STATE ENTERPRISES

Mr. Speaker, an important part of the restructuring of the Barbados economy must entail the creation of a new enterprise culture within which commercial or quasi-commercial enterprises owned by the state will be made to function. Those enterprises such as the Transport Board and the Barbados Water Authority that are providing public goods in a monopoly situation must do so in an efficient and cost effective manner. In addition, transparency must be brought to the determination of their costs and charges and we must reduce their dependency on the consolidated fund for operating transfers.

The fees and other charges for services rendered by these enterprises have not been increased for almost a decade while major component costs, especially wages, have risen over the period.

At some stage, the issue of revenue enhancement and cost containment for these enterprises will have to be addressed.

It is proposed that any requests for adjustments to fees and charges of these enterprises must be made via submissions to the Fair Trading Commission, and only after public hearings that facilitate a full public evaluation of all aspects of the operation of the enterprises.

These state enterprises will be required as part of that process to outline programmes for cost containment and the improvement in the quality and delivery of services, and to accept new benchmarks for operational efficiency that they will have rigorously to apply.

In relation to the financial sector, Government's principal focus is to exercise effective supervision and regulation, to become less involved in owning and running such institutions. For those that are now owned by the state we want to support their institutional development in a sector that has become consolidated and liberalized.

Mr. Speaker, the last quarter of the year 2000 saw initial public offerings by two government corporations: the Insurance Corporation of Barbados and the Barbados National Bank. In my economic policy statement of 2001, I announced the intention to allow the two institutions to return to the market to continue the process of divestment of a substantial portion of the remaining shares owned by the Government of Barbados. I also stated that this offer would not be limited to the local market, but would also be targeted at regional pension funds, insurance companies, social security schemes and strategic partners either regional or international. Since that time the Board of the Barbados National Bank acting as agent of the Government, has been in discussion with possible strategic partners.

With the consolidation taking place in the local and regional financial services sector, it cannot be business as usual for small local banks. The recent merger of CIBC and Barclays as First Caribbean International Bank Ltd, has created a mega institution, which will give it a competitive edge in the pricing of financial products. The days of a local bank being successful by focussing only on retail banking are therefore coming to an end. There is the need for the Barbados National Bank to seek a strategic partner who can add value to the institution and so facilitate it expanding into other areas of financial services, which would provide the opportunity for higher value added and the earning of foreign exchange.

A strategic partner would be expected to enhance the operations of BNB by providing the following benefits for its employees, shareholders and customers: It should :

Allow for greater diversification of products and services in order to keep up with and possibly stay ahead of the expected competition created by mergers and acquisitions

Increased revenue and growth through an increased customer base through external redirecting of business

Allow access to regional and international markets

o Enable the Bank to accommodate US dollar financing to assist in providing more cost effective financing for the tourist industry.

At the end of this process the Government intends to be only a minority shareholder in the Bank.

The Insurance Corporation of Barbados Ltd is facing similar challenges as the Barbados National Bank, a small local institution operating in an industry where there has been consolidation both at the regional and international level. The recent acquisition of Life of Barbados by the Barbados Mutual has led to consolidation in the life insurance and pension business. No doubt we will also see consolidation in the local property and casualty business. ICBL as a small local institution must of necessity look for a strategic partner in order to reposition itself to deal with the challenges that liberalization and the emergence of financial conglomerates offering a multiplicity of services will bring. The board of ICBL has therefore been mandated to look for a strategic partner either regional or international, who can add value to the institution and ensure its long term survival.

Hotels & Resorts Ltd

Mr. Speaker, it has never been the intention of the Government to enter the hotel business but merely to salvage those heavily indebted properties to the Barbados Development Bank. Hotels & Resorts Ltd, trade name, GEMS OF BARBADOS, was formed in 1995 to purchase the hotel properties indebted to the Barbados Development Bank (BDB), and develop the Gems of Barbados Project. The Government of Barbados currently owns 93% of the issued share capital of the company and two former hotel owners own the remaining 7%.

The Company is highly geared, having been financed mainly by debt. The Government is therefore preparing the Company for divestment and has taken the first step by restructuring the debt in an effort to eventually improve the debt to equity ratio.

The privatisation of the GEMS of Barbados will be undertaken at the earliest opportunity.

Caribbean Broadcasting Corporation

It is my Government's intention to prepare the Caribbean Broadcasting Corporation for the widest possible participation in its ownership. The Government has therefore provided a loan for the conversion from analog to digital. The move from analog to digital will allow the corporation to offer more channels, cut back on piracy and enhance the coverage areas to allow the signal to reach more persons. These activities will allow the corporation to enhance its revenues and to become attractive for potential investors .

more