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Carving up government assets

The One Bermuda Alliance, as predicted, brought privatisation to the forefront post-election, with the formation of the SAGE Commission. One of the main directives of the SAGE Commission was to identify activities that can be privatised.

Privatisation means the whole or partial sale of government-owned assets to private investors.

Types of privatisation

• Privatisation of professional and support services, eg, architectural, legal, custodial, IT, telecommunications.

• Privatisation of public works and infrastructure projects, eg, construction and maintenance of highways and buildings.

• Privatisation of service delivery to the public, eg, mental health and healthcare, social services, corrections and education.

• Competition between public and private sectors — this option occurs when the government competes directly with private sector for the administration and delivery of certain services.

Privatisation selling points

• Some may claim privatisation improves efficiency and cut costs. The theory is that private companies are motivated by profit, and are more willing to make cuts in manpower.

• Some may claim that politicians are influenced by political pressures at the expense of making sound economic and business sense. They may say some politicians may be unwilling to make certain “hard decisions” in order to appease voters.

• Increases competition. Often privatisation occurs in conjunction with deregulation, which increases competition. This competition may lower prices.

Disadvantages of privatisation

• Public interest. There are some things that should never be motivated and or distorted by profit, including healthcare, education, security and public transport.

• Monopolies. Often the most efficient way to privatisation is the formation of monopolies. Monopolies tend to set higher prices, such as for milk.

• Divesting. Often governments will look to privatisation to raise revenue in the short term by selling off publicly owned assets to the private sector, for example, government buildings and lands, such as Harrington Sound Post Office.

• Lost government revenue. By privatising, governments and taxpayers lose out on the profits that are generated from key services such as airport operations, tax collection and Transport Control Department.

• Regulating. To ensure that there is no abuse of the monopoly power, often governments will need to invest heavily to regulate and monitor these companies to protect the citizens.

• Fragmentation. Often privatised services are broken up into smaller functions. This may lead to the blurring of lines regarding responsibility and accountability.

• Short-sighted vision of firms. Private firms may also seek to increase short-term profits for their shareholders and avoid investing in long-term projects.

• Shareholders. Private firms have the added pressure from shareholders to maximise profits, regardless of job losses.

Will those private investors, who are lining themselves up to carve up government assets, most likely be OBA friends and family, as seen with recent contracts awarded without tender?

“Curiouser and curiouser!” Cried Alice”

Alice in Wonderland