Budget 2011/12 – Signs of Hope or Distress?

17 October 2011


Now that you’ve had a week to reflect on Finance Minister Winston Dookeran’s budget statement, I’m certain there are still many questions you’d like answered: What does it really mean for T&T? What does it mean for me? Does it matter at all?

It should matter to every one of us. With this year’s growth seemingly range-bound between 1.40% – 1.70%, billions of excess bank reserves, and financial crisis quickly becoming the norm globally, I remain firm in my stance of opportunity amidst crisis. The question then remains: which slice of the pie (see chart below) benefits you as an investor?

Here we’ll focus on three sectors which can drive or at least facilitate economic growth: energy, capital markets and infrastructure.

Energy

Near and dear to us all, the very existence of Trinidad and Tobago as we know it would be entirely changed without the success of the energy sector. Minister Dookeran focused on stimulating increased activity in the country’s vital energy sector. We can’t underestimate the very significant contribution of the sector to the country’s GDP and revenues. Look out for investment opportunities in the down-stream sector as well. Also, significant tax incentives will be given to promote provision and usage of alternative energy.

I for one think that is a step in the right direction (see graph below), but I also hope that the private sector is weaned off the all too common government-dependency syndrome.

Incentives include:

  • A tax allowance of 50% of expenditure incurred in the retail dispensing of compressed and liquefied natural gas up to a maximum of $2 million.
  • A 50% reduction of import duty on vehicles manufactured to use natural gas with engine capacity smaller than 2300cc
  • Wear and Tear allowances of 130% of expenditure on the acquisition of plant, machinery and equipment for the purpose of providing CNG kits and cylinder installation service
  • Wear and Tear allowances of 130% of expenditure on acquisition and installation of CNG kit and cylinder in car
  • Wear and Tear allowance of 150% of expenditure on specific costs related to the manufacture of solar water heaters, wind turbines and solar photovoltaic systems.

Capital Markets

Activity on the local capital market is sorely lacking and the government’s plans are certainly welcome. They are to:

  1. Divest part of its ownership in Point Lisas Port  Development Corporation Ltd, a to be merged Trinidad & Tobago Mortgage & Finance and the Home Mortgage Bank, and First Citizens   via the Trinidad & Tobago Stock Exchange;
  2. Establish a Small & Medium Enterprises (SME) market on the T&T stock exchange; and
  3. Reduced corporation tax rate of 10% for listed SMEs

It remains to be seen how these “divestments” actually work, as in listening to the budget speech myself, Minister Dookeran states that First Citizens will be listed without affecting government’s holdings possibly from a new issue of shares.

This does not take away from the fact, that if successful, the investing public will have a direct interest in the fortunes of these entities rather indirectly through something like NEL.

Infrastructure

Tired of traffic? I can vouch for the inherent frustration of a daily 2-hour + journey back home.

Individual inconveniences aside, how quickly we construct quality roads, offices, homes, hospitals and the like can improve or impair the productivity of this country. Minister of Planning and the Economy Dr. Bhoendradatt Tewarie, in a post-budget seminar this week, essentially refers to the Public Sector Investment Program (PSIP) as a near-complete manifestation of the expected budget deficit of $7.6bn. This, in addition to the Single Electronic Window (SEW) and the implementation of an efficient national broadband system should reduce bureaucracy for businesses on the whole.

Of course, none of these benefits apply without actual implementation. Maybe what we need is a mid-year budget review, to assess the delivery of these measures within the context of the economic climate at that time. Until then, enjoy your piece of the pie before it’s all gone!

What are your thoughts?

Gerard Stephens
Account Executive

Comments are closed.