2012 Financial Statement And Budgetary Proposals (Part 4)
Wed, June 27, 2012 - 12:00 AM
- INCENTIVES FOR ELECTRIC CARS & HYBRIDS
- An electric vehicle is one powered primarily by an electric motor drawing its charge from rechargeable batteries or fuel cells and is recharged by an external source of electrical power. It is proposed that the Customs Tariff (Amendment) (No. 9) Order, 2009 be amended to include the following categories of electric vehicles and recommended rate of duties.
- Currently the rate of duty on Solar Powered Vehicles is 20%. The use of solar energy in transportation will result in replacing gasoline for vehicle use without requiring oil for electricity use. The use of the Solar Powered Vehicles in the transport sector can also reduce the country’s importation of fossil fuels: It is now proposed that the Customs Tariff (Amendment) (No. 9) Order, 2009 be amended to reflect a new duty of 10% on Solar Powered Vehicles.
Off-SHORE DRILLING PROGRAMME:
Finally, while I am on this issue of energy Sir, it would be remiss of me if I didn’t update the House on the off-shore drilling programme much vaunted by the last administration but which ran into server difficulties at the beginning of the economic recession when virtually all of the proposed bidders backed away from pursuing the investment. As you know Sir there were almost major deficiencies identified by several of these companies with the two pieces of legislation – the Off-shore Petroleum Exploration License Act and the Off-shore Petroleum Taxation Act. We have now completed the draft amendments and will very shortly lay the Bill in parliament foe debate and passage.
I can also alert the House that we have reached agreement for an exploration with the one remaining company from the first batch of bidders, BHP Billiton, who will be free to proceed with its operations once the amendments are passed in Parliament. We expect that that agreement will be signed shortly and government will receive a signing bonus of US$6 million.
Unleashing Strategic Investment capacity in key economic sectors:
At present, with an asset base of over BDS$4 billion in its various schemes, the National Insurance Scheme is the institution with largest pool of capital in Barbados. In its most recent actuarial review, the independent actuary reports that the National Insurance Scheme of Barbados has assets of a reserve ratio of eight (8). This implies that the NIS can meet its obligations to beneficiaries for eight years from its current asset base. A common benchmark for a “sound” Social Security Fund is a reserve ratio of five (5). The actuarial review also states that “the greatest challenge the National Insurance Fund will face in the coming years is the ability to find suitable investment opportunities. Already representing almost 40% of GDP, National Insurance Fund reserves are projected to grow at a faster rate than the local economy for many more years.” At present approximately $300M of the NIS portfolio is in the form of various deposits in the banking system as the scheme struggles to find suitable investments. As a pension fund these are not ideal investments as pension funds which have long term liabilities prefer long term investments.
To this extent the National Insurance Board will be directed to:
- Establish a “Hotel Refurbishment, Energy Efficiency and Food Production Fund” as part of its investment portfolio. The fund will initially be capitalized with $18million of the NIS surpluses. For the next twelve months, in every month where the NIS earns a surplus of more than $10M, $1M of that surplus will be directed to further capitalization of the fund. A further $50M of financing will be provided from the receipts of the Government’s divestment programme for a total fund of $80M. Of the $80M, $20M will be allocated to the initiation of a National Food Production Initiative to be managed the BADMC in conjunction with key agriculture stakeholder over five years with a specific mandate to focus on an agreed list of crops and meats for which acceptable programmes can be implemented to achieve self-sufficiency in production. This will not only cut the food import bill but provide work for hundreds of Barbadian small farmers keen to assist in this programme.
- Additionally a special 15 million dollar envelope will be place in the agri-business component of the fund to provide direct funding to private sugar farmers to underwrite a reasonable price support mechanism as a top up to that currently being offered by BAMC for the next two crops. This support is being given on the condition that farmers agree to use their rotation fields for food crop into the production as agreed with the ministry of agriculture. The proceeds for this special envelope with come from government’s divestment programme but will be provided in this year from the consolidated fund on reimbursement terms.
- 50 million dollars will go to a Hotel Refurbishment and $10M to the National Alternative Energy. Manufacturing and Agricultural Firms may also apply to the fund for financing of comprehensive energy efficiency plans and alternative energy electricity generation projects.
