUST 2016

OVERVIEW

Following the elections of September 2014 and Fiji’s return to democracy, the Asian Development Bank (ADB) has resumed full engagement with the Government of Fiji. PSDI has since undertaken a comprehensive review of its Fiji work program and, in November 2014, provided the incoming government with an update to PSDI’s 2013 Fiji private sector assessment (PSA). PSDI has spent more than $1.1 million on private sector development-related reforms in Fiji, 65% of this in the past two years ($427,000 in 2015-2016 and $314,000 in 2014-2015). Financing growth initiatives have accounted for the largest share of funding allocations—54% overall and 62%, or $264,000, in 20152016. The 2015-2016 allocation covers PSDI support to the Fiji Secured Transactions Task Force and the Fiji Development Bank, illustrating the current enthusiasm for secured transactions reform in Fiji. Spending on state-owned enterprise (SOE) reform accounts for 21% of both overall and the last financial year’s expenditure in Fiji, reflecting increased requests for SOE reform support. In June 2015, PSDI posted a Private Sector Development Specialist to ADB’s Pacific Subregional Office to coordinate the increased work program in the country.

CURRENT AND FUTURE PROJECTS

FINANCING GROWTH Discussions with the government on secured transactions reform commenced in 2014. Subsequently, PSDI assisted with the establishment of the Fiji Secured Transactions Task Force, which met for the first time in February 2015, and supported the task force to develop a policy paper to guide the reform and prepare draft legislation. The resulting bill is expected to be presented to parliament in late 2016. PSDI has also been working closely with Fijian financial institutions, including Fiji Development Bank (FDB), to raise awareness of what the effect of the reform will be and the opportunities it will provide for movable property financing. Product concepts for the agricultural application of movable property financing are being developed and additional work is being undertaken to strengthen FDB’s commercial orientation and clarify its role as a development finance institution. PSDI is also supporting the Reserve Bank of Fiji, in its role as secretariat for the Capital Markets Development Task Force, to further the development of Fijian capital markets. An initial diagnostic has been completed and a report on the existing legal framework for capital raising and the potential for new captial market products was presented in July 2016.

CURRENT AND FUTURE PROJECTS

BUSINESS LAW REFORM PSDI supported the creation of electronic transactions laws in 2008 to facilitate the use of electronic payments. Opportunities for business law reform are being explored as part of PSDI’s comprehensive review of its Fiji work program. PSDI, together with New Zealand Companies Office, prepared a diagnostic of Fiji’s company registry with a view toward providing support to the Government of Fiji in the implementation of an online registry. As part of this work, broader support for the implementation of the Companies Act 2015 could be considered.

ASIAN DEVELOPMENT BANK Pacific Private Sector Development Initiative Pacific Liaison and Coordination Office Level 20, 45 Clarence Street, Sydney, Australia

Tel +61 2 8270 9444 • Fax +61 2 8270 9445 [email protected] • @ADB_Sydney_PSDI www.adbpsdi.org • www.adb.org/plco/psdi

PSDI works with ADB’s 14 Pacific developing member countries to improve the enabling environment for business and address constraints to private sector development in support of sustainable and inclusive economic growth.

PSDI is a regional technical assistance facility co-financed by the Asian Development Bank, the Government of Australia, and the Government of New Zealand.

FIJI

COUNTRY OVERVIEW | AUGUST 2016

CURRENT AND FUTURE PROJECTS

OUTCOMES AND RESULTS

STATE-OWNED ENTERPRISE REFORM AND PUBLIC-PRIVATE PARTNERSHIPS PSDI has provided ongoing support for SOE reform activities in Fiji since 2007. Fiji has participated in all five of PSDI’s Finding Balance SOE benchmarking studies. PSDI provided peer review and implementation support to an ADB technical assistance project on SOE reform that ran from 2012–2013 and supported SOE restructuring and outsourcing, and capacity building of monitoring agencies.

Following the national elections in September 2014, PSDI has been supporting the Ministry of Public Enterprises in assessing partial divestment options for several SOEs, including Fiji Electricity Authority and Airports Fiji Limited. In both cases, regulatory implications and the impact of community service obligations are important considerations for structuring the planned divestments, which are expected to be transacted in 2016-2017. In 2015, the ministry also asked PSDI for support in developing an SOE policy framework and in reviewing the Public Enterprise Act and Public-Private Partnership Act. This work is ongoing and part of a larger collaboration with the government to develop SOE restructuring, divestiture, and public-private partnership programs.

CURRENT AND FUTURE PROJECTS

ECONOMIC EMPOWERMENT OF WOMEN A pilot project called the Women’s Business Leadership Program was launched in Fiji in May 2016. The project is working with 29 women employees from more than 15 large businesses and statutary bodies to promote cultural change and make workplaces women friendly; engage male advocates in these businesses who advocate for the economic empowerment of women; and provide pathways for women to senior roles via individually tailored training and support. The participants have also been paired with mentors from Australia, New Zealand, and other Pacific countries.

COMPETITION AND CONSUMER PROTECTION The Government has requested support for competition policy reform and strengthening the Fiji Commerce Commission, which PSDI will commence in the latter half of 2016.

ANALYTICAL WORK PSDI undertook an in-depth analysis of the constraints to private sector development, published as Reinvigorating Private Sector Investment: A Private Sector Assessment for Fiji, in 2013. An update to the 2013 private sector assessment was prepared for the incoming government in November 2014.

ASIAN DEVELOPMENT BANK Pacific Private Sector Development Initiative Pacific Liaison and Coordination Office Level 20, 45 Clarence Street, Sydney, Australia

Tel +61 2 8270 9444 • Fax +61 2 8270 9445 [email protected] • @ADB_Sydney_PSDI www.adbpsdi.org • www.adb.org/plco/psdi

PSDI works with ADB’s 14 Pacific developing member countries to improve the enabling environment for business and address constraints to private sector development in support of sustainable and inclusive economic growth.

PSDI is a regional technical assistance facility co-financed by the Asian Development Bank, the Government of Australia, and the Government of New Zealand.

PACIFIC PRIVATE SECTOR DEVELOPMENT INITIATIVE

MICRONESIA

COUNTRY OVERVIEW | AUGUST 2016

CURRENT AND FUTURE PROJECTS

KIRIBATI The comparatively small amount of funding PSDI has spent in Kiribati was mostly deployed in 2014–2015, when $31,000 of the $51,000 allocated since 2007 was spent. STATE-OWNED ENTERPRISE REFORM AND PUBLIC-PRIVATE PARTNERSHIPS: PSDI has continued to provide peer review and support for the government’s state-owned enterprise (SOE) reform program, and in June 2014, under a separate Asian Development Bank (ADB) technical assistance project, participated in a multi-donor mission to review SOE reform progress. In 2015–2016, Kiribati participated in PSDI’s Finding Balance benchmarking study for the first time since the biennial exercise began in 2009. BUSINESS LAW REFORM: A company law and registry diagnostic was completed in late June 2014. In August 2016, PSDI delivered

a legal diagnostic of the company and business names laws and a review of registry elements of legislation for other entities, including credit unions and co-operatives. PSDI will support the development of a new policy and legislative framework in 2016 and 2017. PSDI is also reviewing designs for an electronic business registry that is appropriate to the volume of registrations and business activity in Kiribati.

REPUBLIC OF THE MARSHALL ISLANDS

OUTCOMES AND RESULTS

Spending on PSDI assistance to the Republic of the Marshall Islands since 2007 amounts to $162,000, with roughly two-thirds of this spent on SOE reform and one quarter on financing growth initiatives. Of the $24,000 spent in 2015–2016, almost all went towards the production of a private sector assessment. FINANCING GROWTH: The Secured Transactions Act 2007 was enacted and an electronic registry installed in 2007 with technical assistance from PSDI. Lenders in the Marshall Islands have been active registry users, with more than 8,000 loans made as of mid2015. Many loans are secured by future land rent proceeds from the military base of the Government of the United States on Kwajalein Atoll. An upgrade of the registry was completed in late 2014. STATE-OWNED ENTERPRISE REFORM AND PUBLIC-PRIVATE PARTNERSHIPS: The Marshall Islands has participated in the 2011, 2012, 2014, and 2016 Finding Balance studies on the comparative country performance of SOEs. The studies have raised awareness of the fiscal cost of the SOE sector in the Marshall Islands and will support the government’s implementation of the SOE Act.

CURRENT AND FUTURE PROJECTS

FINANCING GROWTH: PSDI is providing ongoing support to increase lenders’ update of the secured transactions framework. STATE-OWNED ENTERPRISE REFORM AND PUBLIC-PRIVATE PARTNERSHIPS: PSDI supported the development of an SOE reform policy, which Cabinet endorsed in April 2012. Based on the policy, the SOE Bill was drafted with substantial PSDI advice and input. The bill is designed to strengthen SOE governance and commercial orientation, and support government efforts to improve SOE performance. It was passed by Parliament in 2015. PSDI will support implementation of the bill. ANALYTICAL AND CROSSCUTTING WORK: The Government of the Marshall Islands has requested a private sector assessment, which is likely to be published in early 2017.

