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THE ISSUE: Too costly to carry

Natasha Beckles

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It has been suggested on several occasions that Government either divest some of its statutory corporations or find ways to significantly improve their efficiency.
In 2010 Government’s transfers to statutory corporations and other entities accounted for approximately 40 per cent of its current expenditure, the four biggest going to the Queen Elizabeth Hospital (QEH), University of the West Indies (UWI), Transport Board and Barbados Water Authority (BWA).
Transfers to statutory corporations also account for the majority of expenditure incurred under the “Transfers and Subsidies” category of overall current expenditure.
It was therefore not surprising that Government’s Medium-Term Fiscal Strategy 2010-2014 revealed that caps were to be placed on transfers to statutory boards, statutory corporations and Government-owned companies such as the QEH, Transport Board, Barbados Agricultural Development and Marketing Corporation (BAMC), and UWI.
In addition, Government said it would reduce annual transfers to the BAMC and reduce its debt accumulation by $40 million by 2013-2014.
“The policy will be to regularly review the efficiency of Government’s expenditure programmes and seek where possible to remove wasteful spending, remove excess spending due to inefficient and uncoordinated/unshared procedures, reduce cost overruns and improve service delivery,” the policy document said.
“More specifically, ministries will have to review and reprioritize their programmes to help reduce costs by improving procedures to remove inefficiencies, and by sharing more resources and more procedures between programmes.
“Further, state-owned agencies will have to improve their levels of efficiency and rely less on Government subventions,” it said.
In the 2012-2013 Estimates Of Income And Expenditure, Minister of Finance Chris Sinckler said three state entities that together consume hundreds of millions in public funds are to come under the microscope as Government seeks outside help to restructure them.
He revealed that Government had sought the assistance of the Inter-American Development Bank (IDB) to assist it in a restructuring plan for the National Housing Corporation (NHC), Transport Board, and Sanitation Service Authority (SSA).
While not giving details, Sinckler said that the IDB-assisted project would not only map out a plan to make the SSA, NHC and Transport Board more efficient but if they could be privatized in any form, this too would be examined.
“What we are attempting to do ought to have been done a long time ago . . . . We will do it for the country because it is the right thing to do,” he told the House of Assembly.
In the May 26, 2011 DAILY NATION, Sinckler said Government had become “too large, too inflexible, too slow and too costly to carry” and inefficiency and ineffectiveness in both central Government and para-statal bodies could not continue unaddressed.
He said successive administrations had established “a maze of statutory authorities each important in their own right, some overlapping and duplicating responsibilities but all carrying separate bureaucratic administrations which have grown exponentially on the expansion of their respective remits”.
However, he said this outgrowth in responsibility and size had not led to any discernible increase in the levels of efficiency or quality of services.
He stressed that each of these agencies was necessary at the time of its creation and had filled the void left by the weaknesses in Central Government’s ability to be effective at the community level.
Still, he noted that “many of these organizations have in fact become too much like the very Central Government administration they were created to assist”.
“They have become wholly inefficient in service delivery, extremely costly to maintain and weak in managerial and operational systems.
“That is not to say they have bad managers . . . but at a systemic and structural level, several can no longer effectively and efficiently deliver to the public they serve,” the minister said.
Meanwhile, in the August 23, 2010 BARBADOS BUSINESS AUTHORITY, Sir Courtney Blackman, economist and founding Governor of the Central Bank of Barbados, stressed that statutory corporations should only be established to perform socially essential and non-party-political tasks that cannot be economically or appropriately carried out by the private sector or, because of their dynamic character, cannot be efficiently carried out by the Civil Service.
“The majority of statutory corporations have been established for valid reasons and their closure would result in severe social and economic disruption – for example, the Transport Board and the Water Authority,” he said.
However, Sir Courtney added that with the exception of the Central Bank and Insurance Corporation of Barbados, the overall performance of statutory corporations has been unacceptable.
He said the Central Bank and QEH are dynamic institutions and cannot be efficiently run within the framework of the Civil Service.
“Nor would it be appropriate to have our prison run by a private corporation, as obtains in some countries.
“Water supply, health care, and primary, secondary and tertiary education are too vital to our society and economy to be left exclusively to the private sector.
“However, house and road construction are more efficiently carried out by the private sector, and statutory corporations now so engaged should be closed, as must those that have outlived their usefulness,” he said.
Similarly, economist Lindsay Holder said in the August 23, 2010 BARBADOS BUSINESS AUTHORITY that the services provided by Invest Barbados, the Barbados Investment and Development Corporation (BIDC), Barbados Tourism Authority, National Cultural Foundation, and the National Conservation Commission can be considered public goods and therefore, it would be virtually impossible to support any argument for the abolition of these institutions.
“One can, however, question the need for the two separate entities Invest Barbados and BIDC.
In contrast, the services provided by [the Caribbean Broadcasting Corporation] and [National Petroleum Corporation] can be considered as private goods and thus, under ideal circumstances, the provision of these services can or should be privatized,” he said.
Holder said the services provided by the Transport Board, NHC and the SSA are mixed (quasi-public or social) in the sense that they contain elements of both public and private goods.
“It is because of the partial public goods aspect of these services that governments all over the world are involved in the provision of them.
“Under normal circumstances it is virtually impossible for governments to completely or substantially privatize the provision of those services.
“The Government’s ability and/or willingness to abolish statutory corporations depends on the nature of the goods and services supplied,” he said.