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Former Finance Ministers: Close state companies that do not add value

Sunday, January 31, 2016
Mariano Brown

Former minister in the Ministry of Finance, Mariano Brown, is advocating that the current economic downturn presents an opportunity for both the State and private sectors to “regenerate, retool, revitalise and reinvigorate.”

Brown told the GML Enterprise Desk that the economic downturn or recession may last for as long as five years, but that, he said, should not scare anyone nor should there be a rush to short-term quick fixes like privatisation of state enterprises.

He said the most critical thing at this time is “efficiency at both the State and the private sector levels.” Privatisation of state enterprises, he said, “would not generate any significant cash in terms of what is taking place,” but the State should look at whether it needs to be involved in some companies “like National Flour Mills for example. Is it really necessary for them to be involved there?”

He is also of the view that the State must look at its involvement in the ambulance service. 

“The service is operated by a private company on a state contract. But the State spends millions of dollars to buy ambulances, so all the contracted provider is doing is providing a service. When one examines the service, it is like a taxi service. That ambulance service is a joke.” 

He said in the United States when an ambulance gets to a scene, the healthcare delivery begins from the moment the crew exits the ambulance. In Trinidad, the service simply “picks up and drops off. Is that efficiency? Does the State really need to spend money on that?” 

He also had questions about the State’s continued involvement in the provision of security via the Maintenance, Training and Security company—the MTS. Brown said when companies like MTS were set up it was to get around procurement issues. Today, he said, the State must ask itself whether that is not more suited to the private sector.

Former Finance Minister Selby Wilson—who served in the 1986 to 1991 administration of the National Alliance for Reconstruction—said: “Now is the time for the State to do a clinical review of the state enterprises sector: which companies they want to keep and which they should dispense with. Which ones bring value and which do not.” He said there are currently “too many state enterprises and some serve no purpose.”

He cited special purpose companies like Education Facilities Company (EFCL) which, he explained, must be looked at in the context of the money spent: “Are they useful or profitable? Should they be closed down? They need to do a proper clinical analysis and determine whether they are getting value for money.” 

Wilson said term after term schools are closed for repairs and, invariably, the schools reopen and not all the schools are ready. “Is that efficiency and are we getting value for money? The State needs to decide.”

Wilson, who was replaced as the chairman of the Telecommunications Authority last week, said there is no reason why the state oil company Petrotrin should not operate as if it is a private company. 

“Even TSTT, the level of operation should be such where they are not dependent on the State. They must have aggressive management and the ability to fund their own development instead of depending. They must run their ship in a way they can go to the capital market and get their own funding.”

Wilson recalled that the national airline Caribbean Airlines Ltd—in its former incarnation of BWIA—was privatised, and later closed making way for CAL. “BWIA was a yoyo,” he said.

“It was supposed to be profitable but, today, it is back to the same BWIA bind. That has to do with management. It is good to have a national airline but you need to manage the airline properly. They are not managing well. The business model needs to change and that includes looking at the routes they fly. Do they have the right airlines for the routes.

“If in good times you manage badly, in bad times, it is more difficult to adjust.” 

The simple solution, according to Wilson, “Government should have experts sit back and examine the portfolio of state enterprises and come up with a clear plan. Look at the purpose for which they were established and whether they are efficient or not and take a decision.”

If they decide to continue to hold on to them, “they must take decisions on how to manage them. They must think outside of the box, but demand improved efficiency and productivity.”

Brown is also of the view that the State must ask itself: “what is the value of what you are doing. It is that you need to retool and refocus.” He said the State must do an analysis and determine whether some of the things they are involved in are “providing services that no one else can provide.” It is on that basis they “must determine what they should be engaged in.” 

Brown described Udecott as one of the country’s most successful state entities, because “the private sector could not have built buildings like Udecott did in the timeframe and with that cost. Udecott is a success story. The private sector could not do it. That it why it has come under fire from local contractors.”

The issue, Brown said, comes down to “efficiency, finding the capacity to do the things that need to be done.” 

Using the healthcare system as an example, Brown said “the public system is failing with overcrowding, lack of proper care, equipment which is not working properly and the misdiagnosis of critical injuries in some instances.” 

Brown had a personal experience with a relative involved in a car accident. He took her to Port-of-Spain General Hospital where an MRI was done but the machine did not pick up the fact that her spine was fractured. 

It is because of inefficiencies in the health sector that “private sector healthcare is burgeoning.” There are no proper regulatory systems in place which is why doctors and nurses, employed in the public health system, are at the private institutions. Doctors are referring patients they see at the hospitals to their own private health facilities.”

Former Planning Minister in the People’s Partnership Government, Mary King, said now is a time to “go back to the basics, re-strategise and do the things that will help.” King said the Government needs to set out “a clear strategic plan for the next five years. There must be strategic planning at a time like this.”

King said in his budget presentation, Finance Minister, Colm Imbert, had indicated that the Government’s revenues would be boosted by asset sales. But, she said, selling state assets is not the best option “because the proceeds will be totally inadequate to help in the current situation. We need to be doing more than selling assets.”

She said the Government may want to look at areas where they can cutback. They may want to raise interest rates and taxes, some subsidies could be reduced, there are things the International Monetary Fund (IMF) have told us but we do not have the political will to do it.” 
Contacted on the issue, Finance Minister Colm Imbert told the GML Enterprise Desk: “We have no intention of divesting. No state enterprise will be divested.”
Reminded that in his budget presentation, the minister indicated that revenues raised by increases in the Business Levy and the Green Fund, the phased introduction of the property tax regime and the introduction of a tax regime for the gaming industry, would be supplemented “by a sale of assets programme and the receipt of extra-ordinary dividends, projected to yield a further $13.4 billion.” 
Imbert added that was not a signal that the State planned to sell assets but that it expected to get some of the projected revenue from Clico’s payback to the State.
No one has clearly stated what is Clico’s remaining liability. A part payment was made in March 2015 when non-assenting Clico policyholders, along with the Government, were paid 85 per cent of their contracted liabilities from the insurance company. The proceeds from the sale of Methanol Holdings (Trinidad) Ltd funded what was described as the first phase of the three-part Clico resolution. 
Clico’s assets yet to be sold include: Methanol Holdings Ltd in Oman, part of the shareholding in Republic Bank, CL world bonds, Angostura shares, Home Construction Ltd, which are combined estimated to be worth up to $13 billion. 
The assenting Clico policyholders—those who accepted the State’s offer in 2012—are still owed over $2 billion. 
(See Page 6)


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