BUDGET STATEMENT 2004

I. INTRODUCTION

Mr. Speaker, I am pleased to present to this Honourable House and to the national community the Appropriation Bill for fiscal year 2004. I must, first of all, thank all who have given of their ideas and insights to assist in this exercise. We held appropriate consultations and considered over 300 proposals for inclusion in this Budget.
I also want to thank the Ministers, Parliamentary Secretaries and other members of the Government for their very keen participation in the lead up to this Budget. I wish to say a special word of thanks to all the technocrats from all Ministries who worked tirelessly to generate this comprehensive array of budget documents.
Mr. Speaker, since the last occasion, international developments have been characterized by instability, economic slowdown, the spread and outbreak of disease, environmental disasters and the continuing poverty of close to three billion people mainly in the developing world. The continuing threat of terrorism exacted a heavy toll on the global economy, devastating the Tourism and Travel industries, adding to a loss of consumer confidence, causing unemployment and industrial slowdown and reducing very significantly, the flow of direct foreign investment. The war on terrorism has already contributed most significantly to a growing, unprecedented deficit in the world’s largest economy, whilst structural problems have been a root cause of recessionary conditions now challenging at least three major European economies. Even though there are now hopeful signs as both the United States and Japan appear to be emerging from economic sluggishness, the sustainability of this trend is not quite certain.
In this dynamic and challenging environment, this Government will continue to emphasise fiscal discipline, more efficient spending, direct interventions only in selected priority areas and a responsible macroeconomic programme.
Firstly, Mr. Speaker, this Budget focuses on an investment programme that expands the stock of human and physical capital. Secondly, this Budget recognizes the value of openness and transparency in accounting for the nation’s finances. Accordingly, it includes expenditures which previously would have been financed off-budget.
Thirdly, the Budget recognizes that the energy resources of Trinidad and Tobago are the patrimony of every citizen and should be used to improve the lives of all the people of Trinidad and Tobago.
Fourthly, the Budget will ensure continued economic growth.
Mr. Speaker, this Government has already articulated a bold new vision for all of Trinidad and Tobago.
This is not the first time that a PNM Government has engaged the population in moving this nation to the next level. We provided the country with the People’s Charter of 1956. We followed up with the
“Chaguaramas Declaration” of 1970. Our subsequent position was presented as “Perspectives in the World of the Eighties and Beyond.” Today, all of our experiences have been honed into “Vision 2020” as we focus our population on the objective to transform Trinidad and Tobago into a first world nation.
Our theme this year is – Charting the Course to 2020: Empowering People. The first phase of our plan requires that we focus our attention on the following specific issues:
1. Education; the impact of which pervades every aspect of our social and economic life.
2. Health; the quality of which determines the very nature of the human condition.
3. Housing: the availability of which provides the opportunity for nurturing family life.
4. Social Services Delivery; helps us to realise our full potential.
5. Strong and cohesive communities; constitute the social fabric that binds our citizens together.
6. Unity in diversity; underpins the emergence of a strong, confident national psyche.
7. Safe Streets, homes, places of recreation, and workplaces; provide us with the environment to nurture our creative potential.