The “Hotel Refurbishment, Energy Efficiency and Food Production Fund” will have a board comprised of two members from the NIS, two members of BTII, two members from the Enterprise Growth Fund and a representative each from the Ministry of Finance, Ministry of Energy and Ministry of Agriculture. The board will have the mandate to commission analyses of proposals and decide on the proposals that will be funded. The NIS will provide funding for approved proposals in return for Redeemable Preferred Shares in the entities. The shares will be redeemable in 10 years and carry a dividend rate of 8%. Due to the fact the “Hotel Refurbishment, Energy Efficiency and Food Production Fund” will be financed out of NIS surpluses, and hence these funds would have been invested anyway, the establishment of this fund has no immediate actuarial implications for the NIS fund.
Establish a “Tertiary Education Fund.” For the next five years, in every month where the NIS earns a surplus of more than $10M, $4M of that surplus will be directed to further capitalization of the fund, for a fund of $48 million in the first year, After the NIS provided its share of the “Hotel Refurbishment, Energy Efficiency and Food Production Fund,” in every month where the NIS earns a surplus of more than $10M, $5M of that surplus will be directed to further capitalization of the fund, for an annual fund of $60M. These funds will be transferred to the Consolidated Fund and will be used to assist in the funding of the University of the West Indies, The Barbados Community College, Samuel Jackman Polytechnic, Sixth Forms and Special Education Projects in Barbados.
The public should note that the NIS funds earmarked in these proposals will be accessed if, and only if, the NIS runs a surplus in excess of $10 M per month. Also, the funds in the proposed “Hotel Refurbishment, Energy Efficiency and Food Production Fund” are investments in business entities in the new growth areas of our economy, and stand to provide returns for the NIS. Barbadians more than most appreciate the value of an investment in education, and the public should note that the remaining funds are to be invested in education and education alone.
ENHANCING THE COMPETITIVENESS OF THE TOURISM & HOSPITALITY SECTOR
Barbados has become a highly attractive location for hotel and other tourism development and is now a world renowned leader in the area of tourism. In 2011, World Economic Forum ranked Barbados #28 out of 139 countries in terms of Travel & Tourism Competitiveness with top marks in affinity and prioritization of travel & tourism. In the Americas, Barbados was ranked 3rd overall among the region, behind only US and Canada. The sector in Barbados is currently challenged by an aged plant and high operating costs. The aged nature of the plant creates a challenge for entities to generate the room rates needed to cover costs. The uncertain global economic environment has also created a need for a greater focus on domestic tourists as part of the business model. The following proposals aim to begin to address these three issues.
- Land taxes on hotel accommodation will be frozen at current levels (11/12) for the next two evaluation cycles.
- Hotel Refurbishment Fund: Small and medium sized hotels can apply to the newly established “Hotel Refurbishment, Energy Efficiency and Food Production Fund” for financing to refurbish and/ or upgrade the hotel plant. The refurbishment/upgrade plan must include a comprehensive energy efficiency plan and an alternative energy electricity generation component.
- Provision of an additional $5 million dollars to the BTA to assist with special marketing activities through the end of 2012 to improve visitor numbers in the second half of year.
A SECOND EDUCATION REVOLUTION
The DLP administration recognizes that access to education at all levels has been key to the success of Barbados. The DLP remains committed to and fully supportive of the continued growth and development of UWI Cave Hill and increased access to tertiary education for Barbadians.
What we do not support is a continuation of the current strategy which sees a sizeable majority of students disrupt their normal educational progression by moving directly to UWI from fifth form as lower matriculation students. UWI has always had Lower Level Matriculation. We have no problem with persons who for whatever reason may have left school after fifth form and now want to advance their studies coming into UWI as lower level matriculation students. What we do not however as a policy encourage is fifth form graduates entering UWI directly as a matter of course. To this end we are committed to adding more sixth forms (we have already added two new ones) and expanding places at The Barbados Community College and Samuel Jackman Prescod Polytechnic as resources permit.
