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FEMM Private Sector Dialogue
Introduction
Institutional
Reform
Public
Enterprise Governance and Management
Public Sector Economic
Governance
Economic Reform and
Regional Integration
Outcomes Document (by the Pacific Islands Forum
Secretariat)
FORUM
ISLAND COUNTRIES
PRIVATE SECTOR DIALOGUE
Rotorua, New Zealand
7 June 2004
SUMMARY RECORD
The Private Sector Dialogue was held in Rotorua, New Zealand
on 7 June 2004. The Meeting was chaired by Mr. Gareth Chaplin of the New
Zealand Department of Treasury and was attended by private sector
delegates from Australia, Cook Islands, Fiji, Kiribati, New Zealand,
Niue, Palau, Papua New Guinea, Republic of the Marshall Islands, Samoa,
Solomon Islands, Tonga and Vanuatu.
2.
Observers were present from Asian Development Bank, the Foreign
Investment Advisory Service, the University of the South Pacific, the
South Pacific Tourism Organisation, the United Nations Development Fund
for Women, the Pacific Islands Development Programme, and the Caribbean
Association of Industry and Commerce.
3.
The first four sessions of the Dialogue were based around issues
to be considered by Ministers at FEMM who would have before them the
outcomes from this component of the Dialogue for their consideration.
The remaining sessions (which continued through 8 June) focused on
issues of specific interest to private sector engagement and
collaboration.
4.
Strong messages from the Dialogue were that the private sector
was the source of growth and economic performance for countries, and
they accordingly sought opportunities for partnership with the
Government
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Institutional Reform
5.
Professor Kenneth Jackson (Auckland University), in his
presentation to the Dialogue, highlighted three key issues - the
importance of institutional change in supporting economic reform; that
institutional reform has transaction costs and that country size often
determines the impacts these costs have; and finally, that attitudes to
institutional reform need to change because they affect how people
accommodate economic reform. Professor Jackson considered that
institutions, in the context of his presentation, went beyond ‘brick and
mortar’ organisations and included markets, and social institutions such
as customs, traditions and religion.
6.
The Dialogue noted that theories on institutional change were
predicated on fully monetarised economies, which was not the case in the
FICs. Furthermore, that the private sector could also be termed an
institution under the broad interpretation adopted. Institutional
reforms are a prerequisite to economic growth, and the engagement of the
private sector is crucial to this growth.
7.
The importance of appropriate mechanisms to effectively regulate
competition was also discussed. The Dialogue heard that the quest for
efficiency was the main driver for enhancing competition and that an
ideal environment, in the Pacific context, was one where selected
Government departments were corporitised around ‘hard budgets’.
8.
The Dialogue noted that regulations in FICs were often archaic
and had not kept pace with technological change, with specific examples
cited from the telecommunications industry. The suggestion was made that
reviews of policies and accompanying legislations be made periodically
to ensure their relevance. It was recognised that this would place
increased demand on government capacity. Other instances of poorly
adapted transplanted legislation were also cited.
9.
The importance of ensuring that due process was followed in
carrying out regulatory functions was also emphasised. The Dialogue
heard that, in PNG’s case for example, there was too much managerial
discretion, which not only lengthened the regulatory process, but
increased opportunities for rent seeking behaviour.
10.
In sharing in-country reform experiences, the lack of capacity
was the main obstacle highlighted to the full implementation of certain
institutional reforms.
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Public
Enterprise Governance and Management
11.
Mr Matt Hodge of New Zealand Treasury spoke on the issue of
public enterprise governance and management. He highlighted that there
is a wide variety in the perception of what governance means, but that
in the context of public enterprises, boards played a governance role
and set the policy direction, which the management was responsible for
implementing.
12.
The Dialogue drew attention to a critical aspect of governance -
the clear separation of powers between government ministers, board
members and the management of the organisation. Sequencing of reforms
and divesture of government ownership in public enterprises was also
important and considered a part of the process of creating efficient
public enterprises.
13.
The Dialogue recognised the importance of legislation prescribing
board membership; the roles and responsibilities of government, boards
and management; and, the objectives of specific SOEs, in addressing some
of the difficulties faced by many of the FICs. Samoa’s Public Body
(Performance and Accountability) Act 2001 was given as an example of
model legislation, which addresses some of the corporate governance
issues. The Act identifies the process and procedure for SOE board
member appointment; roles, responsibilities and eligibility requirements
of board members and the Minister’s role in the process and government’s
responsibility in transparently funding community service obligations.
