COMMENT: Sell and suffer

After decisively rejecting any idea of the privatization of national assets during the 2013 electoral campaign, the eventually successful Democratic Labour Party administration that currently holds the reins of government has now been compelled to eat its words with the announcement of the intended divestment of the Barbados National Terminal Company to a local private concern for an alleged sum of US$100 million.

Given the current economic circumstances, especially the parlous state of the local foreign reserves and our relatively low global creditworthiness, one might be tempted to forgive this clear about-turn. However, we caution that any absolution in this respect should be accompanied by the condition that the divestment of any aspect of the national patrimony must satisfy at least three important criteria; first, that the purchase price must be more than trifling; second, that the transaction should expressly pay due regard to the interests of the ultimate consumers of the product –the general public- and, third, that the spirit of free enterprise should not be infringed in any material particular.

We fear that the proposed transaction in question imperils each of these considerations. First, while the alleged purchase price might appear substantial at first blush, a prudential examination of the circumstances might raise the question as to why a local concern with access to that amount of foreign exchange, could not, perhaps in concert with others and in a spirit of patriotism, have offered a loan of that amount to the state on agreed terms. Nationalism should not be limited in these critical times to taxpayers solely.

With respect to the competition and consumer protection aspects of the deal, we remain fearful of the prospect of an active participant in the retail sector of the fuel industry becoming a monopoly for a prolonged duration with regard to the storage of fuel. In light of the nature of its investment made, any commercially minded purchaser would seek to maximize its returns to the extent permitted by law.

In such a context, there can be one winner only and it would definitely not the consumer, who now faces the likelihood of increased prices at the pump, nor the competitors of the purchaser which must now seek consent to access stored quantities of fuel, unless the state vendor is able to guarantee that neither of these should occur. The apparent bargaining power of the respective parties would seem to suggest that such a guarantee is unlikely in this transaction.

Based on the foregoing, we are therefore of the considered opinion that the sale is not in the nation’s best interests at this time and should be re-negotiated with a view to addressing the issues raised earlier, especially the competition and consumer protection concerns.

We note that both of these matters are currently under consideration by the independent regulator, the Fair Trading Commission. Prudence on the part of the contracting parties, in our view, should have required that these issues be resolved even before the first draft of the contract of divestment.