The age-old questions about the proper role of Government, its optimum size and whether it should be involved in commercial activities, are rooted in political ideology and economic theory but their relevance today has been reinforced by the present adverse economic circumstances.
The approval by Parliament of an additional $46 million for the Transport Board should jolt us into the reality that this is not just an ideological or theoretical debate, since the size, nature, and cost of Government has an impact on all members of the society. Government as presently structured has 18 ministries, 74 departments, and 44 statutory entities.
Of these statutory entities, 26 are simply providers of Government services (these include the Child Care Board, National Housing Corporation, Invest Barbados), and 18 are commercial (such as the Caribbean Broadcasting Corporation, Barbados National Oil Company, Transport Board, Barbados Water Authority, Barbados Conference Services Ltd). According to the Central Bank Economic Review 2010 (Table 4), the cost of Government operations in 2010 was $3.01 billion.
Government revenue was $2.30 billion, leaving a deficit of $714 million or 8.8 per cent of GDP.
Of course, the purpose and size of Government must be assessed in the context of the developmental needs of a young, independent, post-colonial nation.
There can be no doubt that various services provided by Government have made a tremendous contribution to the high quality of life and the economic development of our country.
Indeed one of the peculiarities of Barbados is that the state has had to make strategic investments to facilitate economic transformation in key areas of the economy where either the level of risk or the simple lack of private sector investment would have prevented those projects from being implemented.
Notwithstanding the pragmatic justification for Government to engage in commercial activities, it must be acknowledged that the business of Government is not business. These investments must be kept under constant review and there should be an active cycle of divestment.
The brutal reality is that the survival instinct which drives private sector enterprises is largely absent from Government-owned commercial entities. A typical business must compete and make profits or die.
A Government enterprise can have the comfort of regulatory protection as well as the deep pockets of Government (actually the taxpayers) to hide inefficiency and protect it from collapse.
It is the need to survive that causes businesses to make timely adjustments to changes in market demand, technology and so on rather than depend on bailouts at a later stage.
Additionally, Government does not have to own key infrastructure or be involved in business in order to execute necessary regulatory or security functions.
The time has come for Government to dispose of some of its commercial entities.
A carefully crafted divestment strategy could reduce expenditure on loss-making enterprises as well as realize capital gains on the more successful entities.
Gains could be used to reduce the deficit or make other essential investments for national development.
Divestment strategy should allow and encourage broad-based share ownership as well as provide opportunities for innovative Barbadian entrepreneurs.
