The lessons of the pan­dem­ic must be used to push Trinidad and To­ba­go for­ward.

This was the shared view of econ­o­mists as they as­sessed the Gov­ern­ment’s last fis­cal pack­age, and looked for­ward to Min­is­ter of Fi­nance Colm Im­bert’s pre­sen­ta­tion next Mon­day.

Econ­o­mist and lec­tur­er in Fi­nance Vaalmik­ki Ar­joon has tout­ed that “Eco­nom­ic Free­dom” ought to be the theme for Bud­get 2022, giv­en the strain placed on the econ­o­my by the lock­down mea­sures in­tro­duced in the past 18 months which have caused “se­vere dam­age to rev­enues and cash flows earn­ings for the pri­vate sec­tor, job loss­es, and weak­ened house­hold in­comes.”

Ar­joon high­light­ed the im­pact on just one sec­tor to em­pha­sise just how dev­as­tat­ing the past two years had been.

“Con­sid­er the re­tail sec­tor – in the sec­ond quar­ter of 2020 (the height of the first lock­down), re­tail sales fell by 17% and when we drill down in­to the da­ta, hard­ware sales fell by 34%, house­hold ap­pli­ances and fur­ni­ture fell by 8%, tex­tiles and ap­par­el sales fell by 59% and mo­tor ve­hi­cle and parts sales fell by 61%. That’s just in one sec­tor and for one lock­down. Hav­ing en­dured this twice would have now placed the pri­vate sec­tor un­der a men­ac­ing fi­nan­cial dis­tress,” he said.

“Now, the coun­try is in ur­gent need of eco­nom­ic free­dom, where the state earns added rev­enues from pro­duc­tive sources and not a tax­a­tion agen­da that will re­strict sav­ings, pro­duc­tiv­i­ty and in­vest­ment, al­low­ing them to close the fis­cal deficit in the last six years of $63 bil­lion and ease the debt bur­den, which now stands at ap­prox­i­mate­ly 85% of GDP.”

Ar­joon said the pri­vate sec­tor is in need of an en­abling en­vi­ron­ment for growth in their cus­tomer base and prof­itabil­i­ty. He al­so stressed that the bud­get should en­cour­age the pri­vate sec­tor’s abil­i­ty “to pro­vide fur­ther pro­duc­tive jobs, be­come more com­pet­i­tive in the glob­al mar­ket and have eas­i­er ac­cess to cred­it and forex from com­mer­cial banks, while still op­er­at­ing with­in the pan­dem­ic re­stric­tions.”

How­ev­er to al­low for this, he said the bud­get must in­tro­duce clear strate­gies.

These strate­gies he said should “(1) Ur­gent­ly fix the qual­i­ty of our state in­sti­tu­tions, so that it be­comes eas­i­er and faster to com­plete sim­ple yet im­por­tant pro­ce­dures and trans­ac­tions with the state, and there­fore, busi­ness op­er­a­tions are not de­layed; (2) Place added fo­cus on cap­i­tal ex­pen­di­ture projects, es­pe­cial­ly those with the high­est pay­off rel­a­tive to the ex­pect­ed cost; (3) Raise our over­all qual­i­ty of life through pro­vid­ing high­er stan­dards of health care, ed­u­ca­tion, ba­sic ameni­ties like potable wa­ter and hous­ing, while en­sur­ing prop­er fi­nan­cial man­age­ment so that there is no over­spend­ing and wastage; (4) En­hance the rev­enue per­for­mance of our state en­ti­ties and lim­it wastages or ir­re­spon­si­ble fi­nan­cial de­ci­sions; (5) Im­prove the so­cial pro­grams to as­sist the less for­tu­nate while en­sur­ing that there are ap­pro­pri­ate checks and bal­ances so those who are most de­serv­ing have ac­cess to them.”

Ar­joon not­ed sev­er­al gov­ern­ment projects which com­mand­ed a chunk of cap­i­tal ex­pen­di­ture in­clud­ing the La Brea dry-dock­ing fa­cil­i­ty, the San Fer­nan­do Wa­ter­front, Phoenix Park In­dus­tri­al Es­tate and sev­er­al high­way con­struc­tions had not made the progress ex­pect­ed but he called for the state to push through and get them done.

