A cautious budget
Editorial
Given the political instability and the economic downturn that is partly due to this and to other factors such as el nino and drops in export prices of key commodities the Minister of Finance has understandably produced a cautious budget in which there are no new taxes. There are some increases in licences and fees but these are not excessive. The main thrust of the budget proposals is to stimulate private sector investment, to promote housing development, to increase public sector wages, to continue the poverty alleviation programme and to assist the Neighbourhood Democratic Councils. The first objective, private sector development, will be sought by virtue of four measures. First, securities legislation will be introduced. This is welcome and long overdue. The minister does not indicate if draft legislation is ready and how long this will take. The earlier call exchange, of course, flopped. Securities legislation can promote private sector development by facilitating primary share issues like the one Banks DIH Limited had last year to enable companies to raise money direct from the public and other than through the banking system. Though such financing is interest free, of course, there is the cost of paying dividends thereon forever after (and the existing shareholders are affected, too) but it is initially very helpful to a company that needs to expand but may already have borrowed heavily. A stock market also promotes secondary dealing and makes shares much more easily negotiable. The minister should proceed with this as a priority and should seek a competent and experienced person, perhaps from Trinidad or Jamaica which have flourishing stock markets, to run it. He also proposes updating the insurance laws to improve competition and protect consumers and to enable the industry to use its considerable financial resources more productively (by lending to businesses, for example?). These are all admirable objectives and presumably a suitable precedent is available. It is important that these good ideas not be allowed to slide which they can so easily do. The minister should ideally have target dates for all these proposals. The next proposal is for the setting up of a private sector development bank. This is badly needed and hopefully funding can be obtained. Many local manufacturing businesses badly need to upgrade their equipment and some have had to do so on most onerous terms including high interest rates, short term repayment and limited tax relief. Here again, time is of the essence. Finally, the minister plans to reintroduce five year tax holidays for `pioneering' industries that add value to domestic raw materials such as furniture, fish processing, jewellery and canning and for industries that help to open up new areas like the intermediate savannahs. This is a useful package of measures. The main caveat must be that at the moment they are all just words on a page. Follow up is crucial and the minister should perhaps designate a task force with private sector involvement dedicted to the quick passage of these measures. As for housing, the idea of cheap long term financing is sensible. The incentive will be to make financial institutions incorporating under the proposed new Mortgage Financing Act tax free like the New Building Society Limited. The government also intends to raise funds to develop the infrastructure on some of the housing estates that have been started but are at present without proper roads, drainage and electricity. There will be no wage freeze and negotiations, the minister says, will begin soon with the Public Service Union for wage increases for l998. Key supplements for certain categories of officers will continue. In all the circumstances this is a sensible, holding budget. It creates incentives for private sector expansion and thus more jobs and growth but implementation will be the acid test. US$5 million hs been budgeted for relief from the effects of el nino. 
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