Sunday, January 29 2012
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Winston Dookeran ... can sleep better now....
THE Senate last week had a mini-debate on the economy as it passed a bill to adjust the 2011/2012 National Budget, and the Lower House last Friday debated crime. Away from Parliament, two incidents led the public to reflect on the lives of two national leaders.
Prime Minister Kamla Persad-Bissessar marked two years as UNC leader at a gala function at Rienzi Complex, Couva, ahead May’s second anniversary of the People’s Partnership Government. The midterm of a leader and her Government is an apt time to reflect on what has been achieved and what has not. Both sides of the political fence can certainly agree on how quickly time flies.
Secondly, last week, sadly, former prime minister Patrick Manning suffered a mild stroke for which he will need three to six months to recover from. Tributes poured in for his 40 years of service to TT, but the nation also pondered on whether ill health will curb his career in politics.
Last week, away from Parliament, Opposition Leader Dr Keith Rowley and Attorney General Anand Ramlogan rowed over how to effect the death penalty, which both sides claim to back. Rancour over crime continued last Friday in the Lower House debate on a private motion by Opposition MP for Laventille East/ Morvant, Donna Cox, alleging the Government’s dismantling of TT’s structures of national security, to the denial of Minister of National Security, Brig John Sandy.
Last Monday, Senators also clashed over the Government’s handling of the economy, even as next day the International Monetary Fund (IMF) cut its 2012 forecast for global growth to 3.3 percent from the 4.0 percent predicted just three months ago.
Proud of his running of the economy, Finance Minister, Winston Dookeran, said he now sleeps well at night, compared to when he first came into his job in 2010.
“When I first started as Minister of Finance, there were very few nights I felt I was in a comfortable place,” quipped Dookeran.
“Now I sleep comfortably.”
All chuckled at his unexpected jest.
Admitting to less growth in the economy last year than expected, he said TT should see growth momentum in 2012.
He said TT is in a world where no one can sit down and expect good things to happen, but instead must go out to where the money is and make one’s presence felt, perhaps alluding to Persad-Bissessar’s recent visit to India.
Dookeran spelt out the changes to the Budget.
He said the bill approves $2.7 billion in advances already made to the Government from its Treasury deposits over the past year. Of this, $748 million was for Clico claimants, $100 million to pay Hindu Credit Union (HCU) claimants, $354 million for an electricity plant at Union Estate (La Brea), and $1.5 billion for the Point Fortin Highway.
Dookeran said a $2.1 billion cut in expenditure and a $1.9 billion hike in revenue had boosted TT’s balance sheet to the tune of about $4 billion, thereby reducing the Budget deficit from an expected $7.7 billion, down to just under $4 billion.
Of the $2.1 billion drop in expenditure, some $1.1 billion was saved on recurrent expenditure, including $259 million not paid in wage hikes for stalled wage talks.
Dookeran assured that the fall in expenditure did not mean the Government was not addressing TT’s basic needs.
Independent Senator Subhas Ramkhelawan said saw nothing being done at present to reverse the past three years of no growth in the TT economy.
“While all these underlying adjustments are taking place, the nation is not experiencing economic growth,” said Ramkhelawan.
“Citizens want to know that there is something there that is being done that will translate into economic growth, not so far out of the future that we cannot see it.”
He related an old adage about a nation’s economy.
“If we have to wait for the long run to see the economy, in the long run we are all dead. So what is going to happen? What are the things that are going to take place in the short to medium term to give some kick to the economy?”
Ramkhelawan urged a boost to the economy in the areas of manufacturing, financial services and agriculture.
On agriculture, he lamented the absence of any measure to replace sugarcane fields of the now defunct Caroni (1975) Limited.
“I am speaking to the 50,000 acres that were set aside for agriculture, and nothing has been done since the decimation of the sugar industry.”
He said agriculture contributes just 0.6 percent to TT’s GDP, saying it should be three to four percent. He added that agriculture has a high employment-to-invested-capital ratio, compared to other sectors.
Regarding financial services, he thought $47 million was too small an allocation
to build this sector. Noting the scotching of plans to create a TT International Financial Centre (TTIFC), he asked what this project had been replaced with?
Ramkhelawan, a stockbroker, pointed out the huge irony that despite TT being an energy-based economy, one cannot buy one stick of note on the TT Stock Exchange.
“It is a disconnected country. Something is happening offshore and it is not connected with what is happening onshore.”
To truly make TT the “gateway to Latin America”, he said TT must sign treaties on double taxation, cutting tariffs for trade in goods and services, and the regulatory authorities for finance and investment.
Regarding manufacturing, he saw a bright future for TT to make melamine and plastics, the latter having many smallscale opportunities for the private sector. “You might need $2 billion to convert methanol into plastic resins, but once you get the plastic resins there are so many areas that you can produce in that might take $5 million, or $10 million, or $20 million to build a reasonable plant for export.”
Opposition Senator Lester Henry hit the Government’s handling of three key areas of the economy. Just weeks after the downgrade of France and other Eurozone nations by the credit rating agency Standard and Poor’s, Henry warned of similar happening to TT if
Government-backed loans go into default, as revealed in the recent Central Bank Financial Stability Report (December 2011).
The FSR showed more bad loans, “non-performing loans (NPLs)”, some of which were Government-backed. Henry said TT’s rate of NPLs-to-gross loans has worsened over a year from 6.8 percent to 7.5 percent.
“Defaulting on a Government-guaranteed debt is a serious matter. It can have a ripple effect in the financial system,” he hit.
“This is actually quite disastrous.”
Henry regarded the Government’s attitude as being blase, in the face of the likelihood of the credit agencies pending discovery of these Government-backed NPLs.
He concluded, “The Government continues to receive a failing grade, and the Minister of Finance has to take full responsibility.”
He said a 2.4 fall in VAT collection indicated a drop in economic activity.
Henry also hit the Government for funding the start of the Point Fortin Highway by not using capital expenditure but using recurrent expenditure, which is usually used to pay routine, ongoing bills such as salaries. He suggested the Government had met problems in seeking to borrow from the Inter American Development Bank (IDB).
Henry accused the Government of a sweetheart deal to not issue any new Treasury bills so as to maintain a high price on the Clico bonds which policyholders are selling for 80 cents on the dollar to private banks.
“So one of the conditions for the banks to agree to this is that the Government issue very little or no new Treasury bills, so you (Government) tie your hand in such a way in order to allow the banks to cash in on the deal.”
To fund $4 billion in its deficit, the Government has not issued new Treasury bills, but has instead quietly been taking advances from its deposits at the Central Bank, Henry explained. However, he warned that this could be in breach of the Central Bank Act.