OUTCOMES AND RESULTS

FEDERATED STATES OF MICRONESIA PSDI spending in the Federated States of Micronesia (FSM) totalled $56,000 by mid-2016, with two-thirds of this committed to financing growth initiatives and one-third to SOE reform. In 2014-2015, an upgrade of the secured transactions registry saw $15,000 of the $20,000 spent that year allocated to financing growth. The $5,000 spent in 2015-2016 went towards preliminary assessments for the development of a strategic plan for the FSM Development Bank. FINANCING GROWTH: The secured transactions regime in FSM is the longest running in the Pacific. It was established through the Secured Transactions Act 2006 and the creation of an online registry after the ADB assisted the Government of FSM to implement secured transactions reforms in 2005–2006. The new framework saw a large number of initial registrations, a lull between 2008– 2009, then increased registrations between 2011–2015 representing new loans. STATE-OWNED ENTERPRISE REFORM AND PUBLIC-PRIVATE PARTNERSHIPS: On request from Pohnpei Utilities Corporation (PUC), PSDI undertook an analysis of PUC’s options for outsouring its power, water, and wastewater operations. The analysis included public-private partnership opportunities. PSDI presented the analysis to PUC management in June 2014, and it was endorsed by the board in late 2014. Implementation assistance is now being considered by ADB as part of its broader country partnership strategy. FINANCING GROWTH: PSDI is supporting an upgrade of the secured transactions registry, a review of secured transactions reform outcomes, and efforts to increase lenders’ use of the secured transactions framework. PSDI has also commenced discussions with FSM Development Bank on assisting with the preparation of a strategic plan to guide the future direction of the bank.

MICRONESIA

COUNTRY OVERVIEW | AUGUST 2016 NAURU

OUTCOMES AND RESULTS

In 2015-2016, all spending in Nauru—$48,000—was on business law reform activities, specifically, legal assistance in support of the establishment of the Intergenerational Trust Fund. Of the $358,000 PSDI has spent on Nauru in total, two-thirds was allocated to financing growth initiatives, representing PSDI’s ultimately successful efforts to bring banking services to the country. FINANCING GROWTH: Since the early 2000s, Nauru had been without a financial institution capable of providing commercial banking services. In 2012, PSDI undertook an assessment of the Nauruan people’s financial requirements, which it then used to help the Government of Nauru prepare an information memorandum to identify an appropriate institution to provide these services. Expressions of interest were submitted to the government in August 2013 and Bendigo-Adelaide Bank opened an agency in Nauru in May 2015. PSDI also assisted the government in reviewing the existing regulatory framework for financial institutions and, in February 2014, submitted policy recommendations for the regulation and supervision of financial institutions. STATE-OWNED ENTERPRISE REFORM AND PUBLIC-PRIVATE PARTNERSHIPS: PSDI provided technical assistance to the government to restructure the Republic of Nauru Phosphate Corporation’s senior executive management. This included assistance with recruiting a new chief executive officer (CEO) who began in October 2011. PSDI also supported the development of a new organization structure for senior management and board of the Nauru Utilities Corporation (NUC) and Nauru Rehabilitation Corporation (NRC), including assistance with new CEO and other senior management recruitment. NUC’s new CEO took up his position in June 2012. Follow-up performance review assistance for the NUC CEO, and recruitment of a new NRC CEO, was provided under separate ADB funding. NRC’s new CEO was appointed in November 2013. ECONOMIC EMPOWERMENT OF WOMEN: Together with the ADB, PSDI assisted with a review of discriminatory laws and practices in Nauru in 2013 and 2014 and with development of the National Gender Action Plan.

OUTCOMES AND RESULTS

PALAU More than 40% of the $643,000 committed to Palau since 2007 supported secured transactions reform, which culminated in the launch of an online registry in 2013. In 2015-2016, the $126,000 allocated to Palau went mostly towards preparation of a private sector assessment and support for the commercial transformation of the National Development Bank of Palau. BUSINESS LAW REFORM: PSDI completed a diagnostic of the Company Law and the existing company registry in late 2013. It found the private sector in Palau is severely constrained by an outdated company law and an almost dysfunctional paper-based registry. PSDI has provided input into the new Company Law Bill but unfortunately the new Government of Palau does not see its reform as a priority.

CURRENT AND FUTURE PROJECTS

FINANCING GROWTH: Following PSDI-supported secured transactions reform, the Secured Transactions Act was passed in May 2012 and an electronic registry was launched in January 2013. Although relatively small, the number of secured loans per capita ranks Palau’s secured transactions filings in the top half of those in use in the Pacific. PSDI is providing ongoing support to lenders to increase their uptake of the secured transactions framework. PSDI is supporting the commercial strengthening of the National Development Bank of Palau in line with the regulatory requirements of the Palau Financial Institutions Commission. A review of bank policies has commenced and operational assistance may follow this review. BUSINESS LAW REFORM: In 2016, the government requested PSDI lead a reform of the company registry, which will include the drafting of a companies bill and the development of an online company registry. STATE-OWNED ENTERPRISE REFORM AND PUBLIC-PRIVATE PARTNERSHIPS: PSDI continues to support Palau’s development and implementation of an SOE policy. The first public consultation on the draft SOE policy was held in November 2013 and the second in April 2014, and the policy was endorsed by the President in late-2014. It calls for the commercial operation of all three of Palau’s SOEs, the establishment of a contracting framework for community service obligations, and the removal of elected officials from SOE boards. In 2016, PSDI has been providing technical support to review options for private investment and operation of the Koror airport through a public-private partnership mechanism. With the Palau Chamber of Commerce, PSDI has developed a corporate governance strengthening program. This began in April 2014 and is ongoing. PSDI also assisted the newly merged power and water utility with their articles of incorporation and CEO selection process. ANALYTICAL WORK: A private sector assessment for Palau has been written and is scheduled to be published in early 2017.

ASIAN DEVELOPMENT BANK Pacific Private Sector Development Initiative Pacific Liaison and Coordination Office Level 20, 45 Clarence Street, Sydney, Australia

Tel +61 2 8270 9444 • Fax +61 2 8270 9445 [email protected] • @ADB_Sydney_PSDI www.adbpsdi.org • www.adb.org/plco/psdi

PSDI works with ADB’s 14 Pacific developing member countries to improve the enabling environment for business and address constraints to private sector development in support of sustainable and inclusive economic growth.

PSDI is a regional technical assistance facility co-financed by the Asian Development Bank, the Government of Australia, and the Government of New Zealand.

PACIFIC PRIVATE SECTOR DEVELOPMENT INITIATIVE

PAPUA NEW GUINEA COUNTRY OVERVIEW | AUGUST 2016

OVERVIEW

PSDI has been able to plan for considerable expansions of its support to Papua New Guinea (PNG) after the Government of Australia granted an additional $8 million for PNG activities in June 2015. The additional funding is enabling PSDI to support requests from the Government of Papua New Guinea for further assistance in promoting access to finance, enhancing the competition framework, further support for reforming state-owned enterprises (SOEs), implementing the public-private partnership (PPP) framework, and scaling-up economic empowerment of women projects. This increased funding means PNG is likely to soon move past Solomon Islands to become the biggest recipient of PSDI spending, which it was in 2015-2016. PSDI initiatives in PNG accounted for $894,000 in 2015-2016, bringing total expenditure since 2007 to $4.75 million. Financing growth work has accounted for 36% of this overall figure and 24% of the 2015-2016 spend, which funded initiatives to improve the stability of PNG’s financial system and the implementation of a secured transactions framework. Support for competition now accounts for PSDI’s second largest allocation to PNG, amounting to $995,000, or 19%, of overall spending and $520,000, or 58%, in 2015-2016. This is followed by spending on PPPs, which makes up 15% of overall spending but was not pursued in the last financial year. Spending on SOE reform accounted for 13% of last financial year’s spend and 8% overall; analytical work, which encompasses two private sector assessments, accounts for 10% of overall spending; and economic empowerment of women initiatives account for 2%. A PSDI Private Sector Development Coordinator has been based at the Asian Development Bank (ADB) Resident Mission in PNG since January 2010. The coordinator promotes effective private sector development policies and practices through dialog with the government and other stakeholders; supports the implementation of PSDI initiatives; and identifies opportunities to develop ADB’s private sector operations in PNG.