Through the expansion of Sixth Form Schools, The Barbados Community College and Samuel Jackman Prescod Polytechnic this administration envisages a situation where the vast majority of students going on to UWI would have completed a course of study at one of the above-mentioned entities. This approach will yield several benefits including:
- Students entering UWI will be much more prepared for education at the university level, which is expected to enhance the university experience for students, the throughput of students and the quality of the final graduate;
- Substantial savings to the state due to articulation arrangements between UWI and the rest of the tertiary system. At present, through a system of articulation arrangements that exist between UWI, CAPE and the Barbados Community College, students entering the Faculty of Social Sciences in particular, who have completed certain CAPE subjects, and certain Associate Degree programmes at BCC are granted exemptions from Level One courses at UWI, such that they are to complete their degrees in approximately two academic years, instead of the typical three academic years. In addition, certain programs are specifically articulated as “Two plus Two Programmes” where students do two years at BCC and two years at UWI. The Ministry of Education has been mandated to engage BCC, CAPE and UWI Cave Hill to expand the range of “Two plus Two Programmes” and other articulation arrangements to more programmes across the University. Of course such expansions would be subject to the requisite quality requirements.
To further strengthen my point Sir, if one looks at the comparative costs between educating a student at UWI for a year as oppose to the Barbados Community College, the potential for substantial savings is immediately discernible. These savings can serve to reduce the size of the “Transfers and Subsidies” and help the ongoing process of fiscal consolidation while maintaining access for Barbadians.
Schedule of Fees
The second point is that we do not support the notion of Tertiary Education being defined almost exclusively in terms of a Bachelors or higher degree. We believe that appropriate and relevant Associate Degrees, Technical and Vocational Qualifications and a range of Professional Qualifications are an integral part of Tertiary education. The available evidence suggests that Barbados may well be suffering from a shortage of skilled persons in the Technical and Vocational areas. We take the view that the state should seek to create an environment where Barbadians are provided with a menu of tertiary education options. We see tertiary education as including Professional Designations, Associate Degrees, Certificates and Diplomas in a wide variety of areas. For example, in terms of driving the International Business Sector, we would like to see more persons pursuing the Certified Financial Analyst Designation (CFA), The Society of Trust and Estate Practitioners (STEP) qualifications in International Trust Management, International Succession and Probate, Corporate Secretarial Qualifications, and so on. We would wish to see persons pursuing Professional Designations, Certificates and Diplomas in Health Care, Computer and Information Services, Project Management, Security and Protective Services, Videography, Graphic Arts and Culinary Arts to name a few. This is why in the 2008 budget (our first budget) we increased the loan limits, eased the loan conditions and expanded the range of course offerings eligible for funding from the Student Revolving Loan Fund as part of this thrust in tertiary education. We continue to take a very broad view of tertiary education and as resources permit we are committed to expanding the offerings of the Barbados Community College, Samuel Jackman Polytechnic, resources of the Student revolving Fund and the range of courses funded by that entity.
In support of these and other efforts at maintaining our strategic investments in educational development as a key plank in our economic transformation programme we propose the following:
Establishment of a “Tertiary Education Fund.”
- As outlined earlier, for the next five years, in every month where the NIS earns a surplus of more than $10M, $4M of that surplus will be directed for the capitalization of the Fund, for a fund of $48M in the first year, Thereafter, from the second year onwards every month where the NIS earns a surplus of more than $10M, $5M of that surplus will be directed to further capitalization of the fund, for an annual fund of $60M. These funds will be transferred to the Consolidated Fund and will be used to assist in the funding of the University of the West Indies, The Barbados Community College, Samuel Jackman Polytechnic, Sixth Forms and Special Education Projects in Barbados. It is expected that the transfers to UWI, BCC and Polytechnic, and the education budget will be reduced commensurately.
- Also as mentioned earlier, the Ministry of Education has been mandated to engage BCC, CAPE and UWI Cave Hill to expand the range of “Two plus Two Programmes” and articulation arrangements across the university. The aim is that for academic year 2013 to 2014, 75% of Barbadian students entering UWI Cave Hill will be able to complete their degrees in two academic years.
- A 50% reduction in the interest rate on loans from the Student Revolving Fund for training in the following Technical & Vocational areas:
Mobile and Web Applications Development; (Writing Apps for Ipads, Cell phones and so on)
Information Systems Security;
Nursing and Health Care;
Criminal Justice and Security;
Photovoltaic and Wind Generation Electrity Generation systems installation and maintenance.
