No sooner than the dust has settled after Dr Rowley’s self-described report to the nation, we are greeted with news of the collapse of the government’s proposed investment in a Tobago Sandals resort.
Many observers and some experts have given public opinions and rightfully commented on the unnecessary politicisation of a report that was supposed to inform the population of the state of the economy and what is being done to right the ship that is T&T.
Few, though, seem willing to comment on just how politicised the discussion revolving around the Sandals project has been. With few verifiable facts, several critics have decided to demonise a project which ostensibly would be a huge boon and job creator to the ailing Tobago economy.
Many discussions have focused on the minutiae of Dr Rowley’s presentation and the ghost of what the Sandals project could be. After all of this, one is left wondering if Trinbagonians are astute enough to pick sense from nonsense and focus on the dire warning that came from Dr Rowley’s speech.
It is clear that the country remains heavily dependent on oil and gas revenues and that neither this nor the previous government have done much to change that reality. It is also clear that energy revenues have dwindled significantly since 2014 and there is severe downward pressure on energy prices for the foreseeable future—read reduced revenues. This suggests an uncertain future which should concern every right-thinking citizen of T&T.
Whether our projected GDP growth is 0.9 per cent or 2.0 per cent or whatever is of little consequence when one considers the economic hole that the country is in and the reduced shovel available to dig out of it. This remains the reality of the situation regardless of who is in office. The only way out of this economic morass, outside of a dramatic increase in oil and gas prices and production, would be heavy investment in domestic projects with the ability to generate significant foreign exchange revenues.
The Sandals hotel, and the necessary upgrade of Tobago’s infrastructure to enhance its ability to generate additional tourism revenues, would have been one such project. Sandals CEO Adam Stewart stated that the project is estimated to add 3,000 jobs and US$85 million annually to the Tobago economy.
Here are the facts about the project that have been presented in the public domain.
Sandal’s reps have publicly stated that this would have been the largest resort they have undertaken in the region. Unlike the arrangements Sandals had made in other regional territories, this particular model would be based on the existing Hyatt Regency Trinidad model. The same Hyatt hotel which in the past five years has generated profits in the region of $320 million, as reported by he Minister of Trade and Industry. The same Hyatt project which was heavily criticised and politicised is one of the few successful diversification initiatives for T&T in the past 15 years.
The model is based on a public private partnership modality in which the government invests in the infrastructure of the project while Hyatt Hotels Corporation would be responsible for the management of the facility and attracting guests and events from all over the world. This model has been done before in T&T and has worked extremely well. The Hyatt has made T&T the business conference capital of Caricom. There isn’t another country in the region that can host large-scale business conferences like T&T. That is called competitive advantage. That is what is needed to be successful when it comes to international trade.
Several local investors had been invited to participate in the Tobago Sandals project.
One could accuse government of shortchanging taxpayers but it is unlikely that the private sector would shortchange itself. Deep pocket, experienced investors such as Massy, Guardian Group and Republic Bank were all mentioned as possible investors. Would they make a bad investment? The Sandals agreement would also require an upgrade of the Tobago airport, design of a more purpose driven terminal, hospitality training for airport staff and others and a national cleanliness programme. All of these should have been done ages ago for Tobago to be taken seriously as a regional tourist destination.
Note, we are competing against our Caricom neighbours who take tourism far more seriously than T&T ever have.
The tax concession criticism is also nonsense since the government of T&T will be the majority owners of this project any concessions would directly benefit the State.
Minister Stuart Young has also publicly stated that any tax concessions offered to Sandals would be offered to other hoteliers in Tobago. What’s the problem so far? Instead of dealing with facts we have self-interested, political busybodies with too much free time going to court for an MOU which any sensible person would have known would offer few details, like any other MOU. How does this all tie in to Dr Rowley’s statement?
The most important point made by Dr Rowley is that T&T continues to live off of its credit card.
We are borrowing just to stay alive at this point and are projected to continue having deficit budgets at least till the year 2022. This means more and more debt which will eventually have to be paid with uncertain revenues.
Government has also accrued liabilities from the non-payment of bills in various sectors of the economy. Those, too, will also eventually have to be paid. It was legendary investor Warren Buffet who once warned about the 3 Ls: “There’s only three ways that a smart person can go broke...liquor, ladies and leverage.”
Leverage is debt. T&T’s growing debt burden continues to be the most concerning issue in the present economic reality. Recently, neighbouring Barbados announced that they will not resort to any new debt financing for the foreseeable future. They have decided to bite the bullet and stop digging deeper into a pit of debt. This will, of course, come with short-term hardship but could rescue the shaky Barbados economy and ours in the long run. The repayment of this debt will have to come from energy revenues and diversified economic sources. Undermining every attempt at diversification is incontrovertible economic suicide.
The government really only has a few options available to it: reduce costs, increase tax revenue and increase external revenues (diversification and increased revenue from energy products). Dr Rowley admitted during his presentation that the Government borrowed $ 4billion for several state enterprises including the Estate Management and Development Company (EMBD), Caribbean Airlines, the T&T Electricity Commission (T&TEC) and the National Carnival Commission (NCC). He said that the previous government also saddled his with $5 billion in debt by completing salary negotiations with public servants on the eve of the election.
“They were given a pay increase and the money was not there,” he said.
Cost cutting will invariably mean job losses in the public sector and also a reduction in the issue of government contracts which will lead to even more job losses in the private sector. Increases in taxation will drive up the cost of living and make life more difficult for citizens all while oil prices have virtually collapsed over the last few months. It is time for this government or any suitor propositioning the population for political support to present a sensible and serious diversification plan built on our natural competitive advantages as a country. This must become our first priority.
One or two projects in disparate industries will not get it done. We need to build new industries with the potential of generating billions annually in foreign exchange. The very people complaining about this Sandals project, and almost every diversification initiative it would seem, are the ones who will go to the bank and wonder why they can only receive US$500 at a time.
The bottom line: we are in deep economic trouble and there is no quick fix. The cavalry is not coming and this problem won’t fix itself. God maybe a Trini but he is not a fool. This is a possible existential crisis and how it is dealt with over the next few years could determine the quality of life in T&T for generations to come.
Are we going to allow political rabble-rousers to undermine every single attempt at diversification with unverifiable, phantom complaints?
Are we to continue to place politics over people? Over survival?
We have to plan properly and execute efficiently if we are to maintain an acceptable quality of life in T&T, without high-impact diversification projects we will continue circling the drain until time finally runs out.