CURRENT AND FUTURE PROJECTS

OUTCOMES AND RESULTS

FINANCING GROWTH PSDI provided technical assistance to MiBank (formerly Nationwide Microbank) between 2011 and 2013 to develop an innovative mobile telephone-linked bank account, MiCash. PSDI supported development of appropriate audit and risk management processes for MiCash, which were completed in April 2012; a review of the MiCash pilot in West New Britain Province, which was completed in June 2012; and the development of a MiCash training program for staff and agents, which was completed in March 2013. PSDI continued its support for MiBank through 2015–2016, focusing on the development of a business model to increase its regional presence, should it decide to do so. PSDI also funded the design of the Microfinance Expansion Project (MEP), a $24 million sector-wide program cofinanced by the governments of Australia and PNG. The MEP focuses on strengthening institutions; financial literacy and business development skills training; developing appropriate regulation for and supervision of the microfinance sector; and establishing a risk share facility for partner institutions to promote credit expansion to micro- and small-enterprises. Implementation began in 2011 and the MEP will run until the end of 2017. The Personal Property Security Act was passed in December 2011 and an online registry was launched in January 2016 and activated in May 2016. PSDI’s ongoing assistance will focus on working with lenders to make them aware of the impact of the reform and the opportunities the reform provides for the use of movables finance products. PSDI undertook a financial sector assessment in conjunction with the private sector assessment that was released in May 2015, as well as a review of draft capital markets legislation for the Securities Commission of PNG. Through the second half of 2015, PSDI has been working closely with Bank PNG to improve the stability of PNG’s financial system. An assessment of the regulatory regime applying to investment managers and an assessment of financial sector interconnectedness have been completed and their policy implications are currently being discussed with Bank PNG.

OUTCOMES AND RESULTS

STATE-OWNED ENTERPRISE REFORM AND PUBLIC-PRIVATE PARTNERSHIPS In September 2014, Parliament passed the PPP Act, which was developed with PSDI support. The act will allow a PPP program to form, enable PPP transactions to be prepared in a transparent and predictable manner, and reduce risks to private sector participation. Since its passage, PSDI has developed an implementation strategy, a PPP project pipeline, a business plan for a PPP Centre, position descriptions, a project development facility concept note, and supported the development of regulations. These efforts are aimed at operationalizing the supporting institutions necessary for the implementation of the act before its gazettal. PSDI presented updated Port Moresby and Lae Airport PPP assessments to the National Airports Corporation in November 2013, and completed a detailed PPP options study for the new Lae Port in May 2014. Since the Lae Port analysis was completed, ADB’s new Office of Public-Private Partnership has been in discussions with the government to offer transaction support. PSDI will continue to provide input into ADB infrastructure project designs to identify potential PPP opportunities and ensure their consistency with PNG’s Community Service Obligation (CSO) Policy for SOEs. PNG participated in the 2012, 2014, and 2016 Finding Balance SOE benchmarking studies. The October 2014 launch of the study in Port Moresby generated substantial press coverage and public debate around the role of SOEs in the economy. .

PAPUA NEW GUINEA COUNTRY OVERVIEW | AUGUST 2016

CURRENT AND FUTURE PROJECTS

STATE-OWNED ENTERPRISE REFORM AND PUBLIC-PRIVATE PARTNERSHIPS The CSO Policy for SOEs, which was developed with PSDI support, was approved by the National Executive Council (NEC) in December 2013. The policy requires full transparency in identifying, costing, contracting, and financing CSOs. The NEC directed the policy to be piloted in three SOEs, work which PSDI has been supporting since mid-2014 in collaboration with an interdepartmental working group. Of the three SOEs selected for the pilot, one—National Airports Corporation—has been able to provide the necessary data to develop detailed CSO cost estimates and a CSO contract was prepared in the fourth quarter of 2015. The CSO working group intends to use the first successful CSO contract and underlying methodology to expand the application of the policy to additional SOEs in 2016. Since January 2016, PSDI has been collaborating with PNG Power to introduce renewable energy in isolated diesel centers on a PPP basis. This work builds upon a call for expressions of interest launched by PNG Power in early 2015 and aims to conclude PPP agreements using solar energy in selected sites. PSDI has had ongoing dialog with PNG’s Department of Public Enterprises to define measures that could strengthen the legal and regulatory framework for SOEs.

CURRENT AND FUTURE PROJECTS

ECONOMIC EMPOWERMENT OF WOMEN PSDI is implementing a pilot project that helps business women operating in the informal sector—in this instance, fisherwomen— formalize their businesses by providing finance for growth plus relevant training. The project also facilitates greater access to markets for women operating small-to–medium-sized businesses by helping them access finance to grow their operations. A memorandum of understanding was signed with Nationwide Microbank (now MiBank) in July 2014 to provide finance and financial skills training. Other training on product development and organizational governance will be provided by PSDI throughout 2016 to strengthen the ability of these women entrepreneurs to operate sustainable businesses over the long term. PSDI is also working with local organizations to promote the participation of rural women in agricultural production by providing training in agricultural production methods, helping them access finance through the secured transactions framework, assisting with access to markets, and supporting accountable governance of local organizations. By creating such supportive institutional frameworks, PSDI expects to improve the lives of more than 6000 rural women, assisting in their transition from subsistence activities to active participants in the private sector. PNG’s PSDI-supported Competition and Consumer Review recognizes the need for policies, laws, and institutions to be responsive to the needs of women as producers, consumers, and employees. One of the review’s issues papers, Consumer Protection and Economic Empowerment of Women, directly assessed how such laws affect women and made recommendations for how legal reforms could economically empower women and facilitate their role in the private sector. This work is continuing through 2016.

CURRENT AND FUTURE PROJECTS

COMPETITION AND CONSUMER PROTECTION PSDI began the comprehensive Consumer and Competition Framework Review at the request of the Department of Treasury in late 2014. The review has a broad scope, encompassing the industry regulation, price control, and productivity review functions of the Independent Consumer and Competition Commission (ICCC), as well as its general competition law and consumer protection responsibilities. Extensive stakeholder consultation has been carried out, including interviews, public workshops, and consumer focus groups. PSDI anticipates the review will lead to recommendations for legislative reforms, capacity building within the ICCC, and changes in administrative and regulatory practice. In mid-2015, Australia’s Department of Foreign Affairs and Trade requested PSDI manage Australia’s financial support to the ICCC. PSDI has agreed to do so for three years years and is currently supporting the ICCC in its ongoing competition, consumer protection, regulatory, price control, and productivity review functions, and in necessary capacity building, including its capacities to investigate violations and prosecute enforcement actions.

ANALYTICAL WORK A private sector assessment for PNG, Building a Dynamic Pacific Economy: Strengthening the Private Sector in Papua New Guinea, was published in April 2015.

ASIAN DEVELOPMENT BANK Pacific Private Sector Development Initiative Pacific Liaison and Coordination Office Level 20, 45 Clarence Street, Sydney, Australia

Tel +61 2 8270 9444 • Fax +61 2 8270 9445 [email protected] • @ADB_Sydney_PSDI www.adbpsdi.org • www.adb.org/plco/psdi

PSDI works with ADB’s 14 Pacific developing member countries to improve the enabling environment for business and address constraints to private sector development in support of sustainable and inclusive economic growth.

PSDI is a regional technical assistance facility co-financed by the Asian Development Bank, the Government of Australia, and the Government of New Zealand.

PACIFIC PRIVATE SECTOR DEVELOPMENT INITIATIVE

SAMOA

OVERVIEW

COUNTRY OVERVIEW | AUGUST 2016

Each PSDI work area, bar economic empowerment of women, is represented in the allocations of the $2.33 million spent in Samoa to date, which is indicative of the wide range of reforms the country has pursued to improve its business environment. Financing growth initiatives have received 26% of this funding—including 69% of the $379,000 allocated to Samoa in 20152016—enabling the procurement of a personal property securities registry. Business law reform has received the second most funding, with the $493,000 allocated going towards creation of an online companies registry and recent evaluations of the company law and registry expansion opportunities. Significant support for competition reform that required $373,000 in funding culminated in the passage of a new competition policy and consumer protection bill in 2015. Spending on analytical work, which has received $376,000 in funding, includes production of Samoa’s private sector assessment and associated advocacy activities.

CURRENT AND FUTURE PROJECTS

FINANCING GROWTH PSDI supported the passage of the Personal Property Securities Act in February 2013. Subsequent to an amendment to the act in 2015, PSDI commenced procurement of a registry and is supporting registry design and implementation. The registry is expected to be launched in the second half of 2016. Alongside this support, PSDI is working to train stakeholders and raise awareness of the reform and its impact on lenders. Discussions have also been undertaken with Samoan authorities on possible PSDI assistance to improve the operating performance of the Development Bank of Samoa and the Samoa National Provident Fund.

OUTCOMES AND RESULTS

BUSINESS LAW REFORM After updating the Companies Act Regulations in early 2013, PSDI assisted with the procurement and installation of a new electronic registry. Together with the New Zealand Companies Office, PSDI has carried out significant public awareness activities and capacity building for the new registry. Implementation has revealed that various elements of company law would benefit from an amendment. PSDI has been asked to provide drafting and policy support for those legislative changes. In 2014, PSDI surveyed company administrators and business services providers to evaluate the Samoa company registry one year after its launch. The survey found that: • the new company registration rate had doubled by the end of 2013; • the cost had fallen dramatically; • registering and maintaining companies was significantly easier; • online company information searches save large amounts of time and money; and • the ease of access to information has lowered the costs of company administration, accounting, and auditing. To further simplify the environment for doing business and to attract foreign investment, PSDI has been asked to consider introducing a business names framework to enable small businesses to formalise, review foreign investment processes, and to include other registered entities into the electronic registry. Using the company registry as a pilot, PSDI is also supporting the governement to promote

e-payment facilities.

