|Is energy stifling the private sector? |
Natalie Briggs Thursday, May 18 2017
Young, up and coming economist, Dr Jeetendra Khadan presented some sobering statistics at the first installment of the TT Chamber of Commerce’s Economic Transformation Series which asked whether oil and gas were smothering the economy.
According to him 82 per cent of Trinidad and Tobago private firms were in decline. Meanwhile in the last eight years, this country’s average growth rate was -.01 per cent.
Khadan said many, moreover, many in this country appeared undisturbed because they are expecting energy prices to go back up. “We presume that the energy sector will recover and normalise the status quo. A status quo that is highly uncompetitive, highly uncompetitive and highly inefficient.” He said however that energy prices were liable to remain depressed over the next five years.
Moreover, he maintained that the role government has played in the economy has to change.
“Providing job opportunities, providing subsidies and social programmes targeted at various sectors of the population, support of inefficient public enterprises, just to name a few. These things can continue no longer. And this reality needs to set in quickly.” Khadan said that what was needed was new ways to generate growth outside of the energy sector. Most including government turned to the private sector to fill this role, particularly when things were bad in the economy.However, Khadan argues that in its present form, the private sector is hardly able to do that.
“It could, if it were dynamic, employment generating, innovative and export oriented. But it is not,” he said. Khadan said currently, only 14 per cent of firms were exporters, only 5 per cent of firms had an innovation department and they spend less on it than other firms across the region. He also noted that TT private sector firms spent seven times more on security.
Meanwhile, senior management at private sector companies were likely to spend as much as 10 per cent of their time dealing with government bureaucracy in pushing through important works and projects.
“If you extrapolate that out to a year, the average firm would lose over 26 working days of senior management’s time dealing with bureaucracy.” As a result, Khadan said it was therefore no surprise that private sector investment is a quarter of what it is in other small economies across the Caribbean.
If the country’s economy was to thrive, then private sector firms needed to urgently change its mindset concluded Khadan.
“What the private sector needs is a more pro-business environment characterized by incentives and disincentives toward one characterized as dynamic, innovative and export oriented. For the private sector to become that key player in the economy, it doesn’t need lecturers nor to be given lectures,” he said.
During a panel discussion, subsequent to the presentation by Dr Khadan, participants, InvesTT chair, Moonilal Lalchan, Chamber president, Ronald Hinds, Professor Avinash Persaud and former TTMA president, Andrew Aleong, elaborated other problems that the private sector had in becoming what government and the country needed it to be.
These issues included the overvalued foreign exchange rate and the challenges presented to the private sector by it, the mismatch between the supply and demand components of labour and the mistrust between the private and the public sectors.