State enterprises must account

You can tell a lot by the way Caribbean Airlines Ltd (CAL) treated the Parliament’s Joint Select Committee (JSC) on State Enterprises. According to the committee’s chairman, Independent Senator David Small, the airline spent hundreds of millions of dollars on ATR aircraft. But when asked to see documents outlining the tendering process, none were forthcoming. CAL’s officials cited legal advice when they were challenged to answer questions.

“Why should a company owned 100 per cent by the State be challenging the authority of the Parliament?” an understandably frustrated Small said at a press conference on Monday. “CAL does not understand that they are using state funds, and whatever money they earn belongs to the State of Trinidad and Tobago. They are merely the custodians and should not be taking care of themselves in the way they have been taking care of themselves.”

That one impasse, in a nutshell, embodies the legal and ethical swamp that our State enterprise sector has become. It is a backwards sector, riddled with unprofitability, inefficiency, and a lack of transparency. Forget the Paradise Papers and offshore tax havens, our State enterprises hide their affairs right here, using taxpayer funds.

CAL alone has consistently failed to adhere to reporting time lines, affecting the ability of its line ministry, and therefore the Cabinet, to adequately monitor and evaluate its operations. But the problem extends beyond one entity. Something is off in the DNA of these institutions.

State enterprises were initially set up to offer public goods or services and achieve specific social outcomes. The idea was to avoid the bureaucracy of the public service and, through entities fashioned as competitive, “private” corporations provide a better quality of delivery. This was where the problem began.

For though incorporated under company laws that impose specific duties and obligations, most of these companies remained 100 per cent owned, partially owned or indirectly owned by the State. In a way, the companies were meant to be preludes to widespread divestment. Shares would have been sold, with ownership widening significantly.

But despite their ballooning number (at one stage there were as many as 80 State enterprises) these companies have not become the profit-making behemoths they were meant to be. Today, of the 54 State enterprises, only ten generate profits.

Meanwhile, State enterprises account for about $45 billion of the State’s $93 billion public debt. And as the JSC has heard, this debt is not properly monitored with a view to ensuring returns on investment. There is no check on whether growth exceeds the cost of borrowing. In other words, these companies are billion-dollar holes.

We must now, therefore, ask: what is the role of these State enterprises today? Are they meant to provide jobs, stimulate the economy, or provide services? If these are their objectives, clearly, they are not effectively fulfilling their mandates. CAL, like the Petroleum Company of Trinidad and Tobago Limited, is unprofitable and depends on government subventions to survive.

Some enterprises, though, are profitable. How can the performance of companies like First Citizens Holding Limited, the National Gas Company of Trinidad and Tobago Limited, and TSTT be replicated throughout the sector?

While in 2011, the State Enterprises Performance Monitoring Manual was updated to ensure oversight of the acquiring of “significant assets” by these companies, the time has come for a fundamental re-think of how they relate to taxpayers. Starting with their accountability to JSCs.