OUTCOMES AND RESULTS

STATE-OWNED ENTERPRISE REFORM AND PUBLIC-PRIVATE PARTNERSHIPS Samoa has participated in all five of the Finding Balance studies. The studies have raised awareness of the poor performance of Samoa’s state-owned enterprises (SOEs) and led to an increase in SOE reform impetus. The enactment of the Composition Act in early 2012 triggered the restructuring of all SOE boards to remove elected officials. This reduced the number of public servants and elected officials serving as SOE directors; in 2010 almost 50% of SOE directors were either ministers or public servants, by 2013 only 11% were public servants and none elected officials. The June 2015 round of SOE director appointments saw 188 persons apply for 102 vacancies. The move to professional boards will reduce political influence, strengthening SOEs’ ability to implement their commercial mandate.

ASIAN DEVELOPMENT BANK Pacific Private Sector Development Initiative Pacific Liaison and Coordination Office Level 20, 45 Clarence Street, Sydney, Australia

Tel +61 2 8270 9444 • Fax +61 2 8270 9445 [email protected] • @ADB_Sydney_PSDI www.adbpsdi.org • www.adb.org/plco/psdi

PSDI works with ADB’s 14 Pacific developing member countries to improve the enabling environment for business and address constraints to private sector development in support of sustainable and inclusive economic growth.

PSDI is a regional technical assistance facility co-financed by the Asian Development Bank, the Government of Australia, and the Government of New Zealand.

SAMOA

COUNTRY OVERVIEW | AUGUST 2016

OUTCOMES AND RESULTS

STATE-OWNED ENTERPRISE REFORM AND PUBLIC-PRIVATE PARTNERSHIPS (CONT’D) In 2012, the Government of Samoa requested PSDI support for the privatization of three SOEs: Agriculture Stores Corporation (ASC), Polynesian Airlines (Investment) Limited (PAIL), and Samoan Shipping Services. Cabinet approved PSDI’s recommended sales strategy for ASC but the Privatization Committee, appointed by Cabinet, opted for a more complex sales process. The sale of ASC was completed in April 2016. PSDI’s privatization scoping paper for PAIL was submitted in October 2012, but the transaction has not proceeded. In April 2014, an SOE Minister was appointed. PSDI had long advocated for the creation of this position. PSDI provided advice to the new minister and the Ministry of Finance on how best to undertake the responsibilities of this new role. PSDI also provided advice on changes required to the SOE Act to support the SOE Minister’s role and tighten transparency and accountability. The amendments were enacted in January 2015. In June 2014, PSDI prepared an SOE ownership, performance, and divestment policy update, which was endorsed by Cabinet in January 2015. In the first half of 2015, support was also provided to the SOE Monitoring Division to strengthen the selection and appointment of directors and to develop a director performance evaluation tool.

CURRENT AND FUTURE PROJECTS

PSDI provided policy support for the new Ministry of Public Enterprises , which commenced operations in July 2015. At the request of the government, a privatization options paper was prepared for Public Trust Office, Samoa Post, and Samoa Housing Corporation. The paper was submitted in September 2015. The ministry is reviewing its recommendations and the need for any amendments to the SOEs’ establishing acts to facilitate their sale. At the request of the ministry, PSDI undertook a review of proposed amendments to the Public Bodies Act. PSDI submitted its recommendations in August 2016. PSDI is also supporting the development of a public-private partnerships program. At the request of the ministry PSDI reviewed proposed amendments to the Public Bodies Act and submitted its recommendations in August 2016.

OUTCOMES AND RESULTS

COMPETITION At the request of the government, PSDI supported a review of the country’s consumer protection and competition policy and law needs. PSDI then supported the development of a draft National Competition Policy, which was adopted by Cabinet in 2013. PSDI then assisted in the drafting of a Competition and Consumer Bill and with public consultations on it. The bill was vetted by the Attorney General’s office in late 2014 and enacted by Parliament in January 2015. PSDI is currently planning to support the government in the implementation of the Competition and Consumer Act.

ECONOMIC EMPOWERMENT OF WOMEN An analysis of the constraints to women’s economic empowerment was completed in 2015 and included as a chapter in Reform Renewed, the private sector assessment PSDI produced for Samoa.

OUTCOMES AND RESULTS

ANALYTICAL WORK PSDI has produced two private sector assessments for Samoa: 2008’s Consolidating Reform for Faster Growth and Reform Renewed: A Private Sector Assessment for Samoa, published in October 2015. A case study by PSDI on business law and registration reforms in Samoa was included in Enhancing SME Access to Finance: Case Studies, a book published by the Global Partnership for Financial Inclusion in June 2015. A case study of Samoa’s contracting out program for public works, Creating Jobs in Samoa Through Public-Private Partnerships, will be published in August 2016 An evaluation of the Companies Act reform in Samoa will be published in 2016.

ASIAN DEVELOPMENT BANK Pacific Private Sector Development Initiative Pacific Liaison and Coordination Office Level 20, 45 Clarence Street, Sydney, Australia

Tel +61 2 8270 9444 • Fax +61 2 8270 9445 [email protected] • @ADB_Sydney_PSDI www.adbpsdi.org • www.adb.org/plco/psdi

PSDI works with ADB’s 14 Pacific developing member countries to improve the enabling environment for business and address constraints to private sector development in support of sustainable and inclusive economic growth.

PSDI is a regional technical assistance facility co-financed by the Asian Development Bank, the Government of Australia, and the Government of New Zealand.

PACIFIC PRIVATE SECTOR DEVELOPMENT INITIATIVE

SOLOMON ISLANDS COUNTRY OVERVIEW | AUGUST 2016

OVERVIEW

Solomon Islands has been a leading reformer in the Pacific region, actively seeking and implementing reform initiatives with significant support from PSDI. At $5.3 million, it has received the largest share of PSDI funds. Business law reform activities account for 44% of PSDI’s spending in Solomon Islands since 2007, and 31% of the $388,000 allocated in 2015-2016. This initially funded customs and company law reform, including an online companies registry. Initiatives supporting state-owned enterprise (SOE) reform account for 25% of overall spending and have led to the installation of a community service obligation framework, the development of shared accounting services, and the successful privatization of three SOEs. Financing growth initiatives, which account for 15% of overall spending, have underpinned secured transactions reform and a review of the regulatory framework for microfinance and mobile banking. Analytical work accounts for 5% of overall spending but 23% of that for 2015-2016, mostly towards production of a private sector assessment, which was published in May 2016. In September 2013, PSDI appointed a Honiara-based coordinator to support implementation and advocacy of PSDI projects in Solomon Islands. Based in the Solomon Islands ADB Development Coordination Office, the coordinator works closely with the Ministry of Commerce, the Ministry of Finance and Treasury, the Central Bank of Solomon Islands, and the Attorney General’s Chambers to progress legal reforms.

CURRENT AND FUTURE PROJECTS

FINANCING GROWTH PSDI supported the passage of the Secured Transactions Act in 2008, through which an electronic registry was launched in 2009, making Solomon Islands the fourth country that PSDI has helped to establish a secured transactions framework. While Solomon Islands’ biggest finance company has embraced the secured transactions framework and increased its loan assets considerably, banks are yet to take full advantage of the opportunity the reform gives to take movable assets as collateral. In response, PSDI is working to increase lenders’ uptake of the framework, with a particular focus on agriculture supply chain financing. In 2015, PSDI supported the development of a pre-shipment financing facility for cocoa exporters. Through 2014–2016, PSDI supported the Central Bank of Solomon Islands (CBSI) and the Ministry of Finance and Treasury (MOFT) to undertake public consultations and develop a credit union policy, as preparation for new credit union legislation. PSDI also worked closely with CBSI and MOFT to provide drafting instructions for legislation to reform the Solomon Islands National Provident Fund. Both pieces of work have been submitted for cabinet approval.

CURRENT AND FUTURE PROJECTS

OUTCOMES AND RESULTS

BUSINESS LAW REFORM PSDI’s most extensive business law reform activity has been in Solomon Islands. PSDI assistance and extended advocacy saw the Companies Act passed in 2010 and an online company registry, Company Haus, launched. As a result of the registry: • it is cheaper and faster for new businesses to incorporate; • ministerial approval of company names is no longer required; • company seals are no longer required, and; • there is no need to travel to the capital, Honiara. The average time to form a company has been reduced from nearly 3 months to less than 36 hours. On average, 292 new companies have been incorporated annually between 2010 and mid-2015, more than double the pre-reform average. The new company laws also allow single shareholder companies, giving entrepreneurs maximum flexibility to start and manage a business without external ownership influences and allowing women to start a business without a male co-director. The community company structure, also introduced under the new company laws, offers a more transparent and accountable alternative to communities operating businesses informally or through trusts or cooperatives. It has great potential for managing resources royalties and customary land lease payments. By 2016, 33 community companies had been incorporated in Solomon Islands.

