Building Growth Momentum
Over the years, Trinidad and Tobago has been faced with many external challenges, from reduction of exports to the regional market to fluctuating prices for the energy sector. This has resulted in falling real growth from 13.4% in 2006 to -3.5% in 2009 with a small sign of recovery in 2010 (0.1%). National budgets have sought to address these challenges accordingly, giving us a ‘vision 2020’ in 2007 to ‘turning the economy around’ in 2010. The government’s approach thus far has involved Vision 2020, the International Financial Centre, creating a knowledge-based society and growth poles across five (5) regions in the country. However, negative growth has continued in the first quarter of 2011 at the rate of 1.7%.
Being part of this global society, our current challenges include: the political theatre and instability in the United States, debt crisis in Europe, demographic imbalances in Japan and inefficiencies in China’s command economy. These phenomena have created global trends such as declining consumption in G7 countries with consumption in emerging markets insufficiently compensating. We at the Chamber believe that it is time for a change in thinking. Our intended markets must not only be local, regional or even in traditional international markets; we must also consider the non-traditional markets and even be somewhat radical in our ideas. We must ask ourselves, how do we use our resources to add value in our global markets? In other words, how do we build growth momentum? This, as noted by the Minister of Finance, is one of three key (3) areas which will be included in this year’s budget framework. The Chamber has submitted its recommendations to the Ministry of Finance for consideration and inclusion in its 2011/2012 National Budget.
In this article we highlight some of these recommendations together with other suggestions which were enunciated at the Chamber’s pre-budget meeting held earlier in September 2011:
- Increasing the capacity to do business with Central America
Given that there has been a major thrust into Doing Business with Latin America, it is ideal and opportune that Spanish continues to be implemented as the official second language of Trinidad and Tobago. Additionally, the Ministry of Education should place higher priority on implementing the policy of Spanish as a second language starting at the primary school level and making it a mandatory part of the curriculum. Ideally, the Chamber would like to see the implementation of a CARICOM- Central America Free Trade Agreement. We acknowledge, however that this may not be realized in the immediate future due to the lengthy process in achieving consensus with the individual countries. The Chamber proposes, therefore, that the Government initiates a move toward bilateral agreements with the desired countries in the Central American region. Further, double taxation treaties should be considered. - Accelerating spending under the Public Sector Investment Programme (PSIP)
There is a dire need for the Government to accelerate its spending under the PSIP. However, in the face of current financial constraints and challenges, the Chamber strongly recommends that the Public-Private Partnership model be used as an option for the way forward. As noted in the National Budget 2010/2011, the Government must shift its role from State control to facilitator, including regulation and monitoring, and let the private sector take the risk and invest the capital. Government should seek to learn from the Canadian model where the Canadian Government has partnered with the private sector to undertake many large successful infrastructural projects. - Divestment strategy
We recommend that a policy that links individuals directly to the energy dividend, stimulates final demand for manufacturing products and provides the impetus for a sustainable onshore service sector to be created. Such a policy must include a divestment strategy for state enterprises supported by an incentive program to stimulate demand for these shares. In this way, every citizen will now be given an opportunity to have a stake in the assets of these companies. This divestment strategy should be combined with a voluntary personal investment account. The contributor to this account would invest in local stocks and mutual funds with no guarantee in order to create a risk-taking culture. Tax deductions should then be offered to create the demand for these accounts. This strategy would also serve to increase personal savings and create a wealth effect which will ultimately boost the domestic economy. - Trinidad and Tobago as a Retirement Haven – a real possibility
Research has shown that the population density of a country is a key indicator of a country’s economic prospects and is a determination of the demand for its onshore sector. The strength of sophisticated demand in the onshore sector also drives competition among businesses and such demand acts as a catalyst to creating industries that can compete internationally. It is this international or global outlook that drives sustained economic growth. What policy can be utilised to increase our population density in order to achieve the level of demand necessary to sustain the onshore manufacturing and services sector, while at the same time attracting persons with the right income to contribute positively to the national economy? Given the right environment, one solution could be making Trinidad and Tobago a retirement haven, that is, incentivising and marketing Trinidad and Tobago to persons fifty-five (55) years and over from ‘developed’ countries to live out their retirement here. Some of Forbes Top ten (10) Retirement Havens include Panama, Ecuador, Uruguay, Malta and Costa Rica. What have these countries done that Trinidad and Tobago is not capable of doing? We recognise that there are currently many challenges to achieving this goal and further research is needed on what is required to make this initiative a success. This research should be juxtaposed against the current barriers and plans developed to remove them. Major obstacles to such an initiative include the high crime rate and the onerous process involved in obtaining a license to purchase land in Tobago. However, should efforts geared toward solving the crime problem and the removal or smoothening of the land licensing process lead to positive, sustained results there are many reasons why such an initiative could be successful.
In the long term though, it is a change in thinking and commitment to a new way of doing things that will bring about growth sufficient to take us through the headwinds. We must use our spare capacity in human resource, that is, the unemployed, underemployed and the unfulfilled that are best placed for this initiative. A strong onshore sector is recommended to develop the competitive advantage to compete internationally.
