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Sell them!

CDB - Divest air and seaports

President of the Caribbean Development Bank (CDB) Dr Warren Smith today sounded a stern warning that Barbados was not yet out of the proverbial economic woods by a long shot.

In fact, so worried is he about the country’s worsening debt situation that he suggested “front end adjustments” were urgently needed to correct the economic slide.

In a frank interview with Barbados TODAY, Smith also described the island’s overall fiscal position as “unsustainable”, while cautioning that if left unchecked, it would do untold damage to the Barbados dollar.

With that said Smith did not shy away from the dreaded “p” word – privatization, naming Grantley Adams International Airport (GAIA) and the Bridgetown Port as “naturals” for divestment.

“Long gone are the days when Governments need to be involved in things such as airports and seaports,” Smith argued.

“We do not believe that these types of investments need to continue to be in the hands of Government,” he added.

While acknowledging there would be political consequences arising out of the sale of these perceived crown jewels, he said Barbados was not unique in that regard.

In fact, the Jamaican-born CDB president gave the example of that country’s divestment of its Sangster International Airport in Montego Bay, saying, “foreign investors have come in, they have pumped money into the expansion of the airport, which is now promoting the growth of their tourism industry”.

Smith also made reference to the recently privatized Port of Kingston, which he said was now attracting large investments, while stressing that air and seaports were “a means towards an end”.

In Barbados’ case, he emphasized that there was room for both domestic and foreign investment in GAIA and the Bridgetown Port, while pressing home his argument that “these are opportunities to relieve the fiscal burden that the Governments face, so that you can put your priority on other things”.

The CDB head insisted that Government would not be adversely impacted if the Port’s ownership and operation were in private hands, adding that in Barbados’ case the situation was urgent, since it placed the country’s fixed exchange rate under threat.

“I am not saying that you are at threat at the current time. What I’m saying is that if these things are not addressed ipso facto you are going to find yourself in a position where you might not be able to maintain a feature of your economic model that appears to be of very great value to Barbadian authorities and to the Barbadian people. So fiscal rectitude is key. We need to have it and we can’t be in a situation where, for a protracted period, we are running fiscal deficits that are unsustainable, that have implications for debt and ultimately for the overall strength of the economy.”

In addition to both ports, Smith suggested other state-held assets could be sold off, including the Caribbean Broadcasting Corporation. He argued that Government could find other mechanisms for getting its message out.

In response to Minister of Finance Chris Sinckler’s suggestion that many state entities were highly indebted and therefore would not be attractive for divestment, the regional banker zeroed in on the Transport Board, saying it would have to undergo a process of reform to reduce the current burden on the state.

However, Smith was adamant that privatization was among a raft of options that could be pursued, even though he acknowledged that the decision was not his to take.

“At the end of the day the options that you choose to pursue must put you in a position where you get your fiscal house in order, address your indebtedness,” he said.

In this vein, Smith expressed support for Government’s “absolutely vital” fiscal consolidation programme, saying it was moving in “the right direction”, but stressed that the measures were simply not enough.

However, he said while the Bank had no difficulties with the policies being pursued, “the pace of adjustment is where we might have some difference with the Government
of Barbados.

“If you look at where the debt trajectory is going, it is very worrisome,” he told Barbados TODAY.  He therefore suggested that in order “to be able to bring that growth of sovereign indebtedness to a halt, and put it in the other direction where it needs to go, we need to address the fiscal [situation]”.

However, the leading regional economist also emphasized the need to address growth.

“It is a two-dimensional kind of response. So that yes, the fiscal adjustment programme is absolutely vital; if you don’t address it all sorts of unfortunate things are going to unfold. So that has to be high priority,” he warned.

Privatization was a major issue in the campaign leading up to the 2013 general election, with the incumbent Democratic Labour Party (DLP) accusing the Barbados Labour Party (BLP), led at the time by former Prime Minister Owen Arthur, of plotting to sell state assets.

Since the election, which saw the DLP returned to office, Sinckler has spoken about divesting some assets, and announced in April the sale of the Barbados National Terminal Company Limited was all but complete, with Government simply “waiting on the cheque” to consummate the deal. Nothing has been said of that deal since.

Arthur, meantime, has become more vocal and adamant that there is no way out of the choking fiscal situation other than to sell off some state assets, while senior Barbadian economist in the Ministry of Finance in Ontario, Canada Carlos Forte told Barbados TODAY last December that the Freundel Stuart Government should shed some of the “statutory” dead weight contributing to the current economic drag.

In his mid-year economic report, Governor of the Central Bank of Barbados Dr Delisle Worrell said the fiscal deficit had reached $204 million, and that debt owed to private financial institutions, individuals, businesses and the Central Bank was equivalent to 108 per cent of gross domestic product at the end of June.

As Government struggles to bring the bring fiscal situation under control, it has sent home over 3,000 civil servants and has imposed several taxes in the course of the now two-year-old austerity programme. Just last month, Sinckler used his Budget address to announce a two per cent National Social Responsibility Levy, as well as higher bank charges, to much outcry from interest groups.

kaymarjordan@barbadostoday.bb

11 Responses to Sell them!

  1. Phil September 21, 2016 at 6:13 am

    Mr. Smith is making sense but government should not sell completely. CBC, yes. That is only a political tool. I am somewhat fearful that companies like Massey, EMERA and a number of other private conglomerates may buy it and dictate their terms of operations. after all they are really profit centers. I am thinking 35% local investors, 35% government, and 30 % regional and international. A keenly and astutely run International airport and seaport is the main aim here. Don’t build another airport in the north. There is adequate room for expansion and modification at GAIA. Acquisition of a few properties, the paving of another runway at a 45 degree angle to the current one, Build an upper level to entire area, which will be used for departure and the lower level for arriving. build on air bridges. I have seen an artist’s impression of a large circular dome in the spot where the Concord is located. This dome will facilitate eight large aircrafts easily. and linked to the main block by a overhead walkway all enclosed.

