With the stagnant growth within the business community, rising food prices along with high expectations from the new administration, T&T may be quite anxious about the contents of the 2010/2011 Budget. The 2010/2011 Budget will be presented on September 8. The Finance Minister, Winston Dookeran, has already put the nation on alert saying that there would be a deficit in this year's fiscal package. But Prime Minister Kamla Persad-Bissessar has remained tight lipped on the contents. Persad-Bissessar has started to meet with some stakeholders on Tuesday, some have already met with the Minister Dookeran.
Manufacturing industry
The T&T Manufacturing Association (TTMA), in its budget proposals to the Government, has identified a number of key areas, including developing a recycling industry, renewable energy policy, government procurement and local content policy and gas incentive, to build the manufacturing industry. The TTMA said these initiatives would benefit the future competitiveness of the economy, especially the manufacturing sector, the largest non-energy contributor to gross domestic product (GDP). The TTMA said these measures would improve the long-term economic competitiveness and prosperity by encouraging investments and developing wealth-creating assets.
The business body said creating a framework for a recycling industry would help to develop the sector, suggesting redirecting waste from landfills into the productive use for new downstream industries or for export. TTMA said with the declining efficacy of oil and gas sector, which has propelled the T&T economy in the past, must be mitigated through the intense the development of and implementation of this policy. For the Local Government Procurement and Local Content Policy, the TTMA said, "It continues to stand in favour of the principles enshrined in the White Paper 2005, which formulates the policies and guidelines that amplify the best practice principles of value for money, transparency and accountability."
TTMA said it also believed that a local content and participation policy must be supported by the Government's assurance that the procuring agencies would give preference, firstly, to locally-owned and financed enterprises, once the goods and services met the criteria of the competitive standard and quality.
With the gas incentive initiative, TTMA has recommended a $1.50 gas price with no escalator as local industries benefit from T&T's natural resource based on comparative advantage. "We believe that this gas price would maintain relative competitiveness against competitors who have lower energy cost," the TTMA stated.
Financial sector
According to the Bankers Association of T&T's (BATT) official proposal document to the Finance Ministry, it stated that its recommendations would contribute to the attainment of economic growth, improved quality of life for the citizenry and sustainable development. Some measures include strengthening the regulatory, legislative and taxation framework, growing the stock market and strengthening and expanding the small and micro business sector.
Under the improved taxation framework, the document stated that one area of focus should be tax credit on mortgages. It said the removal of the tax credit on mortgage facilities and first-time home owners' tax deductions have affected growth in the mortgage portfolio.
"Therefore, customers are now less inclined to invest in homes due to the removal of these two deductions," the document stated.
It said that even though personal allowances would compensate for the removal, it must be noted the increased allowance applies to everybody and, therefore, there in now no "major" impetus for mortgages as an investment. Against this background and given current real estate prices, it said the mortgage interest deduction should be reinstated and increased to $36,000 a taxpayer and the $10,000 deductions for first time home should also be reinstated. It said for the growth of the stock market, which has been suffering from a shortage of securities, it needs to become much more vibrant as an alternative source of capital to companies.
However, it recommended that the Government should therefore consider selected tax and other incentives that would encourage companies to list on the T&T Stock Exchange and to accelerate its programme of privatisation of state enterprises. Not forgetting the small and micro business sector, the document said the growth of this sector was important for economic stimulation, self-sufficiency and diversification of the econoy. It recommended a re-evaluation of the sector and the identification and introduction of measures to increase growth in the short term. With regards to housing, the association said the Housing Act should be reviewed whereby middle-income home-earners should be brought into the bracket so they can qualify for commercial bank loans. It said the banking sector was prepared to help in making the necessary adjustments and remained committed to partnering with the Government to advance the nation's economic growth and development agenda.
Arima Business Association
Peter Jackson, president of the Arima Business Association, said his first concern is the increase of taxes. If this happens, it would put greater pressure on the business community while taking away from its profits. He said he hoped the Government could implement policies and activities to stimulate the local sector to allow for greater business opportunity and security. He said these policies, which were important as sales have fallen significantly since January, should be two-fold where they redound to the benefit of consumer and businesses.
"Right now the business community is hurting with the decrease in sales and they are looking for the right incentives by the Government that would bolster the sector," Jackson said. "We are also looking forward to measures that would encourage entrepreneurship as well," he added. Jackson said these things relied heavily on the financial strategies employed by the Government and the direction they would be taking the country.
"The Government is the one who drives the macro expenditure and we take up the shortfall.
"Right now, there is a lot of speculation, but this speculation is not helping. Sales have dropped by 30 per cent and for some small businesses, this could mean closure because their sales are based on volume," he said. Asked what were some of the factors which contributed to this decline in sales, Jackson said since the call of the general election, business activity has been at a standstill and consumers are worried about job security. He said a large number of people has lost their jobs, which would definitely have a great impact on sales.
Education
Making reference to the Government Assistance for Tuition Expenses Programme (GATE), Jackson said this financial benefit could continue to have immediate and secondary benefits. "People do not realise that the proliferation of these tertiary level educational institutions offering GATE has been contributing significantly to the gross domestic product. He said GATE has been able to open doors for employment and, in return, consumers are able to earn, providing them with more buying power. He said the secondary benefit has been a more educated population.
More investment
For Lincoln Ragbirsingh, president of Penal/Debe Chamber of Commerce, the Government needs to focus more on the small and medium businesses (SMEs). He said the money was not filtering to the SMEs and that most of it was going to larger businesses. Drawing the example of the contract to provide schools with laptops, Ragbirsingh said "instead of the Government engaging the services of Hewlett Packard (HP), there are SMEs that could have been facilitated." "It is my hope that the Government concentrates more on the SMEs because they are the economy drivers. They interact more with the small man on the street."
Sales drastically decline
Echoing similar sentiments to Jackson, Ragbirsingh said sales have dropped drastically, especially for the farmers who have lost all of their crops during recent flooding. "Construction is also down, as a consequence, people are unemployed, so their livelihoods are being affected. Therefore, they have no money to spend," he said.
He said business has been stagnant for the last year. He said the business community was also concerned about corporate taxes. "For some businesses, when they pay these taxes, they have to increase their margins, resulting in them becoming uncompetitive.
Tourism industry
Kevin Kenny, vice-president of the Hotels, Restaurants and Tourism Association, said more money needs to be invested in the tourism industry for it to compete on the global market. He said T&T attracts less than two per cent of the 24 million visitors that come to the Caribbean. "The industry is under severe pressure and is in dire need of financing," Kenny said. "While the Government invests about US$18 million in marketing the industry, Barbados spends about US$50 million. "We need to start spending to keep up with the competition. Once you are building an industry, you have to ensure that you have the resources to compete on the worldwide market," he said. Kenny said there was a well-established marketing opportunity and T&T has to become more aggressive and increase its market share in order to compete.