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Thursday, July 24, 2025

A crisis of confidence

Cul­ture of com­pla­cen­cy IAN Nar­ine

by

20110629

The Fourth Bi­en­ni­al In­ter­na­tion­al Busi­ness, Bank­ing and Fi­nance Con­fer­ence host­ed by the Uni­ver­si­ty of the West In­dies, St Au­gus­tine cam­pus, was held last week. The over­all theme of the con­fer­ence was: Restor­ing Busi­ness Con­fi­dence and In­vest­ments in the Caribbean. The restora­tion of con­fi­dence is a top­ic that is both time­ly and rel­e­vant to the in­vest­ment cli­mate in T&T and that is why in my ad­dress to the con­fer­ence I fo­cused on the is­sue of con­fi­dence it­self. The is­sue of con­fi­dence is of­ten seen as a rather ob­scure con­cept in that there are a num­ber of in­gre­di­ents that go in­to cre­at­ing con­fi­dence. Fur­ther, it is of­ten how these in­gre­di­ents are mixed to­geth­er as op­posed to their mere pres­ence that lends to con­fi­dence.

I of­fer a de­f­i­n­i­tion of con­fi­dence that it is root­ed in its sim­plic­i­ty, since it is im­por­tant to de­fine and un­der­stand a con­cept as a first step. If you ac­cept the view that con­fi­dence is "the con­vic­tion that to­mor­row will be bet­ter than to­day," then you will ap­pre­ci­ate just how broad is the is­sue of de­vel­op­ing con­fi­dence and just how frag­ile is its sus­tain­abil­i­ty. Ap­pre­ci­ate that eco­nom­ic growth comes through in­vest­ment. In­vest­ment is a form of de­ferred grat­i­fi­ca­tion in that it in­volves com­mit­ting re­sources to work to­day that can oth­er­wise have been used for im­me­di­ate con­sump­tion in or­der to gen­er­ate a re­turn in the fu­ture. Es­sen­tial­ly, con­fi­dence man­i­fests it­self in the form of in­creased lev­els of in­vest­ment ac­tiv­i­ty and, such in­vest­ments take place on the ba­sis that the cur­rent and fu­ture en­vi­ron­ment is con­ducive to gen­er­at­ing a lev­el of re­turn that makes the ac­tiv­i­ty worth the risk.

Those in­vest­ments will in­evitably cre­ate jobs, which will cre­ate eco­nom­ic ac­tiv­i­ty, gen­er­ate tax rev­enues, and spur the econ­o­my on­to greater heights. Es­sen­tial­ly con­fi­dence is the fac­tor that leads to pros­per­i­ty.

The ab­sence of con­fi­dence im­plies that peo­ple do not in­vest for the fu­ture but seek to con­sume for the present. Ei­ther that or they hoard cur­rent re­sources for fu­ture con­sump­tion in­stead of in­vest­ing those re­sources in or­der to gen­er­ate a gain and then con­sume from that fu­ture gain.

Price goug­ing

You may re­call a cou­ple years ago when food price in­fla­tion was ram­pant that there were al­le­ga­tions of price goug­ing on the part of "mid­dle-men." The sug­ges­tion was that the farm­ers were pro­duc­ing foods at rea­son­able prices but "mid­dle-men" re­spon­si­ble for bring­ing goods to the con­sumer were plac­ing un­rea­son­able mark ups cre­at­ing the in­fla­tion that we were ex­pe­ri­enc­ing. At the time, I made the point writ­ing in this space that price goug­ing was on­ly pos­si­ble when oth­er busi­ness­es were un­will­ing to step in to com­pete away some of the ex­cess prof­its. This on­ly hap­pens when peo­ple are un­sure of the en­vi­ron­ment that they are op­er­at­ing in. Con­fi­dence thrives when there are rea­son­able and known pa­ra­me­ters in as­sess­ing an out­come and dis­ap­pears when the land­scape lacks trans­paren­cy.

While the au­thor­i­ties of the day were keen to pass the blame on­to the busi­ness com­mu­ni­ty in la­belling the term "price goug­ing," they were im­plic­it­ly high­light­ing their own in­abil­i­ty to en­gen­der con­fi­dence in the econ­o­my. Es­sen­tial­ly, the sit­u­a­tion was one where ex­ist­ing busi­ness were seek­ing to earn as much as they can in the short­est pos­si­ble time (the price gougers), and po­ten­tial busi­ness en­trants were re­luc­tant to en­ter the mar­ket be­cause they are un­sure of the land­scape that they will face.

When there is a lack of con­fi­dence, every­one los­es in­clud­ing the com­mon man and es­pe­cial­ly those that can least af­ford to sup­port them­selves. The op­po­site is al­so true in that con­fi­dence brings pros­per­i­ty. When we look at the T&T busi­ness land­scape over the past decade, ques­tion the lev­el and type of in­dige­nous busi­ness ac­tiv­i­ty that has tak­en place.

