BOSS could go further

THE proposed Barbados Optional Savings Scheme (BOSS) is a “good start”
to giving citizens a stake in the economy, and a regional economist
feels that the economic enfranchisement reach could go even further,
if persons are able to convert the bonds to equity.

That’s the view of economist Dr. Justin Ram, Co-Founder and Chief
Executive Officer of GSec and Justin Ram Advisory Services. He made
the comments yesterday during a webinar hosted by the Sagicor Cave
Hill School of Business, on the topic ‘Perspectives on Economic
Growth’, when a question was posed from the online audience regarding
the savings scheme, which is promising public servants five per cent
interest on the principals invested.

“What it attempts to do is give public sector workers an opportunity
to save and to earn a higher level of return, and at the same time the
Government can utilise those additional resources to invest back into
major capital works, so that’s quite good. And then, the good thing
about it is that it allows the secondary trading of those bonds, so if
a private citizen or even an institution wants to buy those bonds off
of the public sector worker, they can do that,” he noted.

But, Ram, who is the former Director of Economics at the Caribbean
Development Bank, believes that bonds, such as those received by
persons under the BOSS initiative, have even greater potential to give
persons a stake in the economy. He suggests that the bonds can have a
conversion clause, whereby over time a person can convert the bond
into an equity stake.

“Let’s say for example, if the resources were used to improve the port
or the airport in Barbados, then maybe that average individual could
have a small equity stake in the airport. Then we encourage the
airport to become a lot more profitable and at the same time those
profits are feeding back to the citizens of Barbados,” he said.
He continued, “That’s just an example I think of what we could
consider as we go forward, is that we have conversion clauses towards
equity.”

Ram said that it would not only give persons a larger equity stake in
the economy, but because it is no longer debt, but converted to
equity, the debt is then written off the Government’s books.

“It really does a good thing in that you allow people to now utilise
their resources, take an investment stake, the Government gets their
money to do major capital works which it needs to do, but the
Government doesn’t have to pay that back because now this person has
an equity stake in an asset that they can earn a rate of return on, as
long as that asset is performing well,” the economist explained.

Ram suggested that where a person has an equity stake in an asset,
they would be committed to ensuring that it performs well. In that
vein, using the example of the airport, he noted that by extension
they would have a direct stake in the tourism industry.

“... The airport for example relies on as many people coming through
that airport and the more people that are coming to Barbados for
tourism, or in-transit purposes, then that equity stake performs even
better. So again, it is a real win-win and so I say that’s the next
step I think these bonds need to take – to have this conversion into
equity stakes,” he stated. (JRT)