BARBADOS AND JAMAICA are more than just Caribbean neighbours.
They are dealing with some identical economic challenges: high debt, little economic growth and a need to further develop their infrastructure.
In Barbados’ case, its debt to gross domestic product is smaller than Jamaica’s, about 80 per cent, depending on whose figures are being used, compared to Jamaica’s 130 per cent.
Just as important Barbados’ economy has slipped back into recession at a time when it is talking about constructing a new hospital and acquiring the Almond Beach Resort.
On the other hand, Jamaica has turned to the International Monetary Fund for financial help and is forging ahead with the construction of an extensive toll road that when completed, would stretch from Ocho Rios to Kingston. That’s not all. It is considering expanding the Kingston container terminal.
In both countries the key question is, where’s the money going to come from to get the job done?
Barbados may not have decided on the source of funds for its dreams, but Jamaica seems to have a plan.
“It’s a deliberate thrust,” said Dr Omar Davies, a former minister of finance who is now minister of transport, works and housing, the other day in New York when he addressed a luncheon arranged by the Jamaican American Chamber of Commerce and the Jamaica Children’s Project in association with the Jamaica National Building Society.
Actually, Davies used those words to begin a discussion on the role of the private sector in Jamaica’s future development. What he outlined was a dramatic shift in government policy that’s moving away from an overwhelming role in infrastructural expansion to an enthusiastic embrace of a strategy that puts the private sector in the co-pilot’s seat.
Stated simply, the strategy aims “to bring about infrastructural development, once thought to be the exclusive province of governments” to one in which “it is being carried out by the private sector,” he said.
In February when the Opposition suggested privatizing the Barbados Transport Board, it triggered a strident election row that helped to defeat the Barbados Labour Party. Now, there is talk about rationalizing state enterprises as the Government seeks to deal with its fiscal deficit and its mountain of debt.
As Davies explained it to his mostly Jamaican audience, the government in Kingston was seeking partnerships with the private sector and in some cases with foreign sources of concessionary financing, such as the Chinese, to achieve its goals.
Take the toll road now under construction. When completed in 2016, the massive project would slash the travel time from Ocho Rios to Kingston from up to five hours, depending on traffic, to 45 minutes. It would also open up the country’s interior and the tourism industry to much needed further development.
“The quid pro quo is that the government will be out of the decision-making in terms of the returns to the entrepreneurs,” he said of the road public-private partnerships.
“If you think about it logically, a toll road, it doesn’t make sense for an entrepreneur to price the rates such as no one can use it. He can’t just walk away with a road.”
Davies described the approach as a “significant breakthrough in terms of decision-making, policy-making” in Jamaica, one that has now been “accepted” by the government as the way to go.
He was clear about some key things. The decision to go to the IMF was Jamaica’s, not anyone else’s. Secondly, the move would help the country rein in the growth in debt, something he called “inescapable”. Thirdly, the government couldn’t stimulate economic growth simply by increasing government expenditure on infrastructure.
That was why Jamaica had to seek a new approach to financing infrastructural development, he said.
That puts privatization squarely on the table. And the example he cited was the operations of Sangster Airport in Montego Bay. It had encountered a great deal of resistance when first proposed because many Jamaicans felt it was a “betrayal of the patrimony”.
However, it has since turned out to be a success story, he asserted. And the row has disappeared.
“It has been successfully implemented. The private entrepreneurs have invested much more than the government of Jamaica could ever have invested, but the critical issue is that there is no debt, there is no Government of Jamaica debt,” he said,
What was also true, Davies said, investors have put up the money and the airport was operating efficiently.
Successful model
“We broke this sort of mindset which thought there were certain investment opportunities which were exclusively the province of government,” he said.
“Secondly, we brought about the modernization of an important infrastructural facility with not one single dollar of debt for government.”
Imagine the Government or Opposition in Barbados proposing the privatization of the Grantley Adams International Airport or the Bridgetown Harbour. All hell would break loose.
But the success of the Montego Bay airport model of privatization and the approach used to the toll road have opened the door to other initiatives
being placed on the table for consideration. They would allow the state to “leverage” government assets by bringing in private investors to upgrade, expand or built from ground up without government adding to its indebtedness, Davies explained.
Indeed, the toll road is an example of “financial rationality” prevailing.
“Right now we are working on a public-private partnership with the Kingston container terminal which has been a successful venture but there is need for significant capital investment,” he pointed out.
“An enterprise team is working on the privatization programme and by the end of the year a private investor would be chosen from about three companies to make the investment.
“So, the development and expansion of the Kingston container terminal will not be to the government’s expense,” said Davies. The bottom line with these planned ventures, according to the minister, is there would be major investments but not a single penny of debt to the government.
Is that a road Barbados may also travel as it too grapples with the huge debts on its books, the negligible rates of economic growth and a lack of money to invest in the infrastructure?
Perhaps, Barbadians may begin thinking about it in earnest.