PSDI also identified a complementary reform to the company law reform: simplifying the business names registration system. Business names are a form of license used extensively by small and medium-sized enterprises across Solomon Islands. The successful implementation of the reform to business names will: • significantly reduce the time taken in processing the 1,300 new license requests per year; • save small business owners significant time and money; • enable small business owners to register online, removing the need to travel large distances, and; • streamline license processing, operating costs, and payment procedures through an interface with the existing Company Haus. PSDI’s ongoing policy guidance and support in drafting the Business Names Act 2014 saw it passed through Parliament and into law in August 2014. PSDI is continuing to support the act’s implementation through ongoing policy advice and advocacy and will see business names included within the online registry in November 2016.

PSDI undertook a diagnostic on building an online foreign investment registry. This resulted in a project to build a common online platform encompassing foreign investment registrations, company registrations, and business name registrations, thereby creating an integrated, streamlined investment start-up process. This new online registry is due to be launched in November 2016. PSDI is also assisting the government to create a modernized customs and excise regime. The reform will promote faster clearing procedures, improve revenue collections, reduce process informality, improve border protection, and facilitate trade. Extensive technical consultations on the bill were completed in 2015. Cabinet has now approved the draft bill to be vetted by the Attorney General’s Chambers.

SOLOMON ISLANDS COUNTRY OVERVIEW | AUGUST 2016

OUTCOMES AND RESULTS

STATE-OWNED ENTERPRISE REFORM AND PUBLIC-PRIVATE PARTNERSHIPS Solomon Islands’ SOE portfolio has undergone a remarkable turnaround over the past six years. Rates of return on both assets and equity, which were negative from 2002-2009, are now positive, demonstrating what can be achieved with strong government commitment to SOE reform. Solomon Islands participated in Finding Balance, PSDI’s comparative study on Pacific SOEs performance, in 2011, 2012, 2014 and 2016. PSDI supported the Solomon Islands SOE monitoring unit in implementing a CSO framework and drafting CSO contracts for selected SOEs from 2011–2015. These have been instrumental in improving the financial performance of the SOEs. Their implementation has required ongoing training of SOE and Ministry of Finance officials responsible for SOE monitoring. PSDI also supported the development of statements of corporate objectives by SOEs, shared accounting services for the smaller SOEs, and several privatizations (Solomon Island Printers in 2012, Sasape Marina in 2010, and Home Finance in 2008). In June 2016, PSDI released a regional benchmarking study on port tariffs and productivity, which revealed recent tariff hikes and productivity losses at Solomon Islands Port Authority had made it one of the poorest performers in the region. The study served to inform a national debate on port commercialization. PSDI continues to provide assistance toward the implementation of the SOE Act and supporting regulations and the development of individual SOE restructuring strategies. The current Government of Solomon Islands, elected in 2014, has yet to endorse a program of SOE reform, but will develop an SOE capitalization policy. PSDI has been providing input to this policy, which could formalize the government’s views on SOE performance, restructuring and privatization, including through PPPs.

ECONOMIC EMPOWERMENT OF WOMEN In 2014, PSDI analyzed constraints to women’s economic empowerment in Solomon Islands and initiated the following pilot projects to help devise responses to them:

CURRENT AND FUTURE PROJECTS

Boosting Women’s Technical Skills – PSDI worked with the West Are’Are Rokotanikeni Association, the Ministry of Mines, Energy and Rural Electrification, community organizations, and government agencies to train women on solar panel maintenance. The pilot project has empowered rural women by teaching technical and income-generating skills that have enabled them to open bank accounts, create formal businesses and earn income. Following requests from community leaders the project was replicated in Choiseul Province. It has also attracted significant interest from other organizations, and its strategy of training rural women in infrastructure maintenance is being replicated within the ADB’s forthcoming $15.8 million Solar Power Development Project. Onsite training has continued in 2016 along with ongoing monitoring and evaluation. Improving Inclusive Governance – In collaboration with the Solomon Islands Chamber of Commerce and Industry (SICCI), PSDI delivered a gender-sensitive training program on corporate governance. The women-targeted program aimed to create ‘promotionready’ employees equipped with the skills for senior management positions, including specific preparation for roles on SOE boards. The training was held over three, two-day sessions in July and October 2014 and February 2015, with 70% women participants. Two local trainers who were taught how to deliver the training did so for the first time in November 2015. PSDI helped SICCI to develop a Corporate Governance Manual and is supporting the creation of a database of graduates. An evaluation of the project was undertaken in 2015. Collaborating with Large Businesses to Encourage Women’s Entrepreneurship – In 2015, PSDI collaborated with Guadalcanal Plains Palm Oil company to assist female family members of the company’s male employees to develop a small, sustainable, formal business. The women created a successful clothing and uniform manufacturing business, which is now turning a profit. The aim of the pilot project was to demonstrate an approach for creating small businesses on the margins of big ones, and for the inclusion of women dependents in the formal economy. In partnership with UN Women, PSDI undertook a review of how business law reforms have affected women, and of the effectiveness of women’s business associations in Solomon Islands. PSDI is also working with the Solomon Islands company registry to create women-friendly business support materials, as well as partnering with NGOs to raise awareness among women of the benefits and ease of formalizing their businesses and using personal assets to apply for business loans. PSDI also proposed amendments to Solomon Islands National Provident Fund legislation and Business Names legislation that remove discriminatory provisions, and called for a gender-inclusive approach to the drafting of new credit union legislation.

COMPETITION AND CONSUMER PROTECTION At the request of the government, PSDI commenced a review of the country’s competition policy and law requirements in mid2015. An issues paper produced in December 2015 recommended the government consider a multi-year phased implementation of any reforms and substantial capacity building to provide the necessary skills base for administration of consumer and competition safeguards.

ANALYTICAL WORK Solomon Islands features as a case study in PSDI’s 2014 publication Unlocking Finance for Growth: Secured Transactions Reform in Pacific Island Economies. Two other PSDI case studies on Solomon Islands—one also on secured transactions reform and one on business law and registration reforms—were included in Enhancing SME Access to Finance: Case Studies, a book published by the Global Partnership for Financial Inclusion in June 2015. A private sector assessment for Solomon Islands, Continuing Reforms to Stimulate Private Sector Investment, was published in May 2016.

Pacific Private Sector Development Initiative Pacific Liaison and Coordination Office Level 20, 45 Clarence Street, Sydney, Australia

Tel +61 2 8270 9444 • Fax +61 2 8270 9445 [email protected] • @ADB_Sydney_PSDI www.adbpsdi.org • www.adb.org/plco/psdi

PSDI works with ADB’s 14 Pacific developing member countries to improve the enabling environment for business and address constraints to private sector development in support of sustainable and inclusive economic growth.

PSDI is a regional technical assistance facility co-financed by the Asian Development Bank, the Government of Australia, and the Government of New Zealand.

PACIFIC PRIVATE SECTOR DEVELOPMENT INITIATIVE

SOUTH PACIFIC MICROSTATES

COUNTRY OVERVIEW | AUGUST 2016

OUTCOMES AND RESULTS

COOK ISLANDS Of the $564,000 funding PSDI activities in Cook Islands have received, almost half of this was spent in 2015-2016 and one-quarter in 2015-2015. Spending on business law reform, which includes company law reforms that will pave the way for creation of an online companies registry, accounts for 34% of all spending in the Cook Islands and 54% of the $251,000 allocated in 2015-2016. Analytical work has received the second highest proportion—19%—of overall allocations to Cook Islands; this funded the production of a private sector assessment and reform advocacy activities. In 2015-2016, however, financing growth initiatives received the second-highest proportion of funding, with $80,000 going towards secured transactions reform and the commercial transformation of the Bank of Cook Islands. STATE-OWNED ENTERPRISE REFORM AND PUBLIC-PRIVATE PARTNERSHIPS: In November 2011, PSDI reviewed the legislative, governance, and monitoring framework for Cook Islands’ SOEs. In July 2012, the Government of Cook Islands endorsed the resulting gap analysis recommendations. In March 2013, implementation was suspended as the government sought to clarify several issues. After a further review in July 2013, updated recommendations were submitted to the government in August 2013. PSDI remains ready to support implementation. COMPETITION AND CONSUMER PROTECTION: PSDI commenced an assessment of Cook Islands’ competition law and policy requirements in 2009.

CURRENT AND FUTURE PROJECTS

ANALYTICAL AND CROSSCUTTING WORK: A private sector assessment entitled The Cook Islands: Stronger Investment Climate for Sustainable Growth was published in October 2015. FINANCING GROWTH: Discussions commenced with the government in 2014 on secured transactions reform. In 2015, PSDI assisted the Bank of the Cook Islands (BCI) to introduce a new liquidity risk management policy, consistent with the Prudential Statement on Liquidity Risk Management issued by the Cook Islands Financial Supervisory Commission (FSC) and integrated with BCI’s overall funds management policy. In 2016, PSDI is extending this support to assist BCI to identify and assess the impact of operational risks and then draft a policy for the management of operational risk consistent with the FSC prudential statement. BUSINESS LAW REFORM: PSDI, with joint funding from the Government of New Zealand, is supporting company law and registry reform. A review of the existing act was completed in 2014 and a request received from the government to prepare a new companies bill for consideration by Parliament in 2016. Drafting of the bill has commenced and policy consultations are ongoing. Once the bill has been passed, PSDI, together with the NZ Companies Office, will help implement an electronic company registry. COMPETITION AND CONSUMER PROTECTION: In 2014, PSDI commenced a review of Cook Islands’ competition law and policy requirements. This was halted later that year when the government requested prioritization of an analysis of telecommunications liberalization instead. The telecommunications review was then halted when the government entered negotiations with potential purchasers of Telecom Cook Islands (TCI). Following the acquisition of 60% of TCI by the Bluesky Group early in 2015, the government is again considering reform to liberalize the telecommunications market. PSDI is in discussions with the government regarding the form and extent of possible support.