CAPITAL MARKET DEVELOPMENT & INVESTMENT FINANCING
The capital markets play a crucial role in economic development, facilitating the movement of capital from savers to investors which serves to drive economic growth and development. Investment as opposed to consumption is the ultimate driver of growth in an economy. The future growth and development of the Barbados economy is contingent on adequate funds being available and invested in the key areas that will drive the economy. While Barbados has developed a sophisticated and modern financial system, at present we are faced with a situation in Barbados, where there are high levels of liquidity in the financial system but an acute shortage of capital for investments in the economy. This shortage of capital is especially acute for investments in Agriculture, Alternative Energy, Creative Industries, Education, Health Care, Information Technology, Manufacturing and Tourism and Hospitality - the very sectors we need to drive growth in our economy! The reality is that investments in these types of projects often fail to meet the risk profile of the conservative Commercial Banks and Insurance companies. In many economies, equity investments and the stock market where investors in riskier type projects have access to high levels of liquidity are the mechanisms whereby a number of these types of investments are able to access capital. However, while the Barbados Stock Exchange has grown large in terms of market capitalization (the ratio of the stock market capitalization to GDP is 101% compared to a global average of 55%), the number of listed companies continues to decline and the viability of the exchange seems under threat. The Junior Stock Market has also remained grossly underdeveloped with SunBeach Corporation being the only listing to date. An active Junior Stock Market provides an additional avenue for Small and Medium firms which do not meet the financial and other requirements of the “Main” stock market to access capital without having to resort to borrowing. A vibrant Junior Stock Market which can facilitate the financing of small and medium type enterprises is a critical piece of the puzzle in restructuring the Barbados economy with a focus on Agriculture, Alternative Energy, Creative Industries and Information Technology.
The available evidence therefore points to a bank-dominated capital market, an illiquid stock market dominated by a few large firms, an almost non-existent Junior market, a National Insurance Scheme desperate for suitable investments and an economy facing an acute shortage of “risk capital” for the investments needed to drive a restructuring of the Barbados economy. However, we cannot afford to delay the much needed investments in Energy Efficiency, Food Production and upgrades of the hotel plant. The traditional financial institutions are not providing the financing and we cannot wait on international capital, we must act now to secure our own future in Barbados. Having spoken to the NIS part already I now propose the following additional measures to assist with this problem:
ü Undertake an Initial Public Offering of 30% of the shares of Grantley Adams International Airport Inc, the Oil Company and Barbados Port Authority, and the listing of these companies on the Barbados Stock Exchange. Over the next few months, a valuation of the entities will be undertaken and the IPO process initiated. The listing of these three major entities on the stock exchange will serve to inject some much needed life in the exchange. The IPO process will be undertaken in a manner that will ensure broad share ownership which promotes economic democracy and market liquidity.
ü Providing a fiscal incentive for companies to list on the Junior Stock Market, where firms that choose to list on the Barbados Stock Exchange’s Junior Stock Market will be provided with a tax incentive for ten years structured as follows:
- An income tax holiday on 25% of the company’s operation for the first five years of the ten year incentive period;
- A full income tax holiday for the first five years of the ten year incentive period;
- A half income tax holiday for the second half of the incentive period;
- An exemption from withholding tax on dividends and other distributions from companies listed on the junior market;
- An exemption from transfer tax on transfers of shares in Junior market companies;
To promote liquidity and encourage economic democracy, in order for a company to qualify for the above-mentioned tax incentives the following could be required:
- The company must have a minimum of 50 shareholders;
- No single shareholder should own more than 25% of the shares of the company and no other shareholder should own more than 5% of the shares.
- If at any point these are violated the company must repay the Government all taxes claimed.
Budget Financial Impact
Mr. Speaker the measurers which I have just outlined are intended to add value to the Barbados economy without doing violence to our fiscal consolidation programme. In this regard I am minded to point out that on a calculated basis we expect that the measures will cost the treasury a maximum of 87 million dollars. On the converse we expect that through direct revenue gains, and savings due to direct expenditure cuts, government will garner 96 million. There should therefore be a net positive gain of approximately 8 million dollars.
