‘The difficulty lies not so much in developing new ideas as in escaping from the old ones.’
– John Maynard Keynes, the founder of modern macroeconomics.
AS a businessman, I am appalled to discover Trinidad and Tobago ranks 99 out of 177 countries in the 2022 Index of Economic Freedom, as measured by the reputable Heritage Foundation. The Heritage Foundation is a research and educational institution whose mission is to build and promote conservative public policies, based in Washington, DC.
But what is economic freedom? The Heritage Foundation explains as follows: ‘Economic freedom is the fundamental right of every human to control his or her own labour and property. In an economically free society, individuals are free to work, produce, consume, and invest in any way they please.’
Economic freedom can be measured by the following variables:
1. Rule of Law (property rights, government integrity, judicial effectiveness); 2. Government size (government spending, tax burden, fiscal health); 3. Regulatory efficiency (business freedom, labour freedom, monetary freedom); 4. Open markets (trade freedom, investment freedom, financial freedom).
Clearly we are failing at all these variables, but this column will focus on financial freedom.
A new horizon
Today, we observe that many business enterprises are experiencing tremendous difficulty in operating their businesses. Among the many reasons for this, the one that stands out is the difficulty in accessing foreign exchange. This is not a welcome situation and this has resulted in the closure of several businesses as they experienced the inability to acquire essential raw materials, plant, equipment and other essential goods for trading. This situation has also caused many of my colleagues to experience loss of reputation and deteriorating relationships with international suppliers.
What is even more vexing is that when businesses had to suspend their operations due to the above reasons, workers could not be paid and layoffs were the order of the day. So, even the small man is affected. Calls for both the Government and the Central Bank to address these concerns have yielded nothing, and it seems the private sector is left to fend for themselves.
A paper published by eminent economist Dr Terrence Farrell states the following: ‘Twenty years ago, over the Easter weekend in April 1993, top executives of the Central Bank gathered with the leaders of the commercial banks at the offices of the central bank. It was a historic weekend in the annals of economic policymaking and public-private sector cooperation in this country. Trinidad and Tobago moved from an exchange rate system which had been pegged to the US dollar since 1976 and before that to the pound sterling, to one which would be allowed to vary.’
Dr Farrell continued, ‘But in April 1993, confidence was still low and battered following the terrible recession from 1984 which had caused massive erosion of wealth and incomes due to the devaluations, cuts in the salaries of public servants, the debt restructuring, the conditionalities imposed by the IMF programme, the introduction of VAT, and by no means least, the attempted coup in July 1990.’
The article went on: ‘The nominal exchange rate has moved to $6.41 today and while there are so-called ‘queues’ for foreign exchange, the system has functioned well and remains stable. The country’s foreign exchange reserves today are high at US$11 billion. Moreover, foreign currency accounts in local banks held by ordinary citizens and companies now total over US$3 billion.’
What is critical here is that the then erudite finance minister, Wendell Mottley, saw the value in such a change and the importance of bringing the private sector into this process. This is the example that must be followed today, as several decisions taken over the last few years have directly impacted the private sector without even the private sector being given a seat at the table. There is definitely a need for the pressing of the reset button.
But it seems the Government may not be willing to take such a step.
But what about the working man? Many have expressed their anger and frustrations about having to arrive at their bank on a daily basis just to obtain a paltry US$100. So, if a person intends to travel for a vacation, and needs, for example, US$3,000, then he has to visit his bank at least 30 times to obtain his money for travelling. It is my firm opinion that is a humiliating form of economic slavery and an indignant manner for our citizens to be treated.
Businessmen are even forced to use their credit cards to obtain the imported essentials from overseas and are paying steep interest rates and compounded service charges on top of their required spend.
An initial step to take is for a meeting to be convened with the key players and actors from the business sector, the commercial banking sector and the Central Bank to discuss the reinvention of the methodology on the allocation and distribution of foreign exchange.
I wish to re-emphasise that under our economic arrangements, it is the private sector that must be the engine of growth. The Government cannot be the engine of growth but must play the role of a facilitator and to assist towards creating the enabling environment. The Central Bank must fully be independent and play the role of a regulator and provide information to the public on economic and financial matters.
As a republic, has our nation achieved economic independence? Are our institutions truly independent? Are our citizens enjoying quality life? What is our shared future?
The time to act is now. Everyone must realise that our national economy needs to be transformed in order to put our country back on the growth path. Attitudes need to change, openness to collaboration and dialogue must be the new order of the day, and the ease of doing business must be dramatically improved.