Home' Trinidad and Tobago Guardian : December 31st 2015 Contents DECEMBER 31 • 2015 www.guardian.co.tt BUSINESS GUARDIAN
COVER STORY | BG5
Look to smelter:
Viable source of forex
The Government has to find new ways to earn
revenue in 2016 to survive the collapse of oil
prices, says Karen Tesheira, who served as
finance minister between 2007 and 2010 under
the Patrick Manning administration.
"The Government has a hard task ahead of it. It will be a
difficult year. They have put forward some of the revenue gen-
erating measures they will attempt to put in place like increasing
taxation, setting up the Revenue Authority, re-establishing the
property tax and so on. I know the Prime Minster will be
apprising us of the seriousness of the situation and people will
know that we are going through a period of austerity. This is
the time to tighten our belts," she told the Business Guardian
on Tuesday morning in a telephone interview.
Tesheira said oil and gas natural prices are not going to
recover anytime soon.
"The United States is now a large oil producer. They have
cut their imports by half. They no longer import from Nigeria.
The OPEC countries like Saudi Arabia have indicated they have
no intention of reducing their supply. Iran will be increasing
its oil production. When you put those factors together one
cannot expect the oil and gas prices to rebound in the short
to medium term," she said.
To combat this scenario, she suggested that T&T increase
oil exploration as advanced technology allows for quicker finds
in a shorter period.
She said T&T needs to diversify its economy urgently to
move out of the economic slump it now finds itself in.
She added that there was some diversification in the past
in the energy sector and pointed to the Point Lisas industrial
complex built in the 1970s and the more recent Atlantic liquefied
natural gas (LNG) trains.
"These were all a brainchild of the PNM. This is the time
for the Keynesian model of economics to take place.The Gov-
ernment will have to take the lead and find mechanisms for
generation of foreign
She expanded this by
saying that the Govern-
ment should take the lead
in the economic recovery.
When asked about the
possible impact it may
have on inflation, Tesheira
said there is a "risk" in
"I am not saying the
Government should just
build more roads, I am
speaking about new
industrial plants---like the
plants---and other indus-
trial projects. We just can-
not take austerity meas-
ures. We have to take
strong measures to earn
other sources of revenues."
Manning era projects
Tesheira referred to plans during her tenure when that gov-
ernment was considering the setting up of the controversial
aluminium smelter plant which was carded to be built in La
"Had that plant been built we would not have been in the
situation we are in today. The prices of aluminium have not
depressed. I think what Dr Rowley is going to do is follow
through on some of the initiatives started under Patrick Manning.
The aluminium smelter plant might be back on the table. The
polypropylene and polyethylene and the plastic industry, we
have to go up the value chain and look at those. We have to
set up those production streams."
According to the Economic Intelligence Unit of the Economist
Magazine, forecasts for July 2015 showed that in 2013, aluminium
was US $1,846.7 a tonne, in 2014 it was US $1,867.4, while in
2015 it dropped slightly to $1,779.8 a tonne. In 2016, it is expected
to go back up to $ 1,912.5 a tonne.
She also said this government should continue the work to
turn T&T into an international financial centre (IFC).
"We are flushed with liquidity. The Central Bank has had
to issue treasury bills to mop up over $4 billion of excess
liquidity. We have banks bursting at the seams with money
ready to invest. It was under the PNM administration that the
IFC was set up. This is another stream for diversification."
Tesheira said T&T also has a highly educated population
which will form the base for a strong industrialised economy.
"When you look at countries like Japan and Malaysia they
had no resources but they used their people. We have the
College of Science, Technology and Applied Arts (COSTATT),
University of T&T (UTT) and other institutions."
She said there are major differences between NAR-era reces-
sion during the late 1980s and the situation now.
