Business

Sweeping reform of state-owned enterprises suggested in report

The Economic Recovery Committee (ERC) in its executive summary report tabled in Parliament yesterday, suggested sweeping reforms of state-owned enterprises (SOEs) that would increase their efficiency and justify their huge subventions, even going so far as to explore having more civil servants work remotely.

The long-awaited ERC report was tabled in the House of Assembly yesterday by Prime Minister Dr. Hubert Minnis. 

The report tackled the $400 million economic burden SOEs pose and made recommendations to rectify the low productivity of these entities and the people which they employ.

“The government of The Bahamas provides an average subvention of $400 million to support SOEs each year,” the report states.

“However, the value received in exchange for these subventions may not justify the issuance of such subventions.

“These risks are further compounded by low productivity within the public sector, which can be attributed to many factors, including a lack of ongoing training, low employee morale, poor working conditions and unsatisfactory compensation.

“The country’s performance on the Civil Service Development Index (19 out of a possible 100) reflects these conditions. The importance of this issue cannot be understated, as wages account for 43 percent of government revenue on average.”

The ERC report calls for policy changes that would allow civil servants to work from home, negating the need for extensive office space and costly rent and maintenance.

“A potential latent effect of this suggestion is that unproductive workers will effectively remove themselves from the working environment, thereby enabling potentially huge productivity gains,” the report states.

The ERC also recommends in its report that SOEs be made to publish annual financial and management audits and replace their large, general subsidies with initiative-specific subsidies that are managed through defined deliverables and key performance indicators.

The committee also suggested taking profitable SOEs public to allow average Bahamians to invest in them, while also ensuring the products and services they offer are set at market rates, with “targeted support for individuals who are unable to afford these services” at those rates.

It is also recommended that those closely related enterprises be consolidated.

“Pursue opportunities for consolidation/mergers of SOEs with overlapping or related mandates,” the report suggests.

“The consideration to consolidate/merge SOEs whose objectives are well-aligned to minimize costs is key. Suggested examples include the Bahamas Development Bank, Bahamas Agricultural and Industrial Corporation, Small Business Development Centre and Bahamas Entrepreneurial Venture Fund; Bank of The Bahamas, Bahamas Resolve Ltd. and Bahamas Mortgage Corporation; Bahamas Technical & Vocational Institute, University of the Bahamas, Eugene Dupuch Law School and Bahamas Agriculture and Marine Science Institute.”

The ERC also recommended that oversight of smaller government entities be centralized and a proper governance structure that is outside of the scope of the centralized agency governance model be implemented for large SOEs.

“This recommendation focuses on improving internal structures of SOEs in ways that allow them to operate transparently and efficiently,” the report states.

“The goal for SOE governance is often to create management structures that mirror as closely as possible the structures used in private companies in an effort to encourage maximum efficiency.”

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Chester Robards

Chester Robards rejoined The Nassau Guardian in November 2017 as a senior business reporter. He has covered myriad topics and events for The Nassau Guardian. Education: Florida International University, BS in Journalism

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