By NEIL HARTNELL
Tribune Business Editor
The government yesterday revealed plans to introduce legislation that will address “the real risk” loss-making, inefficient state-owned enterprises (SOEs) pose to its financial health.
KP Turnquest, deputy prime minister, told Tribune Business that the State-Owned Enterprises Bill is designed to introduce “the same kind of accountability and discipline” to SOEs that the Minnis administration is currently implementing with central government.
He added that the Bill would impose “proper corporate governance” on these entities, and “strengthen the hands” of their boards to oversee operations to “the kind of standard” expected within their various sectors and industries.
“As we all know, the SOEs represent a real risk in terms of our exposure,” Mr Turnquest told this newspaper. “Unfortunately, several of them are not at a cost recovery level at this point.
“We need to ensure the same kind of discipline and accountability we’re trying to build within the central government system translates down into the operation of these SOEs. The way to do that is ensure they have proper governance, and ensure as much as possible the kind of corporate governance that makes for an efficient utility.
“The new legislation is intended to strengthen the hands of the various boards and agencies to bring them to a standard one would expect for the kind of operation they may be involved with. It’s significant.”
The Bill’s development was revealed yesterday with the release of the government’s nine-month fiscal “snapshot” and budget report, which said it was part of broader efforts to reform public sector financial management and reduce the burden on taxpayers.
“Work [has] also commenced on the State-Owned Enterprises Bill, which will support an enhanced governance framework for these entities with the objective of securing greater operational efficiency and a reduction in their level of governmental subventions (subsidies),” the report said.
“The Bill will provide for the sustainability and transformation of State-Owned Enterprises into viable, efficient and self-sufficient entities. The Bill will also provide a concise distinction in the classification of a public sector or a private sector-led entity. It will also assist in identification of cost rationalisation and cost recovery options with existing SOEs.”
The Government’s 2018-2019 budget listed some $398.294m in subsidies allocated to SOEs and agencies for the 2018-2019 fiscal year, down slightly from the prior year’s $410m. The bulk of this sum, some $216m or more than 50 percent, was due to the Public Hospitals Authority (PHA) to cover its operational costs.
The usual loss-making suspects, such as Bahamasair, the Broadcasting Corporation of The Bahamas, Nassau Flight Services and the Hotel Corporation were also included among these subsidies, continuing their reliance on Bahamian taxpayers to underwrite their existence.
Besides these SOEs, other perennial loss-makers such as Bahamas Power & Light (BPL) and the Water and Sewerage Corporation also fall into the category of SOEs that fail to recover their costs. Both are selling their services below cost, with the latter having not seen a tariff rise for two decades.
Elsewhere, the Government’s budget report revealed that its acquisition of, and investment in, the Grand Lucayan resort has incurred a $47m total cost as at end-March 2019.
“Equity acquisitions continue to reflect the Government’s capitalisation of the special purpose vehicle, Lucayan Renewal Holdings, formed to acquire the Our Lucaya properties in Grand Bahama during the first quarter of the fiscal year,” the report said.
“To date, these investments total $47m, comprising the original $32.4m in equity contribution and an additional $14.6m in operational support.”
The budgetary report also disclosed that transfers to non-financial SOEs rose by $29.2m to $75.8m during the first nine months of the 2018-2019 fiscal year. “The key drivers continue to be the first half settlement of nearly $13.7m in contingent liabilities with the Bank of The Bahamas, linked to the non-performance of the guaranteed Hurricane and Student Loan programmes,” it said.
“The Government also facilitated the budgeted settlement of $7.2m in interest payment on Bahamas Resolve’s $167.7m promissory note to the Bank of The Bahamas. Among the other items, Clico-related transactions received $8.6m.”
The first item means Bahamas Resolve, the special purpose vehicle set up to facilitate Bank of the Bahamas’ 2014 bail-out, has been unable to sell sufficient distressed properties to make the interest payments due on the bonds held by the BISX-listed bank.
This means, once again, that Bahamian taxpayers are being called upon to finance Bank of The Bahamas’ rescue in addition to the $300m-plus already pumped in.