EDITORIAL - Redesign the divestment vehicle
Nothing short of an aggressive divestment strategy will guarantee the disposal of non-performing state assets in fulfilment of Government's commitment to liberalise the economy. This is what it took to get several hotels into private hands during the 1980s, and again to rid taxpayers of the burden of running failing sugar factories and an airline during the last administration.
Divestment is not an end in itself, but it has to be viewed as the means to a larger goal wherein a country is handed the opportunity to grow and prosper in the long term. There are real advantages to the Government and the people of Jamaica in divestment, the most obvious being to raise capital to finance state projects and programmes so that it can focus its efforts on delivering public services.
Take the Oceana Hotel in downtown Kingston. The 12-storey property has been languishing on the market since 2009, yet there have been no expressions of interest by the private sector. The Urban Development Corporation (UDC) has given investors until the end of this month to put in offers, but a similar deadline passed in May 2009, without any action.
Judging from the opinions of realtors reported in this newspaper, the property is overpriced, so even though the UDC is dangling the carrot of tax incentives, prospective investors are not even tempted. This criticism from property brokers suggests that the UDC needs to refine the sale template for its assets and set realistic valuation parameters for these properties. With no sale on the horizon, the property which now houses the Ministry of Health is a shadow of its former glory and appears to be in urgent need of refurbishment.
Should the UDC be adopting a new approach in support of its divestment mission? The property is favourably located on the waterfront, overlooking one of the world's celebrated natural harbours, yet there are no takers. The new UDC chairman, Mr K.D. Knight, should explain to the country the divestment strategy for the properties currently under its portfolio.
A divestment programme has to be well thought out and orchestrated, employing the services of financial and industry experts who can strategise on how best to divest, who could buy, and how to get the right buyer interested. For a time the National Investment Bank of Jamaica (now merged into the Development Bank of Jamaica (DBJ), working through an Enterprise Team, employed a number of strategies and was successful in divesting more than 100 enterprises. But can the Government claim to have a strong divestment policy today?
We observe that the DBJ, which is the central implementing agency for divestment activities, is seeking to offload some 2,400 acres of agricultural lands in St James and Hanover by the third quarter of this year.
Hopefully, the "positive interests" referred to by Managing Director Milverton Reynolds will translate into signed contracts. But if we are not convinced that there is enough reason to hold out hope, it was not reflected in Mr Reynolds' tone.
If the Government is to successfully dispose of the remaining commercial assets that are not considered critical to the discharge of its functions, it seems that some redesigning of the divestment vehicle is now necessary.
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