State-Owned Enterprises Underperform: Is It Time for Accountability and Reform?
By Staff, Financial Correspondent
Tonga’s state-owned enterprises (SOEs) are showing troubling signs of financial inefficiency and weak returns, based on the latest data made publicly available for the year 2022. With questions mounting over their performance, the spotlight turns to whether the Ministry of Public Enterprises is enforcing enough oversight — and if top-level management should be held to account.
A portfolio review of 12 major SOEs shows a combined Return on Assets (ROA) of just 0.5%, a figure that suggests limited productivity and poor capital utilisation. Despite controlling more than T$500 million in assets and generating T$163 million in revenue, the group delivered a total net profit of only T$2.6 million. This raises the question: is the public getting value from its investment in these enterprises?
Among the most underperforming are:
- Tonga Market Corporation Ltd (TMCL): With liabilities more than six times its assets, TMCL is functionally insolvent and posted a net loss in 2022.
- Tonga Airports Ltd (TAL): Despite having one of the largest asset bases, TAL suffered the highest loss of the group — a staggering T$4.9 million.
- Friendly Islands Shipping Agency (FISA): FISA’s liabilities exceeded its assets, raising major concerns over solvency and operational sustainability.
Even larger and more strategically critical entities like Tonga Power Ltd (TPL) and Tonga Communications Corporation (TCC) delivered only modest profits, with ROAs below 1% — figures that would be deemed unacceptable in most private-sector environments.
Some enterprises, however, did post relatively healthy results. Ports Authority Tonga (PAT) and Waste Authority Ltd (WAL) demonstrated that profitability is possible, offering rare examples of financial discipline within the public sector.
The Numbers Behind the Performance
A five-year snapshot of the combined financial performance of Tonga’s SOEs (2018–2022) reveals a steady decline in profitability:
Year | Revenue (T$’000) | Net Profit (T$’000) | Total Assets (T$’000) | Total Liabilities (T$’000) | ROE % | ROA % |
2018 | 157,599 | 15,432 | 500,642 | 212,824 | 6% | 3% |
2019 | 167,163 | 10,986 | 505,488 | 222,735 | 4% | 2% |
2020 | 164,121 | 3,049 | 532,027 | 238,713 | 1% | 1% |
2021 | 151,924 | 3,969 | 529,111 | 276,471 | 2% | 1% |
2022 | 164,007 | 1,848 | 506,955 | 244,419 | 1% | 0% |
The trend is clear: net profits have plummeted, return on equity has dropped significantly, and asset efficiency is stagnating.
Who’s Pulling Their Weight?
An enterprise-by-enterprise breakdown for 2022 shows the depth of the problem:
oEnterprise | Revenue (T$’000) | Profit (T$’000) | Assets (T$’000) | Liabilities (T$’000) |
TPL | 77,502 | 1,409 | 158,795 | 95,378 |
TMCL | 2,161 | (40) | 3,315 | 20,590 |
FISA | 7,636 | 745 | 11,650 | 11,911 |
TBC | 2,151 | 244 | 6,974 | 4,443 |
TCC | 34,533 | 301 | 80,325 | 34,367 |
PAT | 12,606 | 1,473 | 31,315 | 6,874 |
TWB | 10,247 | 1,345 | 22,450 | 16,688 |
WAL | 6,140 | 488 | 6,803 | 2,551 |
TAL | 7,471 | (4,867) | 79,211 | 17,737 |
TPost | 2,161 | 33 | 26,619 | 20,589 |
TAMA | 860 | (467) | 14,061 | 1,747 |
TCL | 8,175 | 1,929 | 77,087 | 23,455 |
Several high-revenue enterprises are delivering disproportionately low returns. Others are outright loss-making or on the edge of insolvency.
Is It Time to Privatise?
With results like these, questions about structural reform are inevitable. The Ministry of Public Enterprises, charged with oversight, must answer for the worsening trends. Are performance targets being monitored? Is senior management being held accountable?
Tonga must also confront a more controversial issue: whether some enterprises should be privatised. In areas such as shipping, airports, and postal services — where market competition and private capital could improve efficiency — the argument for divestment or public-private partnerships is becoming harder to ignore.
Time for Tough Decisions
Tonga Independent has contacted the CEO of Public Enterprises for updated financial statements for 2023 and 2024, with particular interest in FISA, TAMA, and TAL. As stakeholders await these updates, one thing is clear: transparency and decisive action are urgently needed.
Chronic inefficiency and poor returns must no longer be met with inaction. If public enterprises cannot meet basic benchmarks for performance and accountability, then reform — or replacement — should be on the table.
The people of Tonga deserve better than stagnation. The time for tough decisions is now.
