Is privatisation the way forward for the Virgin Islands economy? Big government is one of the bogeymen negatively affecting VI commercial and economic progress. The very large size of the public sector is a weight on free enterprise.

This commentary looks at the airport development model, and suggests that privatisation or part privatisation of certain public assets is the solution to weaning the territory off the public sector and creating a new commercial dynamism.

However, just like the British privatisation model of the 1980s and early 1990s, it must be done for the benefit of Joe Public, by creating a new group of stockholders and shareholders comprising the VI masses. The creation of a mini stock market based upon the Wall Street and City of London models — a facility accessible to local and international investors, where newly privatised stocks and shares are traded locally — is certainly a possibility one day.

This idea of a VI stock exchange could be a new market opportunity that develops into other forms: international stocks, commodities trading, currency dealing, international securities, and so on and so forth. In a financial services economy, this type of financial market — operated by independent traders plugged into global stock exchanges and securities trading floors and platforms — could become a perfect fit. It will create new market dynamism in the territory. Technology is making the impossible possible this early 21st Century.

US economy

In a recent commentary, this observer concluded that the state of the United States economy could directly affect the political trajectory in the VI. He asserted that a strong and healthy US economy feeds into the VI tourism market directly, creating positive commercial synergies. This was manifested by an increased number of US visitors to VI shores. These were visitors who began to take more vacations, spending higher sums of cash than usual on various leisure activities once in the Caribbean: a direct result of the feel-good factor in the US. US consumers today are feeling better off: They are wealthier after a financial recession that had them badly pummeled.

Why the assertion about consumer optimism in the US? Well, the news on May 28, from this Tweeter’s Twitter news stream, showed that the Dow was up 200 points, with US house prices up over 10 percent, and US consumer confidence the highest it has been in years. A thriving US economy is always good news for incumbent governments in the Caribbean — governments that depend upon the US visitor for a substantial portion of their tourism revenues.

As stated in an earlier commentary, more affluence in the US means more money entering the VI from the pockets of US and Canadian tourists. This has the potential of increasing the feel-good factor —  always a benefit for an incumbent government in a democracy.

However, infrastructure improvements locally are crucial to the continued inflow of tourists from North America. These are guests who spend days in the territory, servicing the local economy.

There were some very intelligent responses online to an article of May 25, headed, “The politics of the Terrance B. Lettsome International Airport.” One response asserted, “The government will not be spending money on the airport ‘directly.’” It added that the airport development project would “be a similar arrangement like with the proposed cruise pier, with private investment.”

The responder added that the project is a “design, finance and build project that was tendered, and interest was shown.” This was very interesting to this observer. Private capital in public projects, and private-sector partnership with government, is the modus vivendi in most advanced industrialised nations.

The anonymous commenter, who posted under the name “Missing Link,” went on to state, “Globally, airports are run as private-public partnerships, with the private entity running the operations. … Every tourist that comes to the BVI benefits: hotels, restaurants, taxis, tours and many other things.”

Missing Link described this business theory as “indirect stimulus to the economy,” adding, “The private sector, once done right, can run things better than government. It has been proven.”

‘Out-of-the-box thinking’

This observer could not fault Missing Link’s out-of-the-box thinking. This was an analytical response to all the recent emotionalism and reactive thinking on airport development.

The commenter also explained how the USVI benefits from this territory’s travel albatross. Travellers to and from the VI frequently have to overnight in St. Thomas. And guess what? Right! “They have to buy food and drink and support the taxi drivers and rental companies.” The hotel industry in the USVI makes a good living off of VI transit guests.

VI travellers and residents alike are a crucial pillar of the USVI economy. Whether this is a good or bad thing is a matter of opinion. However, were it the other way around, one wonders whether the US government would not do all it could to keep business within its own shores.

Private sector

Now in the same stream, the issue of economic growth in the territory, and the limits thereof, is also a result of a public sector that is inordinately large. This is a public sector that controls more than a third of the VI economy, and that is a weight on free enterprise and commercial dynamism not easy to remove.

The territory could well be doing a lot better if voters got off the notion that government can solve all of the territory’s economic problems. The answer to the future growth and prosperity of the VI is in the private sector. Whether today or sometime in the future, this may well mean the privatisation of a large segment of the VI public sector, with electricity, post office, water and sewage, airport, sea ports and so on given to Joe Public in stocks and shares.

Only social infrastructure — such as health, social welfare and education — needs to stay in the hands of a government. Yes, this is a radical and ambitious idea. But it is an idea worth looking at closely as a solution to some of the territory’s economic woes.

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