ASIAN DEVELOPMENT BANK Pacific Private Sector Development Initiative Pacific Liaison and Coordination Office Level 20, 45 Clarence Street, Sydney, Australia

Tel +61 2 8270 9444 • Fax +61 2 8270 9445 [email protected] • @ADB_Sydney_PSDI www.adbpsdi.org • www.adb.org/plco/psdi

PSDI works with ADB’s 14 Pacific developing member countries to improve the enabling environment for business and address constraints to private sector development in support of sustainable and inclusive economic growth.

PSDI is a regional technical assistance facility co-financed by the Asian Development Bank, the Government of Australia, and the Government of New Zealand.

SOUTH PACIFIC MICROSTATES

COUNTRY OVERVIEW | AUGUST 2016

OUTCOMES AND RESULTS

TUVALU PSDI’s engagement with Tuvalu has been limited, resulting in spending of just $16,000 in the 2007-2016 period, all of which related to SOE reform. STATE-OWNED ENTERPRISE REFORM AND PUBLIC-PRIVATE PARTNERSHIPS: In 2012 and 2013, PSDI provided peer review and high level support to ADB’s Pacific Subregional Office (SPSO) with the development of a management contract for the government-owned Vaiaku Lagi Hotel. PSDI also supported SPSO on the merger of the Tuvalu Philatelic Bureau, Tuvalu Post Office, and Tuvalu Ticketing Office into one entity.

ASIAN DEVELOPMENT BANK Pacific Private Sector Development Initiative Pacific Liaison and Coordination Office Level 20, 45 Clarence Street, Sydney, Australia

Tel +61 2 8270 9444 • Fax +61 2 8270 9445 [email protected] • @ADB_Sydney_PSDI www.adbpsdi.org • www.adb.org/plco/psdi

PSDI works with ADB’s 14 Pacific developing member countries to improve the enabling environment for business and address constraints to private sector development in support of sustainable and inclusive economic growth.

PSDI is a regional technical assistance facility co-financed by the Asian Development Bank, the Government of Australia, and the Government of New Zealand.

PACIFIC PRIVATE SECTOR DEVELOPMENT INITIATIVE

TIMOR-LESTE

COUNTRY OVERVIEW | AUGUST 2016

OVERVIEW

PSDI allocation to Timor-Leste was $3.3 million as of mid-2016. Two-thirds of this has been used for financing growth initiatives, primarily, assisting with the establishment and commercial transformation of the National Commercial Bank of Timor-Leste, the country’s first locally owned commercial bank. PSDI is also actively assisting in other areas of financial sector development, namely mobile banking, secured transactions reform, anti-money laundering, and technical assistance to the Central Bank of Timor-Leste. These activities absorbed more than half of the $486,000 spent on Timor-Leste in 2015-2016. PSDI has also provided substantial assistance with public-private partnerships (PPPs), amounting to 26% of overall expenditure in Timor-Leste. Assistance with the development of a PPP policy and legal framework was provided from 2011-2014 and support for pre-feasibility assessments from 2012-2014. Capacity building and procedural assistance for the PPP Unit is ongoing, with funding for PPP-related support amounting to $52,000 in 2015-2016. A private sector assessment, which was translated into Tetum, was published in 2015. In 2013, PSDI appointed a Dili-based private sector development coordinator. Working out of the ADB Timor-Leste Resident Mission (TLRM), the private sector development coordinator works closely with PSDI’s core team and undertakes ongoing discussions with the Government of Timor-Leste, the private sector, and key stakeholders; assists with PSDI implementation and advocacy activities; and identifies potential private sector reform opportunities. The coordinator also works closely with the Asian Development Bank’s (ADB) sovereign operations team members within the resident mission. Following a re-organization in early 2015, the government has shown increased appetite for reforms to improve the enabling environment for the private sector, and recognition that increased private investment is needed to generate inclusive growth. The reform agenda has been further strengthened by Timor-Leste’s desire to join the ASEAN Economic Community and the subsequent need to demonstrate a coherent policy to promote competitive growth. As a result, PSDI’s portfolio of initiatives grew substantially in 2015 following increased requests for assistance from the government to support its Economic Reform Program. PSDI’s initiatives are now embedded within a government-led strategy to strengthen institutions and align TimorLeste’s policies and laws to promote sustainable growth through private sector development.

CURRENT AND FUTURE PROJECTS

OUTCOMES AND RESULTS

FINANCING GROWTH In 2012, PSDI reviewed laws and policies affecting branchless banking operations for the Central Bank of Timor-Leste and assessed the potential for introducing providers of branchless banking services. In collaboration with the Inclusive Finance for the Under-Served Economy program, PSDI produced a report and presented it to the government in June 2013.

In 2015, PSDI provided momentum for lending environment reforms through a legal and policy review of laws governing collateral. Through a consultative process incorporating inputs from the government, the private sector, and other stakeholders, a policy paper proposing a secured transactions law was completed in late 2015. The next phase of the secured transactions reform will involve finalization of a draft law, completing consultations on the law, and obtaining parliamentary support for its enactment. This is anticipated by early 2017. PSDI was instrumental in transforming the Microfinance Institute of Timor-Leste into National Commercial Bank of TimorLeste (BNCTL) in 2011. Since the change, PSDI has supported BNCTL’s institutional capacity strengthening through targeted advisory support to its board, human resource development, risk management, and strengthened accounting frameworks and audit function. The bulk of ADB’s assistance to BNCTL is now provided under a technical assistance project administered by ADB’s Pacific Liaison and Coordination Office. Within this broader assistance, PSDI is supporting the development of BNCTL’s internal audit capability. This work commenced in May 2015.

ASIAN DEVELOPMENT BANK Pacific Private Sector Development Initiative Pacific Liaison and Coordination Office Level 20, 45 Clarence Street, Sydney, Australia

Tel +61 2 8270 9444 • Fax +61 2 8270 9445 [email protected] • @ADB_Sydney_PSDI www.adbpsdi.org • www.adb.org/plco/psdi

PSDI works with ADB’s 14 Pacific developing member countries to improve the enabling environment for business and address constraints to private sector development in support of sustainable and inclusive economic growth.

PSDI is a regional technical assistance facility co-financed by the Asian Development Bank, the Government of Australia, and the Government of New Zealand.

TIMOR-LESTE

COUNTRY OVERVIEW | AUGUST 2016

CURRENT AND FUTURE PROJECTS

FINANCING GROWTH (CONT’D) In line with the emphasis it places on institutions, PSDI has been working closely with the Central Bank of Timor-Leste (BCTL) since mid-2014 in several areas. One of these was support to BCTL’s Financial Information Unit to prepare a national risk assessment and anti-money laundering/combating the financing of terrorism (AML/CFT) strategy. This work is part of the broader mandate of the National Commission for the Implementation of the AML/CFT, which was established in 2014. The strategy was approved by the Council of Ministers in June 2016. PSDI support to BCTL has also included assistance with the development of the legal and regulatory framework for digital financial services. PSDI consultants worked with BCTL to prepare draft regulations and a policy paper on the use of agents in branchless banking, issues relating to consumer protection, and protecting the e-money float. PSDI is also working with BCTL to review its offsite banking supervision system.

OUTCOMES AND RESULTS

BUSINESS LAW REFORM On request of the government, PSDI provided a review of the company laws in Timor-Leste in 2015. The review makes recommendations to simplify and modernize the laws to bring the companies framework up to global standards and provide greater access to the formal sector. In early 2016, PSDI supported a consultative public-private reform taskforce to review amendments to Timor-Leste’s company laws. Many of the recommendations were incorporated into a new draft company law, which received Council of Ministers’ support in April 2016 and is expected to be presented to Parliament later this year. PSDI also provided a legal diagnostic and policy framework of Timor-Leste’s insolvency laws, which are currently non-functioning and are a hindrance to the growth of the financial sector. The legal diagnostic forms the basis of broader recommendations for insolvency reform. Reforming the insolvency framework is a highly technical process. PSDI conducted an in-country analysis in the first half of 2016 and is working on the insolvency policy framework.

STATE-OWNED ENTERPRISE REFORM AND PUBLIC-PRIVATE PARTNERSHIPS PSDI supported the preparation of a public-private partnership policy and laws, with the first decree law approved by Council of Ministers and promulgated in 2012. The amendment to the first decree law and the second decree law were both approved by the Council of Ministers in 2013 and both were promulgated in early 2014.

