Major developments in 2014 Thursday, January 1 2015 THE year 2014 was an interesting one for business news in Trinidad and Tobago. There were many significant stories coming out of the business world over the last year and some of these promise to have interesting sequels going into the new year. Business Day takes the opportunity now to look back at some of the main stories in business in 2014. Biggest budget ever Stating Government is moving to safeguard the welfare of society, Finance Minister Larry Howai on September yesterday unveiled a record $68 billion budget. It contained increased benefits on a wide range of fronts, including pension enhancements which will affect more than 131,020 retired and self-employed persons, a new minimum wage, improved allowances for the disabled and easiser access to mortgages for more than 26,100 prospective homeowners. In the fifth Budget of the People’s Partnership administration, Howai announced: * an increase in senior citizens pension by $500 to $3,500 per month, with a new maximum benefits cap of $4,500, effective October 1, 2014. Retired public officers will also get an increased pension, moving to a minimum of $3,500; * an increase in the minimum wage from the current $12.50 to $15 per hour, effective January 1, 2015; * an increase in the disability grant by $300 to $1,800, effective October 1, 2014; * a new five percent mortgage programme for households with a combined income of between $10,000 and $30,000 for a maximum funding of $1.2 million; * an increase in the public assistance grant by $300 across all bands; as well as an increase in personal allowances for individuals aged 60 and over; * the disbursal of funds left in the Reserve Fund of Caroni (1975) Limited to all pensioners and deferred pensioners of that entity, closed since 2008; * a tax amnesty on individuals and corporations who have outstanding tax returns outstanding for up to 2013 and a waiving of penalties for late filing of company registry documents, effective up until March 31, 2015; * new tax deductible $1,000 savings bond from the Treasury. “The welfare of our State is being safeguarded and we are convinced this Budget will continue to consolidate our vision of a stronger, fairer and smarter Trinidad and Tobago,” Howai told MPs in Parliament at the end of his 125-minute presentation. “We are ensuring that the country’s prosperity is equitably distributed among all our citizens.” Alongside the above mentioned measures was a 50 percent hike in penalties for speeding and other traffic offences, as well as 50 percent hike in penalties for offences related to praedial larceny. Legislation to tighten the working of the Hertitage and Stabilisation Fund, making it harder to withdraw from the fund, was also announced. Reforms to the Unit Trust Corporation legislation, designed to increase its flexibility, are also planned. At the same time, Howai made comments which suggested that while a new $410 million Constituency Development Fund is planned, its implementation will not take place before the drafting and passage of special legislation to govern it, matters which raised questions over its time-line of implementation ahead of the next general election. On pensions, Howai said, the “senior citizens pension” will be increased by $500 per month to $3,500 per month at a cost of an additional $200 million. The measure is expected to impact 84,720 senior citizens. Further, the senior citizens pension will now be adjusted with the receipt of other pensions with a cap of $4,500. Pensions of retired public officers will also move to $3,500 per month, at a cost of $240 million. This will impact an estimated 35,000 retirees. On inclusion of the self-employed within the national benefits scheme, Howai said legislation would be forthcoming to effect this. “I propose to bring the self-employed into the national insurance system with an amendment to the National Insurance Act,” he said. “This proposal will be effective January 1, 2015 and will impact initially 11,300 self-employed.” The minister said any self-employed person in the age group 57 and over, at the commencement of coverage in the year 2015, will receive a one-off payment equivalent to three times their contribution. Anyone in the age group 50-56 will be credited with additional contributions to allow them to receive the minimum monthly pension payments. To this end, Government will inject $12.9 million into the national insurance system to cover the cost of additional contributions for self-employed individuals. Further, the State will subsidise payment of contributions by low-income self-employed persons, defined as persons who earn less than $3,000 per month, in an amount equivalent to two-thirds of the contributions due. The Government will inject a further $41 million