In Monday’s Punch (October 7, 2002) the Editor reviewed the “big mess” left by Hubert Ingraham and the plans of Prime Minister Perry Christie to privatize Batelco. Let’s not discuss the “big mess” and concentrate on the specifics of the alleged deal that The Punch describes as the “perfect combination”. The author contends that it is in fact an “imperfect combination” and will suggest ways to perfect it.
The Punch contends that the privatization deal will have an “International” Bahamian buying 49% per cent as the Government’s “strategic partner” 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 “Government and the people will own the controlling 51 per cent.”
The Editor concludes that this deal is the “best” 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 “the Government will not be ‘selling off the peoples’ assets to ‘a bunch of foreigners.’”
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 “privatization”. The deal is the proverbial “half a loaf”.
Although it provides for non-Government management, it perpetuates the top-down political control of the company that characterizes this economy. Let’s face it…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 Government’s record, including the alleged “big mess”, is the very reason to remove Batelco from its direct control.
Let’s 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.
“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.” 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. “Probing beneath the surface…one discovers that [the Bahamas] is a highly regulated, centrally managed economy.” When that Report was written the FNM had already sold its largest hotels and growth was beginning. The Report ended with “Hopefully, a decade of economic stagnation is ending and this country will move toward deregulation and economic liberalism in the near future.” Growth did occur but the FNM took major steps toward greater regulation. These steps in part created the “big mess”.
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:
1. 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.
2. The Government would obligate itself to sell its remaining shares over the following five years.
3. The new Batelco would publish annually an audited Report to Stockholders and three un-audited interim earnings reports.
4. 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 “management in the closet” is likely to prevail.
Furthermore, it –