The Tribune

By RICHARD COULSON

Last spring, I was debating with my friend Frankie Wilson, the architect of the much ballyhooed Bahamian re-taking of control of the Bahamas Telecommunications Company (BTC) from Cable & Wireless. I had written that government actually was a less than 51 per cent BTC shareholder. No matter, he insisted. Government – and thus the Bahamian people – now owned the “controlling economic interest” in BTC, by adding its 49 per cent to the two per cent transferred by Cable & Wireless to a shadowy Bahamian “foundation”. I did not dispute the official view; if that was deemed “control”, so be it.

Until, lo and behold, two weeks ago, I saw government itself do an abrupt about-face. The ever mellifluous Deputy Prime Minister smoothly announced that he cannot intervene in the downsizing of some 150 BTC staff because – guess what – BTC is now a “private company”! When it comes to the crunch of axing workers (voters) and arousing union wrath, it’s much easier to dump responsibility on the always suspect private sector rather than laying it on Cabinet.

Of course, the switcheroo reveals the original transaction as a myth.

The keystone two per cent of BTC (worth maybe $25m) was given to a foundation whose name and purpose have never been identified, whose trustees have never been named, whose financial structure is unknown and whose beneficiaries are a mystery – despite some early talk of helping Bahamas Broadcasting Corp. Maybe the Prime Minister knows all, but without a Freedom of Information Act the public remains in the dark about this shareholder of an essential public utility. A foundation or a dark sinkhole? The office of the Cabinet Secretary could give me no information whatever “at this time” 13 months after the event.

I recently heard BTC boss Leon Williams speak vividly about all the challenges the company faces, a daunting task for him and his staff. But the Bahamian public would be much more sympathetic if it knew the facts about BTC and had a direct stake in its future. Its financial results are hidden in the reports of its parent company Cable & Wireless, retaining “management control”, and government has consistently vetoed any public offering of BTC shares to Bahaman investors. Why? Because full disclosure rules would uncover unpalatable details?

By nature, I am an optimist and whenever I am swept into Perry Christie’s warm flood of verbiage and genial embrace, I sink into Dr Pangloss’ dream that all is for the best in the best of all possible worlds. Unfortunately, I then read the daily press and look around me, and what do I see? The harsh reality of broken promises and woolly thinking .

Worse than BTC, the even grimmer scandal of the Bahamas Electricity Corporation (BEC) glares at us. For nearly two years, we have been hearing plans for re-structuring our electricity provider, starting with an ingenious splitting into two separate companies with a degree of private ownership, now downscaled simply to selecting a foreign “management company” – name still not announced.

Deputy Prime Minister “Brave” Davis has been left in his usual role of apologising that “more time is needed”. Innumerable proposals for renewable energy, or simply importing LNG (liquefied natural gas), have never been seriously addressed. So, even with the help of expert financial consultants KPMG plus a US technical firm and US lawyers (fees undisclosed to date), the results have been ... zero. The Progressive Liberal Party government has shown itself incompetent to fix the greatest economic drag on our economy, electricity costs that are brutal to the individual consumer and nearly force our hotels into a non-compete status with other tourist destinations.

Of course, government can boast of the vast accomplishment of enacting Value Added Tax (VAT) legislation and actually putting the tax into effect for several thousand companies. Yes, funds have been flowing into the Treasury since early January, although with complications like the pointless “inclusive pricing” policy that raises major costs for retailers without any benefits to the consumer.

Government’s insistence on this illogical policy for the sole reason of obscuring VAT effects was bitterly fought by our Retailers Association and raises doubts about Ministry of Finance competence in understanding commercial realities.

The fundamental question about VAT remains: to what purpose will the new funds (which will reach a minimum of $300m annually) be put? Will they, as promised, be applied to reducing the national debt? Or will they, as many fear, simply be added to the current expenditure budget for paying emoluments to a growing employee base of public servants hired to satisfy political demands? We have not yet seen any indication that government will provide an “application of funds” chart, and without a Freedom of Information Act they will have no obligation to do so. Allocation of VAT receipts is likely to remain unknown, while the budget will visibly grow and imbalance our economy.

