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Challenging task for Mr Howai
The apparent logic of Prime Minister Kamla Persad-Bissessar’s decision—announced in primetime last week Friday—to change her Minister of Finance from economist Winston Dookeran to banker Larry Howai seems to be that she wanted someone who could kickstart the T&T economy.
The Prime Minister went out of her way to note that Mr Dookeran had stabilised the economy, resolved the Clico issue and settled 36 wage negotiations with public servants or employees of state enterprises. Given the tragedy that has befallen many developed economies across the world since May 2010, an argument can be made that what the economy needs is more caution, more wage restraint and greater vigilance of the potential impact of the volatility in the world economy on T&T.
On the other hand, the countervailing argument is that under the “stabilising” hand of Mr Dookeran, the economy slumped back into recession in 2011 with gross domestic production (GDP) declining in three of the four quarters last year—although the prices of many of T&T’s exports were significantly higher than predicted in the September 2011 budget speech.
The challenge that Mr Howai faces is getting the economy growing again in a way that does not add fuel to the fire of rising inflation—which the Central Bank disclosed yesterday had increased by 12.6 per cent between May 2011 and May 2012. The traditional way in which Ministers of Finance have got the T&T economy to grow is by ramping up the capital expenditure budget.
The logic here is that if the State sponsors construction projects, the money should go from the Treasury to local contractors to the local manufacturing sector and to sub-contractors and labourers, both skilled and unskilled. And at the end of this process, there are roads, reservoirs, hospitals, schools and bridges, all of which contribute to the country’s development and hopefully provide the impetus for the establishment of new industries.
Mr Howai would do well to focus on expanding the capital budget rather than simply doling out money to the population by way of popular but essentially non-productive transfers and subsidies—as he will be encouraged to do even by some of his well-meaning colleagues. But the new Minister of Finance must conceive of his role as being much more than the person who signs the cheques.
One of the failings of Mr Dookeran is that it seems as though he was not able to energise the public servants in his ministry (and the small army of special advisers) to translate policies into projects in a way that was quick, efficient and transparent.
Two examples of this are the proposed divestment of 20 per cent of state-owned First Citizens Bank and the proposal by the Government to pay Clico policyholders a significant percentage of their investments in the form of units in an investment trust company named NEL 2.
Mr Howai, therefore, needs to ensure that all of the projects announced in the 2013 budget are given strict timelines and that there are people in the ministry whose full-time job should be to ensure that the projects that have been promised are on track to being delivered—on the dates that they were promised and at the cost.
While implementation of projects is going to be crucial to the success of the new Minister of Finance, he will also need to be astute in signalling that the Government cannot shoulder all of the burden of growth by itself—the local private sector must be given the necessary assurances that it has a role to play...and an important role at that.
For far too long there has been a lopsidedness to the investment in the local economy with the State doing most of the spending and the local private sector paying down their debts and building up their cash reserves. If Mr Howai can give the local private sector the confidence that it is okay to invest their money in T&T and that the Government’s policies will promote an appropriate return on their investment, he may turn out to be a great deal more successful than some of his predecessors.
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