In order to see economic transformation in T&T over the next five years, the new government has to focus on making the business environment in T&T more competitive. One of the ways to do this is by depreciating the exchange rate.
This is the contention of economic consultant and former director of Economics for the Caribbean Development Bank (CDB) Dr Justin Ram, who told the Business Guardian: “Right now the exchange rate is going against production and going against competitiveness.”
According to Ram, the government needs to start thinking about the exchange rate as a mechanism that enhances competitiveness and as something that leads to people buying more locally produced goods and foods but also provides incentive to export.
The foreign exchange system in T&T is underpinned by a managed float regime. A managed float regime is a monetary position adopted by a country’s Central Bank in which exchange rates fluctuate from day to day, but the Central Bank attempts to influence the country’s exchange rates by buying and selling currencies to maintain a certain range.
Currently, the T&T dollar is managed at around $6.79 to US $1. Depreciating the exchange rate would weaken the TT dollar against the US dollar, so that it would cost more local currency to purchase US$1.
Ram said the exchange rate “really needs to be allowed to float a little bit more freely” because there is currently too much emphasis on imported goods for consumption, when there should be greater emphasis on the exports of goods coming from production.
According to Ram, this approach will overt time also boost employment. In his election victory speech, Dr Rowley indicated that the next two years for T&T will be difficult.
However, Dr Ram has asserted that the economy was already in a tough place. He explained, in order for the government to make the rest of the economy more competitive within five years T&T should be “aiming to be a top 40 or top 30 country in the world on the World Bank’s Ease of Doing Business Index.”
T&T currently ranks 105 out of 109 in the world when it comes to the ease of doing business.
Ram added that the pandemic has given the government an opportunity to address inequalities within the society. He explained that one of the ways to address this issue is to change the education curriculum.
By doing this, Ram indicated that through the education system, children from a young age could be trained to adopt the skills necessary to operate and innovate within the Fourth Industrial revolution, which is a digital revolution.
Ram also advocated the digitising of many government processes. Economist Dr Ronald Ramkissoon echoed this sentiment; but he also said that public sector reform is critical to economic transformation over the administration’s next five years in office.
He said, however, that would only come through a change in leadership methods.
Ramkissoon said all ministries must apply the same type of leadership that was displayed by the Ministry of Health during COVID-19 pandemic.
The economist argued: “The kind of skill that was demonstrated, the personnel that we see on the frontline in addressing this pandemic, really indicates to us that we have within us and within our ministries the capacity and capability to deal with life and death issues.”
He said that there is now an opportunity for the country to recognise it has had one area of national governance development that has demonstrated that it is up to the task before it and it has done relatively well.
According to Ramkissoon, while the country recognises certain strengths (in the area of health and ancillary services), it needs to recognise that “we need to do more than one thing well simultaneously.”
In other words, Ramkissoon expressed the need to have the public service understand that everything else cannot be shut down to deal with one area—in spite of how important it is.
He said, “we have to have all our ministries operating as if they have before them a pandemic.”
In order to achieve economic transformation in five years, Ramkissoon said that there must be a strengthening of capacity, greater seriousness and increased productivity with regard to governance in the other various areas of the public service.
Ramkissoon advised: “I think it is very important that the leadership of the country recognises this going forward.”
Meanwhile, Tobago born economist, Dr Vanus James noted that “before the downturn and pandemic, T&T faced two longstanding economic development imperatives.”
The first of these essentials, James said was economic diversification to enable stable growth of the national savings rate and balance of trade surpluses and hence self-sustaining growth of the economy.
The other priority, according to James was the commitment to long-term development of the national capacity to compete globally through continuous improvement and innovation.
James added that the development of the Tobago economy is an integral part of the aforementioned imperatives, but in turn, it requires autonomy for Tobago to optimise its contribution to the process.
However, he asserted that the COVID-19 pandemic simply overlaid a large-scale cash flow crisis on top of these priorities and complicated the efforts needed to achieve them.
Moreover, he added: “The election results provide the PNM justification to continue its pre-election program, which did not give priority to either of these development imperatives.”
James said that the government’s pre-election programme was focused on restoring a budget and current account surplus, and held off on any significant diversification thrust until it was satisfied with the level of success achieved on that front.
Currently, James noted that the pandemic has put a budget surplus far out of reach and made the current account surplus achievable only on a reduced government and private investment program.
He added, “Just when it is urgently needed, diversification and growth of the capacity to compete will also be pushed further into the future.”
The Tobagonian economist said, that in order to find a solution to this, a time-bound national conversation should be organised under the auspices of a Joint Select Committee of Parliament.
James argued that it should consider and agree on the main outlines of the agenda for national diversification and development of competitive capacity, “including the steps to be taken in Tobago to get it underway”—consistent with Tobago’s Bill of Rights.
According to James, fundamental elements of both the diversification and competitive capacity programmes will include international collaboration to upgrade the nation to produce, employ, and export key forms of capital necessary “to lead the process of continuous piecewise technical adjustment.”