Deloitte Consulting Ltd. (acting through Messrs Oliver Jordan and Patrick Toppin) was appointed as Judicial Manager for CIL’s operations in Barbados and the Eastern Caribbean by the High Court of Barbados on April 14, 2011 following the appointment of Richard Surage of PKF as Judicial Manager for CIL’s branch in St. Lucia on April 11, 2011.
On April 29, 2011, Omax Gardner of PKF was appointed as Judicial Manager for CIL’s branch in St. Kitts - Nevis and subsequently Deloitte was appointed as Judicial Manager of CIL’s remaining EC Island branches located in Grenada, St. Vincent, Dominica, Antigua and Anguilla. Montserrat remains the only territory not to appoint a Judicial Manager.
It is important to note that, unlike the situation with CLICO in Trinidad where there was a separate insurance company doing business exclusively in that country, CIL through its branch network, operates in Barbados and eight other Eastern Caribbean jurisdictions. This distinction creates a variety of legal and other challenges to developing an effective restructuring plan for the company.
Activities of the Judicial Manager
Since the date of its appointment last year as Judicial Manager, Deloitte has taken control of CIL’s head office operations and with the cooperation of the Judicial Managers across the region has taken necessary steps to ensure the survival of the company.
The Judicial Manager has since completed its examination of CIL’s financial condition and the most recent information at March 31, 2012 is that the current estimated value of its assets is Bds$454milion while policyholder liabilities are estimated at $854million. Note these figures are preliminary and subject to change.
The Judicial Manager has for the past year, explored a number of alternative options for restructuring the company but has now settled on a sale to a reputable insurance company as the best option in the interest of all the policyholders. After an extensive search process within the region and internationally they have received two credible offers which they are currently evaluating.
A common element in both offers is that the Executive Flexible Premium Annuities (EFPAs), which are non-traditional insurance products, would not be acceptable to the buyers in their current structure. Therefore unless these products are restructured as traditional insurance products they would have no interest to potential buyers for CIL.
Another concern raised by potential buyers is the high proportion of real estate assets within CIL’s total assets. This is a concern because any purchaser of CIL’s policyholders’ liabilities will have to receive eligible assets for inclusion in the relevant insurance statutory funds, and in most instances real estate assets are limited to 20% of those statutory funds.
There therefore has to be an innovative way of converting CIL’s real estate assets into qualifying assets for the purposes of deposit to the statutory funds, failing which any sale for CIL’s business would be unlikely.
A final challenge to a successful sale of CIL’s business is that the majority of CIL’s assets are located in Barbados and St. Lucia. However, to facilitate the sale of policyholder liabilities located in the other EC island jurisdictions where the CIL does not hold significant assets, eligible assets would have to be transferred to these jurisdictions. A mechanism will therefore have to be developed which transfers part of the asset value within Barbados and St. Lucia to the other Eastern Caribbean island jurisdictions.
Current proposal from the Judicial Manager
The Judicial Manager has developed an approach which it believes would facilitate the transfer of CIL’s insurance business to one of the current bidders, as well as the partial settlement and restructuring of its EFPA portfolio. This approach envisages transferring CIL’s existing assets into a Special Purpose Vehicle (“SPV”) and with necessary backing from regional Governments, floating a bond estimated to range from Bds$550million to Bds$650million on the regional capital markets.
The Judicial Manager has been advised that given the current level of excess cash reserves of commercial banks in the Eastern Caribbean, the proposed bond might have a high degree of interest in the market.
The net proceeds from the bond would be used to acquire qualifying assets that would be transferred to a buyer of CIL’s insurance business as well as to fund the partial settlement and restructuring of CIL’s individual EFPA policies.
Upon successful completion of the sale, CIL’s Individual & Group Life, Pension and Annuity policyholders would become new policyholders of the successful bidder for the business.
Individual EFPA policyholders in Barbados and the EC islands would receive a cash payment of up to Bds$25K and 70% of their principal balance above Bds$25K would be converted into a long-term Annuity. These annuities would be backed by qualifying assets purchased by the SPV and transferred to the purchaser. Corporate and Government EFPA policyholders in Barbados and the EC islands would have 100% of the principal balance of their EFPAs converted into an instrument issued by the SPV.
Given current market conditions, the successful issue of a multicurrency bond by the SPV will require the support of regional Governments to ensure its success. The amount of this support required for the restructuring outlined above has been estimated at Bds$200million which would be in the form of Government guarantees or other acceptable credit enhancements required for the bond to be successfully placed in the market.