    Reply
  2. Tony Webster September 21, 2016 at 6:27 am

    Straight from the shoulder!! As inconvenient and uncomfortable such advice /cautions/ warnings are to sensitive political skins that place party above country, the C.D.B. ‘s PUBLIC advice ( you can be certain that much more has already been said confidentially) had better be taken very seriously.

    C.D.B. itself has taken some knocks on the chin, as itself has been knocked down a couple points by the debt-rating agencies, owing to having to nurse wayward children “sucking at its sore nipples”.

    Only the purblind and/or reckless will now proceed with business as usual.

    Reply
  3. Ronnie Warren
    Ronnie Warren September 21, 2016 at 6:31 am

    Quick so after the breaking news of Melbourne selling its port this mr finance jump up with this. Nothing new, I do believe that I have heard our MOF suggest likewise. It seemd that we are a country filled to the brim of financial wizards does it not.

    Reply
  4. harry turnover September 21, 2016 at 6:49 am

    Sell the Water Authority,sell CBC,sell Sanitation,sell Transport….but DON”T SELL the AIRPORT NOR THE SEAPORT..

    Reply
  5. Daniel Polonis
    Daniel Polonis September 21, 2016 at 7:02 am

    You never never never sell your ports of entry and commerce. This the type of stupidity that has contributed to our problems.

    Reply
  6. Trina September 21, 2016 at 8:05 am

    The way we import almost everything even the materials to manufacture goods to export it would not make sense to sell off our ports.Plus if you the points of entry to the island the one thing we depend heavily on Tourism will be affected because private companies only look for one thing profit.CBC yes but not entirely keep at least 30%shares but swell the rest.Mr head of the CDC mentioned Jamaica sale of airport was it their main airport?We should learn from our neighbours devaluation never help any economy and never privatise health care so no to calls QEH to be made pravite.

    Reply
  7. Alex Alleyne September 21, 2016 at 9:43 am

    When the Barbados Nation Bank was sold to T&T the mortgage section should have been kept in BAJAN hands. Now If the air and sea ports are up for grabs I do that BIM keep 51 percent of both. Barbados should stop pumping so much money into LIAT until it move back to BARBADOS.
    The business sector is making sure that this Government fails by any means necessary.
    DLP.or BLP the people will still lose because of the damage that is done to our Barbados. It’s going to take no less than 15 years for us to see a turn around when MIA and company take’s over. No quick fix ahead , so be in it for the long haul.

    Reply
  8. Donild Trimp September 21, 2016 at 12:48 pm

    I agree with some of the points raised by Dr.Smith.

    The following should be privatized.

    1: The Transport Board 100 percent.

    2: The Sanitation Department 100 percent.

    The following are off limits to the private sector. The Barbados Gov’t should never privatize the AIRPORT, the BRIDGETOWN PORT or the CBC.

    Reply
  9. Big Brown September 21, 2016 at 2:29 pm

    Here we are still living on pride without industry. Everybody wants to go to heaven, but nobody wants to die.

    What is so special about the operation of an air or sea port? Once the terms and conditions of lease/sale are well thought out it should be a win-win situation. Can this government do it? No! Not based on their recent record.

    They have followed the same fiscal consolidation game plan for 6 years now and any success is barely discernible. How much longer before they switch gears? Is there a Plan B?

    Never before have I longed so much for the bell to ring so I can vote out this inept excuse of a government.

    You going get cuss Dr. Smith, but the truth hurts the most so don’t let that dissuade you.

    Reply
    • Donild Trimp September 21, 2016 at 7:14 pm

      Big Brown, don’t know what your level of expertise is as it pertains to privitisation of ports but judging from the following your question you put forward (“What is so special about the operation of an air or sea port”) I am surmising that you are limited in this area.

      In drawing from Aurial Newman’s thesis on “The Privatization of ports” the following stands out.

      “In practice the choice between public and private enterprise ownership in developing countries may result in private enterprise which is foreign-owned, resulting in expropriation of funds and no real impact on the economic development of
      the state.

      Efficiency of operation: In developed countries, there is no clear evidence that suggests that privately-run firms are better managed and technologically more efficient.

      Long-run considerations: Despite the efficiency argument in favour of private firms, long-run sustainability of publicly owned firms cannot be ignored.”

      Those are just a few snippets to support my point of view.

      I am sure you can find some from the same thesis to support your own viewpoint.

      Reply
  10. jrsmith September 21, 2016 at 3:08 pm

    Our Barbados is there for the taking but not by bajans…2 years ago I said the government should privatise some of the non productive holdings.
    What shows a lot of concern is why no one as like (Mr Smith) challenge the (Priminister ) and his ministers as to why or what is ever going to be done about the (AUDUT GENERAL’S) report showing the tens of millions owing to the Barbados treasury money which our country needs at the present time . its this because no one want to expose the corruption in Barbados..

    Reply

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