State asset divestment sparks ‘fire sale’ fears

GEISHA KOW­LESSAR-ALON­ZO

Se­nior Re­porter

geisha.kow­[email protected]

The Gov­ern­ment’s pro­posed sale of sev­er­al State-owned as­sets has trig­gered sharp crit­i­cism from Op­po­si­tion mem­bers, who warn that the coun­try risks los­ing valu­able na­tion­al hold­ings, while econ­o­mist Dr Ronald Ramkissoon ar­gues that di­vest­ment could ben­e­fit cit­i­zens if the process is trans­par­ent, prop­er­ly struc­tured and aimed at cre­at­ing long-term val­ue.

The is­sue has come in­to fo­cus fol­low­ing Prime Min­is­ter Kam­la Per­sad-Bisses­sar’s an­nounce­ment that the Gov­ern­ment plans to di­vest sev­er­al State-owned as­sets, in­clud­ing Na­tion­al Quar­ries Ltd, Hilton Trinidad, the Mag­dale­na Grand Beach and Golf Re­sort, and the La Brea In­dus­tri­al De­vel­op­ment Com­pa­ny Ltd (Labid­co).

Speak­ing at the sod-turn­ing cer­e­mo­ny for a new $500 mil­lion Mar­riott re­sort at Rocky Point, To­ba­go, on Tues­day, Per­sad-Bisses­sar said the State had a poor track record of op­er­at­ing com­mer­cial en­ter­pris­es, ar­gu­ing that greater pri­vate sec­tor in­volve­ment was need­ed to dri­ve eco­nom­ic growth.

How­ev­er, Op­po­si­tion MP and for­mer tourism min­is­ter Ran­dall Mitchell con­demned the move, ac­cus­ing the Gov­ern­ment of seek­ing to dis­pose of valu­able na­tion­al as­sets with­out ad­e­quate­ly ex­plain­ing why they should be sold rather than re­struc­tured and im­proved.

“It is clear to me that the Prime Min­is­ter has ac­cept­ed that she is in her last term as leader of the UNC and Prime Min­is­ter of Trinidad and To­ba­go and has de­cid­ed, as a last grasp, to have a fire sale of some of our prized na­tion­al as­sets,” Mitchell said.

He ar­gued that the as­sets be­long to the peo­ple of T&T and not any gov­ern­ment ad­min­is­tra­tion, ques­tion­ing who would ul­ti­mate­ly ben­e­fit from their sale and call­ing for full dis­clo­sure of val­u­a­tions, prospec­tive buy­ers and pro­tec­tions against con­flicts of in­ter­est.

For­mer prime min­is­ter and for­mer en­er­gy min­is­ter Stu­art Young echoed those con­cerns, sug­gest­ing that any as­set-sale pro­gramme should be ex­am­ined against the back­drop of what he de­scribed as de­clin­ing trans­paren­cy in gov­ern­ment.

“Kam­la Per­sad-Bisses­sar seems to make gov­ern­ment de­ci­sions and poli­cies on the fly and ac­cord­ing to what­ev­er pops in­to her head,” Young said.

Young fur­ther ques­tioned whether po­ten­tial pur­chasers may have al­ready been iden­ti­fied.

“Does the kak­istoc­ra­cy al­ready have friends, fi­nanciers and fam­i­ly lined up to take these state as­sets for fire sale prices?” he asked.

He al­so ar­gued that the is­sue should be viewed in the con­text of changes to pro­cure­ment leg­is­la­tion, claim­ing that the Gov­ern­ment was op­er­at­ing with “ze­ro trans­paren­cy and ac­count­abil­i­ty and to the con­stant detri­ment of fu­ture gen­er­a­tions of Trin­bag­o­ni­ans.”

While op­po­si­tion fig­ures have fo­cused on con­cerns about gov­er­nance and trans­paren­cy, Ramkissoon said di­vest­ment it­self should not au­to­mat­i­cal­ly be viewed neg­a­tive­ly.

He not­ed that sev­er­al of the en­ti­ties re­port­ed­ly be­ing con­sid­ered for sale have strug­gled fi­nan­cial­ly for years, mak­ing them dif­fi­cult in­vest­ments un­less sig­nif­i­cant re­struc­tur­ing takes place be­fore­hand.

