Gerry Brooks, Chief Operating Officer of the ANSA McAL Group of Companies
ANSA McAL’s Gerry Brooks: Budget vague on 2011 figures
Gerry Brooks, Chief Operating Officer of the ANSA McAL Group, believes that the budget for fiscal year 2011-2012 presented to the national community on Monday, has mixed offerings. He commended the Government for giving more companies the opportunity to be listed on the T&T Stock Exchange (TTSE). “My view is that there’s too much government in the country and the Government should take a look at how many state enterprises there are. I think there are about 90 of them. Many are not performing. I applaud Government for divesting First Citizens bank (FC).
“One has to ensure that as companies are listed on the stock exchange from a governance standpoint, from a listing standpoint, that those companies can deliver because no one will buy into a company that cannot deliver,” said Brooks, in a wide-ranging post-budget interview at his office, Tatil Building, Maraval Road, Port-of-Spain. The ANSA McAL Group’s 2010 profit before tax was $954 million, an 11 per cent increase over the previous year. On the subject of local investments, Dookeran said in the budget: “For fiscal 2012, in this budget statement, we have identified a national investment programme for which there are commitments from the public sector, the private sector and the energy sector.
“This amounts to approximately $26 billion or 18 per cent of the gross domestic product (GDP), and which will contribute to the renewal of growth in the economy.” Brooks said more state companies listing on the TTSE will compel companies to have better governance structures and be more accountable.
“Locally, we have a frontier exchange with about 35 to 40 companies on the exchange, and our index has done very well in 2011. We do need to deepen the stock exchange and the divestment of state companies onto the stock exchange and this will help that process. “It allows investors a wider menu of investments. It allows companies access to capital. It helps in the governance structure for companies and they now have to submit quarterly accounts. You will not have a case of state enterprises releasing accounts in 2011 which was supposed to have been released in 2009. Companies need to be reporting on a quarterly basis.”
Settle debts to contractors
On Monday, Finance Minister Winston Dookeran said most of the Government’s outstanding debts to contractors have been met. Responding to Dookeran’s statement, Mervyn Chin, president of the T&T Contractors Association (TTCA), said on Monday that the Government should clarify how much of its debts to TTCA members has been paid: 50 per cent, 75 per cent? Brooks said the Government paying off contractors will help stimulate the economy. “Construction is a key catalyst for growth. The Finance Minister said a substantial amount of payments has been made to contractors. My check with contractors has revealed that that is not entirely the case. You have slack capacity in the construction sector.” In ANSA McAL’s 2010 annual report, Brooks stated that manufacturing sector sales had declined by two per cent.
According to the report: “This was primarily influenced by the slowdown in the construction sector, locally and regionally, and its adverse impact on our construction solution business.” On Tuesday, Brooks said of construction: “It is the single greatest catalyst for economic growth and the sector is the single greatest employer of people. We need to find a way to expedite payments to contractors. Contractors also owe suppliers money, they owe companies money and they owe banks money. They can’t make it too litigious. It will provide incentives to build those 4,000 houses. It puts people back to work and acts as a catalyst for the economy. We need to utilise full local content and drive transfer of technology and public procurement has to be more transparent.”
Clico and corporate malfeasance
Brooks has advocated that “a strong message” must be sent to directors who commit “reckless” acts in their conduct of a company’s daily operations. “From a Clico standpoint, we must have a system in which where malfeasance occur and whereas in Clico, there is a $10 billion bailout, where there has been a conflict of duty and interest, where there has been recklessness by directors as in the case of Stanford and Madoff, we need to engage in criminal prosecution and the appropriate regulatory action.
“A significant part of that story is around recklessness, breach of professional responsibility and a strong message must be sent that this will not be tolerated because it creates systemic risk.” “The good news is that the minister addressed Clico. We must take Clico off the table. It’s a $10 billion issue and it poses a systemic risk. It also affects confidence in the national system. My view is that the bond structuring of one to ten years, which can be securitised, provides a good instrument for policyholders. It also allows for deepening of the capital market. It also represent $5 billion of potential income coming in to the national community, which is valuable for development.”
He criticised the Government for not being specific with its 2011 budget figures. “The budget arithmetic was not clear because one does not know the key allocations. I don’t think he (Dookeran) couched very clearly, that is the three-year plan for transformation of the economy. He did not say this was the budget for 2011, here’s what worked and here’s what did not work. We ended up with a 1.6 per cent deficit. What worked and what did not work? There was a lack of clarity around the key 2011 numbers,” Brooks said.
With three straight years of budget deficits he believes that “hard choices” on how to diversify the economy must be made. “This year is going to be our third budget deficit: $7.8 billion in 2012, approximately $8 billion in 2010, and the number could be between $4 billion and $5 billion for 2011. So we are now reaching a point we have had three years of deficit and we still have fiscal room in terms of our debt to GDP ratio, which is around 56 per cent. But the fiscal space is being reduced and the country will have to make hard choices around diversification.”
Of the Government’s plan to achieve 1.7 per cent growth in 2012, Brooks said: “Internationally, we are faced with a challenging situation. On the non-energy side, the challenge continues to be around diversification of the economy. Caribbean markets are on high debt to GDP and have been that way since 2008. Tourists who come to Caribbean are spending less per capita. Remittances to the Caribbean are also down. These countries now are not able to take up the output from our factories for the regional market. He hopes the Government works with manufacturers to find solutions.
“The huge challenge is how our government partners with manufacturers to find new markets, like Cuba, Central America and South America. The Export-Import Bank has an important role to play there, the role of the Business Development Corporation (BDC) in terms of finding new markets. We need to get products into new markets cost-effectively.”
Crime and state of emergency
On the issue of crime, Brooks questioned what were the Government’s plans to sustain a low crime rate, post-state of emergency. “The issue is what will be done after the state of emergency? If we transition back to what obtained previously, then we would have failed miserably. I am not sure that we are catching any big fish as we speak. It has been a huge damper on business. If you look at the restaurant trade, the hospitality trade, the distributive trade, we have paid a huge price.”
He called for “novel” steps to be taken to tackle crime. “There has to be clear security plan to ensure the police have the tools in terms of vehicles, stations are erected in hot spots and introduce new things like global positioning systems (GPS), (ankle) bracelets, undercover police. We don’t want after this temporary relief for crime to return with a vengeance. We must prevent that. We have to do some novel things, post-state of emergency. Crime is affecting the confidence of individuals and is coming at significant cost to country.”
October 13, 2011