PRESIDENT, AMCHAM T&T
ECONOMIC OUTLOOK 2017 - 19/01/2017
HILTON, TRINIDAD & CONFERENCE CENTRE
Good Morning Ladies and Gentlemen.
We once again approached this New Year with the mixed feelings of trepidation and hope, very much akin to how 2016 started. With continued global market fluctuations, Brexit, the rise and subsequent election of Donald Trump as the President of the United States, the major lesson of 2016 is that there is the certainty of uncertainty ahead. Such is the message emanating from the current World Economic Forum (WEF) Annual Meeting in Davos-Klosters, Switzerland.
For over the last four decades, the World Economic Forum (WEF) has been performing its mission of improving the state of the world, as the International Organization for Public-Private Cooperation by engaging societal, business, and political leaders in shaping a multitude of agendas. The message this year is very clear. The temptation of nativism, protectionism, and populism, fueled by growing income disparity globally, need to be fought now with a sense of urgency. The middle-class that forms the base of most progressive societies is under threat.
The global threats have changed significantly. Of 750 experts surveyed by WEF, the economic risks dominated 2008 to 2010, such as an oil and gas price spike and asset price collapse. Income disparity risk dominated 2011 to 2014, which is widely believed to have led to the current wave of populism globally, as reiterated by the Christine LaGarde, Managing Director of the International Monetary Fund (IMF). Now, environmental and societal threats dominate. For 2017, the biggest global risks as identified by the WEF are:
Whilst the world marches on, one gets the uncomfortable feeling that Trinidad and Tobago is not keeping pace. As countries adopt treaties, alliances, and agreements, both individually and collectively, those international commitments have to be translated into domestic law. Hence, one major reason for the importance of the legislative agenda and concomitantly our selection of the Honourable Attorney General, Farris Al Rawi as the feature speaker this morning.
We learned that the views of those who speak the loudest, are not necessarily the views of everyone, and most importantly we learned that above everything else people want to be heard. As we execute the legislative agenda we must be mindful of a vigorous process that is as wide as possible to capture the various stakeholders and perspectives that exist in our plural society. We must not cower from the responsibility of a process that captures that plurality of our society. However, when representing the plurality of views we must not cower from being responsible.
This year the American Chamber of Commerce of Trinidad & Tobago is celebrating its 25th Anniversary, 25 years of vigorous and responsible national engagement. At this stage in our organisational life we fully embrace our role as the Pathway to the Americas, to provide outward connections and reach when we are so inwardly focused. In this role, we recognise that to truly be of service to our members and our nation, we must not only lead but we must listen. This is why we continually encourage our members to come to us and discuss their issues and challenges. We also continue to engage with the Government of Trinidad & Tobago and other state agencies with the intention of positively contributing to the national agenda, such as this morning. It is through these discussions we continue to speak out on issues that not only will have a positive impact on the way we do business but also the quality of life for all in Trinidad & Tobago.
As The Pathway to the Americas, we will continue to advocate for policies and reform in areas that will increase economic growth. For us, economic growth is not just a figure reflected in the GDP; growth must be a national philosophy, as the primary poverty alleviation tool. There must be a real focus on creating an environment of opportunity, the efficient provision of the necessary services, and income for all, not just a select few. It is about security and safety.
We believe that for this growth to manifest, we must realise our power to choose. The power to choose people over politics. The power to make short term sacrifices for long term prosperity. We can choose policies that will spread these sacrifices across the board, so that one portion of the society does not feel excessively burdened. Growth must not be an option, but must be viewed as the only answer for a more just and prosperous society. Based on our interaction with our members and different groups we believe that the two areas affecting growth that need particular urgent attention are trade and legislative reform.
We would like to urge the Government of Trinidad and Tobago, the members of the Opposition and all stakeholders that have the power to make decisions to consider this. After all, from our research, only 10 bills were assented and became Acts last year. The rate of legislative change domestically has to be tethered to and greater than the global rate of change for us to positively affect the lives of our citizens, not just as citizens of Trinidad & Tobago, but as global citizens.
We also appreciate that much of the change we seek cannot take place without a change in legislation. This brings me to what feels like a thorn in the side of businesses. The slow-pace, at which legislative reform takes place, leaves much to be desired. Job creators and foreign investors face excessive impediments to doing business in Trinidad & Tobago. Regardless of the political rhetoric, we now realise that our leaders show their priorities, not by what they say, but how they vote in Parliament.
