Bahamas Government urged: ‘Privatise as many assets as you can’
Wednesday September 07 2011 | 06:48 AM

THE BAHAMAS has been urged to "privatise as many parts of government as possible", a leading accountant also calling on the Ingraham administration to reform the "unsustainable" civil service pension scheme.

Raymond Winder, managing partner at Deloitte & Touche (Bahamas), told Tribune Business that apart from better revenue enforcement the Bahamas also needed to target the spending side of government, describing unfunded civil service pension liabilities as "a sore that will eat away" at investment in public infrastructure projects.

Calling on the Government to employ more civil servants on a contract, rather than permanent, basis in a bid to reduce costs, Mr Winder also called on Bahamians to challenge politicians who promised to dramatically increase public expenditure in particular areas. Given the fiscal position, the key question was: Where is the money coming from?

"The Government is going to have to seek to privatise as many parts of government as possible," Mr Winder told this newspaper, assessing possible solutions to the national debt/fiscal deficit woes.

"It's going to have to break with normal practice for the last 20 years on this issue. It's better to take it in hand now than later, when there will be a greater crisis that will create significant turmoil in this country."

The Ingraham administration, albeit slowly, has begun the privatisation process through the sale a a majority 51 per cent stake in the Bahamas Telecommunications Company (BTC) to Cable & Wireless Communications. Other likely privatisation targets include the Bahamas Electricity Corporation (BEC), plus loss-making 'turkeys' that bleed the Treasury, such as Bahamasair and the Water & Sewerage Corporation.

Yet other assets could also be considered, if the Government wants to 'get out of business' and bring in professional private sector management. This has already happened, to a certain extent, with the Lynden Pindling International Airport (LPIA) and Arawak Cay port, but other activities that could potentially be outsourced to the private sector include hospitals, education and even-revenue generating agencies such as the Registrar General's Department.

All three of the International Monetary Fund (IMF), Moody's and Standard & Poor's have urged the Bahamas to focus solely on revenues - and new or increased taxes - to address the rapid increase in its $4.3 billion national debt, but Mr Winder effectively called for it to adopt a two-pronged approach targeting its $1.68 billion in annual public spending.

"Going forward, the Government really are going to have to seek to employ more people on a contract basis, as opposed to full employment," Mr Winder said. And he warned that civil service pension liabilities were being missed, not even factored into the expenditure equation.

"The hidden cost for government employees continues to grow daily," Mr Winder added. "At the moment, there is nothing the Government can do to reduce expenditure, even if it stays where it is, because of the pension expenditure attached to individuals. This expenditure is not going away.

"Government has to look at bringing individuals on on a contract basis, and look at the pension scheme it has. It is unsustainable, and damaging to the long-term future of this country. It does not matter what we do on the revenue side; that will be a sore that eats away at government's ability to make new investments. They've got to look at coming up with a new pension scheme with a new focus."

This, though, might be a hard sell, especially as Mr Winder acknowledged that efforts at public sector pension reform would only bear fruit in the medium to long-term.

He is not the first, though, to express concern about public sector pensions. James Smith, former minister of state for finance, told Tribune Business earlier this year that with an average of "several hundred" civil servants retiring each year, the Government's pension liabilities to them and other departed colleagues was increasing every month and year.

However, this is never disclosed as a Budget line item, these pension liabilities being included with recurrent spending as wages, salaries and emoluments.

Meanwhile, Mr Winder also called on the three major political parties - FNM, PLP and DNA - to be honest in their upcoming 2012 general election campaigns and educate Bahamians on the issues facing the country.

Referring to the tendency of budding politicians to make statements about doubling public spending in certain areas, he added: "Those statements ought to be challenged from the perspective of: Where are we getting the revenue to fund them?

"My concern is that we're continually raising the expectation level of the average Bahamian citizen, and there isn't those sense that these promises can't be fulfilled unless we raise additional taxes.

"People's expectations are being raised, and people are becoming very frustrated because not everyone understands these issues.

"When people in power are not fulfilling these obligations, they think

the Government is not doing what it ought to be doing."

Mr Winder said too many Bahamians were talking as if the Bahamas could afford to pay for more social services without first raising taxes or implementing new ones.