"When public and private sector goals are aligned great things can happen."
So said Gregory N. Hill the managing director of ANSA Merchant Bank in an interview with the Business Guardian (BG) as he hailed the merits of the private-public partnership model of project development in advancing national goals .
"The public sector is the driving force for business to succeed, while the private sector provides capital, expertise, employment and tax revenues for the long-term viability of all stakeholders," Hill explained.
"The pandemic has made it clear that we should be much more invested in seeking partnerships on a regional level. The road to expansion, diversification and income equality for Caribbean nations depends on us capitalising on the strengths of each country and coming together to promote and buy into our capabilities and talents. This applies domestically and regionally.
"For example, given the evidence provided by the pandemic, an immediate area of necessity is making sustainable healthcare accessible to the most underserved communities across the region. This can be delivered via public-private partnerships. Similarly, partnership co-investment in cross-border digital banking technology and payment platforms facilitated by regional regulators and governments is another great place to start to bring us all together in partnership."
Hill said ANSA Merchant Bank has always partnered with its clients both regionally and domestically in joint ventures and partnerships wherever possible.
"We have executed various forms of public-private partnerships using BOLTs (Build Own Lease Transfer), BOOTs (Build Own Operate Transfer) and other off-balance sheet financial and operating structures. Generally, banks can partner with large contractors and developers to undertake significant infrastructure projects, such as utilities infrastructure, transportation and even hospitals."
These avenues for key project execution, he said, provide a creative channel for government to implement strategic infrastructure projects but avoid having to fund these projects itself or to source funding on the balance sheet of the sovereign directly.
"This allows for a more modest Debt to GDP ratio of the sovereign (which impacts the sovereign global risk ratings), while at the same time allowing for Construction and Completion Risk to be passed on to the contractor or developer. This is a valuable way for the sovereign to mitigate against the huge cost overruns normally associated with Government Guaranteed or sponsored infrastructure projects.
"This issue is evident across the region and hence more public-private partnerships, joint ventures, State Privatisations and State Concession Agreements should be explored without further delay across CARICOM, as these opportunities for risk mitigation are not unique to our country. At ANSA Merchant Bank we are at the disposal of the region to play our part in making the vision of a more dynamic investment and capital market – and a more inclusive distribution of resources – a reality, and to support the future resilience of our society."
An aerial view of Port-of-Spain.
Hill said ANSA Merchant Bank is always looking for channels through which it can allocate funding into new and diversified areas of business.
"Government support and policy can be a major driver of this practice via, for instance, allowance of tax free bonds for the financing of specific projects or sectors or even tax incentives on the financing itself for the financial institutions playing in the capital market to fund new areas of economic diversification.
"Naturally, there will be calls for financial institutions to offer more support to local entrepreneurs by a visible willingness to take on more level of risk, to offer lower financing rates, and to help these types of businesses in difficult times by working with them to find viable solutions to their challenges. It requires all hands on deck really."
Hill said the pandemic has taught Ansa Merchant that all are "vulnerable from an economic and social perspective."
"We must compete for our very survival, not only as individuals, but on a national and regional level. Caribbean-wide, we must pull together to attract significant foreign direct investment to our borders, hopefully in greater numbers than the virus was able to penetrate them. We have strength in numbers and our individual national policies must engender regional and domestic collaboration across bi-partisan lines."
Hill said T&T's banking community is quite capable of assessing projects and investments of international origin and scale and therefore the national budget should facilitate the widening of lending and investing parameters, not only for the banks, but for insurance companies and pension plans, with appropriate policy incentives to do so.
"Driving local content via the use of our domestic financial services sector is a great way to multiply capital and expertise. Our Budget should immediately focus on innovative and impactful stimuli and incentives for foreign direct investment that afford efficient movement of capital to our shores, coupled with red-carpet policies to welcome new and emerging global enterprises which specifically align to our proven clusters of economic excellence. This much needed capital injection should build the antibodies for the future health and survival of our economy."
Hill said with a long-term perspective and programmes to not just facilitate but encourage foreign direct investment alongside domestic private sector local content participation, the economy should see an overall net increase in foreign capital.
"With this focus and growth in foreign direct investment into our economy, the demand and supply balance for hard currency will begin to tip in a much needed direction, reducing the unsatisfied demand for US dollars. If government policy supports the channelling of this focus and energy into export driven businesses, this will shift the balance of trade in the right direction and alleviate foreign currency shortages, but it will take time. These deliberate interventions will directly impact the lives of manufacturers, distribution and logistics companies, and the general public."
As such he said the banking sector can play two pivotal roles in this currency equation: firstly, adding leverage from the local market alongside foreign capital to improve the return on investment to all stakeholders to promote these new industries; and secondly, to ensure a more equitable distribution of hard currency to citizens.
Hill said the need to diversify the economy out of the dependence on Oil and Gas to create additional avenues to earn more foreign exchange is a priority for all.
He said throughout the pandemic, ANSA Merchant Bank remained steadfast in its commitment to its core values for both our internal and external stakeholders.
"Our strengths have always been our sense of social responsibility, our financial stability and the commitment of our team to deliver exceptional performance and unmatched service despite the headwinds."
Port of Port-of-Spain
Hill said relative to the markets in which ANSA Merchant competes, it did extremely well according to key performance indicators, including a significant rebound in Profit Before Tax, enhanced efficiency of operational activities, and by delivering on our promise of service innovation and enhanced use of technology.
ANSA Merchant registered $161 million in Profit Before Tax year to date as at June 30, 2021, compared to $46 million as at June 30, 2020.
"We have discovered and are quite proud about the depth of resilience and innovativeness of our ANSA Merchant Bank team and citizens in general, and their ability to unite in the face of a crisis. At a national and corporate level, the key lesson is that operations and systems must be proactively and thoroughly tested, with buttresses to withstand the impact of unscripted global events…be it a pandemic, a climate change disaster, a geo-political outbreak or anything else in the regional or international arenas. In short, with modern technology, timetables will always be compressed – a valuable lesson for all for the future."
Specific strategies Hill suggested can be used to create additional avenues to earn more foreign exchange include:
· Not just develop a strategic map as a guide towards the country’s economic diversification agenda, but execute same with associated milestones and timelines;
· Include in this strategic map the percentage spilt of GDP that the diversification would aim to achieve over time as a deliberate target and work towards same;
· Prioritize research and development into new areas of economic activity, such as alternative energy sources, to reprioritize the use of available natural gas resources, greater investment in agriculture for food sustainability, expansion of the education sector to bring in foreign students paying hard currency and consuming local products, and, of course, execution of a plan to make Tobago a premier holiday destination;
· Provide attractive incentives for businesses which are net earners of foreign exchange, particularly those that export their products and services to boost our balance of trade and support the foreign currency supply side dynamics;
· Encourage domestic production of goods and services for export and local consumption where, as a Nation, we already have a competitive advantage. This could include specific agricultural products, large-scale food processing, animal husbandry, and select light industrial activities to build up our SMEs, especially in the areas of clothing, shoes, furniture, lumber, local fruits usage, and so on. Growing the supply and demand (taste) for local production should also support the foreign currency on the demand side of the equation;
· Provide attractive incentives for ‘green’, sustainable projects, particularly those that are likely to generate or use alternative energy sources, such as solar or recycled material. Rewarding businesses for investing in sustainable business practices is where the future of policy also needs to focus. Our children are depending on us to make the right decisions for their future, today;
· Encourage and support the production and access to independent sources of data across society (employment sectoral rates, population segmentation, consumption trends and the like) and with less lag time. This is a major source of inefficiency, where data is not readily available to support decision making and business planning.