II NATIONAL SECURITY

Mr. Speaker, the level of security enjoyed by citizens is the most critical problem facing Trinidad and Tobago today. The population is being terrorised as the criminals have declared virtual war on this society. The Government must and shall respond. Accordingly, we now declare war on the criminals and shall do whatever is necessary, within the law, to return this nation to that state where our people can conduct their lives in the full safety and security to which they are entitled. We shall now therefore, initiate the following:
1. With immediate effect Colonel Peter Joseph is relieved of his command as Commanding Officer of the Trinidad and Tobago Regiment and mandated to establish a Special Crime Fighting Unit. For this unit, within the ambit of the law, we shall draw on persons from any of the Services in the country, the Police, the Regiment,
Coast Guard, Prison, Fire Services, Volunteer Defence Force and from the Civilian Population. One of the main pre-requisites for membership of this unit shall be the ability to pass a polygraph test at regular intervals. This shall be a unit of professionals. To undertake this most important assignment, Colonel Joseph is promoted to the rank of Brigadier with immediate effect.
2. The Government recognises that demonstrations are a legitimate expression of dissent in any democratic society. However, the Government wishes to make it absolutely clear that we will not tolerate acts of civil disobedience and will enforce the laws of the country rigidly and fearlessly. Lawlessness will not be tolerated from either the criminals or from any other persons who wish to disrupt the society no matter how strongly they may feel about their cause. The Riot Squad will be the subject of review and shall be provided with the most modern equipment now used in countries around the world.
3. We shall increase Police Patrols in the main business and residential areas of the Country. The Cabinet will soon be asked to approve an appropriate increase in the size of the Police Service to facilitate the use of higher levels of foot patrols.
4. We are also taking the fight to the drug traffickers who are responsible for much of the criminal activity in this country. The Coast Guard will acquire two new fast patrol vessels with the capability to launch two fast interceptor boats and carry a helicopter with an attack capability. These, operating in conjunction with an ultra-modern radar system will give Trinidad and Tobago an unprecedented level of protection and capability. This system should will be available in about two years time. We shall also continue comprehensive upgrading of Coast Guard and Defense Force facilities and infrastructure. The Global Maritime Distress and Safety System for the monitoring of shipping will be completed.
5. The Government is committed to implementing stricter laws to deal with persons found with illegal arms and those charged with kidnapping. It is the view of the Government that stringent measures must be put in place to serve as deterrents to the criminal elements. They must know that civilised society will not tolerate their violations of the law and the Government will be pursuing stiffer penalties for those associated with such crimes.
Accordingly, it is our intention to enter into discussions with the Opposition with a view to getting their support for legislation that increases the penalty for Fraud, Kidnapping, Crimes committed with the use of a Firearm, Extortion, Blackmail, Illegally accessing Bank Account Information and related crimes.
6. Tax credits will be provided to business people and other persons in sensitive positions who are at risk and who install special security systems for their protection and the protection of their families. There will be an approval process for persons desiring to access this facility.
7. Banks will be mandated to provide adequate security systems to prevent unauthorised access to Bank Accounts. It will be the responsibility of the Central Bank to police this arrangement.
8. We shall provide special counselling by trained trauma specialists to kidnapped victims and their families.
9. It is also clear that some of our young people do not have a proper concept of right and wrong and are therefore in need of reorientation. The Government will embark on a programme of Public Education as an essential part of this programme of orientation.
10. In addition Mr. Speaker, we will encourage the expansion of the Cadet Corp, the Boy Scout Movement, the Girl Guides, Brownies, Boys Brigade and other similar organisations within the school system to engender discipline, a disposition of service to others and respect for law and order within the school environment.
11. And finally Mr. Speaker, we shall establish a Special Security Commission to act as a Think Tank on crime prevention and detection, involving former Ministers of National Security, Mr. Overand Padmore, Ambassador John Donaldson, Mr. Herbert Atwell, Brigadier Joseph Theodore together with members of the business community and other persons. The committee will be headed by the Prime Minister’s Adviser on National Security matters, Mr. Overand Padmore.
Mr. Speaker, in addition to these new measures, our war on the criminals will be made more intense by our ongoing efforts to provide the police service with more resources and more modern training and equipment. We shall intensify partnering with communities and embark on the critical matter of Prison Reform.
On behalf of the national community I appeal to the Opposition to support the Government in this exercise which clearly is in the
interest of all.

III. REVIEW OF GOVERNMENT’S PERFORMANCE

Mr. Speaker, in the last Budget Statement, the Government’s vision to have Trinidad and Tobago become a developed nation by the year 2020 was outlined. I believe it is appropriate therefore that we review, if only briefly, what has taken place over the last year in pursuit of that goal.

The Economy
Let us first of all deal with the economy. Despite the slowdown in global economic growth to 3.2 percent, our economy continued to grow, with economic activity increasing by a robust 6.7 percent this year. This expansion was led primarily by the energy sector where economic growth reached 9.5 percent. We generated a trade surplus of over TT$2.9 billion, some 33 percent higher than last year, and the external accounts were in balance. Trinidad and Tobago’s external reserves now stand at a very healthy US$2.4 billion, the equivalent of 8.5 months of imports. The exchange rate has remained relatively stable. Inflation was kept under control at 3.6 percent, down from 4.2 percent in 2002. Interest rates have declined appreciably during the year, and the expectation is for further downward movement.