"For one, we do not have $142 million in foreign exchange
reserves as was the case in the 1980s. Now, we have over US$10
billion in reserves and that is 11 and a half months of import
cover. Look at Barbados, they have only 16 weeks of import
cover. Also, our unemployment is like Greece. We have been
through that deep recession and we survived."
She also said this Government has its new Economic Advisory
Board made up of professionals with economic and finance
backgrounds who will provide sound advice.
When asked if she believes the new Government will be
forced to return to the International Monetary Fund (IMF) she
pointed to recent statements by the Prime Minister who said
he has no intention of doing that.
"There are so many differences between what we experienced
during the 1980s and now," she said.
She hopes that many Patrick Manning era plans that were
discarded will be revived.
"One of the reasons why Standard and Poor's and Moody's
downgraded us was our failure to implement. The last PP Gov-
ernment failed to do that. We can now implement many of
the projects which are going to allow for us to earn foreign
LOOKING AHEAD: 2016
Economist Dr Ronald
Ramkissoon, who spoke to the
Business Guardian on Tuesday,
is also predicting a "difficult"
"This is as a result of the price of our major
foreign exchange earning asset has declined
and will most likely stay low for a while. Also,
T&T has not been as careful in its expenditures
as the country ought have been in the last
few years. Because of those two factors, the
country will have a difficult year and that
should come as no surprise."
He said the Government needs to cut back
"The country need to focus on increase on
revenues and to do the things that are nec-
essary to manage the economy in very difficult
times. It is a very challenging environment
for us. Some of it is because of our own doing
at the domestic level and part of it as a result
of what has happened externally," he said.
When asked if he believes the Government
will take austerity measures like Greece and
other countries, he said he cannot speak on
the Government's behalf but what he did say
is that from an economist point of view "some
austerity measures" will be required.
"If at the personal level this is what an
individual faced, this is what he or she would
have had to do given the fall in income."
Unlike the late 1980s under the NAR
regime, he said T&T has built certain strengths
"We do have a fair amount of foreign
reserves. We do have a population most of
whom are employed, never mind some in
social programmes, so there is no reason to
lose hope. I am certain we can ride out a dif-
ficult period and make adjustments while we
put in place new foreign exchange activities,"
He said it would be difficult to say if 2016
would be a year of no economic growth.
"If we have marginal growth in the economy
next year, we would have done reasonably
well. We are in a difficult position and it is
difficult to determine whether the economy
will be in a plus or minus."
Focus on structural
Ravi Suryadevara, president of the
American Chamber of Com-
merce of T&T (AmCham), said
the economic challenges cannot
be solved overnight as there are
structural challenges to be solved in 2016.
"In this regard, we look forward to working
with this new administration to ameliorate the
structural deficiencies in our economy. The
current circumstances certainly present an
opportunity to build the necessary consensus
to make our country an even better place in
which to live and do business," he told the
Business Guardian by email on Monday.
Given prevailing global economic conditions,
he said the country must act in an urgent and
collaborative manner to address the most press-
"We appreciate the Government's need to
balance several interests as they consider such
pressing issues as how to achieve subsidy
removal, social welfare reductions, reduction
in the costs of government operations, whilst
not suppressing the opportunities for growth
and the stability in the economy required to
He said an effective public procurement
regime, improved taxation system efficiency,
more private sector activity seeking new mar-
kets, greater efficiency of government expen-
diture, institutional strengthening and improv-
ing rule of law are all equally vital to effecting
the changes required to continue to attract
investment and grow the economy.
"All of this against the backdrop of managing
inflationary headwinds and a rising interest
rate environment highlight the need for urgency
in our collective actions."
He acknowledged the Government's mid-
year review being the major driver for further
policy adjustments in 2016 to address these
questions as the country must acknowledge
the unfortunate reality that it simply does not
have enough to sustain our present expenditure
"As we face these challenges of great mag-
nitude as a nation, AmCham T&T continues
to do its part to ensure that together we shall
surmount this as well."
DR RONALD RAMKISSOON
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