Economist Arjoon supports port privatisation

ECONOMIST Dr Vaalmikki Arjoon supported the idea of the State seeking a private port operator as a positive step to boost the maritime sector, he told Newsday on Monday.

“For years, the Port of Port of Spain was in a loss-making state and we lost important shipping lines as clientèle to Jamaica and the Dominican Republic, who privatised their ports.

“We failed to dredge the port and upgrade the infrastructure at the port, and as a result, the large shipping vessels coming out of Asia through the Panama Canal could not be accommodated here – Panamax and Supramax vessels.”

In the past these lines would have docked at Port of Spain, but now their vessels are larger they cannot stop here but go elsewhere, so losing TT market share and clientèle, he said.

“The private operator can therefore provide the capital to dredge the port and upgrade the cranes and trailers, which, in their current state, cause lengthy time to offload containers and also contributed to shipping lines going elsewhere. Upgrading the port could cause us to reattract some of that market share.

“This is important, given the increase in shipping activities to Guyana. Our usage as a transshipment hub will increase, as the port in Guyana suffers from worse infrastructure, heavy siltation and unpredictable currents.

“Overall, a private port operator will help to expand the maritime sector and enhance the revenues and forex.”

Arjoon urged an experienced port operator such as one from Singapore be contracted, and that the Government must get value for money in the arrangement.

On the fiscal side, Arjoon reckoned the Government’s revenue estimate of $41 billion might be too ambitious, given modest energy prices in the short term.

He said the US Government’s Energy Information Administration (EIA) has forecast an oil price of $49.07 in 2021, owing to an oversupplied market, with lower demand amid the global recession, plus company closures and fewer airline activities.

“Moreover, with many local companies making losses, they will carry forward tax losses next year and quite possibly the year after, which means the State will not earn much revenues from taxes on income and profits.”

Arjoon said the income tax allowance will certainly enable more spending power, but only for those employed, not those now jobless.

In agriculture, he urged more staff for the Praedial Larceny Unit to curb theft.

“Turning to energy, the international benchmark margins for gas station operators is 13.8 per cent. This is possibly the margin to be set in January 2021. When selling the NP gas stations, how will they value the gas stations? In these difficult economic times, especially since gas station owners have been earning a margin of only three-four per cent for many years, these gas stations should not be overvalued. The State should obtain a fair value for these gas stations.”

On the $1 billion allocated to contractors to build public-sector houses, Arjoon warned against cost overruns and delays in these projects, with strict timelines to keep costs in check. He urged that small contractors should have adequate access to forex to import construction materials and so avoid delays.

“The State will also need to guarantee that they will pay contractors on time, as for decades, it (has taken) years for contractors to be fully paid.

“The allocation of 20 per cent to small contractors should be increased to 40 per cent, because for far too long, a handful of large contractors have benefited from being awarded the majority of state construction projects.”