Mr. Speaker, although we budgeted a fiscal deficit of $618 million for the last fiscal year, I am pleased to advise this Honourable House that we expect to generate a surplus of $28.9 million, and this is after allocating $497 million to the Revenue Stabilisation Fund. This performance, more than anything else, demonstrates the ability of this Administration to manage the financial affairs of the country with efficiency and transparency. I must report to this Honourable House that the unemployment rate has risen temporarily and we do not hide this fact from the population. We know it has resulted largely from the softening in global and regional demand, and from the inevitable and courageous restructuring that we have been forced to take with respect to Caroni (1975) Ltd.

Total public debt increased by $2.3 Billion during the fiscal year, of which $1.2 billion is in respect of Caroni (1975) Limited restructuring, including financing its Voluntary Separation Enhancement Programme. The remainder is as a result of borrowing by the State Enterprises, largely Water and Sewerage Authority, Airport Authority and the National Housing Authority.
Mr. Speaker, we do not seek to deceive the population with our Budget Presentation. We acknowledge that largely as a result of the restructuring of Caroni (1975) Limited, some jobs have been lost and total debt increased, and we have said why this has happened. But we are convinced nonetheless, that our economic policies will in a short time, result in a lowering of the unemployment rate to singledigits and to a reduction in Public Debt.

Notwithstanding the increase in the debt, the International Rating Agency, Standard and Poor’s, improved our long-term local currency debt credit rating from Triple B minus to A plus, the long-term foreign currency debt from Triple B minus to Triple B, and our short-term foreign currency debt from A minus 3 to A minus 2 - All positive upgrades and the results of high performance Government. We are committed to deepening and widening the industrial base in Trinidad and Tobago. We believe that this is the path to the fundamental revitalization of our economy and consequently to sustainable employment generation and empowerment of our citizens to which this administration is irrevocably committed. We made a step forward with the Atlantic LNG Train 1V Project, which is going to be the largest single Natural Gas Train in the world and which will generate a host of downstream industrial activity creating sustainable jobs. We took steps to establish two new industrial estates - one at Wallerfield for high tech industries and light manufacturing, and the other in San Fernando for light manufacturing, including agroprocessing.

In the small business sector, the Government disbursed through the National Entrepreneurship Development Company over $30 million in loans to small entrepreneurs to expand business activity as well as create a number of new businesses during the course of the year. To complement further our small business development thrust, we established the Community Environment Protection and Enhancement Programme to provide the opportunity to develop the entrepreneurial skills of our traditionally dispossessed people, as well as provide long-term employment opportunities, while addressing the requirement to enhance and protect the environment. Recently the Government took the pivotal decision to strengthen further the agricultural sector by restructuring Caroni (1975) Ltd. The long neglected agricultural sector can now be developed to its fullest potential. The undeniable fact is that agriculture is now being put on a new economic footing in this country.

Education
Mr. Speaker, we also made significant progress in the social sectors. Over the last year, modernisation of the education system was advanced significantly as we moved with care and dispatch in a number of areas including curriculum reform; the strategic decentralization of education administration; the construction of new schools and upgrading of existing schools. We have also provided book grants and a loan system for text books. In addition, we improved the security at three hundred and ten schools; advanced the establishment of the new University of Trinidad and Tobago; and supported construction of facilities for the Institute of Business at UWI.

Health
In the Health Sector, we refurbished, upgraded and equipped a number of health facilities throughout the country. The new Princes Town District Health Facility was opened to the public, and new health centres were constructed in a number of areas in North, South and Central Trinidad and in Tobago. Construction of the long-awaited Scarborough Hospital was started as well as the new wing for the San Fernando General Hospital. We commenced a new programme of training for nurses, and medication for chronic diseases was provided free of charge to the elderly and the physically challenged. We also contracted a significant number of foreign medical professionals to expand and improve our health services and to assist in reducing the waiting time at the country’s health institutions.

