After privatization, it is back to state ownership

Feb 07, 2016 Letters

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Dear Editor,
A number of announcements have been made by the APNU-AFC administration about commercial type ventures, each one seemingly in competition with existing private enterprise, e.g. big busses, resuscitation of Guyana Airways, rice milling, and milk pasteurization. The state is already in electricity, sugar, gasoline retailing, media, etc.; none of them are really profitable.  We are, uncompromisingly, for a private sector driven economy.  We contend that healthy markets develop as places of price discovery, and only rarely as a result of price intervention by the state. Recall that government was engaged in a privatization programme for the past 25 years, why?
Mr. Editor, this is precisely why we argued in previous letters that the first problem to be solved is political consensus on the philosophy about organization of the domestic economy and market.  In addition, what is the difficulty with a robust policy and regulatory/technical framework, with appropriate resources, for business facilitation and a private sector oriented investment climate, as the principal role of government?
Take the proposed milk pasteurization plant idea. Why is the private sector not the driving force developing the dairy industry in Guyana? What will be the ownership model; wholly owned or majority owned by the state, or majority owned by private enterprise? What about the long term supply and quality of fresh milk, and therefore, what is the condition of the dairy cow rearing business, which will be expected to supply fresh milk? How is it anticipated that a profit will be made? Where will the milk be sold; on the domestic market alone?
If so, is there sufficient demand to make the plant profitable over the planned period for amortization of the capital to be invested?   Is price control part of the plan?  Will it involve restricting competing imports of like products and substitutes? Whose, CARICOM’s e.g Pine Hill Dairies from Barbados, and other WTO Members with whom Guyana does not have specific commitments on pasteurized milk? Is this an import substitution project? One recent newspaper headline (2/2/ 2016) read “4 containers of evaporated, condensed milk refused entry”. Is this a precursor of things to come? Or is the plan to export, and if so to whom? The promoters will do well to examine the WTO and CARICOM agreements on Agriculture, Subsidies and Countervailing measures and other regulations of commerce, and the Competition Act.
We ask these questions Mr. Editor not merely to criticize. First, if the government believes that a pasteurization plant will be a viable venture, could the same objective be achieved if the private sector is encouraged to build the plant, with the government pulling out all of the stops within its power to create the most effective investment and business facilitating conditions to support the venture?
Second, Guyana is a graveyard, littered with a history of state owned commercial ventures, including failed past attempts to set up a state owned pasteurization plant. The past fifty years stand witness to the poor judgement and shattered dreams of government officials in business on the one hand. On the other hand, tax payers  have,  and continue to lose hundreds of millions in wasted  commercial investments, that are either long dead white elephants,  or,  if alive just barely, and they mostly continue to cost  massive subventions/subsidies; funds that should have gone into education and training , health care, infrastructure,  building an effective business facilitating and attractive  investment environment,  scientific/technological capabilities etc. Most interestingly, Guyana was engaged since 1990 in a privatization process, yet the PPP was at the same time building new state enterprises, e.g Skeldon sugar factory; why? Is the APNU-AFC doing the same? The confusion is palpable.
Third, what will happen when the government changes? Will the plant be privatized; sold off at a discount to friends and family of the new government, adding to the losses of tax payers?
Fourth, public sector officials are notorious for starting projects without a comprehensive appraisal of their feasibility, profitability and their failure to take account of and compliance with laws, including trade and competition laws, and international obligations. Political expediency replaces business soundness.  Fifth, there are, as a general rule, many good reasons why state owned commercial ventures do not succeed such as,   import substitution projects in small domestic markets combined with restrictions on competition, inability to innovate, and management by people who have no personal stake/incentive in their success or failure.
Finally, the government has its hands full with macroeconomic problems and major sectoral strategic questions; infrastructure development; health and education; the environmental; and a raft of socio-political matters.  This creeping, knee-jerk intrusion of the state back into the market is troubling? What was the point of privatisation over the past 25 years? Just a few questions Mr. Editor.
Ivor Carryl

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