CURRENT AND FUTURE PROJECTS

Since early 2014, PSDI has been assisting the government with implementation of the PPP policy and legal framework. In 2012–2013, PSDI financed a PPP pre-feasibility analysis for the Dili Water Supply System, which concluded that a PPP could be structured to improve service delivery. The government endorsed the recommendations in early 2014 and is now funding a full PPP feasibility study. PSDI has been supporting the Dili Water Supply System’s PPP Unit in managing the study, which will be completed in the third quarter of 2016, and is expected to set up a competitive tender for a PPP contract in 2017. This work is being undertaken in parallel with ADB’s Urban Water Supply and Sanitation Enhancement Sector Project and the Directorate of Water and Sanitation’s ongoing system upgrade planning. In addition to the on-the-job training provided through this PPP project development work, PSDI developed detailed procedures and guidelines for the PPP Unit, and is supporting its evaluation of other potential PPP opportunities, in particular in the power sector.

COMPETITION PSDI received a request from the government in 2015 to undertake a review of the country’s competition law and policy requirements. This work commenced in September 2015 and an options paper for the government’s consideration was delivered in June 2016.

ANALYTICAL WORK A private sector assessment for Timor-Leste, Building the Non-Oil Economy, was published in July 2015 and has been translated into Tetum.

ASIAN DEVELOPMENT BANK Pacific Private Sector Development Initiative Pacific Liaison and Coordination Office Level 20, 45 Clarence Street, Sydney, Australia

Tel +61 2 8270 9444 • Fax +61 2 8270 9445 [email protected] • @ADB_Sydney_PSDI www.adbpsdi.org • www.adb.org/plco/psdi

PSDI works with ADB’s 14 Pacific developing member countries to improve the enabling environment for business and address constraints to private sector development in support of sustainable and inclusive economic growth.

PSDI is a regional technical assistance facility co-financed by the Asian Development Bank, the Government of Australia, and the Government of New Zealand.

PACIFIC PRIVATE SECTOR DEVELOPMENT INITIATIVE

TONGA

OVERVIEW

COUNTRY OVERVIEW | AUGUST 2016

Since 2007, Tonga has received $3.67 million in PSDI assistance, including $334,000 in 2015-2016. One-third of this overall figure has been allocated to business law reform initiatives, which have included development of the Pacific’s first multiple-entity registry and numerous legislative reforms. In-country advisory for private sector reform opportunities and the production of two private sector assessments has received 23% of overall funding, while a broad state-owned enterprise (SOE) reform and public-private partnerships program has received 18%. In 2015-2016, financing growth initiatives received the largest proportion of funding—30%—representing work to develop an agriculture supply chaining financing product and support to strengthen Tonga’s pension fund industry. Economic empowerment of women initiatives received 27% of 2015-2016 allocations, which funded the Women’s Business Leadership pilot project and development of a new pilot project supporting women vanilla farmers.

FINANCING GROWTH

CURRENT AND FUTURE PROJECTS

The Personal Property Securities Act was enacted in September 2010 and an online registry went live in April 2011. PSDI also supported amendments to the act, passed in December 2012, and a registry upgrade. While the secured transactions framework is being used, it is not yet fulfilling its potential. PSDI continues to engage with Tongan lenders to increase their uptake of the secured transactions framework, and, since mid-2014, PSDI has been working closely with Tonga Development Bank and key actors in the vanilla industry to develop a supply chain financing product for the industry. The objective is to launch a pilot financing facility, which could be extended to a wider range of borrowers in the vanilla industry and other agricultural sectors at a later stage. Since mid-2014, PSDI has also been working to strengthen Tonga’s pension fund industry. A review of the policies of the Retirement Fund Board was undertaken in late 2015. Further work to the policies to develop a statement of investment beliefs and to improve investment due-process for each asset class has been built on the initial review. The National Reserve Bank of Tonga has requested PSDI assistance to reform the legal and regulatory framework for pension funds. This assistance will commence in the second half of 2016.

BUSINESS LAW REFORM

OUTCOMES AND RESULTS

In 2009, PSDI assisted in preparing the Companies (Amendment) Act. Approved by Cabinet and the Legislative Assembly in September 2009, the act streamlines the Companies Act 1995 and provides for an electronic registry. A hybrid paper/electronic registry went live in December 2009. In 2012, the government requested PSDI undertake design and implementation of a fully electronic company registry. Procurement began in 2014 and in December 2014 Tonga’s innovative online registry went live, allowing users to file and access company records, business names and business licenses all from the one integrated resource, a first in the Pacific Islands. PSDI’s 2012 private sector assessment identified business licensing laws as one of the private sector’s most significant constraints. PSDI subsequently assisted the government with business licensing reform, completing a diagnostic and drafting amendments to the Business License Act. Parliament passed the amendments in late 2012, simplifying the entire licensing regime and reducing transaction costs for business. PSDI also drafted regulations and assisted with advocacy. PSDI supported policy design and drafting of a Receiverships Bill, which was passed by Parliament in 2015 but is yet to commence. Policy consultations and drafting of a Bankruptcy Bill will also be finalized and tabled in Parliament in 2016. PSDI supported consultations on the Foreign Investment Policy and has drafted the Foreign Investment Act, which will be considered by Parliament in 2016.

OUTCOMES AND RESULTS

STATE-OWNED ENTERPRISE REFORM AND PUBLIC-PRIVATE PARTNERSHIPS PSDI has supported a broad based SOE reform program affecting all of Tonga’s SOEs. This has included: • preparing an amended SOE Act and providing governance training; • developing a director performance appraisal system and a skills based director selection process; • developing and implementing community service obligation guidelines; and, • providing training to assist with implementing the amended SOE Act. Tonga is the first Pacific DMC to publish SOE financial and operational performance information in the local press.

TONGA

COUNTRY OVERVIEW | AUGUST 2016

OUTCOMES AND RESULTS

STATE-OWNED ENTERPRISE REFORM AND PUBLIC-PRIVATE PARTNERSHIPS (CONT’D) PSDI supported the partial liquidation of Tonga Print Limited in October 2013. PSDI also assisted with the corporatization and commercialization process of the Small Industries Centre, which was commercialized in September 2012, and TEQM Limited, which is expected to be commercialized in 2016. PSDI developed restructuring recommendations for Tonga Communications Corporation, which Cabinet approved in August 2013 but has not implemented. In the first quarter of 2014, at the request of Tonga Water Board, PSDI undertook an outsourcing scoping study, the implementation of which was completed in 2015. PSDI funded the placement of an SOE expert within the Ministry of Public Enterprises for three months at the end of 2014 to provide transactional support and capacity building, to advise on Tonga Forest Products Limited’s financial restructuring and privatization options, and to assist Tonga Broadcasting Commission to identify and cost CSOs. With PSDI’s assistance, Tonga has become the first country in the Pacific to develop SOE-specific financial targets based on the ministry’s assessment of risk and required return. PSDI also supported the development of a SOE Ownership, Divestment, and Reform Policy, that was adopted by Cabinet in 2014.

CURRENT AND FUTURE PROJECTS

Tonga has participated in all five Finding Balance studies. PSDI has also worked closely with the Asian Development Bank and donor partners to design SOE reform policy actions for inclusion in joint donor program based grants. Through ongoing policy dialogue with PSDI, Tonga agreed in 2015 to undertake further SOE restructuring and governance reforms. PSDI drafted an SOE ownership and divestment policy that identifies seven high priority divestments and includes reform plans for the balance of the SOEs. Cabinet endorsed the policy in the third quarter of 2015. PSDI has also supported the government’s governance reforms and provided policy advice in the development of shared SOE boards. Throughout 2015–2016, PSDI provided advice on privatization options for Tonga Forest Products Limited, culminating in the government’s agreement in May 2016 to enter into a 50-year concession contract with private sector interests to invest in, manage, harvest, and replant the SOE’s forestry assets.

CURRENT AND FUTURE PROJECTS

COMPETITION PSDI commenced a review of Tonga’s competition framework in 2013. In 2014, the Government of Tonga requested priority be given to the establishment of a multi-sector regulator, which PSDI agreed to support. Issues and options for a multi-sector regulator have been discussed with the government and a proposal for a coordinated approach to regulatory and competition reform was provided to the government in the latter half of 2015. The government has also requested support for competition policy reform, which PSDI will provide in the latter half of 2016.

CURRENT AND FUTURE PROJECTS

ECONOMIC EMPOWERMENT OF WOMEN PSDI designed and implemented the Women’s Business Leadership pilot project, which was designed to move women towards leadership positions by: • Providing training on leadership and management, including corporate governance, media management, and business networking; • Obtaining commitment from Tongan businesses to increase the participation and promotion of women employees, thereby instituting change in business culture and commitment to the professional advancement of women; and • Establishing links between Australian and Tongan businesswomen for theirs and their businesses’ mutual development. The project was enthusiastically embraced by leading Tongan companies and government organizations. Three, two-day training sessions were held: in August and November 2015, and February 2016. Another pilot project initiated by PSDI in 2016 will increase women vanilla farmers’ access to supply chain financing, raise their awareness of business law reforms, and evaluate ways for them to access concessional financing.

