Discuss the rationale and the role of public enterprises in the Caribbean.

Acquisition or consolidation of economic power is another reason for the development of Public Enterprises in the Caribbean. This area is linked to the ideological predilection but the difference is shown, as decisions are made not according to some preconceived position such as nationalism but according to the consequences of particular actions. Governments in various countries use the development of public enterprises to display their political and economic power. According to Leroy. P. Jones “ownership and control of economic units are instruments for advancing certain interests and frustrating others.”

        Historical heritage and inertia are another key factor in the rationalisation of Public Enterprises in the Caribbean. Once the government controls an enterprise for a significant period of time a strong inertia is developed and this enterprise remains in the hands of government even though there is no ideological framework at hand or no economic gain.

        The rationale of ideological predilection, acquisition of political and economic power and historical heritage and inertia are strong reasons for the presence of public enterprises in the Caribbean. However, the pragmatic response to economic problems/ the empirical approach is one of the main reasons for the formation of these government owned enterprises. Employment generation and the preservation of jobs is an important justification for government intervention in the Caribbean where the private sector has failed in this area. With enterprises that provide monopolistic products or services it is considered in the interest of the community, for these enterprises to be a part of the public sector to ensure that consumers are not exploited by prices. These enterprises are also usually taken over to give power to the state. The ideology of pragmatism is also justified in the light that many governments hold the view that certain key sectors of the economy should not be left in the hands of the private sector. Some examples would be the generation and distribution of energy, transportation and communication. The outputs from these enterprises are necessary inputs in the other sectors of the economy to enable sustainable growth and development.

        The rationale and growth of Public Enterprises in the Caribbean can be further examined by looking at their developments in particular regions. In Jamaica around the 1970s, the government’s adaptation of a nationalistic ideology was clearly shown as it sought to own key sectors within the country. These areas were the sugar industry, aluminium / bauxite, utilities and transport, agriculture, communications and financial services. The Jamaican government did not only establish these public enterprises for ideological reasons but also had a pragmatic response when it sought to restore the tourism industry in the late 1970s. Government greatly assisted in the sustainability of the Jamaican tourism industry by purchasing17 hotels which prevented the rise in unemployment and therefore an improvement in economic stability. The Hotel Aid Law of 1944 assisted in the growth of the hotel industry in Jamaica. Seeking to reduce dependency on foreign investment, the government nationalized with compensation all of the foreign owned utility companies and the foreign owned Barclays Bank.

        The development of Public Enterprises in Trinidad and Tobago took a similar approach as in Jamaica. In the late 1960s, the government purchased shares in BWIA and also purchased the Telephone Company from private shareholders. The government also created the Public Transport System in 1965. Nationalisation efforts were also seen in the full ownership of electricity, water and sewage, harbour and port facilities. The banking industry underwent a nationalism process in 1972. In that year, government purchased a 51% share of Royal Bank of Canada, subsequently renamed the Royal Bank of Trinidad and Tobago.  The government of Trinidad and Tobago also took a pragmatic approach in the establishment of Public Enterprises in that country. Between1968 and 1974, the government entered the oil industry by force, purchasing the oil holdings of the British Petroleum Corporation and Shell Corporation and integrating them into the newly established Trinidad and Tobago Oil Company (Trintoc).

        The government of Guyana used a strategy where they saw the importance of private enterprises for the development of the country but they also realised the need for control of these resources to assist in rapid industrial development. There was therefore the form of some public enterprises in Guyana in the 1970s in utility areas. In 1970 the bauxite and sugar industries were taken over by the Guyanese government. By 1980 the government controlled about 80% of the formal economy.

        The Barbadian government took a pragmatic approach in their justification for the development of PEs in that country. According to John Mayers of the University of the West Indies, government involvement in the Barbadian economy “was aimed at diversifying the economy, increasing employment and achieving greater self-sufficiency for the country.”

        The National Housing Corporation (NHC) was established in Barbados on April 1st, 1973. This enterprise was set up to provide subsidised housing for the lower income families and in more recent times for middle income workers. Government’s aim of providing social goods and services was therefore achieved by the NHC, as private enterprises in Barbados were not willing to partake in such ventures. However, the reader must understand that the main purpose of private enterprises is to maximise shareholder wealth. At the present, the National Housing Corporation is embarking on building more houses around the island in areas such as Ellerton, St.George, Hoytes Village in St. James and Kent in Christ Church to facilitate in the social responsibility and general welfare of the citizens.

        The Barbadian government also established PEs to assist in the infrastructural and national economic development of the country. The Barbados Industrial and Development Corporation (BIDC) was established in 1956. This public enterprise was set up with three fundamental objectives: -

1. To increase employment prospects within Barbados
2. To improve the external balance of trade by expanding the production of locally made goods
3. To promote the establishment of industries exporting the whole or major portion of their output to overseas markets.

The major developmental initiative set up by the BIDC was the establishment of Industrial Parks. These industrial parks allowed manufacturers to lease/purchase a factory space and produce their products in a competitive atmosphere. The first industrial park was set up in Grazettes, St. Michael in 1961. At the moment there are 9 more industrial parks strategically located around the island. The employment rate was subsequently increased with the onset of these industrial parks. The BIDC has also assisted in the hotel sector where a number of hotels in Barbados such as and Sandy Beach Island Resort have benefited from financial assistance. The BIDC realised that the local market was too small to achieve its main objectives of expanding employment opportunities and generating exports. The BIDC therefore conformed to the “industrialisation by invitation”. In 1969 the structure of the BIDC was reorganized. The Board was restructured as a statutory corporation and became the Barbados Industrial Development Corporation. A new financial institution called the Barbados Development Bank was established.

        Another Public Enterprise established in Barbados is the National Petroleum Corporation. This was established in 1981 under the Act of Parliament. The purpose of the development of this enterprise in Barbados was for government to gain monopolistic power of this valuable resource and also to provide a reliable and efficient gas service at a reasonable price. This reasonable price is shown, as natural gas is 16% cheaper than bottle gas per unit.

        Public Enterprises such as the Transport Board were also established in Barbados. The Transport Board was set up by an Act of Parliament on August 24th, 1955.This was set up to prevent private bus companies from exploiting consumers by raising bus fares. This was accomplished by the purchase of many private bus companies. By 1955, the government had taken over 116 buses from 8 concessionaries and was operating the routes they formerly had. At the present the price of bus fare is $1.50 and the last price increase took place in 1991 when bus fare was $1.00.

        Public enterprises in the Caribbean have played a very important role in the infrastructural development, economic development and stability of these countries. Governments in the Caribbean, especially those of Jamaica, Guyana, Trinidad and Tobago and Barbados realised that private enterprises could not provide all of the social needs and infrastructural requirements of the countries. Public enterprises were therefore established. Some of them made remarkable profits such as Point Lisas in Trinidad and Tobago. However, many of these Public Enterprises are operating at a loss. But by operating at a loss these public enterprises are providing social services and goods to the countries that the private sector would not otherwise undertake. Therefore the Public Enterprise is a very important organisational device to achieve national development and economic independence to enhance the initiative in establishing enterprises to achieve these objectives if there is no emerging private sector.