Article | 26 October 2020

“Doing business in the Pacific is hard, but sweeping reforms carried out by the Pacific Private Sector Development Initiative (PSDI) are breaking down the barriers to business in the region. PSDI is holistic, demand-driven, and 14 years on its approach is still working and very much wanted”, said Terry Reid, International Business Law Expert and one of the founding team members of PSDI.

PSDI is a regional technical assistance program undertaken in partnership with the Government of Australia, the Government of New Zealand, and the Asian Development Bank.

Since 2007, PSDI has helped alleviate poverty and promote economic growth in ADB’s 14 Pacific developing member countries through reforms that reduce the constraints to doing business and promote inclusive growth, entrepreneurship, and new business models.

From PSDI’s inception, the support of the Government of Australia and New Zealand’s support since 2013 has enabled PSDI to assist the Pacific with more than 300 reforms.

The overall goal of PSDI is to reduce unnecessary costs of doing business in the Pacific and enable private sectors to formalize and grow, which creates jobs, increases tax revenues, and lifts people out of poverty.

To achieve this, PSDI helps Pacific countries address the problems outlined above through its five focus areas, which: modernize business laws, develop better financial markets and services that increase access to finance, reform state-owned enterprises and pursue public-private partnerships, establish effective competition and consumer protection frameworks, and advance the economic empowerment of women.

A series of reforms to business and competition laws, lending, and state-owned enterprises delivered permanent benefits to the Solomon Islands economy.

The launch of the Pacific’s first online business registry, the Company Haus 10 years ago, made business formalization much cheaper and faster. Assistant Registrar of Companies, Veronica Manedika, has worked at the Solomon Islands Business Registry from the beginning and says, “the Company Haus has made it easier to conduct business here. When we went online, suddenly businesses could be incorporated in just an hour, instead of waiting weeks to do that.” Since the new Companies’ Act became effective in 2010, nearly 4900 new companies have registered with the Company Haus.

The new Companies Act made it possible for community groups to form companies and for women to register as sole traders-encouraging more women to be involved in business.

Another key to PSDI’s effectiveness and longevity is its unique structure, which allows it to respond quickly and provide assistance to Pacific governments' requests, working through its team of experts.

“PSDI is flexible and fast,” says Lotte Schou-Zibell, Regional Director of ADB’s Pacific Liaison and Coordination Office in Sydney. “PSDI is able to scale-up or down, pause or postpone support, should conditions require. This flexibility allows us to allocate resources where they are most needed and where the will for reform is strong.”

This year, the coronavirus disease (COVID-19) pandemic has inflicted unprecedented new economic challenges on Pacific governments. COVID-19 has closed borders, suspended international travel, and adversely affected lives and livelihoods globally. The COVID-19 pandemic has severely hit tourism, with the South Pacific economies the most affected. 

The economic impacts of COVID-19 are widespread across the Pacific, threatening many businesses’ survival and raising unemployment across the region. Pacific governments were quick to implement emergency fiscal responses, which will increase public debt while lower economic activity will reduce public revenue, creating additional economic constraints for Pacific governments.

Because of PSDI’s flexible and fast structure, it was able to provide rapid assistance to the Cook Islands and Papua New Guinea governments as they worked to develop legislation to help businesses and individuals withstand the economic impacts of the pandemic. With PSDI’s support, the Cook Island Economic Response Bill was passed by Parliament in July this year and Papua New Guinea’s business response bill is anticipated to pass by the end of the year.

In a post-COVID-19 world, the private sector will play an important role in economic recovery. PSDI’s long-standing work will be critical to helping the private sector contribute most effectively to economic recovery when borders open and social and economic activities resume.

During COVID-19, people rely on fast, reliable internet more now than ever before to pursue a range of activities that the virus prevents them from doing in person. ADB has financed some of the region’s submarine fiber-optic cables in Cook Islands, Palau, Samoa, and Tonga.

The Pacific’s improved internet services have enhanced the benefit of reforms supported by ADB's PSDI, according to the Cook Islands Prime Minister, Mark Brown.

“We are very appreciative of the private sector development initiative. They have been tremendous in assisting us with the legal work needed to implement and commission our submarine cable project. PSDI also gave us some great advice on shipping services. The speed of response, the timeliness, the effectiveness of their work has been very, very good.” 

With requests for its support continuing to grow, PSDI has been extended to 2024 with increased funding and an expanded scope—thanks in part to the Government of Australia’s increased support for PSDI's work in Papua New Guinea through the PNG Australia Partnership. PSDI’s expanded scope in Papua New Guinea includes: Developing a world-class new, online business registry, support for a significant reform program to improve the management and performance of PNG’s state-owned enterprises (SOEs), continued work to increase the availability of finance for PNG businesses including through the development of innovative financing products, and implementing the new National Competition Policy.

PSDI achievements:

• Establishing secured transaction frameworks established in ten countries, making it easier for lenders to accept movable assets, such as vehicles, inventory, accounts receivable, and crops, as collateral for loans, and resulting in the number of secured loans issued more than tripling, on average;
• Establishing online business registries in five countries, dramatically increasing the rate of company formation. This has made new investments possible and spurred formal economic activity and job creation;
• SOE reforms that have more than doubled the profitability of infrastructure SOE portfolios in five countries. Improved governance frameworks and support for privatizations and public–private partnerships have further advanced this agenda;
• Establishing or strengthening competition and consumer protection safeguards, with assessments of competition and regulatory frameworks undertaken in seven countries, competition policies or laws supported in three countries, and dedicated support for three competition commissions ongoing;
• Five PSDI pilot projects have demonstrated approaches to help women gain technical skills, establish formal businesses, access credit and markets, or reach senior professional roles. Meanwhile, PSDI has assessed the impact on women of all its outputs.