14.
Factors such as strengthening oversight of public enterprises,
flow of public information on public enterprise performance and
benchmarking performance were noted as being areas for potential
improvement. Difficult areas in addressing public enterprise governance
and management were recognised as balancing social economic objectives,
particularly for some of the public utility companies; sequencing of
changes, and enforcing accountability.
15.
The Dialogue considered that implicit to privatisation was a
consequent improvement in the quality of services but they recognized
costs of these services tend to remain high for many Pacific countries.
Regulation was deemed a necessity while consideration should be given to
identifying where the operations of public enterprises could be most
effectively managed. In many of the Pacific countries, it was difficult
to separate the functions of regulation and ownership of SOEs within
governments, and therefore, it was suggested that there was a need to
regionalize regulatory issues, through the use of regional experts to
conduct national evaluations. Through publicly posting the findings of
such evaluations, public debate could promote transparency and increased
effectiveness of accountability mechanisms.
16.
Caution, however, was expressed on the expectation of legislation
addressing many of the difficulties faced with public enterprise
governance. While many Pacific countries may have legislation
addressing one issue or another, compliance and enforcement was deemed
as the largest obstacle to effective governance. It was noted that
regional support for corporate governance training was provided through
the University of the South Pacific.
17.
The Dialogue considered that Ministers may wish to consider the
following issues in the course of their discussions:
·
Private sector bodies (including Chambers of Commerce)
could assist in the process of public enterprise governance, both from
regional and national perspective but consideration must be given to, in
the first instance, strengthening their capacity;
·
Regional entities (including the private sector) may,
through economies of scale, be efficient ways to provide expertise,
audit functions, advice and frameworks that identify problems and
possibly solutions to these problems, specific to public enterprise
governance, including issues such as appointment of board members, roles
and responsibility of government, board and management; and
·
Making more transparent the community service obligations
of public enterprises and government subsidies in respect of these.
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Public Sector Economic
Governance
18.
Transparency International (TI) presented a paper highlighting
the outcomes of their National Integrity Systems (NIS) conducted in 12
Forum Island Countries. The NIS findings ranged from concerns regarding
abuse of official travel; favouritism in appointments/contracts; and
‘pet project’ budgeting. Higher risk areas for corrupt practices were
likely to be in the administration of police, customs, forestry,
fisheries, land resources, ports, health and education, retirement
funds, tendering of contracts, trade in tokens of sovereignty
(passports, domain names), and offshore banking.
19.
The studies found that institutions perceived as not being
corrupt included national judicial systems; electoral administration
systems and audit offices. It was recognised as being important to
distinguish traditional practices from what could be considered
corruption.
20.
The studies suggested the need for greater political will to act
against corruption; the need for independent corruption commissions;
national strategies to address corruption; a higher demand for
anti-corruption institutions, stronger coalitions between the
public/private sector and NGO bodies; and stronger support for
accountability and transparency.
21.
The Dialogue noted that where public sector governance had broken
down, there were more opportunities for individual corruption, resulting
in a higher cost being borne by society. There was a need to strengthen
and promote the role of key national institutions, including the role of
the media and civil society, to ensure the checks and balances worked.
22.
The Dialogue also noted that in most countries, the independent
institutions required to ensure the integrity of the public sector
already existed. However, they were typically ineffective due to the
lack of political support, poor resources and constrained capacity.
23.
The Dialogue highlighted the need to address national processes,
sometimes allowed by law, which gave discretionary powers to individuals
who could be compromised by a conflict of interest. For example, boards
that screened applications from prospective investors sometimes had
private sector representatives who were then privy to confidential
commercial information from possible rivals.
24.
A number of Forum countries had signed up to OECD and ADB
initiatives aimed at reducing corrupt practices. The Forum Regional
Security Committee had indicated support for a regional approach on such
issues.
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Economic Reform
and Regional Integration
25.
The Forum Secretariat cited regional integration as a response to
globalisation and noted the benefits of closer cooperation. Key areas in
which integration could be promoted included labour market reforms and
mobility, regulatory reforms, competition, and legal frameworks.
26.
The Chair noted that the impetus for current regional integration
provided by the Leaders at their Auckland meeting, held in April 2004.
He further noted that the issues of labour and regulatory reforms, which
were discussed earlier in the day, was again relevant. Concern was
expressed that the issue of the movement of people/labour mobility was
such that governments were not responding or facilitating this access
despite the gaps in the markets and increasing job opportunities. UNIFEM
advised the meeting they were undertaking a study of female migrant
workers.
