Sale of State companies
GEORGE ALLEYNE Wednesday, July 25 2012
The intention by Government clearly to sell off substantial shareholdings in 11 major State-owned companies to private sector interests is without parallel in the Commonwealth since the 1979-1990 Conservative Administration of former British Prime Minister, Margaret Thatcher, divested several key companies which had been nationalised by the British Labour Party Government following its assumption of power in May, 1945.
The ultra Conservative Thatcher, who was dubbed the Iron Lady, would later be forced to resign in 1990 because of powerful opposition to her within her own party. But while the Conservatives had articulated a policy position on the divestment of nationalised industries from as early as 1945, the People’s Partnership Government in its campaign for office in May, 2010, did not state that if returned to power it would divest, wholly or partially, crucial State-owned companies.
Meanwhile, although the issue of divestment, indeed the decision to divest specific companies is a fait accompli, nevertheless, up to time of writing, the names of the companies have not been announced.
However, I will offer that they include companies some of which are owned outright by Government and others in which Government has shareholdings, but are shared with private sector interests.
Here is a list of companies which suggest themselves: The National Gas Company (NGC), First Citizens Bank (FCB), Petrotrin, Telecommunications Services of Trinidad and Tobago (TSTT), interests in National Enterprises Limited, interests in Point Lisas Industrial Port Development Corporation (PLIPDECO), interests in Hyatt Regency Trinidad, interests in Hilton Trinidad and Conference Centre and National Flour Mills.
Of crucial import is that the National Gas Company, for example, with a shareholding in Atlantic LNG, quantified by a certain level of production of natural gas makes it one of the best investments in the region. In the meantime, Petrotrin should be viewed along with its interest in Trinmar. The State’s interests in Hyatt Regency Trinidad and Hilton Trinidad and Conference Centre involves the lands and buildings of the two hotels.
While any investment of capital is to be encouraged, of significance is that recent monthly reports of monetary policy issued by the Central Bank indicated that despite the high level of liquidity in the nation’s commercial banking system there had been a reluctance on the part of the domestic commercial sector to borrow money for investing in new businesses or expanding existing ones.
So that the announcement that Government had identified 11 State-owned companies for consideration for transfer from the public to the private sector has come to me as a surprise.
Does this mean that the Repo rate, long fixed at three percentage points, will now rise? Where has the silent domestic private sector’s borrowing and/or investment initiative been all these months? Is there at long last a light at the end of the domestic investment tunnel? Or is there the possibility that some of Government’s shareholding in key companies such as, say, the NGC, FCB, Petrotin and TSTT may be taken up by foreign interests should the domestic sector be still coy?
While interests in India have long been hinted at as wishing to acquire FCB, Repsol would, undoubtedly, love to acquire a not insignificant shareholding in NGC.
But these things apart, what really does the People’s Partnership Government plan to do with the countless billions of dollars it hopes to get from the planned “transfer” of public sector shareholding to the private sector? Only recently Government entered into a massive loan agreement with the Corporacion Andina de Fomento (CAF). While Government has stated that the loan was to fund the construction of the San Fernando to Point Fortin Highway and other projects, it is yet to tell the nation either the quantum or terms of the loan.
The CAF loan has already been advanced as taking care of the money needed for the highway to Point Fortin. What then will the money gained from the sale of assets be used for? Will it be for the funding of improvements in the electricity or water supply, the funding of a possible rapid rail project, an increase in hospital accommodation or in additional housing?
Should substantial shareholding in Petrotrin be sold along with that in FCB and should TSTT become largely private sector owned will there be built in provisions aimed at forestalling any possible move to effectively scale down the number of employees, who today work in these companies?