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Encouraging the private sector
At the 2017 post-budget analysis of the T&T Chamber of Industry and commerce, Finance Minister Colm Imbert dismissed his hosts not having come for “sterile debate and academic discussion.” The Planning Minister and others have also spoken of the private sector’s propensity to import distribution. The Prime Minister at the PNM public meeting in Barataria on June 7, 2018, spoke scathingly of those calling for diversification concluding “Our diversification is to find the things we can do and just do them.”
The Trade and Industry Minister on a more conciliatory note, appealed to the business community on June 29 at a Union Club luncheon to get on board the country’s diversification strategy, noting that the Government could not do it alone. She also noted that there were a multitude of incentives in agriculture, tourism, and the creative sector that were not being accessed. She noted “The relationship has to be there. We certainly cannot do it without the private sector.” So, what is the problem?
To start with, there is no diversification strategy. (That deserves a separate article). Also, no business venture was ever started because the incentives were attractive or the interest rate low. The primary reason investors undertake new ventures is the profit motive. Incentives and rates are secondary and help to sweeten the deal. What matters most is confidence: confidence in the opportunity and that the business environment will remain stable. Businesses understand risk: what they do not want is uncertainty. And there are several factors which make the current environment uncertain. I will only identify four.
First, whilst the labour statistics show a low unemployment rate, many HR departments in the private sector complain of staffing vacancies and that the required experience and skill sets are not available at all levels. Even when those vacancies are filled, the turnover rate is high. Further, whilst T&T is a diverse society, applicants tend not to reflect that diversity. This is to be compared with the Energy Minister’s complaint that energy sector companies were not doing their job well as over 241 engineers applied for the six vacancies advertised. Similarly, the Minister of Health complained of a surplus of doctors whilst simultaneously recruiting medical staff externally.
The labour supply shortfall is a significant impediment to any business, especially the diversification effort. Is the education system structured correctly? Manpower planning has been ignored and there is no immigration policy that addresses this issue. Also, the demographic data indicate an impending crisis as both the labour participation rate and the birth rate have fallen. The NIB actuarial report indicates that labour availability will decline from 2020 onwards.
Poor rating for T&T in institutional capacity
Second, it is not sufficient to employ bodies. Productivity is a vital competitive driver in the international arena. To be productive, employees have to arrive at work in the right frame of mind, and on time. That requires a dependable transportation system to get them to work and their children to school safely. Therefore, organizational discipline is always under stress and productivity low.
Third, foreign exchange availability is a critical success factor. No business can survive without it. Since the decline in energy prices, demand for foreign exchange has outstripped supply leading to a continuous shortage. Since T&T officially operates a floating rate system, this ought to have led to an automatic rate adjustment, thus filtering out excess demand. Instead, the exchange rate has been maintained at an artificially low rate, thereby leading to a fall in reserves and rationing. No investor is going to start a new business venture requiring forex when availability, at the right time and in the right amount, is uncertain.
Fourth, personal security and safety in which to conduct business without fear is not be underestimated. The current national security environment does not reassure anyone. We cannot “find” a Commissioner of Police, nor develop an adequate process to do so. Meanwhile, the level of violent gun-related crime and murder is rising. And the spectre of kidnapping is ever present. As a result, some have emigrated; some have sent their children to school abroad. But your business is where your mind is. If your children are abroad, you will set up business there too and the children may never return. This is the human face of capital flight.
Commentators, ministers included, accuse the private sector of rent-seeking behaviour. It is paradoxical that the Government’s crown jewel, the National Gas company, is a distribution company as it depends on the upstream firms to produce the gas which it “aggregates” and distributes to the petrochemical sector. This state monopoly model is now outmoded with the upstreamers holding the upper hand. The real issue is that the Government’s policy stance encourages rent-seeking behaviour.
These are just a few highlights. There are other compelling issues. Government’s job is to facilitate; that means adequate transportation, health, security, education, and financial/exchange rate systems backed by appropriate policies.
The Global Competitiveness Index rates T&T poorly in institutional capacity. Leadership and management are required to get them all working in sync. They are not in sync now.
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