27.
The Dialogue stressed that regional integration encompassed a
range of issues which were crucial to the operations of the private
sector. The Dialogue wished to be involved in Government decision making
in a more participatory manner and not merely to meet the needs of
Governments consultative process. More emphasis must be placed on
working together with Government as partners and not just through
consultations. Furthermore, the private sector was not given enough
credit in the developmental process.
28.
On trade agreements, it was felt that there insufficient
awareness amongst the private sector and other communities. In-country
examples were shared and queries raised on how regional integration
(more specifically integration of the Pacific region with other regions)
would serve nations when new market entrants may impact negatively on
national industries - for example, pearl farming and fisheries (in the
Cook Islands).
>Back to Beginning<
Private Sector
Dialogue
Rotorua, New Zealand; 7-8 June 2004
Outcomes Document
Representatives
of the region's private sector met in Rotorua, New Zealand on 7-8 June
2004 to discuss ways to improve linkages within the private sector as
well as between the private and public sectors. They shared experiences
and agreed that such partnerships, when meaningful and effective, will
strengthen the region's business environment thereby facilitating
private sector development in the Forum Island Countries (FICs).
2. The Dialogue was attended by
representatives from 14 Forum Member countries namely Australia, Cook
Islands, Fiji, Kiribati, New Zealand, Niue, Palau, Papua New Guinea,
Republic of Marshall Islands, Samoa, Solomon Islands, Tonga, Tuvalu and
Vanuatu. Also present were Observers from the Asian Development Bank (ADB),
Caribbean Association of Industry and Commerce (CAIC), Foreign
Investment Advisory Service, Pacific Islands Development Programme,
South Pacific Tourism Organisation, Transparency International, United
Nations Development Fund for Women and the University of the South
Pacific. The Pacific Islands Forum Secretariat facilitated the
Dialogue.
3. The Dialogue first focussed on key issues
before the 2004 Forum Economic Ministers Meeting, and
examined the role of Institutional
Reform in Development, Public Enterprise Governance and Management,
Public Sector
Economic Governance, and Regional Integration and Economic Reform. This
provided Ministers with a private sector perspective on the given key
economic issues.
4. The Dialogue participants agreed that
regular exchanges and contacts amongst themselves, with the public
sector as well as with regional and international agencies is key to
ensuring the dissemination of information on appropriate engagements,
support facilities and training opportunities relevant to private sector
development in the region. They also felt there was a need to network
with their counterparts in the Caribbean Community and other regions
having similar interests.
5. The participants noted the ADB’s
Pacific Strategy 2005-2009: Responding to the Priorities of the Poor,
and recognised the thrust of the recommendations of the publication,
entitled Swimming Against the Tide? An Assessment of the Private
Sector in the Pacific. Its recommendations need to be actioned
especially on how the private sector, in partnership with the public
sector and other stakeholders, could contribute towards the alleviation
of poverty in the region. They encouraged the support of their own
Governments and the Forum Secretariat to assist the ADB, wherever
possible, in implementing its Pacific Strategy.
6. The participants also noted the Forum
Secretariat’s Regional Private Sector Development Strategy (PSDS).
7. As part of the PSDS’ implementation,
participants agreed to pursue the following within the next 12
months:
a)
support the idea of intensifying regional co-operation by
strengthening National Private Sector Organisations and seeking the
assistance of the Forum Secretariat in exploring the viability of
establishing a Pacific Regional Private Sector Forum, Body or Council
and that CAIC to assist facilitate this endeavour;
b)
seek donor assistance to support the proposal for a Regional
Business Forum to be attended by private sector representatives (drawn
from existing Chambers of Commerce; national industry and business
associations; micro, small and medium enterprises; and other interest
groups) to consider the findings of the Secretariat on the proposed
Pacific Regional Private Sector Forum, Body or Council and discuss other
issues of strategic concern to the development of the private sector;
and,
c)
support the proposal for a Regional Entrepreneurship and
Enterprise Development (EED) Trainers’ Training Programme that would
lead to the introduction of EED into the region's high school
curriculum.
8. FIC Governments were urged to collaborate
with the private sector in developing/strengthening their own National
Private Sector Strategy.
9. Finally, the participants requested the
Secretariat to continue supporting initiatives that facilitate the
development of the private sector, through information sharing, capacity
building and the strengthening of consultative mechanisms at both the
national and regional levels.
Pacific Islands Forum Secretariat
Rotorua, New Zealand
8 June 2004
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