Interview: Derek Chin
Will 2018 bring an end to the contraction cycle?
DEREK CHIN: I do not think T&T has seen the bottom just yet. Despite the announcement of major construction projects and other stimuli, few of these strategies alone could effectively create the net revenue to balance the fiscal deficit. The government is markedly against the depreciation of the T&T dollar, and the foreign currency shortfall over the past years will continue with very little incoming capital from abroad. Hydrocarbons are still our main source of revenue, and the stagnation in prices means that no significant stimuli are expected to come in 2018. Diversification in other sectors has not been realised to the extent necessary for a real change to be visible. The country needs to reduce government spending in non-priority areas. High, uncontrolled levels of public spending may translate into a possible intervention by the IMF in the not-too-distant future.
How does foreign exchange (forex) affect business?
CHIN: The shortage of forex has certainly changed the way the private sector does business. The delays and overall difficulties in obtaining forex have resulted in a reduction of purchases in some businesses. Delays in obtaining vital supplies and raw materials have affected production and distribution cycles across sectors. I would not say this is a desperate situation, but businesspeople certainly have to take possible delays into account when ordering stock from international suppliers and before any commercial transaction is finalised. Operational costs have also been affected, since purchasing prices have increased for goods as the demand for hard currency has created a parallel market with its own exchange rate for US dollars.
What effects will the budget’s proposed fiscal reforms have in the short and medium term?
CHIN: The announced fiscal measures in 2017’s budget have not yet had any material effects, since most of the disclosed tax reforms have not been fully implemented and executed. In this regard, the effects of one of the most notorious reforms, the new property tax, have barely been felt by taxpayers, and significant changes to home- and land-ownership taxes are usually passed on to the general population. Up to this point the impact of increased costs in transport and other public utilities has not been a significant threat to social peace, nor has it caused large social unrest, as some may have feared.
Additionally, it appears there are delays in the implementation of several new taxes that were announced in the 2018 budget. This is a consequence of either the long legislative procedures such measures entailed or poor implementation schemes.
Which sectors are likely to drive diversification of the Trinbagonian economy?
CHIN: Economic diversification has been a key challenge for T&T, in tandem with over-reliance on hydrocarbons and the energy sector as the sole economic driver. For years, tourism has been a plausible source of diversification, and it has received a lot of focus, but it has failed in providing tangible results. Governmental policies and strategies have not helped to develop the sector’s potential, hindering growth opportunities and leaving the sector underperforming.
Additionally, it seems that tourism is mostly misunderstood in T&T from a social point of view. Fuelled by decades of buoyant hydrocarbons-driven growth, local populations often have negative attitudes towards foreign visitors. This, coupled with a “chip-on-the-shoulder” mentality, necessitates a complete overhaul and re-education process of the local workforce for tourism to become a vibrant industry, as it is throughout the region. Furthermore, quality standards must be increased to make T&T an appealing travel destination. Tourist facilities need thorough upgrading and additional investment. Regional competition is tough; thus, there is a need for a complete overhaul of the sector to make T&T competitive vis-à-vis international markets.
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