Business jittery over war

The US led war on Iraq has local business people jittery.

Many continue to live in hope that the war will be short-lived, otherwise they could see their profits being whittled away. At a recent panel discussion organised by the RBTT Roytec Institute of Learning on the “Impact of the war against Iraq on the TT economy,” President of the TT Chamber of Industry and Commerce, David O’Brien, noted that the war would result in a lack of certainty among the business fraternity, which would seriously affect the local economy. “Business thrives in certain times,” he said, adding “right now, we don’t know what is going to happen tomorrow.”

This uncertainty, he said, will always affect the economy. War, he went on, will also have a negative effect on confidence, which is the key to business and economy. He said, “people have to feel confident to start new businesses, they have to feel good that they are going to risk their money to open or expand their business or hire new people. When we are in times of war, this negatively affects our confidence.” However, O’Brien maintained that all is not lost since war can also bring some positive opportunities to counter the bad. Every bomb, he said, which is dropped needs to be replaced, therefore there is a new demand for the replacement of armaments. This, in turns signifies a possible shift in terms of the world economy to reinforce or rearm the major world powers.

“Additionally, there will be an increase in oil prices,” he stated, “which will be a short term opportunity for us. We need to ask the question : ‘if it does increase dramatically, how is this going to affect our trading partners? “It might help us in the short-term, but it won’t help us for too long,” he said. O’Brien went on to note that while it was wise to keep a watchful eye on the situation in Iraq, there were situations closer to home which should have us a lot more worried. He said, “while I am in no way trivialising the war in Iraq, here in TT we are fighting a number of wars ourselves — the war between the two polarised elements of society, the gangwar in Laventille and the kidnapping war.”

“The effects of the local wars have me more worried,” he asserted, stating that the polarisation between the two factions of society could have serious long term repercussions. He revealed that business in the South and Central areas have already begun to show a decline, possibly because of the impression that things are not going to happen in these areas. However, business in the East/West corridor is picking up. “The Chamber is making a concerted effort not to pick a side,” O’Brien maintained. “We would like to see the war end quickly and a return to diplomacy. “Business is about negotiation and about dealing with win-win situations and we think that there is an opportunity for both sides to win,” he said.

Central Bank Economist Garnett Samuel, expressed his belief that the world was in no way ready for a war at this point in time, since the global economy is still on a “recovery watch” after the events of September 2001. He revealed that before the war IMF projections had predicted a 2.6 percent growth in the US economy in 2002 from 2.2 percent in 2002. Japan was expecting a growth of 1.1 percent, up from the 0.5 percent of 2002, while the European Union was hoping for a 2.3 percent growth after a mere 1.1 percent for the previous year. “Things were looking up,” Samuel said, noting that people were optimistic as to what 2003 would bring. Then came the war.

The Caribbean economies fared no better in 2002. In recent years, Samuel disclosed, they have been going through “rough times,” faced with declining growth, an increase in unemployment as well as fiscal deficits. “This came about mainly as a result of 9/11 which had a profound negative impact on the tourism industry which is extremely important to the economies of the Caribbean like Barbados, Jamaica and the Bahamas,” he said. In 2002, Barbados experienced a negative growth rate of 0.5 percent with Jamaica seeing a mere 0.6 percent. Trinidad, however was one of the lucky ones, showing a significant growth rate. However, this may be short-lived if the war continues longer than is expected, Samuel asserted.

The challenges for the world economy will continue, he said, noting that the pace of recovery in the US is cause for worry, in addition to the effects of falling incomes and weak consumer and investor confidence which has shown significant decline. “Once the world economy is affected, especially the US economy, then the TT and Caribbean economies will also be affected.” The Caribbean, he went on, also faces the continued challenge of trade liberalisation on the WTO agenda as well as the FTAA agenda. Caribbean economies, Samuel explained, are basically monocrop economies, which display a disproportionate dependence on certain markets, specifically that of the US and Europe, and these are the principal countries involved in the war.

Samuel said 41 percent of our exports go to the US and when this is combine with the falling incomes in the US as well as the low consumer confidence, “we have a serious problem on our hands.” UWI Economist, Dennis Pantin agreed with O’Brien and Samuel, saying that the economic gains from an increase in the price of oil will be short lived. “Iraq,” he said, “cannot fight the US. Sooner or later the US will take control of Iraq and its oil supplies at which point in time oil supplies will become wildly abundant and the price of oil globally will fall.” However, Pantin presented the impact of the war in moral terms when he described it as the “might exercising its right.” He said, “we are sanitising what is a human tragedy, where millions of people are suffering, by discussing it in terms of seasons and thinking of it only in terms of its economic implications.”

He described it not as a war against terrorism but one effectively intended to serve the interests of the US. “Any small country in the world needs to be extremely concerned about unilateral arrangements outside of the UN,” he asserted, “since as small countries we have virtually no power and we need the protection of the UN.” Pantin explained that this particular war endangered the UN and now established the kind of unilateralism which has implications for all Caribbean economies.