The Tribune

By NEIL HARTNELL

TRIBUNE Business Editor

nhartnell@tribunemedia.net

THE GOVERNMENT yesterday unveiled a policy to involve the private sector “at the very earliest stages” on commercially viable infrastructure and public services projects in a bid reduce the Public Treasury’s burden and generate greater value for money for Bahamians.

Michael Halkitis, minister of finance, hailed the ‘Private Sector First’ policy that was tabled in then House of Assembly to kick-start public consultation, asserting that it will help unlock business capital, knowledge, expertise and management through multiple private-public partnership (PPP) investments designed to benefit and serve the Bahamian public.

Explaining that the new policy will work alongside the revised PPP policy, and a “manual” guiding how such projects should be executed, which were also tabled in Parliament yesterday, Mr Halkitis said of ‘private sector first’: “The public sector presently bears a substantial portion of the pressures linked to infrastructure delivery, including recurring operational expenses and contingent liabilities.

“Against this background, the approach will favour private sector involvement for infrastructure projects that are commercially viable while public sector involvement will be for circumstances involving evident market failure or a clearly-established public interest requirement. Under this model, the potential for private sector participation would be considered from the very earliest planning stages.

“Projects with commercial potential would be directed first towards private delivery, and public [sector] involvement would only move forward when a private sector solution is not practical or when.. project structuring cannot resolve a market failure. This would mark a more significant movement away from direct government provision of infrastructure and services, but the Government will be focusing instead on enabling, supervising and facilitating private sector investment.”

Mr Halkitis, explaining how the ‘private sector first’ policy ties into the PPP revisions and their associated implementation guide, added: “The ‘private sector first’ policy is designed to work in tandem with the revised PPP policy and the wider PPP assessment framework. It reflects the Government’s development priorities to limit fiscal exposure, attracting private capital and drawing more effectively on private sector knowledge and capabilities.

“The initiative sets out a coherent and disciplined way ahead. The revised PPP policy will underpin sound governance. The PPP assessment framework will translate the policy into practical action, and the Government will have a strategic means of handling private sector participation where it can add value. Together, these measures will support the advancement of infrastructure and public services for the benefit of the Bahamian people.”

The ‘private sector first’ policy itself signals the Government’s plans for the private sector to take over the financing, execution and management of major infrastructure projects from the taxpayer and public purse - especially if they generate revenue, or income, streams that generate a return on investment and pay-off any debt financing.

“The Government continues to carry a significant share of the fiscal burden associated with infrastructure delivery, including up-front capital investment as well as ongoing financial commitments linked to operation, maintenance and contingent liabilities,” the ‘private sector first’ policy said.

“In this context, there is a clear rationale for considering a more market- led approach to infrastructure provision, particularly in sectors where projects can attract private investment and operate on a commercial basis. This ‘private sector first’ policy is distinct in its orientation.

“It sets out a more directive approach under which infrastructure projects are considered for private sector delivery at an early stage of planning, with public sector implementation proceeding only where private participation is not feasible or where there is clear evidence of market failure. In this model, the role of Government shifts further away from direct provision and toward creating the conditions under which private investment can be mobilised and sustained.”

Acknowledging the financial, operational and maintenance challenges of having to duplicate key assets, such as roads, docks, airports and bridges, plus public utility systems across all inhabited Bahamian islands, the policy added: “The Bahamas faces ongoing challenges in the provision of infrastructure required to support sustained economic growth and improved service delivery.

“The geographic dispersion of the islands, combined with relatively small and distributed populations, raises the overall cost of providing infrastructure and keeping it in service over time. In several sectors, this has resulted in constraints on access, as well as inconsistency in service quality and reliability.

“Meeting the country’s infrastructure needs requires substantial and sustained investment, alongside improved approaches to delivery and management. In this context, the private sector has the capacity to contribute investment and specialist capability in a manner that can support more efficient and reliable infrastructure provision.”

Ports and maritime services; telecommunications; energy and electricity systems; roads, bridges and related networks; water and sanitation services; civil aviation and airports; tourism-related assets; waste management; place=making and urban development; and schools and hospitals and clinics were all cited as examples of PPPs that could be led by the private sector.