AMCHAM T&T believes that there are some key legislation and policies that would improve our business environment once implemented. We need to operationalise the Procurement legislation, to ensure that there is accountability and rationalisation of Government spending. I am hopeful that the Attorney General can shed some light on what has been to date largely opaque modality by Government in the operationalization process for this piece of landmark and systemic change legislation. I draw reference back to my earlier comments on process and inclusion.
If we are to get serious about international trade, we also need to show we are serious about curbing white collar crime. Careful consideration and support for the passage of all Anti-Money Laundering and Counter Terrorism Financing legislation is necessary for this to occur. We must increase and build on existing capacity to detect and prosecute fraud in both the public and private sectors.
A policy that promotes the use of alternate technology based channels for the delivery of Government services is also critical. We must provide for a seamless and integrated single electronic window would ease the administrative burden and improve efficiency in key areas such as customs and tax administration.
Looking beyond our shores I also believe that we need to think about how we can fully utilise the Strategic Engagement Act. The act was passed in the Senate in December, 2016. It seeks to increase engagement with the governments of the Caribbean, the Caribbean diaspora community in the United States and the private sector civil society in both the U.S. and the Caribbean. This allows for an evaluation of the Caribbean Basin Security Initiative (CBSI) and a breakdown of CBSI assistance provided to each country; and an evaluation of U.S. diplomatic engagement with the Eastern Caribbean. The United States still remains our biggest trading partner and despite the uncertainty of the priorities of the new President, we need to continue to align ourselves with the right people so we can be well prepared for any opportunity that presents itself.
AMCHAM T&T continues to advocate for the best interest of Trinidad & Tobago through our involvement in AACCLA. In early February we will be meeting with our AACCLA counter parts in Miami, where the theme of the meeting is “Outlook on the Americas”. We believe that this involvement gives AMCHAM T&T to offer what no other chamber in Trinidad & Tobago can offer. That is the ear of one of the biggest trade organizations in the world, the US Chamber of Commerce. This will be closely followed by the mid-year meeting in Nicaragua for the Business Future of the Americas Conference, for which we are also leading a trade mission.
One issue that has had our attention for the last three years at least is that of PETROTRIN. PETROTRIN has been a source of concern and AMCHAM T&T has included these issues as a part of our annual budget submission for several years and with the various Governments in office at that time. Governments have offered many solutions but these have either brought no resolution or not implemented. Mismanagement and inefficiency have continued to be a perennial problem for this state enterprise. With aging infrastructure and machinery, rising management costs, and a track record for delayed and unfinished projects with huge cost overruns. In his recent address to the nation, the Honourable Prime Minister sought to explain the predicament in which PETROTRIN has found itself. Last year, at our 20th Annual Health, Safety, Security and Health Conference we had Fitzroy Harewood, president of PETROTRIN candidly speak to the challenges facing the company. Time and time again we have advocated that Government seek to ensure viability of PETROTRIN by rationalizing its cost base and operational inefficiencies. AMCHAM T&T remains concerned about PETROTRIN's significant debt obligations, with US$850M coming due in 2019. We understand that these and other critical challenges now occupy PETROTRIN’s leadership’s attention and look forward to the outcome of on-going discussions.
As a country we understand that there is an urgent need to look beyond our borders and into the Americas for trade. To do that we need to we facilitate a culture of trade and export. We must find the best way to make full use of the current trade agreements as well as aggressively look to increase our trading relationship with all of Latin America. This must be fostered at every level of our economy. The late Prime Minister, Dr. Eric Williams stated that “the future of our nation is in our children’s book bags” however, are our schools equipping students with the necessary skills that will prepare them for the job market that will exist in five to ten years? Or are we preparing them for jobs that may not even exist two years from now? It is this reason we have chosen the theme “Re-Engineering Education” as our theme for AMCHAM T&T’s National Youth Productivity Forum. The program now in its eight year will allow students to critically access the education system and determine if it needs to be re-engineered to keep up with the modern world. This we believe is critical for the realisation of future growth. If we do not address this, we are perpetuating a system where there will always be a subset of people that will become dependent on social intervention, not so much for their lack of trying to get ahead but the lack of structural and educational foresight of the leaders.
