PEOPLE & THINGS: Privatization II

Peter Wickham,

Added 11 November 2012

peopleandthings

Last week People & Things attempted to establish a philosophical basis for this discussion on privatization. Today we will look at the track record of both political parties on this issue, as well as the general public’s attitude.   A review of the “thought, words and deeds” of both the Barbados Labour Party (BLP) and Democratic Labour Party (DLP) on this issue is quite interesting and quickly demonstrates that both parties at different times have engaged actively in both nationalization and privatization. This is not surprising since they share a common philosophical berth referred to as “democratic socialism”, which means that at times the state is expected to take control of some sectors in the national interest.   Similarly, both have at different times acknowledged that they need not retain full ownership of an entity to secure the national interest and privatization was therefore an option. The history of our Government’s involvement in nationalization and privatization over the years is perhaps best demonstrated with respect to public transportation, where Sir Grantley Adams (BLP) stepped in to nationalise that sector in 1955 when private owners attempted to increase their fares. His initiative saw Government take control of all but two transport entities (Rocklyn and Elite), which were subsequently also nationalized by his son in 1978. In the meantime, the BLP also created an effective private-public partnership in transportation by legalizing private operators who were not concessionaires in 1976, which became the first minibuses. This initiative was effectively blessed by the DLP in the late 1980s with the creation of the ZR vans. It is interesting that the DLP has more recently been exploring the possibility of moving back to a concessionaire system, consistent with the private model successfully employed in several European countries. This system is an example of a privatization model that has the potential to deliver enhanced efficiency while protecting the vulnerable and, in the case of Trinidad and Tobago, creating opportunities for thousands of small business people. The transport “partnership” which has been endorsed by both the BLP and DLP here has also created a similar stake for several small and medium-sized entrepreneurs which help to further the goals of democratic socialism. Outside of the transport sector, there has also been considerable nationalization and privatization activity on the part of both parties here.  The BLP created the Insurance Corporation of Barbados (ICB) and Barbados National Bank (BNB), neither of which was technically “nationalized” since they did not previously exist. The BLP did, however, establish a majority interest in Cable & Wireless which became BET [later BARTEL] in 1984 and later partially or fully privatized both the ICB and BNB. The DLP has demonstrated a similar inclination over the years with its divestment of Government’s interest in Cable & Wireless during the 1990s economic crisis and the full privatization of the Flour Mill (Barbados Mills Ltd). The case of Heywoods Hotel is an interesting one since the BLP set it up in 1985, while the DLP sold it to Barbados Shipping & Trading in 1993 and it has now been closed under the DLP’s watch in 2012. More recently, the Thompson administration articulated a commitment to the complete divestment of Government’s interest in BNB (2008). In his Budget, Minister of Finance Chris Sinckler signalled Government’s intention to “undertake an initial public offering of 30 per cent of the shares of Grantley Adams International Airport Inc (GAIA), the oil company and Barbados Port Authority”, which for all intents and purposes is partial privatization or divestment to which the DLP is now committed.   Although the DLP now appears less comfortable with the BLP’s privatization stance, the reality of their position is not philosophically dissimilar since if one agrees to partially privatize an entity, then the presumption is that one is not opposed to privatization. Certainly, if one is willing to allow private participation, then there should be nothing fundamentally standing in the way of a complete sale. There is also a practical aspect to all this which would make partial divestment unattractive to able investors, who would be disinclined to invest heavily in an entity whose destiny they cannot fully influence. Having established the level of harmony between the two parties on this issue, we can now look to the public’s attitude to privatization. Regretfully, there has never been an assessment of our attitude to nationalization. The most recent NATION/CADRES survey, however, examined the attitude of the public to the issue of privatization by way of a series of related questions which have already been reported upon in September 2012. The public was generally hostile to the issue of privatization, although there was a keen interest in seeing the Caribbean Broadcasting Corporation (CBC) privatized and a slightly lower level of opposition to the privatization of the Transport Board. Presumably this attitude demonstrates that Barbadians generally see privatization as an option in cases where they see themselves as receiving little value from a Government department. Hence “we” are willing to surrender ownership of CBC since relatively few people see TV8’s product as being worth the expenditure, and perhaps believe that private operators would deliver a more reliable transport service. It is interesting that more than 70 per cent of Barbadians opposed the sale of GAIA Inc which the DLP has committed itself to [partially], and which the BLP would also presumably target early in any privatization programme. It is clear from this review that both the DLP and BLP are some distance away from the public on this issue and, moreover, that “we” see privatization as being inherently negative. This negativity is perhaps associated with experiences such as Heywoods, which has resulted in hundreds of people being out of work, and the 1955 transport situation where private concessionaires were holding the people of this country to ransom. Clearly “we” are not aware of the numerous positives that would have influenced BLP and DLP governments over the years to pursue these initiatives.   We are also unaware of the new models of divestment and regulation now available to governments to supervise private enterprises in sensitive areas. Most unfortunate is the fact that we are blissfully ignorant of the extent to which we can self-finance major developments here by divesting our interest in potentially lucrative state assets. Hence we continue to believe that we will preserve our nationhood by retaining interest in these investments, while further indebting ourselves to international borrowers. One can only hope that the pending election campaign will close this information gap. • Peter W. Wickham is a political consultant and a director of Caribbean Development Research Services (CADRES).

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