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T&T on a rocky road

The trinidad Guardian / In case anyone actually happened to miss the point in the last two Budgets of the Rowley administration, things are tough and they’re unlikely to be that much better in 2018. That is, judging from last Wednesday’s overview by Government at the symposium by the Prime Minister’s Office geared to give insight on T&T’s economic and financial circumstances.

Coming on the eve of Finance Minister Colm Imbert’s 2018 Budget presentation tomorrow, it’s revealed T&T’s continuing rocky road. But along with the problems emphasised, came certain plans (from Government) and prescriptions (from experts.)

After two years of low oil prices and challenging economic circumstances, the event sought solutions to repivot T&T towards growth.

Apart from recommendations from business and academia, Government’s own plans, which were detailed, may lend insight into some of what’s ahead in Budget 2018.

Government’s target:

“A strategy addressing the two main problems facing T&T-the sizeable stubborn deficit and the need to reverse the economy’s growth trend . . . putting it on a moderate, but steady, growth path over the next three years,” said Prime Minister Dr Keith Rowley.

“If the national income is on a negative long term downward trend, government revenue will follow the same trend. This means that even as it tries to stabilize the revenue situation the government is duty bound to get the growth process restarted, since growth will bring new revenues for government.”

If useful suggestions don’t make it into Imbert’s package tomorrow, Rowley added, they will be there for the months and years ahead. Government, he added, intends to get the economy “to learn how to grow without depending on the energy sector.”

But getting there means confronting issues plaguing T&T that are not limited to crime.

Economist Dr Roger Hosein, at the forum, listed challenges

“Worker ethic has been identified in the Ease of Doing Business index as the number one business obstacle in Trinidad and Tobago,” he said.

“Also, Trinidad and Tobago’s real effective exchange rate in 2016 was 79 per cent more overvalued than in 2000. The economy’s ranking on the Ease of Doing Business index and Global Competitiveness Index has been sliding, labour productivity has been falling, debt rising, the current account balance worsening and the shares of employment in manufacturing, agriculture and tourism falling.

“Policy makers must consider how to get people to work harder in an environment of rising prices, limited wage increases and falling government budgetary outlays.

“This is a critical question at the heart of T&T’s economic progress for the next ten years. This is a very trying period. Growth in the next 10 years would be moderate, at best.”

Hosein’s advice: “Albert Einstein once said, ‘The world as we have created it, is a process of our thinking. It cannot be changed without changing our thinking’.”

T&T Chamber president Ronald Hinds’ view put it into a T&T perspective: “We’re running out of runway and space to manoeuvre. We have to make the hard choices now, or they’ll be made for us.”

T&T’s problems

? Energy sector revenues, taxes, royalties dropped from $15.7b (2010) to $2.1b (2017)-89 per cent plus fall in main revenue sources. ? Bills which Government couldn’t discharge. ? Chronic minimal economic growth. ? Slight downward trend for past decade despite few growth spurts. ? Rate of growth of four and a half per cent in 2007 reached under three per cent in 2013, declining steadily since. ? 2016 growth figure almost negative three per cent. ? 2018 revenue situation very challenging. ? Foreign exchange sales to the public since January totalled US $3.7b but forex inflows were US $2.55b ? Biggest Forex users: retail and distribution sectors, credit card transactions, manufacturing, financial services sectors. ? Current account went from surplus (2007) to deficits (up to 2016) ? Value of import/export reserves dropped from $11b (2015) to $8.6b (2017). ? T&T currently has 10 months of import cover, described as “reasonable”. ? Tax revenues: $40b (2008) to $15b (2017). ? Taxes from oil companies: $25b (2008) to $472 million (2017) . ? VAT levels from $5 billion (2007) to “flat” now ? Transfers and subsidies from $17.7 b (2007) to $27.8 b (2016) ? Personnel expenditure rose from $6.2b (2007) to $9.6 b (2016), minus contract expenditure. ? Productivity waned by over 7 per cent from 2015 – 2016

Government’s plan

? Tighten revenue collection mechanisms. ? New expenditure monitoring systems; new procurement system to reduce expenditure. ? Action calls to reduce expenditure, but caution about dramatic cuts. ? Some things T&T may want in 2018 must be postponed. ? T&T should remain open to any/all suggestions to boost revenue levels. ? Forex priority for firms/industries generating reasonable amounts of Forex. ? Development programme with some government spending and mobilization of significant private capital. ? Private sector investment in targeted industries. ? Over 2018-2021 government will work with private sector to push activity in export manufacturing, tourism, housing, maritime services, agriculture, financial services, creative industries. ? Fiscal regimes configured to support spawning of new businesses and getting existing businesses to adopt new modes and activity. ? Sectors will be selected annually with projects aimed at generating forex and new output levels. ? Intended six per cent growth after three years. New output projected between $2b (first year) to $4.5 (third). Expected deficit reduction of $1.1b (third year).

Expert’s prescriptions

Dr Roger Hosein:

? T&T’s Labour Force Participation Rate, compromising economic output, needs improvement ? Examine spending-transfers and subsidies. Fiscal gap must be closed ? Consider removing surplus Cepep labour, reallocating to agriculture/other sectors ? Obtain GATE formula that explicitly factors in the demographic transition at work in the economy ? Examine VAT, income taxes to boost revenues ? Reduce import propensity to below 50 per cent ? Consider if T&T needs help to reduce the murder rate to 200 annually ? Survey the top 20 most successful non-energy firms. Profile how they overcame exporting obstacles ? Examine exports’ structure Locate popular-demand goods ? Assess sectors for which demand for imports by the trade partner is rising but T&T exports to that market is falling ? Compare ease of doing business in T&T to Caricom partners and implement team to move T&T to top spot within Caricom in a year ? Policy makers must determine whether in the medium term the current account balance will improve and whether the focus should be on the overall balance or non-energy balance

Dr Vaalmiki Arjoon:

? Unions can bargain for additional training/retraining to continuously upgrade workers’ skills ? Stimulate investment in avenues that don’t require significant Government expenditure but can increase revenue streams, exports, forex ? Assist small/medium sized businesses source funding from local/ foreign private investors/governments ? Cepep/URP expenditure reallocated to capital expenditure. Work force merged into programmes for youth agriculture apprenticeship, cocoa rehabilitation, new tourism initiatives, “Farmpep” agricultural development ? Skills training for entrepreneurs on technical aspects of business: marketing strategies, product development, human resources, employee productivity, corporate governance ? Agro-processing, agricultural co-operatives. Farmers can collaborate/share use of big companies’ equipment ? Global logistics/shipping industry, partnering with foreign sector giants ? Push for local/foreign companies to be listed on TT Stock Exchange and foreign investors to trade ? Re-allocate more finances to capital expenditure

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