We cannot speak to trade without touching on the challenges that continue exist with the foreign exchange shortage, especially as we continue to grapple with reduced revenues and the US dollar continues to strengthen. The shortage in foreign exchange, which has now spread to other currencies such as Canadian and The British Pound, continues to negatively affect business and prospects of growth for small, medium and large businesses. In December, it was reported that The Bank of Guyana “temporarily” stopped purchase of Trinidad and Tobago and Barbados currency, in a bid to stabilise their foreign currency market. They realised that individuals from these two countries were coming to Guyana to purchase United States currency and in the process flooding their local market. This alone illustrates the lengths to which business owners and individuals are willing to go to ensure that they have adequate stock piles to pay their bills and keep their companies in good standing with international creditors. While many may think that the solution may be to advocate for the Central Bank to release more foreign exchange into the system, we believe that is a temporary solution. Injections as we have seen in the past are used up quite quickly. The bigger issue to consider is if we use without replenishing our reserves it will eventually leave us in a greater crisis than before. We need to focus on ways to bring foreign currency into the system. This can only be done through increased international trade.
While all businesses are being affected, it is the small businesses owners that are most vulnerable. We all know that it is the small businesses are the backbone of any economy, and they are the ones that often lead the charge when it comes to diversification and innovation. So again I ask the question: Are we adding strength to our backbone or are we adding strain to the very thing that holds together much of the fabric of our economy? We need to take preventative and proactive measures in place to propel us into long term and sustainable prosperity.
We need to focus our energies on finding feasible solutions that can be implemented in the shortest possible time and in the best way. In times like these we need leaders who have the courage to make the tough decisions. Decisions that may not necessarily be in favour with everyone. It requires leaders with the foresight to know that if these decisions are not made, it will mean a greater burden to us all in the future. With the economic environment being as uncertain as it is we cannot afford to leave our future to chance, to the certainty of the precariousness we face.
AMCHAM T&T has and continues to show our commitment to free trade, economic policies that make sense both in the short and long term, and facilitating an environment that makes it easy to do business.
AMCHAM T&T’s INITIAL RESPONSE TO THE 2017 NATIONAL BUDGET
The American Chamber of Commerce of Trinidad & Tobago (AMCHAM T&T) acknowledges the philosophy and the framework of the Budget, as we strive to address the current economic challenges. The government has recognised that it cannot be business as usual and has taken steps to cut back on expenditure, but we are of the view that more needs to be done particularly in reference to transfers and subsidies. We would like to thank the Ministry of Finance for taking on board the recommendations of the private sector particularly those outlined by AMCHAM T&T, in particular moves to boost investment facilitation and raising revenue through the sale of shares in state enterprises.
Moreover AMCHAM T&T welcomes the full operationalisation of the Public Procurement Act, the appointment of a Procurement Regulator and the establishment of the Office of the Procurement Regulator and procurement units in the public service in the next six months. We commend the Government’s commitment to establish the Revenue Authority, and we await further details.
We commend the review of the Petroleum tax regime inclusive of the Supplemental Petroleum Tax (SPT), and we hope to be included in these discussions. However, we are disappointed in the introduction of the 30 percent increase in Corporation Tax on chargeable profit of one million dollars. The increase in this tax is counter-intuitive to the thrust of developing entrepreneurial activity. In addition, the higher effective tax rate will act as a disincentive to new investments, particularly in the non-energy sectors. This is an additional burden coming on the heels of the increase of the Business and Green Fund Levy.
We recommended and support the consideration of transfer pricing legislation. We however urge consultation, early and meaningfully, as the country should not enact legislation which goes so far that it acts as a disincentive for investment and economic activity. This is pertinent as we seek to encourage trade and export and more of our local companies are themselves seeking to become multinationals.
The Information Communication Technology (ICT) policy for education is an extremely positive step as the country seeks to create a modern workforce that can compete in the knowledge economy.
We also welcome the sale of shares in the state enterprises and the creation of the high level team to review significant investments.
The FATCA extension is welcome. We urge both sides not to squander the opportunity and for the Government and Opposition to set and agree on clear timelines in Parliament for passage.
The reduction in Transfers and Subsidies, particularly restructuring the URP and CEPEP programs has long been advocated for by AMCHAM T&T. While there has been successive announcements of returning these programs to their policy moorings, AMCHAM T&T is concerned that sufficient action has not been taken to give effect to reducing these expenditures to sustainable levels.
AMCHAM T&T is disappointed that the Minister announced the online tax without consultation as he committed to discuss with AMCHAM T&T and other stakeholders prior to the budget.
We await details on valuations for the property tax and once again urge that uncovered plants, rigs and machinery not be included in the value of the property, as this would present a challenge to some companies.
The removal of VAT on ship repairs is a very positive move, as we believe this will this will assist the industry. It is important to note that this is an export industry which earns foreign exchange.
