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TEMPLATE FOR STATE SECTOR REFORM
DR HAMID GHANY
On September 2, Prime Minister Dr Keith Rowley addressed the nation and outlined the rationale behind his Government's decision to close the Petrotrin refinery at Pointe-a-Pierre.
He effectively outlined a case for how the Government could engage the entire state enterprise sector where annual losses are widespread and the taxpayer is the funder of last resort to keep these enterprises going.
The relevant part of his speech that addresses this issue read as follows:
“On Tuesday, August 28 the board of directors of Petrotrin, after months of dedication and hard work, in analyses and consultations, met with its employees and their union representatives to announce plans for changes that would be implemented in the coming weeks and months to get the company on a path to sustainable profitability. These measures are expected to stop the taxpayers funding operations that are losing billions of dollars and to stop the haemorrhaging of much-valued, and much-demanded, foreign exchange—US dollars. The primary objective of the announced interventions is to transform the business of the company from chronic money-losing to a return to profitability.”
This is a state of affairs that one can find in many other state enterprises who continue to benefit from transfers from the state Treasury in order to prop them up. If this approach were to be adopted across the board, then one can imagine what the Government surpluses would be like in the annual budget.
The philosophy of the PNM in taking over the Texaco refinery in 1984 was addressed by the Prime Minister in the following way:
“By 1984 this refining business was in trouble and losing money, facing closure by the international oil giant. It was against this background of uncertainty and even despair that on August 30, 1984, under Prime Minister George Chambers, the already antiquated and failing refinery was purchased for $189.2 million, of which $98 million was paid in cash and the balance paid in refined product over a ten-month period. In March 1985, a few months after we bought the Texaco refinery, an article in the New York Times reported: 'The Government agreed to buy the money-losing refinery, officials say, mainly to save more than 3,000 jobs.'”
Having made the decision to buy what has been described as a money-losing refinery mainly to save jobs, it appears that there has been a shift of PNM philosophy. In 1969, when the government of Dr. Eric Williams created the joint-venture company Trinidad-Tesoro to take over the BP operations, the philosophy was the same - to save the jobs of workers.
What is significant is that this is not the philosophy being advanced today. According to the Prime Minister:
“To some, these changes may appear drastic, but the situation at Petrotrin requires drastic action. It requires intervention now, in fact before now, but the country's decision-makers, whilst knowing the problem, shied away from the negative responses that were certain to accompany any corrective action. In short, the Petrotrin fix was always seen to be bad for politics and even one's political survival, but we have arrived at a place now where its ongoing failure threatens the national survival. Such is my lot.”
Dr Rowley now has to face what Prime Minister ANR Robinson had to face with an IMF programme and its conditionalities in the 1980s after he came to power in 1986. Those conditionalities were tough, but they saved the country from economic demise. The main problem that they faced was the political management of those economic conditionalities which subsequently cost them the 1991 general election.
The difference today is that the IMF is not here officially, however, some of these measures are not too far off the mark where IMF conditionalities are concerned. This Petrotrin approach (without the IMF) could be a new template for the State sector under this PNM government.
Apart from many state enterprises losing money and being fed by the taxpayer every year, there is also the additional problem of late submission of financial accounts to Parliament for scrutiny.
There is now an opportunity to take a look at profitability and performance across the State sector based on this new model that has been unveiled by the Prime Minister. Will other State boards are asked to undergo a similar exercise with the representative unions of their workers or have this medicine been set aside for Petrotrin only?
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