This col­umn, on page 3 of the Busi­ness Guardian, has long been in favour of the pri­vati­sa­tion of state as­sets, on the lo­cal stock ex­change, in or­der to gen­er­ate long-term wealth for the cit­i­zens of T&T.

In Au­gust 2010, in this space, a com­men­tary head­lined “Is pri­vati­sa­tion the an­swer?” was pub­lished, which in­clud­ed the fol­low­ing:

“As Fi­nance Min­is­ter Win­ston Dook­er­an and the Min­istry of Fi­nance tech­nocrats con­tin­ue the work nec­es­sary to com­plete the 2011 bud­get, one of the pol­i­cy op­tions that should be giv­en se­ri­ous con­sid­er­a­tion is the pri­vati­sa­tion of some key State-owned en­ter­pris­es.

“On many oc­ca­sions in the past four years, this col­umn has called on the Gov­ern­ment to em­bark on a pro­gramme of pri­vati­sa­tion aimed at deep­en­ing the sense of re­spon­si­bil­i­ty for the de­vel­op­ment of the econ­o­my and in­creas­ing the in­vest­ment op­por­tu­ni­ties for T&T na­tion­als.

“It can be ar­gued that one of the main chal­lenges that the lo­cal econ­o­my faces is a lack of in­vest­ment cap­i­tal be­ing de­ployed to de­vel­op new in­dus­tries and re­tool ex­ist­ing ones to meet glob­al com­pe­ti­tion head on. But, ob­vi­ous­ly, there are oth­er good rea­sons why T&T should em­bark on a pro­gramme of pri­vati­sa­tion at this time.

“An in­sight in­to the rea­sons for a pro­gramme of pri­vati­sa­tion in the Caribbean comes in a 1999 pa­per pub­lished un­der the aus­pices of the Cen­ter for Strate­gic and In­ter­na­tion­al Stud­ies by Richard Bernal and Win­some Leslie in which they ar­gued that pri­vati­sa­tion in de­vel­op­ing coun­tries was usu­al­ly mo­ti­vat­ed by a de­sire to do ten things.”

Of the ten rea­sons for pri­vati­sa­tion cit­ed by Bernal/Leslie, the col­umn iden­ti­fied three po­tent rea­sons why a pro­gramme of pri­vati­sa­tion was ab­solute­ly ap­pro­pri­ate for T&T at that time (and this time as well): the Gov­ern­ment could raise rev­enue as an al­ter­na­tive to rais­ing tax­es or in­cur­ring fur­ther debt, it could re­duce the bur­den of ex­ist­ing state-owned com­pa­nies and at­tract do­mes­tic as well as for­eign in­vest­ment.

A fourth el­e­ment can be added. It would trans­fer wealth from the state sec­tor di­rect­ly to T&T in­di­vid­u­als, cred­it unions, mu­tu­al funds, and the Na­tion­al In­sur­ance Board.

In the Au­gust 18, 2024 edi­tion of this pub­li­ca­tion, in a com­men­tary head­lined, “What is the na­tion­al in­ter­est in Cli­co?” a let­ter writer ar­gued that it would be in the na­tion­al in­ter­est for Cli­co to be al­lowed to write new busi­ness for two years so that the 49 per cent share­hold­ing could be­come more valu­able in the fu­ture.

My re­sponse to the let­ter writer was that the na­tion­al in­ter­est lies in Cli­co/CL Fi­nan­cial re­pay­ing the Gov­ern­ment, which rep­re­sents the tax­pay­ers of this coun­try, all of the mon­ey that was used to bail out the CL Fi­nan­cial group as soon as pos­si­ble.

The col­umn made the point that the sole pur­pose of a cred­i­tor (Cor­po­ra­tion Sole) putting a com­pa­ny in liq­ui­da­tion (CL Fi­nan­cial) is to re­cov­er the mon­ey owed to the cred­i­tor, as soon as pos­si­ble.

As far as this col­umn is con­cerned, there­fore, one of the high­lights of Mon­day’s pre­sen­ta­tion of the bud­get for the 2025 fis­cal year by Min­is­ter of Fi­nance Colm Im­bert was his an­nounce­ment that the Gov­ern­ment in­tends to em­bark on the sale of its 49 per cent share­hold­ing in Cli­co in 2025.

The sale of the 49 per cent stake is one of sev­er­al spe­cial projects iden­ti­fied by Mr Im­bert that aim “to gen­er­ate much-need­ed rev­enue and cre­ate new jobs, to di­vest state as­sets that are bet­ter man­aged by the pri­vate sec­tor, to en­cour­age di­rect for­eign in­vest­ment, and lo­cal in­vest­ment, es­pe­cial­ly in the tourism sec­tor.”

Val­ue ex­trac­tion

Mr Im­bert said, “Cli­co is no longer con­sid­ered to be of strate­gic im­por­tance to the Gov­ern­ment and its di­vest­ment will earn sev­er­al bil­lion dol­lars in rev­enue for the Gov­ern­ment, to see us through the fi­nan­cial dif­fi­cul­ties of the next few years.”