Should additional support over and above the Bds$200 million be available from the regional Governments, then restructuring of the non-individual (Corporate and Government) EFPA policies into an annuity product will also be possible. The conversion rate of these EFPA’s will be entirely dependent upon the level of support received from the regional Governments.
Upon confirmation of support from regional Governments and the respective regulators for the proposed approach of structuring a bond to facilitate the sale of CIL’s insurance business and the partial settlement/restructure of EFPA policies as well as for the amount of financial support available for the proposed bond issue, Deloitte as the Judicial Manager will prepare a final sale/restructuring plan for submission to the Court for approval in Barbados and the other jurisdictions. It is anticipated that similar submissions will be made by the Judicial Managers in St. Lucia and in St. Kitts-Nevis.
Mr. Speaker, on the 3rd of next month a team from the Ministry of Finance and myself, will gather with other CARICOM Ministers of Finance at the CARICOM Finance Ministers’ meeting at which these proposals by the Judicial Managers are expected to be presented and discussed. Our hope is that at the end of those deliberations these proposals or some amended version of them will be given broad support and receive the general endorsement of all of the affected regional Governments, with each accepting and agreed share of the responsibility for the execution of the proposal.
This is critical since a shared responsibility ensures that policy holders in each country will be given the only reasonable solution to their predicament, and regional Governments a responsible and palatable burden to carry. A regional technical Committee made up of official and regulators from all of the affected countries together with the Judicial Managers in the different jurisdictions who have been working assiduously on examining options for a resolution of this matter have also surmised that this proposal seems at a broad level to be the most orderly option for a resolution of this very sad and unfortunate debacle.
It is important to appreciate Sir that should this effort at a resolution fail, the likelihood of a disorderly and separated resolution on a country by country basis will ensue with likely devastating consequences for thousands of policy holders including those in Barbados as the company will be forced into liquidation and become entangled in myriad legal suits.
I give this House and the people of Barbados the assurance that this Government will at next week’s meeting seek to secure the best interests of all Barbadian policy holders and investors affected by this matter and will not give a final commitment to any solution unless and until an appropriate consultation is held with them to present and discuss such so that their views might be incorporated.
I equally give the assurance Sir that at a date to be determined by the Cabinet, that members of this Honourable House will also be given an opportunity to examine the proposed solution before in is fully implemented so that they too may input into the crafting of the final solution.
Mr. Speaker in the last few weeks a rather unfortunate set of statements and commentaries have emerged following the collapse of the Barbados registered airline Redjet, which have sought to, in the least, question this administration’s support of this business venture, and at most cast aspersions on members of this Government including myself as to our alleged commitments to the principals of this company. This has been rather unfortunate, though not entirely surprising for a community populated by some who delight in the propagation of lies, half truths and gossip. Tonight I will set the record straight.
During the course of October last year, at the request of the principals of the company Redjet, I acceded to have a meeting with them to discuss what they called serious issues affecting the airline. That meeting took place at the Ministry of Finance.
During the course of the meeting I was made aware by company officials that the company was having severe financial difficulties just months into its operations, blamed in large part as they put it to “Government’s” delay in granting the airline permission to fly in a timely manner. I was told that the delays severely affected their business plan as they couldn’t get sufficient routes when they wanted them to increase their load factors and earn enough money keep the operation profitable.
I thought it myself a little odd that an airline would have planned its business in such a way as to anticipate regulatory approval in a specified time up front knowing how complicated and thorough airline approval regulations could be.
The principals requested to know if the Ministry of Finance would be willing to issue them with a sovereign guarantee so as to allow for them to go to a financial institution to raise resources to support their operations.
I immediately indicated to the principals that this was not possible as Government cannot issue a guarantee for a private company. This they understood and subsequently withdrew.
Early in January, at the request of the Hon. Prime Minister, a team of ministers including, International Transport, Tourism and the Minister of State in the Prime Minister’s office met with the same principals of Redjet. An identical set of lamentations were placed before us only this time the principals were threatening to close the airline in a few weeks time if some level of support was not forthcoming from Government.