Housing
Mr. Speaker, in keeping with our programme to meet the housing needs of the society, we have started construction of thousands of houses in various locations throughout Trinidad and Tobago. Existing NHA apartments are currently being upgraded and squatter regularization is bringing security to thousands of our citizens who are most in need of assistance from the State. In our Accelerated Housing Programme, construction has been completed on 260 houses, while contracts have been awarded for the construction of an additional 2,298 housing units throughout the country. Mr. Speaker, this is short of our target but compares exceedingly favourably with the performance of those on the other side during the period 1996-2001.
Last year we promised the upgrade and refurbishment of 237 of the 351 NHA apartment buildings. That promise has been delivered. Refurbishment of 300 of the 351 apartment buildings was completed by April 2003. This includes major overhaul of roofing, plumbing, electrical systems and painting. Refurbishment works of Sewerage Treatment Plants were also completed at Couva and Harmony Hall, while major works are ongoing at Maloney, Malabar and La Horquetta. Infrastructure upgrades have commenced at Rice Mill, Arouca; Harmony Hall, Gasparillo; and La Paille, Caroni.

Physical Infrastructure
The country’s physical infrastructure was improved considerably during the year. We improved the water supply for thousands of consumers with over one hundred and thirty two projects completed, in addition to the continuation of construction on the new WASA Wastewater Project and introduction of a new distribution system to cater for new industrial loads in the Point Lisas area. We installed approximately six thousand new street lights and completed close to two hundred electrification projects bringing much needed relief to thousands of citizens, particularly in the rural areas. We are currently undertaking an on-going programme of drainage to alleviate flooding problems and modernize water management in Trinidad and Tobago. Planning was also advanced on the expansion of the road network for five new highways. Two of these are from San Fernando - one to Point Fortin and the other to Mayaro.

We provided the sum of $127 million to finance the expansion and upgrading of a number of roads and bridges throughout the country. Under the National Highways Programme construction began on approximately 75 KM of roads, including Cedar Hill Road, Couva Main Road, Diego Martin Main Road, Guaracara/Tabaquite Road, Moruga Road, Mayaro/Guayaguayare Road, Naparima/Mayaro Road and the Southern Main Road. Under the Trunk Roads Expansion Project construction work commenced on the extension of the Diego Martin Highway from Sierra Leone Road to Wendy Fitzwilliam Boulevard. Work also began on the Santa Rosa Bridge as part of the dualling of the Churchill Roosevelt Highway to Wallerfield. Extension of the Solomon Hochoy Highway from St. Joseph Village, San Fernando to Golconda was completed this year. Contracts were awarded and works began on the stabilization of a number of landslips on the North Coast Road and Moruga Road. Local Government bodies also upgraded a number of secondary roads and bridges in the various communities.

Social Programmes
Mr. Speaker, our social sector programmes place great emphasis on disadvantaged communities and individuals, as we seek to ensure that all our people are brought into the mainstream of national development. Last year, this Government spent approximately $1.7 billion on social development. The Social Help and Rehabilitative Efforts (SHARE) Programme was intensified in 2003 with over $19.7 million being expended on the programme. This included the expansion of the Food Distribution Programme from 8,000 to 15,000 households, the development of training programmes for NGOs and CBOs, and the facilitation of 67 skills training projects, from which 12,164 persons benefited. We spent $125 million on the Unemployment Relief Programme providing short-term employment relief, while enhancing the skills of individuals in the community. This programme also includes a women’s programme, targeting single parents in households. During the year, 60,000 job opportunities were provided under the URP, while approximately 24,000 job opportunities were provided for women under the women’s programme. Last year, the On the Job Training Programme and the Civilian Conservation Corps were expanded to benefit approximately 2,832 and 2,500 persons respectively. This was done at a cost of $60 million. The Old Age Pension Programme provided significant financial comfort to over 63,000 senior citizens at a cost of $750 million, while over 8,000 citizens benefited from the Disability Assistance Programme at a cost of $60 million. We completed 132 projects under the National Social Development Programme at a cost of $66 million. Last year we spent $80 million on the Community Environmental Protection and Enhancement Programme.

