Editorial | Government must accelerate divestment
We keep our fingers crossed that after its overlong gestation, the divestment of Caymanas Track Limited (CTL) will finally be delivered. Under the agreement recently signed between the Government and the gaming company, Supreme Ventures Limited, the transfer should happen on March 7.
It is not only that, as a broad philosophy, we are opposed to governments running commercial enterprises; in this case, it has consistently lost money and, over decades of state ownership, has shown no prospect of a serious turnaround. Its occasional smidgens of profit are usually followed by longer years of significant losses.
So, although CTL's accounts for the financial year to March 31 are yet to be made public, we seriously question the company's projection, made at the start of a period of a so-called surplus of nearly J$220 million. If it were achieved, it would only have been possible because of an expected J$245-million injection in free government money. We, therefore, expect that the accumulated deficit of J$577 million as of the end of the previous financial year would have worsened. At best, it would have improved only marginally.
Additionally, while the Government will have to embrace these historic losses, the pockets of taxpayers won't, in the future, be raided to shore up what, essentially, was a bankrupt company. Further, though the US$305,000 the new promoters of horse racing will pay annually for the lease of the Caymanas Park track and facilities is, on the face of it, modest, it represents a reversal of the previous outflows from the treasury. That will contribute to the meeting of national expenses.
More important, however, is the 1.875 per cent of pre-tax profits from its horse racing operations that the new company will have to pay to the Government. The old company paid nothing and had nothing with which to pay.
OFFLOADING STATE ASSETS
The larger issue represented by this divestment, therefore, is that the Government is not offloading state assets fast enough, even though it finds it difficult to meet its core obligations, such as the cost of security, health care, education, and the maintenance of public infrastructure.
As it drags its feet on this matter, the administration scrambles about finding ways to raise an estimated J$30-billion gap in its Budget; money to fund the second tranche of its income-tax giveback and any hole left by the end to, or a scaling back of, its call on the National Housing Trust to help finance the Budget.
Some additional inflows may come from increased property rates and more aggressive collection of existing taxes. But there are concerns that new taxes could still be on the table.
We, however, insist that no new taxes should be contemplated until, and unless, the Government maximises its earnings from divestments as well as the savings attendant thereto. These assets must include the Government's 19 per cent stake in the light and power company, the Jamaica Public Service Company, notwithstanding the Opposition's misguided call for a delay, in the hope that new investments in modern power plants will increase the value of the holdings.