To­day's Ed­i­to­r­i­al

When Fi­nance Min­is­ter Win­ston Dook­er­an stands up in Par­lia­ment on Wednes­day to de­liv­er the fis­cal pack­age for the 2010-2011 fis­cal year,he will re­port on an econ­o­my in which do­mes­tic de­mand has de­clined sig­nif­i­cant­ly but whose ex­por­tled sec­tor is per­form­ing rea­son­ably well. Mr Dook­er­an has some un­usu­al chal­lenges with which he must grap­ple. He pre­sides over an econ­o­my in which the most re­cent re­port placed the rate of in­fla­tion at 14.1 per cent. Along with a high in­fla­tion rate,which is like­ly to be a tem­po­rary phe­nom­e­non caused by a se­vere drought fol­lowed by floods, there is an ab­sence of TT dol­lar in­vest­ments which can keep pace with the rate of in­fla­tion. As well, the Min­is­ter of Fi­nance faces a sit­u­a­tion in which his rev­enue streams are un­cer­tain and volatile and are al­so like­ly to be less than his ex­pen­di­ture com­mit­ments. The Gov­ern­ment needs a sin­gle pol­i­cy or a com­bi­na­tion of poli­cies that can raise a pre­dictable amount of rev­enue as well as pro­vide cit­i­zens with ac­cess to as­sets whose to­tal re­turn, from both cap­i­tal ap­pre­ci­a­tion and div­i­dends, can keep up with the rate of in­fla­tion while at the same time pro­vid­ing an out­let for the bil­lions of dol­lars now parked in de­posit ac­counts of lo­cal com­mer­cial banks, which is po­ten­tial­ly in­fla­tion­ary.

Giv­en the triple chal­lenge of the need to raise rev­enue, con­trol in­fla­tion and pro­vide blue chip in­vest­ments, Mr Dook­er­an should clear­ly be look­ing to struc­ture a pro­gramme of pri­vati­sa­tion of some of the State's more prof­itable com­pa­nies. Such a pro­gramme would raise bil­lions in rev­enue for the Gov­ern­ment through the sale of shares in com­pa­nies like First Cit­i­zens, Pow­er­Gen, Phoenix Park Gas Proces­sors, NGC or as­sets such as the bal­ance of T&T's share­hold­ing in At­lantic LNG. The TT dol­lars raised from the sale of state as­sets can be rein­vest­ed in the con­struc­tion of high­ways, bridges, rur­al ac­cess roads or reser­voirs or placed in­to do­mes­tic funds which would pro­vide sup­port for the Gov­ern­ment's re­cur­rent ex­pen­di­ture. The for­eign cur­ren­cy raised by the sale of state as­sets, on the oth­er hand,could be trans­ferred to the Her­itage and Sta­bil­i­sa­tion Fund through a bud­get ap­pro­pri­a­tion by the cen­tral gov­ern­ment. By pro­vid­ing new list­ings on the lo­cal stock mar­ket, the Gov­ern­ment would be giv­ing cit­i­zens ac­cess to long-term in­vest­ments which have the po­ten­tial to keep up with the rate of in­fla­tion.

These new in­vest­ments will al­so pro­vide an av­enue through which cit­i­zens can in­vest a per­cent­age of their in­come for the fu­ture in­stead of spend­ing all of their in­come look­ing af­ter their cur­rent needs–which is cer­tain to con­tribute to sig­nif­i­cant and pro­longed in­fla­tion when the do­mes­tic, on­shore econ­o­my re­cov­ers. Mak­ing the state-owned en­ter­pris­es avail­able to both TT and US dol­lar in­vestors, with both sets of stock be­ing trad­ed on the lo­cal stock ex­change, has the added ben­e­fit of pro­vid­ing an op­por­tu­ni­ty for the Gov­ern­ment to dis­pose of the 56 per cent of Methanol Hold­ings, the over-lever­aged CL Fi­nan­cial sub­sidiary, now un­der the con­trol of the State. One of the pos­i­tive pol­i­cy de­ci­sions tak­en by the first Unit­ed Na­tion­al Con­gress gov­ern­ment was the cre­ation of Na­tion­al En­ter­pris­es Ltd, in­to which the State placed its share­hold­ing in com­pa­nies in­clud­ing TSTT, Na­tion­al Flour Mills and a per­cent­age of the State's stake in At­lantic LNG.

That was break­through think­ing at the time and served the pur­pose of pro­vid­ing the Gov­ern­ment with rev­enue while al­low­ing it to re­tain some sem­blance of con­trol over state as­sets as a re­sult of the struc­ture of the in­vest­ment hold­ing com­pa­ny. While NEL has been one of the huge suc­cess­es of post-in­de­pen­dence T&T, one of its weak­ness­es has been that it lumped dif­fer­ent kinds of com­pa­nies to­geth­er in one in­vest­ment ve­hi­cle–so that young in­vestors could not choose on­ly a fast-grow­ing com­pa­ny and old­er in­vestors one that paid a more pre­dictable stream of in­come. The fact that NEL grouped to­geth­er some of the strongest sta­te­owned as­sets in one ve­hi­cle–from which a very high per­cent­age of the in­come was paid out as div­i­dends–was al­so one of the un­doubt­ed strengths of the con­cept. As Mr Dook­er­an puts the fi­nal touch­es on his 2011 bud­get,we rec­om­mend that he re­vis­its the NEL mod­el of pri­vati­sa­tion to es­tab­lish its rel­e­vance for to­day's T&T.