Public Service Reform
Reform of the Public Service is moving apace and we expect to achieve greater efficiency and productivity in the very near future. We recently launched the national plan for the Information, Communication and Technology Sector. Our goals for this sector include the establishment of Electronic Government and a communication backbone to create connectivity among all departments of the Public Service, and the furtherance of e- Commerce throughout the country. Mr. Speaker, I have given you and Honourable Members a general picture of what we have done over the last year in pursuit of national objectives. It is only a summary. Ministries and Agencies of Government have done much more. During this debate, Ministers will provide further details which will astound you, the national community and even Honourable Members opposite. And we have done it without corruption; without dark back-room deals and without stashing ill-gotten gains in foreign accounts. The character of this administration shall continue to be one of integrity, transparency and accountability in public affairs.

IV. THE NEW BUDGET
Mr. Speaker, I now turn to the specific policies and measures we intend to pursue in the new fiscal year. There are indications that in the coming fiscal year global economic growth could improve, especially if present positive conditions strengthen in the world’s two largest economies. There is still hope that the realities and responsibilities of global inter-dependence would ensure that wisdom prevails in pursuit of the development round of multi-lateral trade negotiations. Mr. Speaker, whatever the international environment, we have a responsibility to ensure that Trinidad and Tobago stays the course in pursuit of its national objectives. This, in essence, is what this year’s Budget will ensure.

Advancing the Reform Agenda
Mr. Speaker, the achievement of developed-country status necessitates that we undertake a comprehensive programme of second-generation reforms, not only in the economic and financial sectors, but also in the social sectors. We have commenced that reform exercise.

Financial Sector Reform
One of the major areas we have earmarked for reform is the financial sector. You will recall that just over four months ago this Administration laid in this House a Report on the Review of the Financial System in Trinidad and Tobago, in the form of a Green Paper. Based on the comments received a Draft White Paper with an implementation schedule is expected to be brought to the Parliament by the end of this year. The importance of a strong and well-regulated financial sector must not be underestimated. We plan to introduce a number of legislativeamendments to establish enhanced prudential and supervisory systems to ensure that our financial system is adequate to meet the challenges of globalisation and financial liberalization. Amendments will be brought to Parliament with respect to: the Insurance Act; the Financial Institutions Act, the Securities Industry Act, and the Co-operative Societies Act; Legislation integrating the Supervisory Authority for the insurance, pension and banking industries under the Central Bank of Trinidad and Tobago will be presented to the Parliament before the end of this calendar year. Additionally, legislation governing mutual funds will be introduced in the new year so that this important and fast growing sector is held to the same standards as the rest of the financial sector.

Mr. Speaker, the Central Bank is collaborating with the local financial sector to promote the establishment of a regional credit rating agency to support our role as the financial centre for the Caribbean. In addition to the strengthening of supervisory and regulatory mechanisms, the Government’s policy agenda will also address issues relating to capital market development, corporate governance, the cost of financial services, and Government’s involvement in the financial sector. Recently, the Government, in collaboration with the Central Bank, discussed with the financial community its intention to use an auction system for placing bonds on the domestic market as part of its programme for developing the local capital market. The first issue will be done in November this year.

Reform of the Trade Sector
Trinidad and Tobago’s trade liberalization initiatives are well advanced and this country is well - positioned to participate in multilateral trade negotiations of the Free Trade Area of the Americas. The FTAA represents a potential market of over 800 million people with a combined GDP of US$14 trillion, and can boost trade, investment, employment and income for participating countries. Led by the Ministry of Trade and Industry, this country is actively participating in the negotiating processes of the WTO and the FTAA, which are to be completed by December 2004. Negotiations with respect to the Cotonou Agreement are also to commence shortly. The recent WTO meeting in Cancun, Mexico, highlighted the concerns of the developing world with respect to the agricultural subsidies applied by the USA and the European Union in particular.

Trinidad and Tobago, which assumed the chairmanship of the Intergovernmental Group of 24, an arm of the World Bank and the IMF, merely two weeks ago, endorses the expressions of concern and will champion this cause over the next year, as Chairman of this Group, on behalf of all developing countries. In preparation for this inevitable push for deepened liberalization and heightened competition, the Government is collaborating with the private sector to raise Trinidad and Tobago’s competitiveness to new levels. The Ministry of Trade and Industry will undertake a Business Expansion and Industrial Restructuring Programme as part of the Trade Sector Loan from the Inter- American Development Bank. The establishment of light industrial manufacturing parks will strengthen our technological base while the EXIM Bank of Trinidad and Tobago will continue to provide exporters with favourable credit terms and information on new market opportunities. In addition, the Government will simplify the approval process for new investments, bring new foreign investment promotion legislation to Parliament, accelerate the finalization of bilateral investment treaties, widen the capital market to increase access to equity finance, and allocate additional funding for market development. The Government is currently reviewing a number of proposed amendments to the Anti-dumping and Countervailing Duties Act, as well as the Fair Trading Bill.

