The investment of National Insurance Scheme (NIS) funds in the Four Seasons project has been badly handled by Minister of Finance Chris Sinckler. An Investment Committee, that is chaired by the chairman of the board and made up of qualified persons, reviews all investment proposals prepared by the Investment Unit. It then makes recommendations to the NIS board whether to invest or not.
According to Section 35 of the act, if the Minister of Finance disagrees with the recommendation of the board, he can give a directive to the board with respect to an investment. It must be in writing. In doing so, the minister may disregard the objectives of the Investment Committee which include among others, meeting the scheme’s liabilities as they fall due and maximizing returns to the National Insurance Scheme without pursuing speculative investments.
It has been made public that the Investment Committee of the scheme has not recommended that the NIS funds be invested in the Four Seasons. Therefore the chairman of the board, who chairs the committee, is obviously in favour of the recommendation not to invest in Four Seasons.
It is known that the investment of NIS funds is a pre-condition for access to funding from the Inter-American Development Bank. Notwithstanding how the committee and the chairman of the board may feel about the investment, the recent negative outlook given to the country by Standard & Poor’s will make access to foreign borrowing even more difficult for the government.
Therefore if investing NIS funds in Four Seasons gives the government access to foreign exchange, those behind the project have a major card to play which is obviously being done. Simply put, the government is valuing the potential foreign exchange more highly and is willing to pay a premium for it.
The composition of the Investment Committee, with the presence of a Central Bank representative and a board member of the bank, reinforces my view that access to foreign exchange through the back door is driving the conflict between the respective parties.
This is where the process has gone wrong. Persuasion now seems to be responsible for the reduced resistance of the NIS board.
Here is a company that was a state of abeyance for almost two years making a presentation to the committee which reached a firm recommendation and in less than two weeks stumbling on new information, so potent, that it caused a complete reversal.
The only thing that the committee could have stumbled on in so short a time period was political coercion. The process is now intended to create an environment for the minister of finance to look as though he is rubber stamping a new recommendation of the Investment Committee and by extension the board.
Finance Minister Sinckler must be made to invoke Section 35 of the NIS Act which gives him the authority to give a directive to the board. If such a course of action is not followed, then it will reflect badly on the Investment Committee and the board.
A collection of qualified persons cannot be made to succumb to political persuasion in the full glare of the public. Such behaviour cannot be tolerated when time will be present to judge the wisdom of professionals who were forced to betray their training.
The irony of this episode is that unlike taxes, the public can lay claim to legitimate ownership of the NIS funds and more importantly those funds will determine their quality of life in years to come. The thing that truly distinguishes taxation from NIS payments is the benefit principle. This principle makes the cost more direct and very specific to the individual’s needs.
The decision to invest NIS funds in Four Seasons is now simply a political one that does not require any financial or economic analysis. In this regard, there is only one way out and that is for the minister to deliver a directive in writing.
• Clyde Mascoll is an economist and Opposition Barbados Labour Party spokesman on the economy. Emailclydemascoll@gmail.com.