Fri | Aug 18, 2017

Shaw grows impatient with slow sale of state assets

Published:Friday | January 27, 2017 | 1:00 AMNeville Graham
Minister of Finance Audley Shaw

Usually, it is the private sector that complains about the slow wheels of government, but Finance Minister Audley Shaw was the one urging on state agencies this week to act faster to rid the State's balance sheet of "comatose" assets.

The Holness administration has an ambitious growth agenda and it wants to drive investments in and by Jamaicans.

The State itself has underutilised assets that it wants to sell, but the pace at which deals are being structured and executed falls well short of what Shaw expects.

"We are sitting down as a Government on too many assets that are dormant, that are idle," said the finance minister. "I don't want to say they are dead, but they are comatose," he declared in a presentation at the Wednesday sessions of the annual JSE Regional Investments and Capital Markets Conference.

Shaw called out the Urban Development Corporation (UDC) as one of the laggards, saying the agency is sitting on billions of dollars in assets that could otherwise be utilised, with private-sector involvement, for productive purposes.

"I tell the UDC, go and sell the dormant assets, because not only will they get the cash flow to do other aspects of development, the private sector will take the assets, invest in them, create jobs, employ people, earn foreign exchange and help us to move from poverty to prosperity," Shaw said.

For years, UDC has been pitching a number of assets that it has packaged for divestment to private investors, some of which have been sold. The agency provided an update on those investment opportunities later at the same JSE conference.

Divestment for productive purposes

One of the biggest privatisation projects that UDC is managing is the transformation of Caymanas Estate into an economic zone. The master plan for the 10,200-acre estate includes housing, light industry and manufacturing, among others. Some projects are under way.

Shaw reported that he has already asked the UDC to furnish him with a list of its assets that are available for sale, so that he can publicise it.

"The divestment of idle assets is on the radar for this Government. There is land and buildings that can be utilised for productive purposes, instead of investing in foreign exchange assets that eventually bid up the Jamaican dollar," Shaw said.

He otherwise referenced the recent divestment of horse racing company Caymanas Track Limited, saying the $1 billion of investment proposed as part of the privatisation deal with Supreme Ventures Limited will mean new life for the ailing industry.

Regarding Jamaica's capital markets, Shaw indicated that the Government was still interested in pursuing the development of a diaspora bond through the local stock market, to add to the range of investment vehicles.

"A diaspora bond, creatively employed using the stock exchange, can be an opportunity for us to broaden the embrace of the diaspora," Shaw said.

"There are Jamaicans abroad with a lot of money, and we must offer them the opportunity to be making three or four per cent here rather than one or half a per cent abroad," he said.

He said he wants to see a more vibrant stock market in Jamaica that will come from the introduction of new investment vehicles, citing the delayed plans to introduce Jamaica Depository Receipts (JDRs) on the JSE, which would open up local access to foreign stocks.

"We have to develop new exchange-traded products to grow the variety of products on the stock market for Jamaicans to choose from. We have to remove the roadblocks for the introduction of tradable JDRs to the local market. We have to consider the removal of taxes on dividends to local investors," Shaw intoned.

The JSE had expected to introduce JDRs a year ago, but last week the Bank of Jamaica (BDJ) said it was weighing potential disruptions of such securities to the cap placed on the holdings of foreign assets by regulated companies and pension funds. For pension funds, it is five per cent.

The caps are being lifted. Still, BOJ told the Financial Gleaner that the timing of the introduction of JDRs is up to the JSE and its members.

neville.graham@gleanerjm.com