Having discussed the matter at length the meeting came to a number of broad understandings which included a commitment from Government to explore the possibility of assisting with the arrangement of a facility through the BTA that would allow for a small capital injection in the airline and a marketing support initiative. Redjet on the other hand undertook to itself inject sufficient additional capital into the company as to keep it in operation, produce for analysis by Government its financial statements so we could ascertain the true state of the airline, and a new revamped business model.
For the record Mr. Speaker permit me to both read and enter into the records of the House a letter which I wrote to the management of that company as to my understanding of the outcomes of that meeting:
Clearly Mr. Speaker even a blind man on a trotting horse could see from this letter that at no time did I guarantee to Redjet or any other person an absolute commitment to inject eight million dollars into that airline. I clearly pointed out that we were committed to exploring the possibility of a possible guarantee through the BTA for resources to be identified to assist the company. I further went on to advise the principals that no such facility if it were deemed possible could be effected without the approval of Cabinet and as such they should not take any such commitment as a fait accompli. Sir shortly after that letter was issued the company had a separate meeting with the Minister of Health who was acting in the stead of the substantive minister and he too reiterated the position which I took in the letter and advised the company accordingly.
In the ensuing period Sir, Redjet did submit its financial accounts for the period up to February 2012 and these were sent for analysis by our business and financial analysts in the Ministry of Finance. Sir I received from the PS in Finance a copy of that analysis which concluded in part that based on the accounts submitted “…that not only has Airone Ventures Inc. been making substantial losses, but also the Company has been budgeting to make these losses. The actual revenues and budgeted revenues are not sufficient to cover the respective costs. More critically, the revenues are not even sufficient to cover the Company’s variable costs comprising passenger and aircraft costs and thus cannot make any contribution towards maintenance and overhead costs. This is not sustainable. As a consequence of the foregoing the management accounts indicate that the Company is technically insolvent.”
I immediately informed the Prime Minister and other colleagues of the findings of the financial review but we still agreed that we would try to see if it were possible to assist in anyway. In that time it was made clear to the principals of Redjet that one of the conditions for any level of Government support was that the airline had to remain in the air. This would entail the shareholders putting in sufficient resources to capitalize the airline to allow for continue operation.
The BTA subsequently finalized a marketing and operational support programme which it submitted to the Ministry of Finance and and we met and agreed that instructions would be given to the BTA to proceed to negotiate with a local financial institution to secure the financing necessary to support the plan for Redjet. Sir in the middle of these negotiations while the BTA was awaiting the final term sheet from a preferred lender for submission to the Ministry of Finance for approval, all of us were shocked to hear the breaking news that days after launching a new regional route that Redjet’s principals were pulling it from the sky.
However Sir, even with that happening the relevant ministries and departments still proceeded to conclude negotiations on the facility and sent it off to Finance for final approval. Our hope was that even at that stage that it would have been possible to assist them but this was snuffed out once the company filed for bankruptcy.
So that Mr. Speaker Sir, it is not true to say that I or anybody else in this Government misled Redjet or reneged on any promise to lend financial assistance to that company. Redjet was a private operation not a Government department. It had no right to any direct financial assistance from Government and was promised none.
Having given potentially million of dollars in concessions to the company we still undertook to try to see how it would be possible to get it through a surprisingly early and difficult financial period. In the end the airline clearly did not have sufficient of its own private capital to survive and even if the eight million dollars were given immediately upon request it is clear that it would have only postponed the inevitable. May the company rest in peace.
Mr. Speaker as I draw to the end of this presentation I am minded to reflect on the course which we as an administration have had to take over the past four years. Many a day Sir, some of us have cursed our luck, others still have fallen on periods of time when the sheer weight of the challenges has caused us to feel depressed over our circumstances.
However at no time during these turbulent economic times have we lost ultimate faith in the generosity of God and the goodness of his Son. From the throes of the world’s greatest economic recession, through the loss of a leader, sickness of colleagues, and the carping criticism of our detractors, team DLP has held together and not lost faith.
And we have done so Sir knowing that we have continued to retain the love and respect of the vast majority of fair-minded Barbadians who know that we have been dealt an extremely difficult hand and frankly Sir have played it well. We have kept our economy stable, protected the Barbados dollar from devaluation, contained job losses as best we could, maintained a high level of service in our social services, enhanced the social safety net, and hold the hands of our private businesses through a variety of mechanisms.
