Ja reaps in billions from privatisation efforts
Government has raked in approximately US$231 million (J$26.6 billion) from its privatisation programme since it started in 2009, information obtained from the Development Bank of Jamaica (DBJ) has revealed.
The Milverton Reynolds-chaired DBJ revealed that this includes purchase price of US$67.7 million (J$7.7 billion) and investments of US$164 million (J$18.8 billion) projected over periods between five to 10 years after purchase.
Claudette White, manager for public relations at the DBJ, noted that since 2009, 16 assets have been privatised, including the six sugar factories.
She said that some of these entities were identified in the Public Sector Master Rationalisation Plan (PSMRP) as candidates for private-sector acquisition and/or management through divestment (outright sale of a Government) or public-private partnerships with Government retaining ownership).
White revealed that 70 per cent, or 11 of the 16 assets, were acquired by local investors and purchasers of varying types and size.
She said that these included publicly listed local blue-chip entities, small and medium-sized enterprises, family-owned businesses and multinationals.
Of the operating assets privatised, White revealed that eight were considered underperforming, undercapitalised or were a drain on fiscal resources.
"These were, primarily, the six sugar entities, Wallenford and Windalco," she said. "The sale of these entities essentially removed the cost of operations from the Government's books and transferred those obligations to the private sector."
White said that overall savings to the Government from privatising the entities were approximately J$4.34 billion per year.
She said that operating losses for the sugar companies averaged J$3.7 billion per year over the last three pre-divestment years with Wallenford recording average annual losses of J$297 million since 2005 and Windalco's losses, for the account of the Government, were in the region of J$345 million (US$3 million) per annum.
White indicated that five privatisation transactions are in progress.
The DBJ also cited the expansion of Soapberry Wastewater Treatment Plant, the Caymanas Special Economic Zone and a Schools Solar Pilot Project.
White noted that several public investment projects are under development which may be implemented through private-sector investment.
"The required feasibility studies have been, or are being, undertaken which will determine the implementation methodology," she said.
White said that it is with this in mind that the Public Investment Management Committee (of Cabinet) (PIMC) has been established.
"The primary mandate of the newly established PIMC is to assess and approve public investment projects which will be included in the Government's five-year Public Sector Investment Plan," said White.
She said PIMC will also determine whether the selected projects present viable opportunities for implementation with private investment via PPPs.
According to White, privatisation modalities include sale or divestment, where ownership is fully transferred, such as the case of the Wallenford Coffee Company, Mavis Bank Coffee Factory and sugar factories.
She said it also considers mechanisms where Government retains ownership such as lease (sugar agriculture lands), concession/public-private partnerships (PPPs).
Given the inherent complexities and potential fiscal risks involved in developing and implementing PPPs, White said that there have been a specific focus for the Government and a separate PPP policy was approved as an addendum to the privatisation policy.
"The PPP policy has defined public-private partnerships (PPPs) as a long-term procurement contract between the public and private sectors in which the proficiency of each party is focused in the designing, financing, building and operating an infrastructure project or providing a service through the appropriate sharing of resources, risks and rewards," she said.