Dr Hosein suggests 5-year plan Manage economy at US$35 for oil, gas at US$2

He continued, “There has to be a formula that keeps costs free at the point of consumption, but that involves students repaying their full tuition fees at a later date, having gained suitable employment.” He also reiterated that government should reconsider its “subsidisation” of the Communitybased Environment Protection and Enhancement Programme (CEPEP), a suggestion, he said, which had been repeatedly made over the last ten years. He said the State will have to consider shifting some of the workers employed in CEPEP into the agricultural sector, to boost domestic agriculture production and in so doing create more meaningful employment whilst simultaneously reducing the demand for foreign exchange for imported agricultural foodstuff and also spur an improvement in worker productivity.

Dr Hosein said the Government needs to find a way to manage the economy closer to a price of US$35 a barrel for crude oil and US$2 per million metric British thermal units (mmbtu) for natural gas for the next five years. He said, “The state has to find a formula to cut back expenses closer to TT$50 billion per annum and to pull government revenues closer to that level. In the process we need to be careful about persistently increasing the stock of debt. In this regard, in this fiscal year it seems possible that we may see a freeze in wages at some point in time and perhaps even an increase in income tax, and various utility rates as the State tries to correct imbalances built up over the last 17 years of the resource curse.” Critically, he added, these rates may be the “true” rates at which the economy should have been operating at in the past and the lower rates which currently exists, as a gift from the state courtesy of the natural gas rents.

He said, the State will have to find a solution to get the E-teck Parks going as manufacturing sector activity has enormous capacity to produce sustainable employment and even more to generate foreign exchange.

According to Dr Hosein, Government will have to “consider taking a closer look at the Guyanese economy which has been experiencing very buoyant economic growth in the last few years and with its pending oil boom is ripe for investment from the TT economy. The Ministry of Energy has signed an MOU (Memorandum of Understanding) with the Ministry of Energy in Guyana. This is a step in the right direction.” He added that the crime situation seems to getting worst with murders seemingly on the rise; a kidnapping has popped up; breaking and entering seems to be on the increase and the perception can be greater than reality. “The state in its attempt to promote domestic private sector investment has to take a more aggressive look at the crime situation and provide interventions to halt its increase.” Meanwhile, senior economist at The UWI, Dr Anthony Birchwood, said he expected that the government will try to be conservative in spending in the upcoming fiscal year “and will not go on a wild spending spree.” In light of warnings by the trade union movement against any harsh new taxes which will negatively affect the standard of living of “the poor man,” Dr Birchwood said the country tended to treat labour as a “soft target.” He said the labour movement had a point because each time the country found itself in a difficult place economically “we tend to attack labour and make all the adjustments through labour,” turning to the taxation medicine which seemed to be inevitably administered to the working class whenever the country found itself in trouble.

In the meantime, Dr Birchwood said the class of people who had money to invest and could make a major difference in investing to bring in foreign exchange were not investing in the right projects to bring benefit to the country.

He said that instead of investing in productive industries which might earn foreign exchange for the country, the wealthy classes chose instead to invest their wealth in foreign franchises which might make them richer but saw the country paying out millions of dollars in foreign exchange in fees to the franchise holders in the US and other metropolitan countries.

And while the Government has been looking toward the manufacturing sector to pick up some of the slack from the falloff in the energy sector, Dr Birchwood questioned whether that sector had the capacity to do so. He pointed to the arrangement between Trinidad and Tobago and Venezuela under which Venezuela had provided a revolving facility of US$50 million to purchase goods from this country which were desperately needed in Venezuela. Dr Birchwood said the reality was that Trinidad and Tobago’s manufacturing sector could not meet Venezuela’s demands. And while the sector has been talking about increasing its capacity to fulfill the South American Republic’s need, Dr Birchwood said “they will probably be working to doing that, but that takes time. So it’s not like they could just wave a wand and miraculously they could make up the shortfall for oil.

However, Dr Birchwood said the performance of the manufacturing sector was good news for the country because it helped Trinidad and Tobago diversify and Venezuela provided a ready demand for our manufactured products.” Dr Birchwood compared the country’s current situation to the scenario which greeted the government of the National Alliance for Reconstruction headed by ANR Robinson when it came into power and faced conditionalities imposed upon the country by the International Monetary Fund (IMF). He recalled that then finance minister Selby Wilson was required to write to the IMF outlining how the country planned to adjust in preparation for the structural adjustment programme which was to be imposed by the fund. He observed that in those days the philosophy of the IMF was one of austerity, demanding that errant economies “cut, cut, cut” and raise taxes in the hope that the economy would grow. He said that the IMF had been softening its harsh prescriptions since “geopolitics had taken over.” However, he said there had now been the rise of the rating agencies which could have nearly the same effect as the IMF by downgrading a country’s economy, as it did recently in the case of Barbados.

He said if this country does not practice fiscal discipline it will be spending faster than it could actually be comfortable with. He noted that because Trinidad and Tobago still had its oil revenues it was able to survive by financing the exchange rate through a “managed float” of the Trinidad and Tobago dollar. He added that although those oil revenues are at a reduced level the country is still fortunate in that it still has its oil income, “but if we do not reflect fiscal discipline we could be in trouble,” he said.