Q: Dr Hosein, which is most appropriate to describe our economic condition today: recession, regression, downturn, or what have you?
A: (In his office at the St Augustine Campus of the University of the West Indies) I think we are in a recession on account of the Dutch Disease (DD).
To the layman, what exactly is Dutch Disease?
This refers to the adverse effect on an economy occasioned by a boom in one of the tradable goods. In our case, this DD took place in the petroleum sector and the manifest effect of this is seen in a decline in employment in manufacturing, a decline in the size of manufacturing value added, and a decline in the size of manufacturing export revenue.
In my mind, the sectors that we should be concerned about that were adversely affected in the past energy booms were manufacturing, export/agriculture and tourism.
These sectors can generate foreign exchange in times such as now but they were the most compromised because of the change in relative prices in the domestic economy.
Have you seen any move towards correcting this situation over the years?
Yes. I think the present Government is certainly making a lot of statements with regards to correcting some of the tendencies that were developed in the last 15 years.
Is it just statements you are seeing...no action?
I say statements because we are not seeing much action, some may say we will see action after the Finance Minister presents his mid-year review. In all fairness we have to wait, but there is more conversation around change rather than the actual hardcore action in the direction which the change should be taken.
Dr Hosein, you were among the first to support the freezing of wages at the National Gas Company which landed you in some heat with the trade unions.
I am in support of freezing wages at this time in the context of the economic climate because we simply cannot afford a decline in external competitiveness as reflected in the various economic reports.
So, Dr Hosein (a somewhat fast speaker), in recalibrating the country’s economy what is the best way forward?
Okay. In so doing, Mr Raphael, one strategy that must be considered before retrenching workers is one of freezing wages, trying to preserve employment and in parallel with increased productivity.
Dr, why in these times the first people to face the breadline are always the workers, why this sort of punitive response?
I certainly do not think this should be at the expense of the workers. My knee-jerk reaction and my opinion has always been try to save jobs. Try to increase productivity, cut costs where we can, but preserve employment because people’s welfare are very closely linked to employment.
But to answer your question from another perspective, in the time period 2000 to 2015, we were able to make a lot of money in the energy sector. Some firms including banks made enormous amount of money in this economy. Now is the time for these large companies to show a greater degree of commitment to the T&T economy by engaging and embracing public/private partnership agreements so that we can stimulate economic activity.
Dr Hosein, the MO of the private sector is to make as much profit as possible. How do you reconcile this fact with the appeal by the Government to these firms to make less profits at this time of economic contraction?
I don’t think that is an entirely unreasonable call at this time. I think all hands on deck are needed in the context of this new normal, and what would therefore be required is greater collaboration between employers, employees, the unions and the state.
So one solution is the public/private partnership, and I think the present strategy of increasing mortgage rates may be one that would have to be relooked because increasing this rate would decrease the demand for housing at this time.
Wouldn’t this, Dr, have a deleterious effect on the construction sector since this is a vital component of pushing economic activity?
Yes. It is well known that this sector is one of the engines through which an economy restarts the growth process.
So even if it is fair or unfair, it is strategic and useful from an economic growth perspective for policy makers to try to work with the banking sector to get the mortgage rates to a level in which it would be useful to rekindle the construction sector, rather than be an obstacle towards the growth process there.
Dr Hosein, you spoke about diversifying our economy, something I have been hearing about since a little boy. What is happening there?
Let me put it this way, during the 2000 to 2015 period, the opportunities in the make-work programmes drew a large proportion of the workforce that would have been deployed in the agricultural sector away from this sector, towards the make-work schemes (smiles).
The capacity of this sector to sustain itself and to produce large enough volumes of goods to meet the needs of a growing per capita GDP in the economy was constrained. Further, many consumers turned towards the foreign market for different types of agricultural produce...apples, seedless grapes, strawberry, and all the different types of berries we love to buy.
Consequently?
What happened is that in terms of the way trade data is recorded, agricultural imports soared as we speak. I think agricultural imports is about $6 billion and so we need to get our policy coordination together.
If the Minister of Trade is announcing a buy-local campaign and if we relate that argument to the agricultural sector, but yet at the same time we are deploying important parts of the labour force in make-work programmes that sector would not be able to rise to the campaign call because there are constraints for labour.
So there is a misalignment for policy coordination and we need to sit and work out the details and make sure that all of us are rowing in the same direction.
Your plan to take some of the Cepep workers and put them into agriculture makes some sense, but don’t you think that because of their culture over the years they might be averse to go to the land?
Look, Mr Raphael, we have to start somewhere. We have no money and as a consequence, we need to start to make tough decisions. In these tough economic times we need to work together, all of us, to rebuild this nation.
These same Cepep workers and people of that nature would have reaped benefits when we had plenty money to go around...CDAP, free schooling, free medical facilities, free public transport, free school lunches.
In times of plenty we shared a lot, what is wrong that in trying times we put our heads together to rebuild our nation?
Finally, Dr Hosein, there are some people who are still saying that we do not need to diversify as we already have the infrastructure to widen and strengthen our productive capacity. Do you buy into that?
Mr Raphael, this economy has no choice, absolutely no choice in terms of not diversifying. We must diversify and if not, we are going to the IMF and end up an economy running under a structural adjustment programme.
Handed down by the IMF?
Yes.