Overall we believe that this is a positive budget and we believe that the announcement of Private Public Partnerships (PPP) is welcome as consultation needs to continue. AMCHAM T&T is committed to playing our part.
Shaping a Better Future : A Blueprint for Transformation and Growth
Presented by the Honourable Colm Imbert, Minister of Finance
September 30, 2016
AMCHAM T&T ADVOCATES FOR PASSAGE OF FATCA LEGISLATION
The American Chamber of Commerce of T&T (AMCHAM T&T) strongly urges the Government and Opposition to work together to ensure the passage of the Tax Information Exchange Bill 2016 (commonly referred to as the FATCA legislation) by the deadline date of September 30th, 2016.
We are of the view that our country is on the brink of being demoted to the periphery of the global financial system largely due to inaction on the part of politicians on both sides of the political divide. This is a crisis manufactured by politics to the detriment of the national interest. The former Government had ample opportunity to pass this legislation during its tenure, and the current Government has also had more than a year to ensure that this important piece of legislation was properly vetted, reviewed and passed.
We are mindful that there has been limited, if any, consultation with stakeholders on the legislation which is currently before the House. However, AMCHAM T&T is of the view that there is still enough time for both the Lower and Upper Houses of Parliament to complete deliberations on the Bill and to ensure its passage before the 30th September 2016 deadline. The foregoing is critical since there has as yet been no indication that an extension of time is being contemplated by the U.S. Government.
Should this Bill not be passed by the deadline, the costs of participating in the international financial system can be impacted and ultimately, a possible loss of correspondent bank relationships could occur if this and other obligations are not met which could, in turn, lead to difficulties in conducting, for example, credit card transactions and wire transfers. This would mean that everything from buying goods or services online, to transferring money to pay university fees or purchase inputs for businesses would be affected. Potential shortages and consequential increases to the prices of goods and services already in scarce supply would also arise over time as a consequence of the deadline not being met.
AMCHAM T&T is mindful that once the Bill is passed, guidelines for compliance will be developed by the regulators of financial institutions, the Central Bank of Trinidad and Tobago and the Securities Exchange Commission of Trinidad and Tobago. To this end, we encourage stakeholder involvement in the early stages of the development of these guidelines.
We caution that once this piece of legislation is passed, other critical pieces of legislation require urgent attention to ensure that Trinidad and Tobago comply with anti-money laundering and counter-terrorism financing obligations. Failure to do so would continue to jeopardize our country’s links to the international banking system.
Several CARICOM countries, including Jamaica, Barbados and the Bahamas, have already passed their ‘FATCA’ legislation. It is our view that legislators on both sides of the aisle should put country first and work toward the passage of this legislation by the deadline. The consequence of inaction is not something that we can either afford or entertain.
DETAILED ACTION PLAN NEEDED FOR NEW FISCAL YEAR
As the Government prepares for the presentation of the 2016/2017 national budget, the American Chamber of Commerce of Trinidad and Tobago (AMCHAM T&T) acknowledges that the past fiscal year presented various challenges for the country and the Government. We appreciate what we view as incremental attempts to curtail spending while balancing economic growth and social stability, in the context of a drastic fall in energy prices.
In the upcoming 2016/2017 budget, AMCHAM T&T believes that the Government should engage in revenue generating measures and pursue aggressive structural reform geared towards cost-cutting and operational efficiency. A detailed plan, with specific action, is needed to address inter alia, institutional strengthening, improvements in the business environment, enhanced public sector efficiency, greater transparency in public procurement and facilitation to sectors which can provide future growth.
Some measures that AMCHAM T&T would like to see addressed in the 2016-2017 National Budget are as follows:
Increase Accountability And Efficiency For A More Favourable Business Environment
AMCHAM T&T also believes that there must be some urgency in articulating a plan of public debt management, as the ballooning of Government to Government financing arrangements and the overdraft utilization at the Central Bank of Trinidad and Tobago over the last several years and the apparent absence of these numbers from our external debt position are alarming. AMCHAM T&T is concerned about the overall quantity of public debt and the absolute size of the obligations that the country can comfortably service in years to come.
AMCHAM T&T is aware of the difficult position in which the Government finds itself given the steep, sudden decline in revenue and the structural inefficiencies which have been developed over decades. We know that a return to sustainable growth will require a collective effort. We continue to encourage the Government to engage all stakeholders, and we reiterate that we remain willing to work with the Government and other stakeholders whenever needed.