“Those men­tioned are in­deed loss-mak­ing, sev­er­al of them, and it is more dif­fi­cult to con­vince the pub­lic in­vestors that they are like­ly to be mak­ing re­turns on those in­vest­ments any time soon un­less some work is done to bring those com­pa­nies to a prof­itable bal­ance,” Ramkissoon said.

At the same time, he ar­gued that cit­i­zens should be giv­en op­por­tu­ni­ties to own eq­ui­ty in na­tion­al as­sets, de­scrib­ing wider share own­er­ship as an im­por­tant tool for build­ing wealth.

“Di­vest­ment and the en­cour­age­ment of cit­i­zens to hold eq­ui­ty in com­pa­nies is in­deed a pos­i­tive way to go be­cause we need to ap­pre­ci­ate the im­por­tance of own­ing as­sets in any econ­o­my,” he said.

Ramkissoon point­ed to pro­pos­als in the pre­vi­ous bud­get for a re­al es­tate in­vest­ment trust in­volv­ing ho­tel as­sets, say­ing such ap­proach­es could broad­en own­er­ship while main­tain­ing pub­lic par­tic­i­pa­tion in valu­able en­ter­pris­es.

He ex­pressed con­fi­dence that the Hilton could at­tract in­vestor in­ter­est but was less cer­tain about the Mag­dale­na Grand, which has faced op­er­a­tional and fi­nan­cial chal­lenges for years.

“Hilton is def­i­nite­ly good. I’m not so sure about Mag­dale­na. And by them­selves, es­pe­cial­ly Mag­dale­na, be­cause as we know, that is an en­ti­ty that has been strug­gling for years now. And I don’t know that on its own, de­pend­ing on how that of­fer is pack­aged,” he said.

Ac­cord­ing to Ramkissoon, in­vestors must be con­vinced that any as­set be­ing of­fered can gen­er­ate sus­tain­able re­turns.

He al­so ques­tioned why dis­cus­sions ap­pear cen­tred on strug­gling en­ti­ties rather than prof­itable State en­ter­pris­es that could be eas­i­er to mar­ket to in­vestors.

Ul­ti­mate­ly, he said the suc­cess of any di­vest­ment pro­gramme would de­pend on trans­paren­cy, pric­ing and whether the as­sets are pack­aged in a way that gives cit­i­zens con­fi­dence that they are in­vest­ing in vi­able busi­ness­es rather than in­her­it­ing long-stand­ing fi­nan­cial prob­lems.

“Whether or not in­vestors are go­ing to be mo­ti­vat­ed or in­clined to buy these en­ti­ties on the stock ex­change is a some­what dif­fer­ent kind of ques­tion, be­cause it de­pends on whether these in­sti­tu­tions are done in a par­tic­u­lar way that is at­trac­tive to the pub­lic,” Ramkissoon added.

WHAT IS DI­VEST­MENT?

Di­vest­ment is the sale of all or part of the Gov­ern­ment’s own­er­ship stake in a State-owned en­ter­prise to pri­vate in­vestors or the pub­lic. It can in­volve trans­fer­ring full own­er­ship or sell­ing a por­tion of the State’s shares while re­tain­ing some gov­ern­ment own­er­ship.

Ac­cord­ing to the Min­istry of Fi­nance, di­vest­ment is one of sev­er­al strate­gies used to ra­tio­nalise the State En­ter­prise Sec­tor, along­side re­struc­tur­ing, merg­ers and liq­ui­da­tion. The Gov­ern­ment’s pol­i­cy frame­work iden­ti­fies im­prov­ing eco­nom­ic ef­fi­cien­cy and re­source al­lo­ca­tion as key ob­jec­tives of this process.

Di­vest­ment can take dif­fer­ent forms, in­clud­ing the sale of shares to pri­vate in­vestors or through a pub­lic share of­fer­ing on the stock ex­change. De­pend­ing on the arrange­ment, cit­i­zens may have an op­por­tu­ni­ty to pur­chase shares and ac­quire an own­er­ship stake in the en­ter­prise.

The ex­tent of the di­vest­ment de­ter­mines whether the Gov­ern­ment re­tains par­tial own­er­ship or trans­fers its en­tire stake. The Min­istry of Fi­nance is re­spon­si­ble for de­vel­op­ing and re­view­ing di­vest­ment pol­i­cy and pro­pos­als, as well as fa­cil­i­tat­ing the im­ple­men­ta­tion of ap­proved plans.