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Everything for Sale: Privatization in Trinidad and Tobago Part VII by Godfrey Vincent

posted 9 Dec 2020, 11:55 by Gerry Kangalee   [ updated 9 Dec 2020, 12:17 ]
Dr. Godfrey Vincent
Delivering the 2016 Budget Speech to Parliament on October 5, 2015, Finance Minister Colm Imbert confirmed that his government’s position on privatization was not out of step with that of the previous government.

On the issue of Public-Private Partnerships, he affirmed the following, “Public-Private-Partnerships have evolved in both advanced and developing countries as a robust approach for the delivery of infrastructure services and for catalyzing growth and development. Trinidad and Tobago is already utilising public-private-partnerships to deliver public infrastructure services in some areas of the economy, including health, education and ICT.

Technical capabilities are being built in the Ministry of Finance and in a number of other Ministries. We will continue to use this model of development as we establish long-term contracts with investors to deliver much-needed infrastructure”

It was clear that “the more things changed, the more they remained the same.” The PNM’s policy was in lock-step with that of the People’s Partnership (See State Enterprises Investment Programme 2016: 7-8). The continuation of policies became clearer as more Budget presentations were made.

While the 2017 Budget Statement failed to mention any details on privatization of State owned enterprises (SOEs), the 2017 Report on SOEs showed government’s intention to pursue privatization policies. According to the Report, “In collaboration with the IDB, the PPP Unit has initiated a number of measures to build capacity within Government institutions to structure and implement PPP projects.

These measures include the development of the National PPP Policy and Institutional Framework and Draft Guidelines to support PPP investments. The National PPP Policy provides a high level framework for the PPP programme. This Policy sets out the definition of PPPs, the value drivers, the criteria that all projects must meet, the process by which PPP projects will be developed and implemented and the institutional responsibilities for the PPP programme”.

Additionally, the report stated that, “The principal responsibilities of the PPP Unit are:
• developing and disseminating the National PPP Policy throughout the public and private sectors;
• regulating the PPP programme to ensure PPP projects are developed in accordance with National PPP policy and Public Procurement and Disposal of Public Property Act;
• screening projects submitted by Ministries and Agencies for consideration by the Cabinet; 
• serving as a repository of skills and knowledge by continually building knowledge on managing PPP’s and by drawing from domestic and international experience to inform PPP programme development.
The PPP Unit will screen projects approved by GORTT for implementation during the fiscal year 2016/2017 in the following sectors: 
• Health 
• Housing 
• Tourism 
• Utilities.” (See 2017 Report on SOES

Based on the above policy proposals, it is evident that the PNM government did not radically deviate from the People’s Partnership on PPP. Why was that the case? It was because the new government was committed to the agreement signed with the Inter-American Development Bank (IDB) that closely worked with the IMF and World Bank. This meant that more doses of PPP will be applied and privatization of SOEs examined.

In the 2018 Budget Statement entitled CHANGING THE PARADIGM: PUTTING THE ECONOMY ON A SUSTAINABLE PATH, the Minister of Finance, on the issue of SOEs, informed the country that, “we are now reviewing and reforming, as appropriate, our portfolio of State Enterprises. We recognize that the State, through a state enterprise sector, has been playing a distinctive and instrumental role in the development and industrial successes of this country.

Madam Speaker, we can no longer justify the retention of state-owned enterprises which are not strategic in nature. In the context of this framework, we have closed a number of enterprises which were commercially oriented or which had deviated from their mandates or whose mandates were no longer required. The reform represents an important component in our efforts to rebalance and strengthen our economy.”

Like the Manning administration, the Rowley led PNM had no qualms about dismantling the remaining SOEs. A study of the 2018 Report on SOEs demonstrated that, “The national budget statement for fiscal year 2017 outlined a sale of assets programme as follows: (i) the sale of assets in Trinidad and Tobago NGL Limited (TTNGL); (ii) an additional 25 percent of the shares held by First Citizens Holdings Limited (FCHL) in First Citizens Bank Limited (First Citizens); (iii) sale through competitive processes of 50 percent of the industrial estates now under the remit of Evolving Technologies and Enterprise Development Company Limited (eTecK); (iv) sale of 20 percent of Trinidad Generation Unlimited (TGU) to institutional investors; and (v) partial divestment of Lake Asphalt of Trinidad and Tobago (1978) Limited (LATT ) to an International Strategic Partner."