OUTCOMES AND RESULTS

ANALYTICAL WORK In 2008, PSDI published Transforming Tonga: A Private Sector Assessment, triggering a significant range of reform measures, including company law reform, secured transactions reform, engagement on microfinance, and various initiatives supporting private sector growth. In 2011, PSDI published an update to the 2008 assessment. The update’s findings were presented and discussed at a Central Bank sponsored summit in March 2012, and a final report, Continuing Reform to Promote Growth: An Update of the Private Sector Assessment for Tonga, was published in December 2012.

ASIAN DEVELOPMENT BANK Pacific Private Sector Development Initiative Pacific Liaison and Coordination Office Level 20, 45 Clarence Street, Sydney, Australia

Tel +61 2 8270 9444 • Fax +61 2 8270 9445 [email protected] • @ADB_Sydney_PSDI www.adbpsdi.org • www.adb.org/plco/psdi

PSDI works with ADB’s 14 Pacific developing member countries to improve the enabling environment for business and address constraints to private sector development in support of sustainable and inclusive economic growth.

PSDI is a regional technical assistance facility co-financed by the Asian Development Bank, the Government of Australia, and the Government of New Zealand.

PACIFIC PRIVATE SECTOR DEVELOPMENT INITIATIVE

VANUATU

OVERVIEW

COUNTRY OVERVIEW | AUGUST 2016

The greatest proportion of PSDI’s spending in Vanuatu is on business law reform, which accounts for 38% of the $2.35 million in PSDI assistance the country has received. This proportion increased dramatically over the past two years—it was 78%, or $464,000, of 2014-2015 spending and 37%, or $171,000, of 2015-2016 spending—with the creation of a multiple entity business registry, which was launched in August 2015. Prior to 2014-2015, financing growth initiatives had received the most funding, with the $605,000 spent in total used to strengthen the institutional capacity of the Vanuatu Financial Services Commission, support the creation of a secured transactions framework, and pursue microfinance related activities. State owned enterprise (SOE) reform has received 12% of overall funding but just 4% of 2015-2016 spending after preparation of an SOE policy and act was completed and ongoing support moved to identifying SOE reform priorities and providing training for SOE directors. Spending on economic empowerment of women initiatives and support for competition reform each amounted to 21% of 2015-2016 funding, representing business development awareness raising with local womens groups and a review of Vanuatu’s competition framework.

FINANCING GROWTH

OUTCOMES AND RESULTS

PSDI provided assistance to strengthen the capacity of the Vanuatu Financial Services Commission (VFSC), Vanuatu’s main nonbank regulatory and supervisory body (both off- and on-shore). PSDI also reviewed the International Financial Centre’s structure and operations, and recommended actions for its corporate strategy. PSDI supported the creation of Vanuatu’s secured transactions framework reform through the drafting and passage of the Personal Property Securities Act, which the Government of Vanuatu passed in July 2008. Through PSDI, an electronic registry was installed in April 2009 to record the filing of security interests. PSDI also supported a registry upgrade in February 2012. Lenders are using the new framework, but further support to identify applications of movables finance is necessary to maximize its benefits. Initially, the most active users of the new framework have been wholesaler businesses, which have increased their credit limits tenfold by securing their loans. Lately, banks have made greater use of the framework, especially in taking general security interests. In 2012, PSDI completed a diagnostic for the Reserve Bank of Vanuatu and VFSC on the legislative framework for microfinance. The diagnostic identified legal provisions to ensure that unregulated microfinance institutions taking deposits are adequately regulated to protect the interests of deposit holders.

CURRENT AND FUTURE PROJECTS

Also in 2012, PSDI assisted the Vanuatu Women’s Development Scheme to strengthen its strategy and governance. PSDI facilitated workshops with the management and board and introduced the organization to international microfinance practices. Since mid-2014, PSDI has been assisting with the drafting of a new trustee bill to improve Vanuatu’s compliance with international commitments and its reputation as an offshore financial center. PSDI is also working with VFSC on issues related to the Financial Action Task Force guidelines—standards for anti-money laundering and countering terrorism financing—to ensure the international companies regime is best practice. In mid-2014, PSDI began working more closely with lenders to increase their use of the secured transactions framework. This includes identifying transactions where movable assets could be used as collateral, such as financing civil construction contractors using accounts receivable as collateral.

OUTCOMES AND RESULTS

BUSINESS LAW REFORM PSDI supported a comprehensive reform to foundational business laws in partnership with the Vanuatu Financial Services Commission and the State Law Office. A new Companies Act was passed by Parliament in September 2012 and the Companies (Insolvency and Receiverships) Act and Insolvency (Cross Border) Act were passed by Parliament in 2013. PSDI support for the implementation of these acts culminated in the launch of an online companies, business names, and charitable associations registry in August 2015. The multiple-entity registry has reduced the average time for company and other business entity registrations from more than three weeks to less than three days, and made payments and other regulatory requirements simpler and more convenient. While PSDI supported the drafting of a Personal Insolvency Bill as part of an insolvency reform package, the government indicated in 2014 that this had become a lower priority. PSDI stands ready to re-engage when government priorities change. PSDI will undertake a review of the registry implementation to ensure the transition to an online service is progressing smoothly. It is anticipated that further work on the reform of trustee laws will continue through 2016 along with support for PSDI’s financing growth work in the development of a capital markets reform agenda.

VANUATU

COUNTRY OVERVIEW | AUGUST 2016

CURRENT AND FUTURE PROJECTS

STATE-OWNED ENTERPRISE REFORM AND PUBLIC-PRIVATE PARTNERSHIPS At the Government of Vanuatu’s request, PSDI completed a public–private partnership assessment for a proposed new slipway in the fourth quarter of 2014. The study confirmed that no public investment in slipway facilities was required as private investors were already expanding existing infrastructure and competition existed in the sector. PSDI supported preparation of an SOE reform policy, which was approved by Cabinet in October 2013. The policy has guided the development of an SOE bill that will place SOEs on a firm commercial footing and enhance governance, monitoring, and accountability frameworks. The bill has been drafted with substantial PSDI input and oversight. It was considered by Cabinet and the Government plans to introduce the bill to Parliament in November 2016. Throughout 2014, PSDI supported a separate Asian Development Bank (ADB) technical assistance (TA) project on SOE reform in Vanuatu. The project concentrated on eight SOEs identified as reform priorities, for which it developed restructuring proposals, assisted in bringing audited accounts up-to-date, and identified and costed community service obligations (CSOs). On completion of the project, four of the SOEs were selected for either liquidation or partial privatisation. Cabinet papers were prepared and in some cases approved by Cabinet, but following the change of Prime Minister and Minister of Finance in June 2015, Cabinet determined to reconsider all recent decisions. PSDI is now working with the Ministry of Finance to progress the privatization/liquidation of two of the SOEs. It is expected that the transactions will be complete in 2016–2017. In collaboration the ADB TA, PSDI provided governance training for SOE directors, capacity building for the SOE Monitoring Unit, and the development of an SOE director performance assessment tool.

COMPETITION Following a request from the government, PSDI commenced a review of the country’s competition law and policy requirements in August 2015. An issues paper titled Competition Policy and Law for Vanuatu was delivered to the government in early 2016 and a workshop with government representatives was held in June 2016.

ECONOMIC EMPOWERMENT OF WOMEN

CURRENT AND FUTURE PROJECTS

An analysis of the constraints to women’s economic empowerment has been included as a chapter in PSDI’s forthcoming private sector assessment for Vanuatu. In partnership with UN Women and the Vanuatu Financial Services Commission (VFSC), PSDI will be working with women’s groups to increase awareness of the opportunities for, and benefits of, business formalization, and how to access finance using the secured transactions framework. PSDI, with VFSC, will also provide training to women working in corporate settings or for government bodies on corporate and SOE governance.

OUTCOMES AND RESULTS

ANALYTICAL WORK PSDI published Sustaining Growth: A Private Sector Assessment for Vanuatu in 2009. Vanuatu features as a case study in PSDI’s 2014 publication Unlocking Finance for Growth: Secured Transactions Reform in Pacific Island Economies. Another case study by PSDI on secured transaction reform in Vanuatu was included in Enhancing SME Access to Finance: Case Studies, a book published by the Global Partnership for Financial Inclusion in June 2015. A new private sector assessment for Vanuatu, including a financial sector assessment, is scheduled to be published in late 2016.

ASIAN DEVELOPMENT BANK Pacific Private Sector Development Initiative Pacific Liaison and Coordination Office Level 20, 45 Clarence Street, Sydney, Australia

Tel +61 2 8270 9444 • Fax +61 2 8270 9445 [email protected] • @ADB_Sydney_PSDI www.adbpsdi.org • www.adb.org/plco/psdi

PSDI works with ADB’s 14 Pacific developing member countries to improve the enabling environment for business and address constraints to private sector development in support of sustainable and inclusive economic growth.

PSDI is a regional technical assistance facility co-financed by the Asian Development Bank, the Government of Australia, and the Government of New Zealand.