When he said Cli­co is no longer con­sid­ered to be of strate­gic im­por­tance to the Gov­ern­ment, what he meant was that the cur­rent ad­min­is­tra­tion has ex­tract­ed max­i­mum val­ue from the in­sur­ance com­pa­ny in re­turn for the $18 bil­lion that was ad­vanced to Cli­co with its bailout in 2009.

That ex­trac­tion of val­ue from Cli­co in­cludes:

* The sale of Methanol Hold­ings In­ter­na­tion­al Ltd in De­cem­ber 2023 to Con­sol­i­dat­ed En­er­gy Ltd, a sub­sidiary of the Pro­man Group of Switzer­land.

The 2024 Re­view of the Econ­o­my doc­u­ment states, “Re­ceipts from cap­i­tal rev­enue are es­ti­mat­ed to sub­stan­tial­ly in­crease to $2.877 bil­lion in com­par­i­son to $158.9 mil­lion col­lect­ed in the pre­vi­ous year. This sig­nif­i­cant boost in rev­enue is at­trib­ut­able to in­creased col­lec­tions un­der sale of as­sets con­se­quent to Cli­co’s set­tle­ment of li­a­bil­i­ties to GoRTT”;

* In 2018, four of the five blocks of shares com­pris­ing the Na­tion­al In­vest­ment Fund (NIF) came from Cli­co and its sis­ter com­pa­ny, Cli­co In­vest­ment Bank (CIB). The val­ue of the shares in Re­pub­lic Fi­nan­cial Hold­ings Ltd (RFHL), An­gos­tu­ra Hold­ings Ltd, West In­di­an To­bac­co Com­pa­ny, and One Caribbean Me­dia to­talled $5.8 bil­lion when trans­ferred to Cor­po­ra­tion Sole.

Ac­cord­ing to the re­port of the Cen­tral Bank to the high court on Cli­co, CIB and British Amer­i­can (Trinidad), for the quar­ter end­ed Sep­tem­ber 30, 2019, Cli­co re­ceived from the liq­uida­tor of CIB an in­ter­im dis­tri­b­u­tion of 27,619,219 RFHL shares. NIF1 was con­sti­tut­ed with 42,475,362 RFHL shares, which means 14, 856,143 RFHL shares would have come from Cli­co.

* Cli­co has trans­ferred its head­quar­ters build­ing on St Vin­cent St, and build­ings in Ch­agua­nas and San Fer­nan­do to the State, as part of the re­cov­ery ef­fort of the Min­istry of Fi­nance. Cli­co al­so trans­ferred the Mau­si­ca Es­tate to the State in 2021;

* Fur­ther to the di­rec­tions of the Cen­tral Bank from the Min­is­ter of Fi­nance, Cli­co was in­struct­ed to trans­fer 17,022,984 Cli­co In­vest­ment Fund units to the Gov­ern­ment in April 2021. Those units, when trans­ferred in­to RFHL shares, were the ba­sis for the 6,546,417 shares of the bank­ing group that were used to back the $400 mil­lion NIF2, which was is­sued in Feb­ru­ary.

* The ac­qui­si­tion in 2017 of 100 per cent of the share­hold­ing in Cli­co com­pa­nies Oc­ci­den­tal In­vest­ments Ltd and Ocean­ic Prop­er­ties Ltd—which were own­ers of the Buc­coo Es­tate in To­ba­go—to fa­cil­i­tate the trans­fer of the es­tate to Gold­en Grove Buc­coo Ltd, a state en­ter­prise. The Buc­coo Es­tate is to be the site of a new five-star in­ter­na­tion­al­ly brand­ed re­sort, which is ex­pect­ed to be on the scale of the pre­vi­ous­ly pro­posed San­dals Ho­tel, which was to have been lo­cat­ed on the es­tate. The five-star es­tate is an­oth­er of the spe­cial projects out­lined by Mr Im­bert in his 2025 bud­get pre­sen­ta­tion;

* Cli­co would have re­paid the $4.99 bil­lion in pref­er­ence shares, plus the 4.75 per cent in­ter­est on those shares.

Flaw­less process

If Mr Im­bert is se­ri­ous about the sale of the State’s 49 per cent share­hold­ing in Cli­co, he must en­sure that the process for the dis­pos­al of the as­set is be­yond re­proach. This must in­clude the ap­point­ment of the fi­nan­cial con­sul­tants, au­di­tors and the val­u­a­tion spe­cial­ists.

The Min­istry of Fi­nance al­so needs to have a dis­cus­sion with Sagi­cor Fi­nan­cial Com­pa­ny, the par­ent com­pa­ny of Sagi­cor Life, to which the Cen­tral Bank agreed to trans­fer the tra­di­tion­al in­sur­ance port­fo­lios of Cli­co and British Amer­i­can on Sep­tem­ber 30, 2019.

It makes no sense to sell 49 per cent of Cli­co with­out its tra­di­tion­al in­sur­ance port­fo­lio.

Dis­clo­sure: The au­thor of the com­men­tary is a share­hold­er of Sagi­cor Fi­nan­cial Com­pa­ny