In Mondayﾴs Punch (October 7, 2002) the Editor reviewed the ﾓbig messﾔ left by Hubert Ingraham and the plans of Prime Minister Perry Christie to privatize Batelco. Letﾴs not discuss the ﾓbig messﾔ and concentrate on the specifics of the alleged deal that The Punch describes as the ﾓperfect combinationﾔ. The author contends that it is in fact an ﾓimperfect combinationﾔ and will suggest ways to perfect it.
The deal…
The Punch contends that the privatization deal will have an ﾓInternationalﾔ Bahamian buying 49% per cent as the Governmentﾴs ﾓstrategic partnerﾔ who will have a management contract with a leading telecommunications company to run the day-to-day operations. This strategic partner will presumably sell a portion of his shares to the competent North American telecom company and to several leading local partners. The ﾓGovernment and the people will own the controlling 51 per cent.ﾔ
The Editor concludes that this deal is the ﾓbestﾔ because the competent North American telecom company is the day-to-day manager and the strategic partner, the leading businessmen and obviously the Government are Bahamians. Apparently, the most critical issue to The Punch is ﾓthe Government will not be ﾑselling off the peoplesﾴ assets to ﾑa bunch of foreigners.ﾴﾔ
The Editor does not address the fact that this deal leaves Batelco as a government controlled corporation. Private management and government control do not constitute ﾓprivatizationﾔ. The deal is the proverbial ﾓhalf a loafﾔ.
Government control
Although it provides for non-Government management, it perpetuates the top-down political control of the company that characterizes this economy. Letﾴs face itﾅBatelco must drastically re-invent itself so that it becomes innovative and responsive to the present and future needs of its customers. It must become the technological sparkplug for e-commerce. The Governmentﾴs record, including the alleged ﾓbig messﾔ, is the very reason to remove Batelco from its direct control.
Letﾴs step back for a moment and review what has happened in the last century. The 20th century saw the rise and fall of centrally controlled and managed economies under many and radically different political guises. These included Nazism, Fascism, Communism, Fabian socialism, National Socialism, central planning and Keynesianism. All were touted as the ideal and even utopian ways to harness the industrial revolution.
ﾓIn rich and poor countries alike, the prevailing consensus of informed opinion now holds that boundless centralization, as a general principle, is a failure. It has been tried, exuberantly and repeatedly, and found wanting.ﾔ The top-down economic system brought down the walls of Communism and revealed the inherent long term weakness in the central planning of Japan Inc. Free markets and free market solutions simply work better. (Brink Lindsey, Against the Dead Hand, Wiley, 2002, p. 250)
The description of the Bahamas contained in the Economic Freedom of the World Report of 1997 is still correct. ﾓProbing beneath the surfaceﾅone discovers that [the Bahamas] is a highly regulated, centrally managed economy.ﾔ When that Report was written the FNM had already sold its largest hotels and growth was beginning. The Report ended with ﾓHopefully, a decade of economic stagnation is ending and this country will move toward deregulation and economic liberalism in the near future.ﾔ Growth did occur but the FNM took major steps toward greater regulation. These steps in part created the ﾓbig messﾔ.
A better deal
With a true privatization of Batelco the PLP can take a major step toward freer markets. Its plan should be structured to include the following:
- The Government as an integral part of the privatization transaction would offer at least 25% of its initial 51% to the public in an Initial Public Offering that may or may not be listed on the Bahamian Stock Exchange.
- The Government would obligate itself to sell its remaining shares over the following five years.
- The new Batelco would publish annually an audited Report to Stockholders and three un-audited interim earnings reports.
- Batelco would be a regulated utility and the mandate of the Public Utilities Commission would be to set service and pricing objectives, etc. for the company that would mimic a free market environment to the maximum extent possible.
The success of the Initial Public offering would in part depend on whether the underwriters and the equity market perceive the strategic Bahamian investor and the North American telecom manager/partner to be creditable contributors to the success of the enterprise.
The alleged deal allows for concentrated control whereas the better deal passes an important review and control function to shareholders who can make their views known at annual meetings or immediately with their buy, sell or hold decisions. Without these changes corruption by ﾓmanagement in the closetﾔ is likely to prevail.
Furthermore, it ﾖ
- Gives the Bahamian public the opportunity to be direct owners of the nationﾴs assets; and
- Promotes the equity market as an alternate to banks in financing business ventures.
This would be a more ﾓperfect combinationﾔ.