“Private sector participation (PSP), which includes PPPs and other forms of private participation in infrastructure provision, offers both operational and strategic advantages,” the ‘private sector first’ policy said. “At the operational level, it can improve efficiency, sharpen the focus on service outcomes, and support a more joined-up approach to delivery across the life of an asset. It can also introduce new methods and practical experience from the private sector.

“At a strategic level, PSP can strengthen accountability by clarifying responsibilities between public and private actors. It can also allow public financial and institutional resources to be redirected toward core government functions, particularly policy, supervision and regulatory administration, thereby strengthening overall public sector effectiveness….

“In many countries, infrastructure provision has traditionally been led by the public sector, reflecting the public service nature of these assets. However, this approach is evolving. Fiscal constraints limit the extent to which governments can meet infrastructure needs through public investment alone, particularly where competing priorities exist in areas such as social services and human development,” the policy added.

“Enabling the private sector to take a leading role in commercially-viable infrastructure projects can reduce pressure on public finances, allowing government resources to be directed toward areas where alternative sources of investment are limited. The Government of The Bahamas will continue to play a key role in shaping the infrastructure landscape.

“This includes establishing a policy and regulatory environment that supports PSP, while maintaining appropriate oversight of service delivery. Direct public sector involvement in infrastructure provision will be focused on areas where there is evidence of market failure that cannot be addressed within a reasonable timeframe. In such cases, the decision to intervene will be informed by an assessment of the scale of the market failure and the relative costs and benefits of public intervention.”

However, Michael Pintard, the Opposition’s leader, in a statement to Tribune Business questioned whether the Government will abide by its revised PPP and new ‘private sector first’ policy as he alleged it had failed to follow the one left in place by the former Minnis administration.

“The 2018 policy was not a vague statement of aspirations. It established a detailed process requiring project screening, project concept notes, business cases, value for money assessments, fiscal analysis, risk allocation reviews, competitive procurement, Cabinet approvals, contract management procedures and public disclosure obligations,” he said.

“PPPs were supposed to be transparent, accountable and demonstrably superior to conventional procurement. Yet today, the Bahamian public cannot review the business cases for major PPP projects. It cannot review the value for money analyses. It cannot review the contracts themselves in most cases. It cannot even review a complete list of all existing PPP obligations and their associated fiscal risks.”

Branding many of the Government’s existing PPPs as “off book transactions” that add “costs and create no value for Bahamian taxpayers”, he added that many such deals involve investments financed by the contractors which “simply places an extra step between the Government and a loan”.

Mr Pintard said: “The Government launched an ambitious programme to concession Family Island airports through so-called PPP arrangements. It is pursuing major energy reforms involving independent power producers, LNG infrastructure and private sector participation.

“Let’s be clear, the issue is not whether these public investments are necessary. The issue is whether projects satisfy the principles outlined in the Government's existing PPP policy. The answer is a simple: ‘No’. That is why the Government should not simply implement the new PPP framework going forward. It should apply it retrospectively.”

Calling for all existing PPPs to be reviewed against the standards established in the new policy framework, the Opposition leader urged that all such projects be publicly listed with their contracts disclosed bar commercially sensitive details. He added that all taxpayer liabilities must be disclosed, and said the Government should publish an annual PPP report plus disclose “every appropriation supporting PPP payments” and annual “fiscal risk summaries” for all projects.

“And, most importantly, it should contain an explicit prohibition against the use of vendor-financing arrangements masquerading as PPPs where there is no demonstrable transfer of risk, no clear commercial rationale and no measurable value for money benefit,” Mr Pintard blasted.

“The Government cannot restore that confidence merely by publishing a stronger policy. It must first open the books on the projects already undertaken. Only then can Bahamians determine whether PPPs have been used as genuine tools for infrastructure development or merely as a convenient mechanism for obscuring public liabilities. The country does not simply need a new PPP framework. It needs a full accounting of the old one.”

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Private sector involved at ‘earliest

stage’ on commercially viable deals