- Cape Verdean Minister of Finance and Planning, João Pinto Serra, in an official letter promises the International Monetary Fund (IMF) his government will "accelerate the structural reform agenda during the remainder of 2004." This in particular is to affect the sectors of energy, water, telecommunications, transportation, fisheries and shipping.
This was disclosed in a 'Letter of Intent' sent by Minister Serra to the IMF on 23 July and made accessible to the public today. The government of Cape Verde in the letter and in an attached memorandum of economic and financial policies (MEFP) promises to comply with IMF initiated economic reform programmes. In particular the process of privatisation is to be accelerated, according to the Minister.
According to the Ministry's memorandum, the Cape Verdean government's structural reform agenda had been "subject to some delays, but we have recently taken actions to accelerate its implementation in the areas of economic regulation and privatisation." Privatisation is a key factor in IMF prescribed structural reforms.
To reach its economic reform benchmarks, the Praia government in February this year had sworn in the board of the Economic Regulatory Agency (ARE). ARE, according to Minister Serra, "will be responsible for economic regulation in energy, water, telecommunications and urban and maritime transportation." All these sectors recently have undergone painful privatisation processes that ended up in hiking prices for Cape Verdean consumers.
The Finance Ministry's Privatisation Coordination Unit had signed a memorandum of understanding with ARE on project financing, the released document said. With the ARE board and the agency's financing in place, it will start working within short.
One of the first tasks of the new agency will be looking into the pricing policy of the newly privatised companies, which are still to be commercially set. The government is preparing "an automatic tariff adjustment mechanism for electricity and water" with technical and financial support from the World Bank, the Minister says.
Also the national airliner, TACV, is to see accelerated reforms during the rest of the year. Completed reforms of TACV had already "resulted in sharply lower losses for 2003," the Finance Ministry said. All subsidies for the airliner have been halted permanently. The Praia government recently approved the terms of reference for placing the company under private management to restructure it and prepare it for privatisation.
Interbase - the government-owned fish freezing enterprise established in 1987 - was offered for sale in December 2003. The company, based in Mindelo, is one of the main employers on the island of São Vicente. Technical and financial bids from qualified bidders were received in May, and "the government expects to finalise the contract negotiations by August," the document says. No government statements have since been made on the outcome of this privatisation attempt.
Also the inter-island shipping company Arca Verde is to be privatised, as the Cape Verdean government has promised the IMF since early 2001. "The government has published the invitation for bids for the purchase or lease of the ships owned by Arca Verde," the Finance Ministry says.
The Cape Verdean shipping and port sector as a whole is to come on private hands. According to Minister Serra, "CABNAVE shipyard and port operator ENAPOR are being prepared for privatisation in 2005, by which time the ARE will be ready to assume its regulatory functions in the maritime transportation sector." The privatisation of CABNAVE and ENAPOR was originally previewed to be authorised in end-November 1999, according to earlier Cape Verdean promises to the IMF.
The Praia government finally had recently approved a Policy Statement for ARFA - the new government food and drug regulator - and had nominated an installation committee to set up the agency, which is expected to begin operations by November 2004. "This will open the way for the privatisation of drug maker and distributor EMPROFAC," the Ministry announced. EMPROFAC holds the state monopoly for distributing pharmaceuticals.
The strong emphasis on privatisation by the IMF and the Cape Verdean government during the last years has created little controversy among the island state's established political parties. Consumers, trade unions and other civil society groups have however strongly protested the effects of privatisation, in particular the price hikes in basic goods such as water, electricity and local transport.
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