Most of the ac­tiv­i­ty has come in the form of re­tail su­per­stores where peo­ple im­port goods and sell to con­sumers ready and will­ing to con­spic­u­ous­ly con­sume for to­day. There has been a pref­er­ence for the fast food and ca­su­al din­ing ex­pe­ri­ence as well as en­ter­tain­ment cen­tres. All of these are not in­vest­ments that seek to cre­ate sus­tain­able wealth for the na­tion but, rather, they are geared to­wards cap­tur­ing as much of the wealth that is cur­rent­ly in cir­cu­la­tion. Let me be clear that I have no is­sue with the busi­ness com­mu­ni­ty by and large adopt­ing this ap­proach, since mon­ey will fol­low the path of least re­sis­tance, and it is the role of the ad­min­is­tra­tors of the econ­o­my to cre­ate and de­vel­op a sus­tain­able path such that busi­ness­es will be pre­pared to take the risk of in­no­va­tion, in­vest­ing in tech­nol­o­gy, im­port­ing ex­per­tise and com­pet­ing in­ter­na­tion­al­ly.

Us­ing for­eign ex­per­tise

Sad­ly this has not been our fo­cus. In­stead we sought to im­port labour and utilise for­eign ex­per­tise in a mad rush to de­vel­op in­fra­struc­ture, which now lies idle. Our at­tempts at fos­ter­ing en­tre­pre­neur­ship in the form of Cepep turned in­to a mech­a­nism to share the largesse of the State to those faith­ful to the par­ty in pow­er and very lit­tle of that has changed up to to­day. En­er­gy cri­sis. If you ac­cept this as our busi­ness re­al­i­ty over the past decade, then ap­pre­ci­ate that we have not had an en­vi­ron­ment of con­fi­dence for a very long time. There have been pre­cious few in­vest­ments out­side of pan­der­ing to re­tail con­sump­tion and such con­sump­tion was on­ly pos­si­ble due the un­prece­dent­ed lev­els of spend­ing in the lo­cal econ­o­my over the past decade. That spend­ing cre­at­ed an il­lu­sion of con­fi­dence and now that such ex­pen­di­ture is no more, hav­ing been un­sus­tain­able in the first place, the lack of con­fi­dence in the econ­o­my is ex­ac­er­bat­ed.

En­er­gy re­serves

There are many in­gre­di­ents that go in­to the con­fi­dence soup and how the pot is stirred is as im­por­tant as the in­gre­di­ents that goes in. It is my firm view that the num­ber one is­sue af­fect­ing con­fi­dence in the T&T econ­o­my is our lev­el of proven en­er­gy re­serves. At last count, we were down to about ten to 12 years of proven re­serves at cur­rent con­sump­tion lev­els. Un­less and un­til we can re­build our re­serve po­si­tion to the point where we are not anx­ious­ly look­ing to the de­ple­tion of our en­er­gy re­sources with­in the next decade, then I sug­gest that the econ­o­my of T&T is go­ing to go nowhere. We have in­vest­ed pre­cious lit­tle in in­creas­ing the lev­el of proven re­serves from 2005 on­wards, but im­ple­ment­ed a num­ber of ini­tia­tives that led to the rapid de­cline in our re­serve po­si­tion. Now with the glob­al re­serve to pro­duc­tion ra­tio for nat­ur­al gas in ex­cess of 60 years, such that nat­ur­al gas prices are at ex­treme­ly low lev­els, it is in­creas­ing­ly dif­fi­cult to gen­er­ate in­vest­ment ac­tiv­i­ty in this sec­tor in or­der to im­prove our re­serve po­si­tion.

If we fail to ad­dress our de­clin­ing re­serve po­si­tion, then we will be faced with a pop­u­la­tion that will be in­creas­ing­ly seek­ing to max­imise their im­me­di­ate re­turn as op­posed to in­vest­ing in the na­tions fu­ture. It is es­sen­tial­ly a case of run­ning away while try­ing to gath­er all that you can now.

En­gi­neer­ing con­fi­dence

This at­ti­tude has man­i­fest­ed it­self in the pre­dom­i­nant re­tail busi­ness trade, in the unions fight for high­er wages, in what and where peo­ple choose to study (abroad) and even where they in­vest and in what cur­ren­cy they in­vest in. The longer we are un­able to ad­dress this is­sue, the more per­va­sive it be­comes and the more up­hill the task of en­gi­neer­ing con­fi­dence in the econ­o­my. An­oth­er key is­sue is that of moral haz­ard. As a peo­ple, we have be­come ac­cus­tomed to the Gov­ern­ment step­ping in and sav­ing the day, and so out­side of the cul­tur­al and en­ter­tain­ment cir­cuit, there is very lit­tle busi­ness in­no­va­tion on show. To be fair, the moral haz­ard is­sue is not unique to T&T.

There is the feel­ing in the Unit­ed States that the US Fed­er­al Re­serve will do what it takes to prop up the stock mar­ket, there is the view that the Eu­ro­pean Union will do what it takes to en­sure that Greece does not de­fault, there is a view that the Chi­nese gov­ern­ment will en­sure that the econ­o­my does not crash.

The prob­lem with all these views is that it leads to com­pla­cen­cy and here in T&T, our de­pen­dence on the State means that our com­pla­cen­cy is al­most cul­tur­al. At the end of the day, it is im­por­tant that the State recog­nise its role in en­gi­neer­ing the re­quired con­fi­dence in the econ­o­my. The lengthy de­lays in ap­point­ing state boards fol­lowed by a Cab­i­net reshuf­fle just af­ter one year in of­fice sug­gests that there is a long hard task ahead. Let's see how well we rise to the chal­lenge.

Ian Nar­ine is a bro­ker reg­is­tered

with the Se­cu­ri­ties and Ex­change Com­mis­sion.


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