Home' Trinidad and Tobago Guardian : September 11th 2014 Contents This commentary was written
before the 2014/2015 budget
announcement so it is not a
pronouncement on what is.
Yet I am confident the points
being raised here are relevant
simply because every year the same issues
recur without being effectively addressed.
This is not a fault of the budget itself, but
the context in which the budget is produced.
This criticism is not specific to this admin-
istration but has become a feature of our polit-
ical landscape. The budget document is sup-
posed to be a detail of revenues and
expenditures within the context of an overall
medium- to long-term plan. It has morphed
into a political tool to offer rewards and incen-
This year s budget comes in the eve of a
general election with the expectation that there
will be "a basket of goodies." Recall a few years
ago when a former prime minister promised
us "a land of milk and honey". Juxtapose all
the promises you hear and see, now, in the
past and the promises to come, against the
fact that it took us more than 15 years, spanning
the political divide, to build the interchange
at the Uriah Butler Intersection.
A big part of our challenge is to move past
the political rhetoric and into the frame of
efficient and effective execution. In order to
properly execute, we need to properly plan so
as to provide a suitable frame of reference.
The annual budget should be the last and
most inconspicuous stage in this process.
Instead, it is the focal point.
Successive administrations have treated us
to their respective plans without the level of
debate required for them to be termed national
plans. We had the Vision 2020 plan, the exe-
cution of which left much to be desired. The
current administration shelved this plan and
came forward with a Medium Term Policy
Framework 2011-2014 titled Innovation for
Lasting Prosperity. The last three budgets were
supposed to provided the resources to bring
this plan to reality. So how did we do?
Today, the debate should be centred not on
the budget, but rather understanding and
accounting on the results of this policy frame-
work and whether the promised targets have
been met and if not why not.
Lack of focus
Our problem is not budgeting but rather
the lack of planning to provide a context for
the way in which money is being spent. Every
successful country, company or person first
set out to do one thing and do it better than
anyone else. Here in T&T, we have set out to
be everything from oil and gas exporters to
fashion designers and everything in between.
Politically, this makes everyone feel included,
but it lacks an overarching context and frame-
The mantra of achieving "developed country
status" is not and never was the answer since
this is an outcome rather than an objective.
In other words, we have spent the better part
of 15 years chasing after the pot of gold at the
end of the rainbow. It does not exist. We will
become a developed country when we get
there because the benchmark for development
changes all the time. If we had set out to
achieve something focused and tangible, we
could have been much better of at this stage.
When there is no single-minded focus,
everything is disjointed and ends up being sub
par. If we want sustainable economic pros-
perity, then every citizen must be able to iden-
tify our area of focus.
We have a number of pressing needs. The
issue of unacceptably high levels of crime is
into its second decade; corruption (white-
collar crime) is yet to be effectively addressed;
our healthcare system remains wanting; our
transport infrastructure inadequate to suit our
We are unable to produce enough sustainable
employment and, in the end, extend subsidies
and make-work programmes that only exac-
erbate the other issues raised. Attempting to
fix these issues in silos as is the prevailing
prescription will take us down a path to
nowhere. All these issues were touched on in
the current medium term planning document.
Were the benchmarks identified achieved?
We can achieve great things with a clear
focused objective. Back in the 1960s, Singapore
had one resource of note, deep waters that
gave rise to a trading port. The country focused
on becoming a transport hub for South East
Asia and everything was built around that
single objective. A world-class port was built
and a world-class airport and a world-class
internal transport infrastructure were obvious
parts of the mix. Yet it was not just any airport,
the objective was to be a "sanctuary" for pas-
sengers. There was clarity of purpose and
everyone in the country could grasp what was
needed to become a "sanctuary" for travellers.
Demographics the key
Many a politician have suggested to us that
T&T is ideally located to connect North and
South America. Now compare our sea and
airports. After decades of trying, is it world
class, is it properly located, and is our passenger
and cargo handling capability sufficient? How
about security, especially in terms of the drug
trade? The issues with our national airline are
The first order in terms of a solution to our
economic problems in T&T is to increase the
level of aggregate demand in our on shore
economy. The challenge is to formulate a clear
focused objective towards achieving this.
Aggregate demand is defined as the total
demand for final goods and services in the
economy at a given time and price level.
In the case of Singapore, by becoming a
transport and trading hub a number of on
shore services were created that included logis-
tics management, financial services, and
tourism. Even where manufacturing was
involved, it is due in part to the quality of the
infrastructure of being a transport hub. In
other words, the solution, which eventually
encompassed many sectors, was born out of
a single objective.
In T&T we are trying to develop many sec-
tors at the same time, but the overarching
objective is missing resulting in a mismatch
of ideas. In the past, we have transferred rev-
enues earned from the off shore economy (the
petrochemical sector) to the onshore economy
by running what was termed the "energy
deficit" and utilising subsidies to stimulate
demand. This is both artificial and unsustain-
If the size of our national budget were to
be reduced as some have argued for, govern-
ment spending and consumption as a per-
centage of the overall economy will also fall.
By itself it would represent a decrease in aggre-
gate demand, leading to a recession. This is
why we continue to see ever expanding budgets
and deficits for eight out of the last ten years.
In the past few years, more it seems out of
desperation rather than any real hope, there
has been an appeal to the business sector to
increase their investment in capital goods. The
figure of $7 billion in investment spending
coming from the private sector has been a
recurring theme. Interest rates have been pushed
to record lows in order to accommodate this
It has not happened to the required size and
scale and it puts the economy into a cycle of
dependency on injections from the State or
foreign direct investment. Over the past four
years, I have maintained that a sustainable
increase in consumer demand is the key to
increasing our levels of onshore aggregate
demand in our economy.
We have prompted consumption in motor
vehicles and for property through low interest
rates. This by itself is insufficient as both result
in leakages via imports.
Developing our onshore service sector will
remain challenged because our population is
lacking both in terms of size and overall afflu-
ence to sustain this sector.
Yet it is only going to get worse. Our last
census highlighted our aging population. This
has a clear implication for productivity and,
by extension, on shore economic growth in
the years to come. Worse still, we lose around
70 per cent of our tertiary level educated labour
force through emigration to developed countries.
In the United States, 10,000 people will turn
65 today and this will continue for the next
19 years. My assessment suggests that the US
is one year away from full employment, which
implies that more of our educated will be lured
away from our shores. Consider this in the
context of the monies spent on GATE while
crime is still high and transport and health
care infrastructure lacking.
We are spending lots of money without a
real long-term context to ensure that the dots
are properly connected. T&T needs to focus
on our planning policies more than on the
BUSINESS GUARDIAN www.guardian.co.tt SEPTEMBER 2014 • WEEK TWO
Budgeting without context
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