Is now the time for privatisation?

In the ear­ly 1990’s, when I start­ed my ca­reer as a busi­ness jour­nal­ist, pri­vati­sa­tion meant the sale of state as­sets and was usu­al­ly as­so­ci­at­ed with the struc­tur­al ad­just­ment pro­grammes ad­vanced by the In­ter­na­tion­al Mon­e­tary Fund (IMF) and the World Bank.

An April 2016 IMF work­ing pa­per, au­thored by Kevin Greenidge, Mered­ith Arnold McIn­tyre, and Han­lei Yun, and ti­tled Struc­tur­al Re­form and Growth: What Re­al­ly Mat­ters? Ev­i­dence from the Caribbean places pri­vati­sa­tion among a gen­er­al pack­age of struc­tur­al re­forms that un­der­pinned the pol­i­cy ad­vice and con­di­tion­al­i­ties of ad­just­ment pro­grammes im­ple­ment­ed by the IMF and the World Bank in the 1980s and 1990s.

This re­form pack­age in­clud­ed:

* Trade re­forms—pur­suit of trade lib­er­al­i­sa­tion in­volved the re­moval of im­port quo­tas, tar­iff re­duc­tions and im­proved ex­port in­cen­tives;

* Ex­change rate pol­i­cy—to en­sure a re­al ex­change rate that would im­prove in­ter­na­tion­al com­pet­i­tive­ness and re­struc­ture eco­nom­ic in­cen­tives to ex­pand the pro­duc­tion of ex­ports;

* Tax re­forms—aimed at neu­tral­i­ty and ad­min­is­tra­tive sim­pli­fi­ca­tion in­clud­ing a shift from trade tax­es to oth­er tax­es e.g. VAT;

* Fi­nan­cial lib­er­al­i­sa­tion—set pos­i­tive re­al rates to en­cour­age do­mes­tic sav­ings and pro­mote in­vest­ment in­clud­ing through in­ter­est rate pol­i­cy re­form;

* Prod­uct pric­ing poli­cies—re­moval of sub­si­dies (in­clud­ing agri­cul­tur­al sub­si­dies) elim­i­na­tion of price con­trols; and

* Pri­vati­sa­tion—the trans­fer of pub­lic com­pa­nies to the pri­vate sec­tor to im­prove ef­fi­cien­cy and re­source al­lo­ca­tion.

A 1993 pub­li­ca­tion by the In­ter-Amer­i­can De­vel­op­ment Bank (IDB), en­ti­tled Pri­vati­sa­tion in Latin Amer­i­ca, states in its in­tro­duc­tion that one of the struc­tur­al re­forms as­so­ci­at­ed with the suc­cess­ful per­for­mance of sev­er­al Latin Amer­i­can coun­tries was pri­vati­sa­tion, which seeks to broad­en in­di­vid­ual coun­tries’ ef­forts to­ward mar­ket lib­er­al­i­sa­tion.

“As part of a new de­vel­op­ment strat­e­gy, this process stems from the re­de­f­i­n­i­tion of the state’s role in the econ­o­my, sub­sti­tut­ing di­rect gov­ern­ment par­tic­i­pa­tion in the pro­duc­tive process­es with ac­tion pri­mar­i­ly re­lat­ed to ex­port pro­mo­tion and reg­u­la­tion. Pri­vati­sa­tion can be ac­com­plished in var­i­ous ways, the most com­mon be­ing the to­tal or par­tial sale of the stock in pub­lic en­ter­pris­es, fol­lowed by the grant­i­ng of pub­lic ser­vice con­ces­sions to pri­vate com­pa­nies and the pri­vate fi­nanc­ing of gov­ern­ment in­fra­struc­ture works.”

So, even in 1993, the IDB was say­ing that the most com­mon form of pri­vati­sa­tion was the to­tal or par­tial sale of pub­lic en­ter­pris­es, but that the con­cept in­clud­ed pri­vate com­pa­nies re­ceiv­ing pub­lic ser­vice con­ces­sions and pri­vate fi­nanc­ing of pub­lic in­fra­struc­ture works, both of which are in­clud­ed in the de­f­i­n­i­tion of Pub­lic Pri­vate Part­ner­ships (PPPs).

Re­fin­ery, air­line for sale?

Al­though the Gov­ern­ment is like­ly to de­ny it, the is­sue of pri­vati­sa­tion is back on T&T’s agen­da, as the Gov­ern­ment con­tin­ues to re­ceive ex­pres­sions of in­ter­est for Guaracara Re­fin­ing Com­pa­ny, the en­ti­ty that was es­tab­lished by the State in 2018, to hold the as­sets of the Pointe-a-Pierre re­fin­ery.

The cur­rent ad­min­is­tra­tion has been vague on whether a for­mal re­quest for pro­pos­als process will fol­low the ex­pres­sions of in­ter­est or if the Gov­ern­ment is more dis­posed to a to­tal or par­tial sale of the re­fin­ery as­set or some form of PPP.

The is­sue of pri­vati­sa­tion is al­so alive at Caribbean Air­lines Ltd (CAL) as the last Sun­day Guardian re­port­ed that at least two of the di­rec­tors on the board of the air­line be­lieve it should ei­ther be shut down or sold. 

And at some point, the cur­rent ad­min­is­tra­tion will have to dis­close its plans for Cli­co, the in­sur­ance com­pa­ny that col­lapsed 17 years ago and is still pay­ing pen­sions and de­clar­ing prof­its from the dis­pos­al of its as­sets, even though it has not writ­ten any new busi­ness in over a decade.

Through the liq­uida­tors of CL Fi­nan­cial, the par­ent com­pa­ny of Cli­co, the Gov­ern­ment has an in­ter­est in An­gos­tu­ra , the Laven­tille-based rum and bit­ters com­pa­ny.

Would An­gos­tu­ra, Cli­co, CAL, and the re­fin­ery not be in bet­ter hands if these com­pa­nies were owned by the pri­vate sec­tor?

One won­ders what Mr Tan­coo, our Min­is­ter of Fi­nance, thinks?