“The forest was shrinking, but the trees kept voting for the Axe, for the Axe was clever and convinced the Trees that because his handle was made of wood, he was one of them.” ––Turkish proverb
Some have said that government must find new revenue streams. Unfortunately, government’s fiscal policies and its expenditure pattern may influence the direction of economic activity, or even stimulate such activity, but it does not create the economic activity. Taxation, royalties, or fees are derived from successful businesses initiated by the private sector, foreign or local. Therefore “new” or additional tax revenues will only occur if the business sector finds new successful opportunities or improves existing methods to attain sustainability and profitability.
Stabilising the economy is no easy task as the Finance Minister has found out after five years of decline. Raising USD $500 million is nothing more than window dressing. Coordinated actions, not words, are required to revive the economy. T&T has passed this way before and recovery has come when government, the private sector and citizens made the necessary adjustments.
The manufacturing sector expanded in response to George Chambers’ fiscal incentives which allowed business to reconfigure and retool expanding exports to Caricom and the wider region in the 1990’s. Foreign direct investment made possible the expansion of Point Lisas and the creation of Atlantic LNG, all facilitated by proactive government. This upsurge in investment activity starting in 1996 facilitated the buoyant conditions which lasted to 2014 when energy prices declined and removed the gloss.
Achieving a turnaround has been elusive and will be no easier going forward. The UNC fiscal incentives did increase drilling activity at a time when the rest of the world was reducing drilling activity.
The incentives also facilitated the successful conclusion of the Juniper and Angelin projects. But the decline in gas production was only halted temporarily; gas production has not recovered to 2010’s peak output levels. In 2019 oil and gas production declined, as did energy prices. Since then, the impact of the pandemic has worsened matters.
There are no game changers that can magically move T&T to economic growth. It requires a disciplined, coherent, and coordinated approach along with inspired leadership and competent management. Leadership to build a tripartite consensus around a plan or objective and to communicate through formal and informal channels to move the plans along. Some level of trust and goodwill is needed, even if the persons involved may not like each other. This will make the task easier, but not easy.
The provision of timely economic data is vital to allow businesses to make an objective assessment of present and future prospects particularly in the current uncertainty. At today’s date, there is no objective assessment of the size of the decline in 2019, nor the economy’s performance to date. On what basis did the Finance Minister estimate 2020’s decline of -2.4 per cent? How do Vat refund bonds help to stimulate the economy if they are not yet tradeable (ie they cannot be exchanged for cash at the bank because the necessary arrangements have not been made by CBTT/ MOF)?
The Trade and Industry Minister this weekend called for the private sector to do more. “Corporate citizens ought to be doing much more for the country as the country faces a difficult economic situation…This is a difficult time…so they have to pick up the slack. They are all going to make a profit…and they should do more like not sending employees home,” said the minister.
This was better than the Prime Minister’s criticism of the Chamber’s CEO Gabriel Faria as someone who “is only about himself and what he can suck from the country.” What of the decision to increase parliamentarians’ pensions whilst leaving the National Insurance imbalances unaddressed?
This is not the first time that Dr Rowley has attacked businessmen, nor is it an isolated broadside against the business sector. Shamfa Cudjoe, Fitzgerald Hinds, Camille Robinson Regis, Randall Mitchell amongst others have said words to that effect in and out of parliament. The Trade Minister’s blithe and loose comment, like Dr Rowley’s, is unsupported by the facts. Businesses are losing money, and many are in a precarious position doing what they can to retain staff. Cabinet ought to understand this after their careful and considered decision to close Petrotrin!
The recovery committee has made recommendations. Government must determine priorities and implement them whilst cooperating with its tripartite partners. Politicians cannot abdicate their responsibility by making their partners unlikely scapegoats.