As The Pathway to the Americas, AMCHAM T&T has been developing and cultivating our relationships to extend our reach throughout the hemisphere to bring you new business and development opportunities. These efforts continue to bear fruit!
Here is an opportunity which is exclusive to AMCHAM T&T members:
On November 17-19, Peru will host the APEC CEO SUMMIT 2016 : QUALITY GROWTH AND HUMAN DEVELOPMENT.
Scheduled to attend are some of the most influential Presidents from all over the globe, such as Presidents:
Also featuring Prime Ministers:
Also participating in this Summit is:
Once you are a member, you can send us the name and passport number of CEOs who wish to attend and, through AMCHAM Peru, we will register you.
AMCHAM T&T – ‘BREXIT’ LONG-TERM IMPACT STILL UNCLEAR
As a very open, small island economy, which has deep political and economic ties to the United Kingdom, the results of the UK referendum on that country’s membership in the European Union will undoubtedly have an impact on Trinidad and Tobago and the Caribbean. The real, long-term impact is unlikely to be clear for some time however.
Nonetheless, with the UK voters casting their ballots in favour of a “BrExit”, and while we await the vote being taken to the Parliament and the UK invoking Article 50 of the Treaty on European Union to allow for that exit, the Caribbean has several things to consider.
The first group of issues surround competitiveness. Concomitant with the victory of the “Leave” vote, the British sterling faced a sharp decline, reaching levels that it had not seen since the 1980s. The question of where the pound will settle and how long the volatility will persist is of some concern for several reasons. While a decline in the value of the pound may provide new opportunities for local businesses to source inputs from Britain and elsewhere in the UK, a sustained decline in value may also pose additional challenges as UK exports become cheaper and more price competitive, even in local markets. This will include services exports as the UK is second largest services export economy globally.
With a decline in the purchasing power of the British Sterling comes an attendant threat to regional tourism as the cost of a Caribbean holiday for UK travellers will increase. This is important because according to data on the Tourism Development Corporation website, the UK is our third largest source of tourists over the past decade. In raw numbers, on average over the past decade, 38,000 UK nationals visited T&T per year. Assuming that this number will fall if the cost of travel increases due to a devaluation of the UK currency, T&T will have to look for alternative markets. We therefore suggest that renewed efforts be placed on attracting tourists from near markets in Latin America and new markets in North America. In this regard, establishing Piarco International Airport as a pre-clearance port to the United States would be particularly valuable.
In the medium term, another area of uncertainty for the region is in our trade arrangements. Currently 15 Caribbean countries are in an Economic Partnership Agreement with the EU, which allows for preferential trade and in some areas asymmetrical benefits (i.e. terms of trade that benefit the CARIFORUM more than the EU). Note here that the Parties to the EPA are 15 individual Caribbean States while on the other side, it is the European Community; and “Contracting parties to the Treaty establishing the European Community and the Treaty on the European Union” (i.e. not individual EU member states). If the UK is no longer a member state of the EU, then the applicability of the agreement to the UK comes into question.
Apart from the EPA, there is no legal framework allowing for preferential treatment between the UK and the English-speaking Caribbean. While we anticipate that the UK, being a longstanding development partner with the region, would not let our relationship wither, a strategy to prevent any negative impact of the Brexit and ensure the continuation of legal (in the context of the WTO) preferential trade, with the necessary certainty and predictability, should be devised quickly. Since CARICOM negotiates international treaties as a bloc, regional governments will need to move quickly to devise and execute a strategy to engage with both the EU and UK throughout the BrExit process.
Article 233 of the EPA – Definition of the Parties and fulfilment of obligations – states that:
Contracting Parties of this Agreement shall be Antigua and Barbuda, Bahamas, Barbados, Belize, Dominica, the Dominican Republic, Grenada, Guyana, Haiti, Jamaica, Saint Lucia, Saint Vincent and the Grenadines, Saint Christopher and Nevis, Surinam, and Trinidad and Tobago, hereinafter referred to as the “CARIFORUM States”, on the one part, and the European Community or its Member States or the European Community and its Member States, within their respective areas of competence as derived from the Treaty establishing the European Community, hereinafter referred to as the “EC Party” on the other part.
Article 245 – This Agreement shall apply, on the one hand, to the territories in which the Treaty establishing the European Community is applied and under the conditions laid down in that Treaty, and on the other hand, to the territories of the Signatory CARIFORUM States. References in this Agreement to ‘territory’ shall be understood in this sense.
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