Opinion
- Editorial
Narisha
Khan :
Declining
competitiveness,
but what are we doing about it?
Two
events integral to the economic future of T&T
occurred recently. The first was the release of
the Global Competitiveness Report (GCR) produced
by the World Economic Forum (WEF) in collaboration
with Lok Jack GSB, followed closely by the 2006/2007
Budget delivered by Prime Minister Patrick Manning.
The
GCR measures T&T’s international competitiveness
not only by looking at the country’s real
effective exchange rate, but also its ability to
create a sustainably developed society through “factors,
policies and institutions” which determine
the its level of productivity in comparison to the
124 other countries who participated in the survey
this year.
Its
ultimate goal is to allow countries to see where
they stand in the world in terms of their ability
to achieve sustainable growth and development.
As
the budget is supposed to represent Government’s
proposed strategy for achieving sustainable development,
then the recommendations made by the one should
coincide with the policies pursued by the other.
Since
2004, the focus of the GCR has been shifting towards
a new index, the Global Competitiveness Index (GCI),
which combines elements from both the Business Competitiveness
Index and Growth Competitiveness Index based on
the latest in economic intelligence gathered by
the WEF.
This
year, based on a cursory look at the three subindices
of the new GCI, it seems that the focus for T&T
should be on improving the basic requirements subindex
of the GCI as this was the only subindex in which
the country showed a deterioration in rank (from
56th last year to 63rd this year).
This
implies that the policies and institutions which
are supposed to actively support private sector
development are lacking and becoming progressively
worse in the eyes of the executives who rely on
them to make their firms competitive.
In
particular, and for the second year running, the
issues which most persuasively perturb our executives
(based on the WEF’s executive opinion survey)
are those concerning corruption and ethics of those
in public life, in addition to the existence of
nepotism (especially in the awarding of public contracts)
to a worrying degree.
The
perceived wastefulness of government spending and
concerns over safety issues such as the reliability
of police services and the business costs of crime
and violence means that T&T ranks below 100th
on each of these elements of the institutions pillar
of the GCI.
What
has been consistent in this and last year’s
budget speeches is the pages dedicated to public
sector reform which should supposedly address the
lack of confidence in the public sector.
Yet
it seems that executives are not convinced of the
effectiveness of these proposals, nor are they very
confident about the plans for restructuring the
police service “to ensure accountability and
to root out corruption” (as our rank of 123rd
with respect to the reliability of police services
indicates).
On
the second pillar of the basic requirements subindex
(macroeconomy), T&T remained within the top
40 countries. With special emphasis on the fiscal
side of the economy, the country ranked 18th and
28th respectively with respect to government debt
and government surplus/ deficit, but, it is, interesting
to note that both these variables depend largely
on energy prices (in T&T’s case at least).
With
respect to the other variables which comprise this
pillar (such as the national savings rate, inflation
and the real effective exchange rate), our rank
fell 27 places on average.
The
Prime Minister has noted the decline in personal
savings, yet beyond public education, it is unclear
what tangible incentives will be offered to encourage
citizens to save and help take excess liquidity
out of the economic system.
As
the rate of saving is intrinsically linked to the
inflation rate (and the latter is so related to
the real effective exchange rate), it is essential
that the government provide more concrete savings
incentives.
In
fact, though the PM says that combating inflation
will be a “priority” he says nothing
about significantly reducing government spending
(instead he is going to increase the spend in the
overheating construction sector) or using the interest
rate to control spending overall. Yet subsidies
will increase, meaning that when the boom ends the
government will be unable to continue supporting
these subsidies and the poorest in society will
be hardest hit.
T&T’s
rank on the efficiency enhancers subindex increased
from 66th to 64th this year, primarily due to improvement
in our rank on the higher education and training
pillar index from 73rd to 65th. This is not surprising
as the tertiary enrolment ratio increased from 3.3
per cent of the population to 12 per cent this year,
and, executive perception of the quality of the
educational system all round (and that of the math
and science education, in particular) have greatly
improved.
The
high quality of our management schools and executives’
ability to access specialised research and training
services locally have also contributed to our improved
ranking on this pillar. As such, the policy providing
free tertiary education seems to have translated
into greater tertiary enrolment which bears the
promise of a more educated workforce.
The
promised increase in spending, continued restructuring
of the tertiary education system and focus on sixth
form education implies that the trend in performance
on this pillar should continue, as long as the brain
drain (where we rank 83rd this year) does not affect
the return on this investment.
On
the innovation and sophistication factor subindex
our rank improved from 69th to 63rd largely due
to our rank on innovation which leapt from 80th
to 67th.
Executives
perceive that the local capability to create new
and innovative products and processes has improved.
More evident company spending on R&D and university/industry
collaboration on research are the areas of greatest
improvement, most indicating that the importance
of investing in innovative capacity has at least
been recognised by the private sector.
The
public sector has recognised this as well with the
PM announcing plans to boost the competitiveness
of the industrial sector by establishing a National
Research and Development Fund to stimulate innovation
and investments when the Tamana Technology Park
at Wallerfield is completed.
This,
the continued support to the SME sector and the
improvement over the last year in the availability
of scientists and engineers (possibly due to the
thrust towards increasing tertiary enrolment) means
that to some extent the government is courting the
development of the entrepreneurial spirit which
gives rise to true innovation and ingenuity.
At
the very least, the Government seems to be aware
of some of the more glaring issues affecting T&T’s
competitiveness.
Where
concrete policies have not been proposed, the government
has expressed their intention in the national budget
to take the necessary and appropriate steps towards
remedying the situation.
The
problem is that where policies have been pursued,
implementation has been slow, and where intentions
have been made, actions have not been rapid or forceful
enough. Yet we should remain encouraged, as the
first step to recovery is admitting that we have
a problem.
Narisha
Khan
is a research associate at the Arthur Lok Jack Graduate
School of Business. She can be reached at 662-9894
ext 156 or email n.khan@gsb.tt. Petroleumworld not
necessarily share these views.
Editor's
Note: The preciding article was first publish by
The Trinidad Guardian,Thursday 19th October 2006.
Petroleumworld reprint this article in the interest
of our readers.
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Petroleumworld
10/22/06
Copyright
©2006 Narisha
Khan.
All Rights Reserved.
