Never mind the 500 pages worth of statistics and 200-plus recommendations. The core of the so-called Five Year Plan couldn't be more simple: If you want to stop the government's financial free-fall into bankruptcy, you can't just reduce spending, you've also got to improve the private sector.
And the private sector is in need of strengthening.
In the Five Year Operating and Strategic Financial Plan, the Economic Recovery Task Force cites numerous signs of decline. In recent years, the U.S. Virgin Islands air tourism market share has decreased from 8.7 percent to 5.5 percent. In 1980 the territory provided 10 percent of all the accommodation units in the Caribbean, but that number has dropped to 4 percent. With the exceptions of Hurricane Hugo rebuilding and construction of the HOVIC addition, building activity has been static for a decade.
Again with the HOVIC exception, employment has not grown in 12 years. Wages have been flat since 1994. Commercial bank assets dropped from $2.3 billion to 1989 to $1.4 billion in 1998. The marine industry shrunk from $83 million in 1989 to $20 million currently.
To counter this decline, the Plan recommends tax reform, expansion of the financial services industry, better promotion and management of the tourism industry, one-stop service centers for business licensing and regulation, and the privatization of many government functions. (See separate stories on tax reform and tourism.)
Privatization has a double benefit, according to the task force.
"Most governments with bloated bureaucracies and narrowly based private sectors consider privatization a way to reduce the size of the government and simultaneously enhance and broaden their private sector base. This paradigm shift is especially heightened and compelling in the case of small economies such as the U.S. Virgin Islands and a number of Caribbean economies in the region."
The Plan, which was released in the spring, favored the sale of the V.I. Water and Power Authority, which was later defeated in the Legislature. It also recommends either outsourcing the management of public transportation or selling the entire operation, including buses, to a private concern.
Other targets for outsourcing or privatization include the management of the government's fleet of some 1,055 vehicles, public parking lots, school lunch programs, government printing, some security, collection of property tax and lease agreement delinquencies, and the Lottery.
The task force recognizes what it calls "a level of skepticism between the public and private sectors that has impeded economic growth and expansion." Nevertheless, it notes that the Legislature already has initiated the "policy consideration" by requiring the executive branch to submit plans for privatization.
It recommends a joint public-private working group to follow up on specific areas.
"It is only through an extensive outsourcing and privatization program that the government can hope to reduce its current excessive workforce and reduce its General Fund expenditures," according to the Plan.
"All stakeholders in the U.S. Virgin Islands economy need to be educated regarding the benefits of privatization and private sector development in terms of long-term economic development and prosperity."
