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Corporate Governance PSEs Umbrella Legislation Restructuring Public Sector Entities Reform Strategies – an Alternative to Privatisation PSEs Budgets FY 2000/01 The level of investment in physical capital is considered a prime indicator of economic growth. This is often measured by the rate of expansion of the stock and flow of capital goods, i.e. inventories, assets and infrastructure. Although physical capital alone cannot explain overall changes in overall growth, statistics which highlight expenditure on physical capital nonetheless tell us much about the state of an economy. A significant proportion of the capital formation activities in the economy have resulted from the activities of Public Sector Entities (PSEs). Collectively, they are a large employer of human and physical capital and continue to be the vehicle through which major social and economic programmes are administered. At the end of March 2000 net assets of the group of thirteen (13) Selected Public Sector Entities (SPEs) is estimated to be approximately $82,729 million. This compared with $66,494 million at the end of March 1999. The spotlight has been focussed on public sector entities and issues of governance and transparency of their operations have risen to the forefront of discussion during the past year. This has resulted in repeated demand for timely and accurate disclosure of all material information relevant to enterprise management. Observance of basic principles of corporate governance continues to be an increasingly important criterion for investment decisions. Corporate governance activities must be credible if Government at the macro level and entities at the sectoral level are to reap the full benefits of the global capital markets. Even where there is no reliance on foreign sources of capital, the concerted efforts of Boards and management to attain and sustain best practices in these entities will help to improve the confidence of domestic investors and create the climate necessary for economic growth. Cabinet has recently issued drafting instructions to the Chief Parliamentary Counsel for the development of new legislation that will address concerns about corporate governance and transparency (incorporating efficiency and accountability issues). Preparatory work is at an advanced stage and the legislation is slated for completion in FY 2000/01. The new umbrella legislation will replace the previously proposed regulations under the Financial Administration and Audit (Amendment) Act 1992. The principles governing the proposed Dividend Policy have been finalised. However, much of the work that was slated for completion in FY 1999/00 has been delayed. Some areas of work will dovetail with the examination and amendment of enabling Acts of statutory bodies and Memorandum and Articles of Association of government-owned companies required to give effect to the new legislation. RESTRUCTURING PUBLIC SECTOR ENTITIES Government is compelled to ensure that the activities undertaken by public sector entities provide value for money. During FY 1999/00 the Ministry of Finance and Planning embarked on a restructuring programme to identify opportunities for mergers of entities; to assist in restructuring marginal operations; and to recommend closure of those entities where the mandates are no longer relevant. The following decisions were taken:
Cabinet approved the ‘fast tracking’ of these restructuring activities through a Public Sector Entities Restructuring Project, and in August 1999 five (5) consulting firms were engaged to undertake the assignment and make recommendations. The ultimate goal is to reduce the size of the public entities sector thereby allowing for greater control and higher levels of efficiency. The project is now at an advanced stage and a Committee specifically appointed for this purpose, is evaluating the draft reports. The recommendations accepted by Cabinet are to be implemented in FY 2000/01. REFORM STRATEGIES -AN ALTERNATIVE TO PRIVATISATION Government will continue to utilise traditional privatisation modalities to the extent that they are considered feasible. However, it is recognised that some entities may not attract purchasers in their existing conditions, therefore, focus is on the promotion of efficiency through private sector participation. The National Water Commission (NWC) in its drive to improve the quality and quantity of potable water, within the constraints of limited funds, has entered into a Build-Operate-Transfer (BOT) arrangement with the Waycor/Integral Group to rehabilitate and upgrade the Bogue Water Treatment Plant. NWC has also entered into a joint venture arrangement with the Ministry of Water and Housing, Caribbean Engineering and Construction Limited (CECL) and two international firms: Montgomery Watson Enterprises of the United Kingdom and Azurix Corporation of the United States of America. The joint venture - Jamaica Water 2000 Project (JW2000) - will embrace major expansion and rehabilitation sub-projects. Another BOT scheme - the Ferry Desalination Project is also being pursued. As part of its financing strategies, Petrojam will enter a joint venture with a British based company, Air BP, to supply jet fuel to airlines operating at both the Norman Manley and Sangster International Airports. Another reform strategy of Government has been the use of Performance Contract. The contract is a mutual agreement, usually between the owner of the enterprise on the one hand and the management of the enterprise on the other, setting out certain targets or results to be achieved in a given timeframe. This has been successfully implemented in the Jamaica Public Service Company (JPSCo), thereby paving the way for use on a wider scale. PSEs BUDGETS FY 2000/01 As part of its continued commitment to disclosure, the Ministry of Finance and Planning will increase the number of PSEs’ budgets included in the presentation to Parliament. The presentation will again be made in two parts. The first section will consolidate the financial forecasts of the thirteen (13) SPSEs. The National Housing Development Corporation (NHDC), representing the merger of Caribbean Housing Finance Corporation (CHFC), National Housing Corporation (NHC) and incorporating Operation PRIDE, has been added to the group. Total revenue generation by the group of SPSEs for FY 2000/01 is forecasted at $56,170.6 million, representing an increase of $4,337.5 million over FY 1999/00 estimated outturn. Capital expenditure for the group is projected to be approximately $17,297.6 million, compared with the $10,554.2 million in FY 1999/00. The second section will provide financial data on twenty-nine (29) Other Public Sector Entities including the merged ACB/NDB, Montego Bay and Kingston Free Zones, Port Security Corps, Jamaica Deposit Insurance Corporation and the Transport Authority || Previous | Table of Contents | Next ||
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