Key Note Address by Hon. Afu'alo Matoto at 1st PE CEO Forum

26 June 2009.

The Government has adopted a new framework for National Strategic Planning beginning July 2009 with a longer term of 5 to 10 years.

The framework provides key objectives for the line Ministries and their ‘Core Stakeholders' for the development of their strategic action plans with outputs to contribute to achieving these key objectives.

The Strategic Planning Framework has ‘Seven key Objectives' and ‘Four Enabling Theme.' Briefly the seven objectives are:
1. Facilitating Community Development
2. Supporting private sector growth
3. Facilitate Constitutional Reform
4. Infrastructure development
5. Increase Training performance
6. Improve health, and lastly
7. Integrating environmental sustainability and climate change into all planning and executing of programs

The Public Enterprises are core stakeholders to the Ministry of Public Enterprises and your contributions to the achievement of the Planning framework is vital.

Once of the four enabling themes relates directly to public enterprises, namely:-
1. Ensure State Owned Enterprises are accountable to government as owner and that they provide dividends for the benefit of the people in proportion to capital invested.

The other there enabling themes are:
1. To continue progress to smaller and more efficient government to transfer resources to improved services and maintenance of resources
2. Improve the effectiveness of revenue collection to ensure a level playing field and that services to the people can be appropriately funded
3. Ensure a more coordinated whole of government approach to donor funding

The theme directly concerning public enterprises has clear instructions on what the shareholder requires:
• To be accountable to the government and
• Provides dividends....proportionate to the capital invested
I know the public enterprises can not do this on their own and therefore a partnership approach is necessary. That is the Government, as shareholder, must plan its role: as an enabler, facilitator, regulator, and funds provider.

On that note, I will share with you what policies and strategies the Government of Tonga has in place to ensure PE's are allowed to contribute to the ‘Seven Core Objectives' and the ‘Four Enabling Themes' but particularly the Enabling Theme concerning PEs.

The Ministry of Public Enterprises:
The setting up of the Ministry of Public Enterprises in 2006, was a sign that the shareholder (GOT) requires better performance, financially and in output form the public enterprises and a better return for its investments. The Ministry, I am sure has been playing a vital link, seeking compliance and at the same time providing advice and monitoring performance for the Government, the Stakeholder.

Technical Assistance and Support
The Ministry sees fit to acquire technical support to assist the growth and improvement of PEs. The ADB is providing consultants who are working along side the Ministry's team to rationalize the PEs to improve performance, corporate governance and where necessary privatise or wind.

Governance:
Research finding have proven that a good independent private sector Board of Directors, in most cases, lead to successful Public Enterprises. The Government of Tonga has accepted this finding and is progressively independent private directors to the Boards of Directors of Public Enterprises. The aim is to complete this exercise by May 2010.

Legislative Framework:
The aim is to create a level playing field so that PEs and private sector players can compete fairly. For the PEs, his means allowing them to make decisions on commercial basis and adopt commercial discipline.
The GOT is of the opinion that PEs should grow but this growth must not be at the expense of the private sector.
Currently the Ministry of Public Enterprises is reviewing the Public Enterprises Act 2002 to reflect these commercial realities. It will also remove any conflict in its own Act and the Acts specific to some PEs.

Government buying services from the PE-CSO
Gone are the days when Government, as shareholder, gets services or products for free or on reduced prices. The Government will pay commercial rates for services it requires PE's to provide, to ensure the commercial viability of the PE. This will continue into the future. Do not do something at a cost and then seek Government CSO funding, enter into agreement first and then provide the service.

Competitive Environment and Private Sector Participation
The Growth of the private sector is important for the Growth of the National Economy. As thus GOT has allowed private sector participation in supplying for Government needs or invest even in Public Enterprises. This has created competition and more participation by the private sector, allowing more public funds to go to social services such as education or health and other public needs.

The PE and the CEO
These framework and enabling themes in themselves do not ensure that PE's are successful and will contribute to the needs of the shareholder as required by the Enabling Theme:
‘Ensure State Owned Enterprises are accountable to government as owner and that they provide dividends for the benefit of the people in proportion to capital invested.'

What must be in place also is a:
Pro-active, innovative, aggressive, forward looking, well resourced organization that is prepared to take risks with clear goals and time frame. With a Board of Directors which is ready to provide strategic direction and to govern and a CEO who has vision, strategic thinking, business acumen, entrepreneurial skills, leadership and motivation they will create a culture and take responsibility to encourage growth and commercial profitability.

People with the right skills and experience are vital to any organization.

Government, as the stakeholder, and myself as the representative of the shareholder, expects you as CEOs, to make the vision as reality and to contribute to the objectives and provide compliance with the enabling themes.

The GOT has set some operational financial goals for PEs including the 10% Return on Equity and dividend payment of at least 50% of net profit. The performance against these goals have been poor in the past. I am sure my staff shared the recent ADB survey findings of PEs in Tonga with you. WE MUST IMPROVE ON THESE RESULTS.

I know the rest of the speakers' to-day will share some of their views with you on how this can be achieved. But I believe each and everyone must have some strategy that can assist.

I urge you to share these ideas and to work smart and be innovative to add value to the investments in each respective PE's.

To conclude I hope you will have a fruitful and beneficial forum. I would like also to thank the speakers for agreeing to share their thoughts and experience with you.


MALU ‘AUPITO.


 

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