Home' Trinidad and Tobago Guardian : September 7th 2017 Contents SEPTEMBER 7 • 2017 guardian.co.tt BUSINESS GUARDIAN
FINANCE | BG11
Budget 2018: Harnessing
the wisdom of the crowd
We are in
much of the
discussion and speculation is going
to be about which expenses will be
cut and what taxes and other fiscal
measures are likely to be increased. I
have often lamented the short-term
nature of our budgeting process and
the fact that measures come about
annually and are a closely guarded
secret until the day of the budget
I expect that anyone involved in
any level of corporate planning---
whether it is an industry specialist
or someone operating at a C-suite
level---would agree with the following
In order to successfully plan and
execute on those plans one needs to
have a multi-year horizon.
Further, this multi-year horizon
needs to be properly and effectively
communicated. This is why annual
budgets are either part of a three-
or five-year forecast. This forecast
is then updated as circumstances
In T&T successive administrations
have perpetuated a myopic approach
to governance with the emphasis on
an annual budgeting exercise that
includes passing reference to me-
dium-term projects without the
necessary detail or clarity to allow
the public to understand how they
will be actioned.
My wish---which I have expressed
every year before the national
budget---is for this year to be differ-
ent. I live in hope. For clarity I am not
speaking about the Vision 2020 Plan
nor the "Medium Term Plan" of the
last administration. I am referring
to a plan that actually has numbers
associated with it, as opposed to a
series of glorious thoughts and ideas.
To appreciate how wrong we have
been in the past see if you can find
a copy of the original Vision 2020
document. There you will find in the
first few pages a targeted inflation
rate of five per cent on the road to
achieving developed country status.
Appreciate that one key role of
government and its agency, The
Central Bank is that of price stabil-
ity. Then check the inflation trends
in the years subsequent to the release
of the Vision 2020 plan and you will
appreciate that through this one
measure the plan failed before the
ink had time to dry.
The lack of price stability has seen
the cost of many items increase by
150 per cent over a 15-year period.
The cost of owning a home and home
ownership, in general, has increased
at a faster pace meaning the gap be-
tween the owners of capital and those
without has grown wider.
As the cost of home ownership and
durable items (cars and appliances)
increased many had to finance this
through higher levels of borrowing
which mean that the all inclusive cost
taking financing charges into account
resulted in a 200 to 300 per cent in-
crease in these items over the period
Appreciate as well that as this
happened over the past 15 years,
the savings rate would decline and
a rapidly aging population would be
saving less and less for retirement.
The full price to pay for this is yet
The last administration had a Me-
dium Term Plan that spanned three
Published in 2011, by the time
we got to 2013 those targets were
actually blacked out on the docu-
ment that was available online. A
clear admission that they were not
achieved or achievable. This plan was
supposed to provide the guidance for
the preparation of the annual budg-
ets during the time it was in effect.
However, it was difficult to find many
direct correlations between the Me-
dium Term Plan and the respective
The repercussions of the past 15
years are now being felt.
The ever increasing use of sub-
sidies and make-work programs
masked the true economic impact
of our failure to implement and ex-
ecute plans within the required time-
lines. As the tide on these subsidies
are now coming in, many are left
standing close to be proverbial shore
with their nakedness exposed. This
is creating a backlash in the society
and the antagonism towards "the one
percent" by "the balance" is evidence
of this reality.
Moment of truth
The point to appreciate is that up to
now our inability to plan and to exe-
cute on those plans have meant that
private sector capital will prefer to
stand on the sidelines and sit idle as
opposed to being deployed in a pro-
ductive way that helps to meet our
economic objectives. Our inability to
plan and execute over a multi-year
horizon means that every year we are
simply seeking to out fires.
In the current environment, that
fire is morphing into a raging inferno
and there is a real risk it will con-
sume the most valiant attempts at
Bear in mind that since 2009 we
have been running budget deficits.
This trend is likely to continue into
the foreseeable future. Recognise as
well that this month marks the 10th
year since the start of the global fi-
nancial crisis so for the past eight
years, the world has been in recov-
Statistically you would expect a
global economic expansion to lose
steam at some point over the next
three years and this will have an
impact on our economic fortunes.
However, by the time we get to that
point we may have used up signifi-
cant buffers that have assisted us to
keep going over the past few years.
Recognise that we have not put
anything into the Heritage and
Stabilisation Fund for five years and
that trend is likely to continue to the
foreseeable future. The likelihood is
that we probably will no longer be
able to make any contributions to the
heritage part of this fund again. What
we have now we will have to make it
work for the next generations.
These are our realities.
So, how do we get out of this quag-
Both this administration and the
one before have spoken extensive-
ly about the use of Public Private
Partnerships (PPP). It is in my view
a valid mechanism if we would use it
properly. Sadly, we are nowhere close
to doing so.
Firstly, for extensive use of the PPP
model to make sense the "private"
element of the equation has to have
line of sight of government plans and
policies and that line of sight must
be transparent as opposed to only
being accessible to those within a
close circle of financiers and friends.
This is why multi-year budgeting is
so important and forms a clear pre-
requisite to what we want to achieve.
If there is a line of sight as to pro-
jects and timelines and the process
is seen to be transparent then the
private sector with a two- or three-
year horizon in place can begin the
process of acquiring resources,
training and development in order
to bid and then deliver on the requi-
site projects to the standard required
by the public.
We are already behind on this
timeline so the tendency is to move
towards less transparency and have
more directives from the State.
Of course, a key part of this equa-
tion is the implementation of the
necessary procurement legislations
that are required. To date, successive
administrations have dragged their
feet on this important piece to the
PPP puzzle. This is why we contin-
ue to have scandal after scandal on
the issue of public procurement and
which is why the necessary private
sector impetus that is required has
failed to materialise.
At the very least if we have prop-
er and transparent competition by
the private sector to participate in
various Government initiatives then
that, in itself, will lift the standard
of our private sector operations and
push the economy to greater heights.
The most important thing for a
government facing this type of fiscal
challenges is to realise that the more
one attempts to micro-manage, the
greater the risk of failure.
Key decision makers in the current
administration---if they are serious
about a collective national effort to
move the economy forward---would
do well to understand the concept of
"The Wisdom of Crowds"
In fact, there is a book published
in 2004 on the same topic, "The
Wisdom of Crowds: Why the Many
Are Smarter Than the Few and How
Collective Wisdom Shapes Business,
Economies, Societies and Nations."
The "wisdom of crowds" is the
basis upon which capital markets
of the western world function and,
if we truly want to move forward as a
country, then we have to provide the
enabling mechanisms for this collec-
tive wisdom to manifest itself and
then lead to concrete action.
Providing clear, definable and im-
plementable multi-year details in the
form of a budget presentation that
can lead to transparent and deter-
mined action by all elements of the
private sector is the biggest step that
we can take to extricate ourselves
from our current predicament.
Ian Narine can be contacted via email
we have been
trend is likely
to continue into
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