Furthermore, the report noted, “On March 13, 2017 an Additional Public Offering (APO) of shares of First Citizens was launched which reduced the shareholding of GORTT, through FCHL, from 193,982,660 shares (77.18%) to 161,946,890 shares (64.43%) of the issued share capital of First Citizens. The APO realised proceeds of $1,012.9 million. Additionally, an APO by NGC of its 40,248,000 (26%) Class B shares in TTNGL was launched on June 5, 2017 which realised proceeds of $838.2 million. NGC continues to hold 38,700,000 Class A shares of the issued share capital of this company.”

Moreover, it detailed other initiatives such as: the sale of 40 percent of TGU with another 10 percent to be offered to public and private institutional investors. The sale of the shares was expected to be completed by September 2017; 
 the sale of the Rice Mills Operations of National Flour Mills located at Carlsen Field. Proposals for divestment of the Company were evaluated and a report was submitted to the Ministry of Finance for consideration; and the divestment (wholly or partially) of the Vehicle Management Corporation of Trinidad and Tobago Limited (VMCOTT). 

Additionally the 2018 report itemized the companies that were dissolved such as: Caroni Green Limited (100% State-owned);• Community Improvement Services Limited (100% State-owned);• Government Information Services Limited (100% State-owned);• Government Human Resource Services Company Limited (100% State-owned);• Seafood Industry Development Company Limited (100% State-owned);• Tourism Development Company Limited (100% State-owned);• Caribbean News Media Group Limited (100% State-owned); and• Human Capital Development Facilitation Company Limited (100% State-owned” (See 2018 State Enterprises Investment Programme).

Returning to power in 2020, the Minister of Finance presented the budget for fiscal year 2020/2021. As part of this speech, the government returned to the issue of Public Private Partnerships. He announced that, “we are now encouraging the private sector to become an additional source of funding as partners in this new pipeline of growth-enhancing activities. These public-private-partnerships will relieve the funding constraints in our economic programme. This mechanism will bring private sector technology, greater efficiency and innovation…

…Public port agencies have been moving away from the service port model under which national port authorities provide all commercial services as well as regulatory functions; but increasingly have been utilising the landlord model. The Government has decided to adopt this approach with the Port Authority retaining its regulatory and asset management functions, but with managerial, operational and financial responsibility for commercial activities such as terminals and equipment in the port area under a new investor.

The Ministry of Works and Transport will therefore be mandated to take immediate steps to rationalise by the end of fiscal 2021, the operations of the Port Authority of Trinidad and Tobago and to introduce a private sector operator into the Port handling operations now carried out by the Port of Port of Spain, leaving the ferry service to the Trinidad and Tobago Inter-Island Company Limited and the lands for the Port of Spain Infrastructure Company. We will also take steps to ensure that the operations at Point Lisas Industrial Port Development Corporation are consistent with the operations of the port handling operations of the Port of Port of Spain.”
(See 2020/2021 Budget Speech).

The Budget Speech also focused on the privatization of the energy sector. In relation to PETROTRIN, the government has “re-structured the Petroleum Company of Trinidad and Tobago (PETROTRIN), a loss-making state enterprise with operational expenditure outstripping its revenues and with unsustainable debt obligations.

We focused on exploration and production by creating a dedicated company into which we transferred and vested the exploration and production assets of PETROTRIN: Heritage Petroleum Company Limited (Heritage). We established a terminalling business model by creating Paria Fuel Trading Company Limited (Paria) which became responsible for importing and distributing all categories of fuel
required for our domestic and sub-regional markets.

We also established a refining company into which we placed the refinery assets: Guaracara Refining Company Limited. These 3 companies became subsidiaries of the holdings company: Trinidad 
Petroleum Holdings Company Limited and we retained the legacy assets, including non-core under the control of PETROTRIN” (See 2020/2021 Budget Speech). 

Additionally, the government is in talks with the OWTU to purchase the refinery. These talks were initiated in 2019 but have since stalled. Additionally, in other parts of the energy sector, the government intends to sell off its gas stations. In his discussion of the Budget under the section entitled “Reform of the Liquid Petroleum Product Sector, the Minister of Finance noted among other things, “… the liberalisation of the liquid petroleum fuel market, especially at this time of envisaged stable and low prices for petroleum products will set the stage for enhancing strategic investments to keep the industry efficient and competitive. We are now ensuring that the new pricing model will put the retailers on a self-sustaining and profit-oriented basis. All gas stations owned by National Petroleum Marketing Co. will also now be offered for sale to the private sector with first preference given to existing dealers and concessionaires.”

The PNM, under the leadership of Prime Minister Keith Rowley, has remained true to form in implementing privatization like previous regimes that have governed the twin-island republic. If it continues apace with the pursuance of these policies, SOEs in Trinidad and Tobago will become entities of the historic past. Part V111 will conclude the series.