Urgent call for $ action

TRINIDAD and Tobago faces an economic challenge that comes from both an internally prescribed objective and the need to adjust to the global movement of trade liberalisation. At home, the government has identified the achievement of developed-nation status by the year 2020 as the principal developmental goal of the country. At the same time, we must also gear ourselves to deal with the imperatives which the establishment of the Caricom Single Market and Economy and the Free Trade of the Americas will impose upon us. While this dual thrust will have its impact on the manufacturing or productive side of the economy, an equally important role will have to be played by the country’s financial sector which will also have to be strengthened, to be streamlined, to be shaped into a far more effective mode to meet the standards of a developed nation and the increased competition that will inevitably come from these globalising events.

What is the present status of the financial sector and just how much has to be done in this area to meet the double challenge ahead are outlined in the timely Green Paper recently issued by the TT Government. The comprehensive document, in fact, is the report of the 13-man committee appointed by Cabinet to review the country’s financial sector. The Green Paper, in our view, is a valuable document not only because its presents, for the first time in one study, a critical profile of TT’s financial infrastructure, dealing with all its sub-sectors in a diagnostic fashion, but also because it sets out recommendations for policy action to meet the strategic economic challenges of this changing time. The Green Paper deals with each sector in orderly way, giving its architecture, its performance, its major weaknesses and then the challenges and opportunities it faces. The report concludes with general recommendations and policy recommendations for each sector. It seems significant that many of these recommendations are for improvement and integration of the regulatory and supervisory systems of the various sectors.

Among the many recommendations for banking is one that would “encourage reliable and regular information disclosure to the public which should form part of the overall regulatory and supervisory process.” The report would also like to see measures instituted “to encourage a more competitive environment by facilitating the entry and exit of new players in the sector.” As for the capital markets, the report recommends, among other things, the improvement of standards for good corporate governance in accordance with international best practices “by establishing rules to deal with inter-locking directorates, voting rights of trustees and management of collective investment schemes.” Also, the Paper advocates the implementation of international standards for information disclosure and reporting so as to improve transparency. With respect to the insurance sector, the report points to a variety of weaknesses including the inadequacy of overarching legislation and the limitation this places on growth and development, and the need to increase the powers and technical and human resources of the Supervisor of Insurance to enable him to conduct effective oversight of insurance companies.

Among its general recommendations, the report calls for an upgrading of the sector’s legal framework and the country’s telecommunications infrastructure in terms of bandwidth and Internet connectivity plus the development of a national competition policy which should include the definition of monopolistic and unfair practices and rules to protect consumers. The Green Paper on the financial sector reads like an urgent call for action in an area where development, although considerable, has been haphazard and uncoordinated. Let us hope that it stimulates the necessary response.