He said: “Giv­en our lim­it­ed fis­cal space, the state has to im­ple­ment bet­ter fi­nan­cial man­age­ment dur­ing im­ple­men­ta­tion. These projects should not be de­layed – pro­long­ing them cause cost over­runs and the cost of com­ple­tion goes up.

“The state must al­so be cau­tious to avoid po­ten­tial cor­rup­tion in the pro­cure­ment process. When monies are lost due to cost over-runs and cor­rup­tion, it de­prives oth­er sec­tors in the econ­o­my that could have made more pro­duc­tive use of these funds, or oth­er gov­ern­ment projects which may have cre­at­ed ad­di­tion­al jobs in the process and low­ered pover­ty lev­els.”

Prakash Ramlakhan

SHIRLEY BNAHADUR

He al­so not­ed, “The 2021 bud­get al­so in­di­cat­ed an in­tent to pri­va­tise the Port of Port-of-Spain (PPOS), which has al­so not tran­spired. This, how­ev­er, is an im­por­tant step to boost­ing the rev­enues from the mar­itime sec­tor while pro­vid­ing a po­ten­tial­ly lu­cra­tive in­vest­ment av­enue for el­e­ments of the lo­cal pri­vate sec­tor pro­vid­ed that they are award­ed the in­vest­ment con­tract.”

He added, “The port is in dire need of sig­nif­i­cant funds to up­grade the in­fra­struc­ture in­clud­ing cranes, trail­ers etc. For in­stance, at the end of 2020, on­ly five of the 18 cranes had some eco­nom­ic life. With this poor in­fra­struc­ture cou­pled with labour pro­duc­tiv­i­ty is­sues, it takes much longer for con­tain­ers to be of­floaded —on av­er­age 12 per hour. This caus­es much de­lay and a back­log of ship­ping ves­sels that have to wait longer times to of­fload, which is cost­ly to them, es­pe­cial­ly if they miss their sched­ule at the Pana­ma Canal. They al­so re­quire cap­i­tal to prop­er­ly dredge the port – fail­ure to do this a few years ago lost us mar­ket share, as larg­er Pana­max ship­ping ves­sels could not be ac­com­mo­dat­ed at the PPOS and in­stead start­ed to call at the Kingston Freeport Ter­mi­nal in Ja­maica.”

He said: “If the PPOS is pri­va­tised, they will have the cap­i­tal to fix its in­fra­struc­ture, dredge and re-at­tract some of the lost mar­ket share, es­pe­cial­ly giv­en our con­ve­nient lo­ca­tion above the South Amer­i­can sub­con­ti­nent, and be bet­ter poised to take ad­van­tage of trans­ship­ment op­por­tu­ni­ties to Guyana.”

Ar­joon, how­ev­er, warned the gov­ern­ment should be cau­tious con­cern­ing the in­tro­duc­tion of new tax­es giv­en the fi­nan­cial hard­ships brought up­on by the pan­dem­ic, and the like­li­hood that these is­sues will linger for a cou­ple more years.

He said: “More fo­cus ought to be placed on tax col­lec­tion ad­min­is­tra­tion, and if the state is con­fi­dent that the TTRA will be able to ef­fec­tive­ly plug tax leak­ages and col­lect bil­lions of dol­lars in ad­di­tion­al tax­es owed, then there should be no need for new tax­es to cre­ate fur­ther dis­tress for the pri­vate sec­tor. They should post­pone the im­ple­men­ta­tion of the prop­er­ty tax, un­til the pri­vate sec­tor has a mean­ing­ful re­bound.”

He said in­tro­duc­tion of the prop­er­ty tax now may even en­cour­age more at­tempts of tax eva­sion.

“If im­ple­ment­ed in the short-term, it could cre­ate more un­cer­tain­ty in the minds of both house­holds and busi­ness own­ers about their fu­ture fi­nan­cial po­si­tion. It may even en­cour­age more tax eva­sion and avoid­ance es­pe­cial­ly if there isn’t prop­er val­ue for mon­ey,” said Ar­joon who not­ed that there had not been enough ev­i­dence that tax funds had been prop­er­ly in­vest­ed in­to in­fra­struc­ture giv­en con­cerns over road main­te­nance and flood­ing.