Pension Reform
Mr. Speaker, Pension Reform has been on the Government’s agenda since 1997, and over the last five years a number of initiatives, including increases in Old Age Pension and the National Insurance System Retirement Pension, has been proposed to address the need for reform in Trinidad and Tobago. The most recent initiative in this regard has been the establishment of a Working Group on Pension Reform with the mandate to develop a detailed reformed pension system for Trinidad and Tobago. The reform process will provide for:-

• Full portability and transferability of pension benefits;
• Harmonisation of the NIS Retirement Pension and the Old Age Pension;
• Administrative integration of the NIS and OAP;
• A guaranteed level of income maintenance in retirement;
• An appropriate integrated regulatory framework for the pension industry; and
• Integration and consolidation of the various laws and regulations governing the pension industry.

The Working Group has already submitted to the Cabinet its first Interim Report on Harmonization of the NIS Retirement Pension and Old Age Pension.
To further the reform process and make the National Insurance System more relevant to the needs of the population, the Government took the decision to increase the NIS retirement pension to a minimum of $1,000 per month per person with effect from October 01, 2003. The increase in contribution rates to fund this guaranteed minimum retirement income will be spread over a threeyear period commencing January 05, 2004. In addition, the level of insured earnings will also strengthen the financial integrity and relevance of the National Insurance System.

Tax Reform
Mr. Speaker, there is no doubt that there is a considerable amount of leakage in the tax system with the result that the Government is not collecting its fair share of revenues and consequently is constrained in its ability to accelerate the tax reform agenda. This places an unnecessary burden on those individuals and organizations which comply with the tax laws and pay their fair share of taxes. To correct this situation, we will undertake, in this fiscal year, a comprehensive review of the Tax Administration to ensure a much higher level of tax compliance. We will also initiate an overhaul of the non-oil Tax Regime with a view towards simplification. One of the first steps in this regard will be the establishment of the long overdue Revenue Authority that will bring together the Inland Revenue Division and the Customs and Excise Division into a single entity. The Authority will have the autonomy to ensure a more effective management of the tax collecting agencies of Government. Currently the Government is in the process of identifying an appropriate Implementation Team, comprising personnel from both the Inland Revenue and the Customs and Excise Divisions. This Team will be supported by an Advisory Committee which will act as a link between the public and private sectors to achieve universal buyin to the process at an early stage. We shall be simplifying and modernizing the tax system to remove the loopholes that foster tax avoidance and weaken the tax base. The restructured tax regime will facilitate an environment in which the business sector can thrive and operate more efficiently.

Reform of the Value Added Tax
Mr. Speaker, allow me to address the issue of the Value Added Tax. The contribution from VAT relative to GDP has been declining since 1998 as an increasing number of items have become either zerorated or exempted and thereby excluded from the VAT base. Currently, only one third of Gross Domestic Product forms part of the VAT base. In addition to the loss in tax revenues, the system has encouraged evasion and fraud. To address these concerns, a Committee has been established to undertake a comprehensive review of the VAT regime with a view to streamlining the system and improving its revenue performance.

Reform of the Oil and Gas Tax Regime
Mr. Speaker, Trinidad and Tobago is now a producer of both crude oil and significant quantities of natural gas. In fact, this country is the largest producer of LNG in the Western Hemisphere. It is therefore imperative that as a Government we ensure that the country gets its fair share of economic rent from these non-renewable resources. Given the changing international petroleum environment, the Government will seek a revision of the existing oil and gas taxation regime. It is evident that there exist certain anomalies in the regime that must be addressed as a matter of urgency. In support of this exercise, a reputable international firm of consultants was engaged in May 2003. The consultants have submitted an Interim Report and are expected to submit a final report within the next four weeks. The new regime will come into effect on January 01, 2004.