Given the challenges which we faced most Governments as we have seen by example across the world would have collapsed by now. And while it has been a weekly prediction from our opponent almost from the 16th of January 2008, we are still here and going to work on your behalf every day.
In the preparation of this statement I was blessed to have received from friends and strangers too, many versions of their views on how I should conclude this address. I am thankful for this wonderful support.
However, I had the privilege of reading a column in the local newspaper a few weeks ago penned by a very intelligent young man called Corey Worrell as he related his own personal encounter with disappointment and hardship. Entitled the Wilderness Experience this very moving piece to my mind demonstrated what a strong belief in God and supreme confidence in his power to deliver us from tough situations can do to liberate both mind and spirit so that we can together achieve even greater things. Sir I feel compelled to read to this House and to all Barbadians:
HARD TIMES HIT ME
OVER THE LAST 12 MONTHS, many people have been experiencing some kind of hardship. It may be due to many reasons but there is one thing they all have in common and that is hope.
Many people are touched and encouraged by these articles and some people have this perception that I have it all together since these articles are inspiring to read. In today’s article, I want to make myself vulnerable to you and share with you some of what I have experienced over the last 12 months, so you will know that I, too, share that hope. If you know someone who is unemployed, struggling financially, going through a divorce, battling with an illness, fighting for custody of the kids or going through any other hardships, encourage that person to read this article. One week ago I came to the realization that in the last 12 months I have worked for only three months (the first three months of this year). This realization caused me to sit and reflect. As I reflected, I started to feel so bad, tears welled up in my eyes. I felt embarrassed, I felt like a failure as a man, husband and father since I wasn’t able to provide for my family the way I wanted to. The more I reflected, the more depressed I got. While sitting there, a voice whispered to me, “But look what I have done”, and the voice repeated, “But look what I have done”. Immediately, a fresh revelation came to me. Even though I had been unemployed since June last year, all my bills were paid in full and on time; my car was not taken up and had a full tank of gas every week; my wife and daughter were clothed, fed, provided for and housed; my health did not deteriorate. As a result of not working, I spent the majority of my time with my daughter, which in my opinion is more work than any other job I had. Being home with her gave me the privilege of seeing when she first crept, walked, clapped her hands, talked, climbed and fed herself. And anyone who sees us together knows she is truly a daddy’s girl. Sometimes we spend so much time wallowing in our despair and situations that we often don’t see the goodness of God in our lives and the positives that are birthed out of challenging times.
We as a people will face numerous hardships and dry seasons in our lifetime but they are there for a purpose. I call these hard and challenging times – wilderness experiences. A wilderness is a dry, uncomfortable and lonely place.
A wilderness experience is a time of hardship and dryness in your life, which will lead you to celebration, peace and freedom once you don’t give up or stop moving. (Think about it as your promised land.)
During these experiences there isn’t much that others can do to help because it is a time when God deals with you one on one. It’s a time for building character, renewing perceptions and mindsets, and reforming the heart and focus.
During my wilderness experience I have been dealing with areas of laziness, procrastination, selfishness, jealousy and pride in my life. Yes, I have issues too but one thing is sure, because of this wilderness experience I am a better person today than I was last June. We are often tempted to ask God to take away these hard times from us but I want to encourage you not to make this prayer. Instead, ask God to give you the grace and strength to face these challenges so that, in the end, He gets the glory. God didn’t take Daniel out of the lion’s den; he didn’t stop the three Hebrew boys from going in the fiery furnace; he didn’t rescue Joseph from his brothers or Potiphar’s wife and neither did he save Jesus from the cross. What He did was give them the grace and strength to overcome. All of these men were facing wilderness experiences. The wilderness experience lasts only for a time, once you don’t stop moving or give up.
● Corey Worrell
I say to you fellow Barbadians, stand firm, keep the faith, and we shall overcome.
The DLP will not fail because we are made to succeed. Barbados will not fall because we are constructed win.
I am obliged Sir.
- 2012 Financial Statement And Budgetary Proposals (Part 1)
- 2012 Financial Statement And Budgetary Proposals (Part 2)
- 2012 Financial Statement And Budgetary Proposals (Part 3)
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