He al­so wor­ried that the tax could in­crease rental costs and dis­suade for­eign in­vest­ment. “It could al­so dis­cour­age for­eign and lo­cal busi­ness­es that may be think­ing to ex­pand their op­er­a­tions or up­grade their in­fra­struc­ture as this will in­crease the an­nu­al rental val­ue and there­fore in­crease the tax to be paid. Land­lords may in­crease rents. Many pri­vate­ly owned malls have lost ten­ants. How will these mall own­ers af­ford to pay the tax? We need a tax en­vi­ron­ment that will not sti­fle fu­ture in­vest­ment op­por­tu­ni­ties,” he said.

UWI lec­tur­er in Bank­ing and Fi­nance Prakash Ram­lakhan felt the gov­ern­ment could use the re­mote work plat­form in­tro­duced dur­ing the lock­downs as a po­ten­tial av­enue to trans­for­ma­tion.

“The pan­dem­ic has shown us we don’t all have to go in­to Port-of-Spain and the ur­ban cen­tres and go and work. You can work re­mote­ly.

“So there­fore, we could use this as an op­por­tu­ni­ty for the de­cen­tral­i­sa­tion of the gov­ern­ment. So we don’t have to rush every­body to Port-of-Spain and rent or lease high cost re­al es­tate. Cause tremen­dous traf­fic con­ges­tion, ex­pen­sive road net­work, high stress lev­el and the as­so­ci­at­ed health costs. We don’t need that any­more,” he said.

“I would like to see the gov­ern­ment do is ac­tu­al­ly em­brace the chal­lenge to trans­form the so­cial and eco­nom­ic land­scape of Trinidad and To­ba­go in­to one that is go­ing to cre­ate greater hap­pi­ness and sus­tain­able growth. They have the re­sources to do so.”

Ram­lakhan not­ed that sev­er­al mea­sures an­nounced in the last bud­get had mid­dling to lit­tle im­pact, es­pe­cial­ly those in­tro­duced to ad­dress the eco­nom­ic fall­out caused by the pan­dem­ic.

‘The mi­cro­fi­nance grant, they had set aside a few mil­lion dol­lars, I can­not re­mem­ber the ex­act fig­ure to as­sist mi­cro en­ti­ties with grants I don’t know how suc­cess­ful but sev­er­al small busi­ness­es I have seen close up and I have read close up. There is very lit­tle re­search in this time be­cause of the COVID peo­ple are not go­ing out there, but I am not cer­tain to what ex­tent mi­cro-fi­nanc­ing was able to save a num­ber of mi­cro-en­ti­ties,” he said.

Like Ar­joon he recog­nised the lack of progress on high­way projects and hous­ing projects and the re­vamp­ing of the Na­tion­al In­sur­ance Board, al­though he did how­ev­er ac­knowl­edge progress made on spe­cif­ic as­pects of dig­i­tal­i­sa­tion. How­ev­er many of these suc­cess­es were sim­i­lar­ly un­der­cut by the pan­dem­ic’s im­pact.

“I think they have im­proved the sys­tem for VAT re­fund, how­ev­er VAT re­funds still takes a lit­tle time still long be­cause of fund­ing avail­abil­i­ty and not so much the sys­tem be­cause they have pro­posed to make the VAT re­fund sys­tem more ef­fi­cient, but they had made progress in that area, but fund­ing con­tin­ues to be a prob­lem,” he said.

How­ev­er, he felt the coun­try still large­ly strug­gled with re­gard to the ease of do­ing busi­ness.

He said the gov­ern­ment should shy away from re­peat­ing fis­cal plans they had an­nounce pre­vi­ous­ly and in­stead adopt new strate­gies for sus­tain­abil­i­ty.

Ram­lakhan al­so called for fur­ther di­ver­si­fi­ca­tion in the econ­o­my and urged the gov­ern­ment to em­pow­er in­dus­tries apart from the en­er­gy sec­tor.