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posted 4 Dec 2019, 05:23 by Gerry Kangalee   [ updated 4 Dec 2019, 05:48 ]
David Walker
Our Prime Minister has declared that 'Gambling is a ridiculous pastime' and I have to say that I agree with him. It is no coincidence that the National Lotteries Control Board (NLCB) is consistently one of the most profitable State Enterprises. Gambling is beneficial to those who operate gambling businesses, hence the plethora of gambling establishments, all apparently thriving even during our current economic downturn.

Indeed, economists will tell you that the gambling industry is one of a rare breed. That breed is described as counter cyclical economic entities. Basic
economic theory, not to mention common sense tells us that during an economic downturn businesses are expected to do less well that otherwise. It has been found that the gambling industry thrives during such periods, presumably as desperate persons seek a magic solution to their woes via a game of chance.

As an aside I have also written that our financial services sector likewise shows consistently impressive performance during recessions. If you wish to access my writing on that phenomenon, contact me at d.walker@alcindorwalker.com.

Some make a distinction between gamblers and players. Players are those who pay little or no regard to numbers or probabilities of various outcomes. They will place hundreds of dollars on a number because "somebody fall down on the corner". Gamblers study probabilities seeking out situations where it exceeds a certain threshold that they set. Yes they take risk, but they assess risk by objective criteria and gamble (some will say invest) on that basis.

Which brings me back to the Prime Minister. While he criticises citizens for engaging in the ridiculous pastime of gambling with their own money, he and his political colleagues routinely gamble away taxpayer dollars on projects based on little more than a hunch or a warm feeling for a particular project or supplier.

This is what has happened with Petrotrin and so many other State Enterprises and we the taxpayers and citizens are left to pick up the tab. Like the "real" gambler, what we ought to be doing is estimating the probability of success of each proposal as a bare minimum. We should also be evaluating the need for and likely impacts of whatever will emerge from a proposed investment.

Perhaps the greatest irony of this reality is that this government agrees with me. In debating and passing the procurement legislation they extolled its virtues at length. It demands the performance of Needs Analyses, Feasibility Studies, Impact Analyses and Income Projections among other things. It mandates open tendering which is the equivalent of comparing odds (returns) offered by different establishments. These are at the core of the legislation that the Prime Minister himself told us forcefully was needed in order to eliminate corruption and underpin better investment decision making.

Yet despite that, this government is determined to rush through a whole raft of investments (gambles) without reference to the undeniable benefits of the legislation while the Prime Minister lectures us about the ridiculous nature and outcomes of gambling. While he criticises the average citizen for enjoying "the rush" that comes from gambling, he is himself addicted to it on the strength of the nation's money and no personal loss suffered regardless of the outcome.

If he really believed his own exhortations while promoting the legislation, he would use his authority as Prime Minister to dictate that no project will henceforth be approved unless it went through the procedures prescribed in the legislation. We do not have to wait until all the apparatus is in place. He could demand Needs Analyses, Feasibility Studies, Impact Analyses etc. today if he were really minded to seek the best investment decision for the country.

I won't list the numerous failures of public expenditure but put the Petrotrin debacle and the incorrectly named CLICO rescue at the top. There are dozens more, accounting for tens of billions of wasted public funds over just the last ten years. The Prime Minister tells us that his procurement legislation represents a massive step in avoiding repeats and I couldn't agree with him more. He has the power to make it happen right now but he appears to enjoy the gambling "fix" too much.

Why are we rushing to "invest" in the rescue of Magdalena Hotel, an airport to meet an unspecified need or various other "assets" of dubious value and almost certain negative returns? It may well be that some of these projects are worthy of our scarce investment resources. If they are then proper analysis will confirm that and enable us to invest with the greatest chance of success.

The strictures of the procurement legislation are a great start but represent only a part of valuable, professional Investment Appraisal. Most notably best of breed investment appraisal includes sophisticated Risk Management. No major corporation or investor would undertake any commitments without it. If there is one addition I would wish to see added to the processes undertaken by government in making investment decisions it would be Risk Management to include all its major components (Assessment, Mitigation etc.).

Sadly though, our current crop of leaders pour scorn on the notion of proper Investment Appraisal. It has been derided by one prominent Minister as "paralysis by analysis". Another says that people like myself wish to "talk projects to death" (if only someone could have talked the Petrotrin projects to death). Our leaders describe anyone who dares to ask for information as being against progress or wishing to block progress.

They prefer to gamble. They never have to answer for the consequences (losses). For example, in the Petrotrin matter, the outgoing Chairman (appointed by the PM) told us that the biggest cause of the problems was political interference. I take that to mean that the costly decisions were taken by the politicians rather than the directors, executives and hired professionals. Cabinet gambled based not on proper investments appraisal but on their hunches and other external factors. Unlike the citizens who the Prime Minister now chastises for their gambling habits, our political leaders suffer no personal losses as a result.

This is what will be all but eliminated under a proper Investment Appraisal regime. We can't continue to gamble with our national patrimony. It is a truly ridiculous way to manage what is effectively our development budget. Can the leaders of either or both major parties be weaned off of their gambling habit? I suspect that the Prime Minister's criticisms of gambling are meant for us and not for himself. I would love to be proven wrong.