It is time to get back to the issue of privatization.
As the year 2015 draws to a close and a New Year approaches, a senior Barbadian economist has expressed strong concern about the island’s continuing debt situation, while advising the Freundel Stuart Government to shed some of the “statutory” dead weight that is contributing to the current economic drag.
In this regard, Carlos Forte, who is a senior economist in the Ministry of Finance in Ontario, Canada, made particular reference to the loss-making Caribbean Broadcasting Corporation (CBC), which he described as “a drain on the public purse”.
“I think CBC is a fine candidate for privatization in the sense that it is clear that the private sector has the interest and would do a better job in delivering the product,” said Forte, who is currently back home on holiday.
The former employee of both the Central Bank and the Ministry of Finance here, who also worked previously in offshore banking, also suggested that the delivery of media and other such services might best be left to the market, while Government focuses its attention on regulation and the necessary legislative framework “to ensure minimum domestic content and the like”.
“We have regional media entities that have demonstrated their excellence. One media company, Barbados TODAY, has been a pioneer in online media and utilizing different forms of media in delivering what previously was a traditional newspaper as an online platform and there is now video and the like,” Forte pointed out.
He added that even though it was still debatable which statutory corporations should be sold and which should be kept, even profitable entities, such as the Grantley Adams International Airport and the Bridgetown Port, should be considered for privatization.
“I don’t see it as a problem to essentially sell a majority stake because the Government would always retain the latitude to provide a legislative framework to ensure that the interest of Barbados is preserved through legislation and regulation,” argued Forte.
“I know we have sentimental reasons associated with selling off the family silver, but in many instances it is misplaced, not just from an economic standpoint, but from a social standpoint. The economy has to evolve and you can view it from the perspective of Governments in the past investing in areas that were necessary for the future development of the country. Those investments became proven and Government then exits when the private sector is interested to take on a risk which previously would have seemed unproven or risky,” he told Barbados TODAY, insisting that it was all part of “the evolution of economic development”.
Based on his economic training, as well as his recent experiences in Ontario, which is in the throes of a five-year debt and deficit reduction programme, Forte also criticized the current administration’s handling of Barbados’ economy.
He said although he was beginning to see “some bright spots” in terms of tourism and other investments, and was happy to see that “the rot has stopped”, he remained concerned that the economy was generally “stagnant” and that Government’s debt situation was out of control.
“It is in fact unsustainable. The Central Bank has admitted within the last year that Barbados does in fact have a debt problem, which is basically the accumulation of deficits over time, in circumstances where the Governor was initially indicating that we didn’t have a debt problem.
“The problem is that the Government now finds itself in a position where it has to commit about 30 per cent of its revenue to debt servicing, which doesn’t leave much resources to meet our ongoing commitments in health care, education, other social services, public infrastructure and the like.
“So the Government is really in a legitimate bind as a consequence of the accumulation of the unsustainable deficits in the post 2008 period.”
Forte said the dire debt situation had informed Government’s “penchant” for continually raising taxes, which he said was the “wrong approach”.
“[It] does nothing but stifle the economy by essentially reducing the disposable income that would be available to people, and has the effect of dampening aggregate demand and economic growth and development.”
Forte therefore suggested a change in approach in the New Year. While respecting the Central Bank Governor as an economist, Forte differed strongly with his position on debt restructuring. In fact, he suggested it was the only thing, apart from privatization, that would give the Government the fiscal space it needed.
“What that does is that it allows the Government to create some fiscal space for itself by using the proceeds to either pay off some of the debt or to invest in desperately needed capital infrastructure.
“Going about the country, you can see the effects of worn infrastructure or underinvestment in our infrastructure in roads, buildings, we currently have a water issue which has to do with ageing mains. Again this is something that has been an issue for the better part of the last two decades but the fiscal situation that the country is in right now does not afford the Government the latitude to be able to commit the investment in those areas that it is needed and would also have the impact of giving the economy a stimulus. And not a stimulus that is short-term, in the sense that it is transient, but a stimulus in the sense of one that is sustainable because these are projects that the country needs for its future growth and development.”