COLUMN-Sinckler’s statement review 2
Last week, I used my allotted space to review the statistical and numerical component of the Ministerial Statement and noted the progress made to date under the adjustment programme. This week, I turn my attention to the sustainability aspect of any economic turnaround we are able to initiate, as the improvements in the short term must be replicated and maintained into the future.
Fiscal responsibility. The proposed fiscal responsibility law, rules, policies must yield a comprehensive framework as outlined by the minister recently. This framework must of necessity address fiscal responsibility at levels of Government, and not only at Cabinet or parliamentary level.
We understand the challenges of small open and developing economies like ours, but I trust that these rules will make us more proactive and most importantly more committed to protecting our economic fortunes and future performance. Essentially, what we are seeking to legislate is a satisfactory level of discipline that would dictate, based on the environment, the international economy manageable limits for our fiscal deficit, Government debt, taxation levels, concessions and incentives and so on.
The importance of these rules which have been used with success in Australia and many other Commonwealth countries is the platform it assists
in creating for sustainable economic management with continuity, regardless of political party in power.
Fiscal responsibility must also include fiscal accountability where those held responsible are regularly accountable to those who have placed them there, through sound and clear communications at all levels.
Financing statutory enterprises. One of the major issues challenging our financial sustainability has been the size of Government and more importantly how to finance the various arteries of Government, especially where many of them earn little or absolutely no revenue to contribute to their operations. The major state enterprises provide social services, which will of necessity be another part of the sustainability dialogue. There are many other enterprises: NHC, RDC, UDC, GAIA, BNOCTL, KOMI, BTMI and so forth.
In Government’s efforts at sustainability, these enterprises must be made more efficient and amalgamated or privatized (in a suitable form) to bring about efficiencies and economies of scale. The extent of this change in financing will vary from enterprise to enterprise, but sustainability suggests that Government must ascertain, based on the provision of services and availability of finance, which of the services offered by these enterprises must essentially continue to be offered by Government exclusively.
We have to confront the choice of Government being the owner of a television station versus a public hospital offering high quality and efficient health care. What is our priority?
There are many mechanisms for funding our state enterprises all of which have been tried and tested in other jurisdictions; there remains no need to reinvent the wheel on our way to sustainable efficiencies and funding.
Funding public services. During 2013/2014 our Government implemented a requirement for students of the University of the West Indies (UWI) to pay some portion of their tuition fees as an initial step to making the financing of that institution sustainable. The other public services of health (QEH), transport (Transport Board), waste management and water (SSA and BWA) and other areas of education must be analysed and the future financing requirements and model determined. If we want to take our future into our hands and keep the IMF and others on the fringes then the hard decisions must be made by us. In this regard what is required?
1. Determine the full costs of optimal operations (efficiency, economy and effectiveness) for each service through their respective state enterprises where applicable.
2. Identify the inefficiencies in the system, sector or industry.
3. Identify and pursue areas of mutual cooperation and other alliances within the sector (for example, between hospitals, polyclinics, private doctors, ambulance services and so on) that would create useful synergies and improved utilization of limited resources.
4. Identify aspects of existing and new services that allow for generation of revenue.
5. Determine a cost per unit of service on which basis the Government would then assess the level of any subsidy that it can afford, if necessary.
6. Develop a framework of key performance indicators (KPIs) which would be utilized by the services to assess performance and further identify areas for improvement and cost saving or revenue generation.
Creation of growth. Having considered responsible decision making and cost and financial management, the final element of sustainability may be argued to be creation of growth that would yield increases earnings and revenues that allow our country to further develop and enhance its position. Our economy has been based on tourism for several decades and in recent year’s international business for the earning of most of our foreign exchange.
To create growth, there must be activity and consumption in these areas, and so long-term sustainability may be achieved.
This growth at the desired level appears in the last couple years to have been elusive, but it may indicate a need to review what, where and how in terms of our expectations. A few of the pertinent will likely be:
1. What is our value proposition?
2. How do we translate this into the products and services we offer?
3. Are further incentives required?
4. Are the systems which investors, businesses and citizens are required to use functioning optimally to encourage the activity
that spurs growth?
5. What are our competitors doing?
6. What do our stakeholders really want? And are we delivering?
The economic growth in our country is not the sole responsibility of our Government. It is actually a contribution that we must all collectively make towards the development of our country –– household by household, business by business, and sector by sector; and we all must have the confidence to do so.
It has been proposed that future growth will come from new sectors and industries; so we must assess rapidly the mechanisms for these new industries and then how they should mesh with our mainstay industries of tourism and international business to date. Can we merge or intertwine them to create a hybrid industry for the future?
Our potential for sustainable economic management is not beyond our reach, if we commit ourselves to doing what we know will take us past our goal. I look forward to further analysis and much need conversation on how we can achieve a sustainable path for our country that will result in better opportunities for all.
(David Simpson is immediate past president of ICAB and a director of the Barbados Entrepreneurship Foundation, and serves
as co-chairman of its finance pillar.)