A sleeping tiger that is only occasionally poked bears the boring name “unfunded pension liabilities”, a roughly $2 billion tiger that when awakened will have vicious claws. This is not a sexy issue. Unlike the acts of violent crime, it generates no colourful newspaper stories.

But every day its effects creep forward. Every day, there are more public employees with gradually increasing salaries, so every day the money they will be entitled to collect on retirement increases, under the prevailing “defined benefit” pension schemes used throughout the public sector based on a percentage of final salary. “Unfunded” means government has not accumulated any financial assets as a reserve to pay these liabilities, so they can only be a charge against the current expenditure budget. Eventually this charge will become so large as to be unsustainable. It’s unthinkable that government will then default on its pensioners. The only solution will be raising cash by major bond issues, an inflationary measure that will shatter our credit rating.

There is nothing hidden about this scenario, but financial commentators have recently noted that in the recent mid-year budget message it was given no mention whatever – the standard ostrich-head-in-the-sand reaction. Although late in the day after years of this feckless policy, there are still several steps that government could take. First, it could shift to a contributory plan where employees take a payroll deduction to cover a part of their actuarially determined pension. Second, it could require each ministry’s budget to include an annual transfer into a pension reserve fund. Bit by bit, the huge future liability would be whittled down to manageable size. Unless the political will to take these steps is found, we will see, as KPMG predicted last year, the iceberg that quietly sunk the Titanic.

The most depressing news on the recent spectrum was the report of an enterprising Guardian reporter as she explored Bain Town. She interviewed Delerice Rahming, 41, mother of ten, one of whom was stabbed to death, four are grown and have moved out, and five, aged four to 11, shoeless in the dust, share a three-room shack with her, served by an outhouse with no running water, fetched by bucket from a community pump.

She has no job, and of course no husband is in evidence, although the father of her last six children makes contributions. The reporter had no estimate of the number of homes like this in Bain Town, Grants Town and other Over-The-Hill communities, but she quoted the Department of Statistics figure of 43,000 people living under the poverty line and 5,000 getting food assistance.

This story is not “news” – and that’s just the point. For the 34 years that I have been living here (and far longer) anyone has been able to drive through the unchanging lanes and alleys in what seems an irreducible poverty pocket surrounded by the growing middle-class affluence (and the flashy new wealth) of the rest of the island. All the Urban Renewal projects, the clean-up campaigns, the charges against slum-lords, the politicians’ promises – of either party – have been unable to destroy, or even much shrink, this blight on our capital city.

The reporter asked Ms Rahming: “Why so many children without holding a job?” To which she got the defeated answer: “They are already here; I don’t know why”. Nothing can better illustrate the depths of helplessness and ignorance to which this unfortunate lady has sunk, losing all control over her own life.

Public funds have not improved her surroundings, our educational machinery has not lifted her status, even our gleaming churches have left her bereft of moral direction. She and thousands of others are a true social tragedy, with no apparent escape, while government devotes itself to grandiose projects like a National Health Plan and a barely functioning Critical Care Block.

At this crucial point in our history, our economic health and all the trickle-down to create social stability seems to depend on the success of the vast Baha Mar complex in creating jobs, jobs, jobs. While I hope for its success, and discount the dire rumours warning of snafus from the Chinese contractor bungling the construction, no government should depend so heavily on a single project – and a foreign-created one – to rescue the public welfare.

Eventually, Mr Christie and his successor will have to focus on policies promoting true growth by our local private sector, rather than complex schemes conjured up by ministerial bureaucracies.

• Richard Coulson is a retired lawyer and investment banker resident in the Bahamas. He is a financial consultant and author of A Corkscrew Life - adventures of a travelling financier.