into the national insurance system to meet this liability over the next five years but with an injection of $4 million for fiscal 2015. Further, the transition for the self-employed into the National Insurance system will be fully-funded for the first year only at an additional cost of $2 million. The increase in the minimum wage, Howai said, was “in keeping with the recommendations of the minimum Wages Board.” In relation to the disability grant, the Minister said the new grant of $1,800 per month will cost an additional $86.8 million and will impact 24,100 differently-abled individuals. The public assistance grant will also be increased by $300 across all bands. This will cost $89.3 million and will impact 24,797 citizens. Howai also said the personal allowances will be increased from $60,000 to $72,000 for the calculation of individual taxes; at a cost of $53.3 million. The measure takes effect from January 1, 2015. On measures to make housing more accessible, Howai announced a new five percent mortgage programme to benefit 26,100 applicants at the Housing Development Corporation. He said the State would expand the existing 2.0 percent mortgage programme by increasing qualifying property values from $625,000 to $850,000 and by increasing the combined monthly income of households ceiling from $8,000 to $10,000. To supplement that programme, a new 5.0 percent mortgage programme for households with a combined monthly income of greater than $10,000 and less than $30,000 will be implemented. In relation to the latter, persons will be eligible if they are working towards accessing a mortgage greater than $850,000 but not exceeding $1.2 million. On pensions for ex-Caroni (1975) Ltd workers, Howai said in May 2016 disbursal will be made from the Reserve Fund. The minister also said the new Baby Care Grant to provide financial assistance to mothers totalling $500 per month will be for one year only for any child born to underprivileged parents. The measure had previously been announced by Prime Minister Kamla Persad-Bissessar. The Tobago House of Assembly was allocated $2.609 billion, of which $2.202 billion will be for recurrent expenditure, $384 million for capital expenditure, and $23.0 million for the Unemployment Relief Programme (URP). However, Tobago will also receive an additional amount under different ministerial headings. “In 2015, we anticipate that close to 100.0 percent of the population will receive a 24/7 supply of water,” Howai said. The Budget was based on a price of US$80.00 per barrel for oil and a gas price of US$2.75 per mmBtu. Total expenditure net of capital repayments and sinking fund contributions was estimated at $64.6 billion, while total revenue was put at $60.3 billion (oil: $21.2 billion, non-oil: $39.1 billion) with a deficit of about $4.3 billion, which Howai said was about 2.3 percent of GDP. The minister said this was in keeping with the Government’s commitment to reduce the deficit by one percent per year. Falling oil prices, budget cuts Falling global oil prices caused Government to raise the possibility of cuts to its $68 billion budget towards the end of the year. In November , in a statement in the House of Representatives, Howai said all government ministries would be required to reduce their expenditure by $45 million. In a subsequent interview with Sunday Newsday during the sitting of the Senate in December, Howai disclosed that a circular which went out, calling for the cuts was also directed at non-ministries. “Every single department will be reviewed but we are focusing more right now on the ministries, moreso than the departments such as the Auditor General and some of those,” Howai said. The minister expressed the view that the first areas in line for cuts will be ministries, but warned that should the need arise the other departments will draw the attention of the Finance Ministry. The circular set a deadline of December 31 for submission of cuts, with a view to implementation over the January 2015 to September 2015 period. Howai said the process will see little interference from the Finance Ministry which will simply set a target for cuts (about two percent) which must be met. He however tstated that one thing Government does not envision is a cut in the $4 billion fuel subsidy as being among the possible cuts to expenditure which may occur if oil prices continue below the US$80 per barrel upon which the Budget is pegged. Three possible scenarios Government is working with include oil at US$75, at US$60 and between US$65 to US$70 per barrel. The budget was based on an expected oil-price of US$80 per barrel and a natural gas-price of US$2.75 per mmbtu. The budgeted oil price is pegged against the price of West Texas Intermediate (WTI) which fell below US$80 per barrel towards the latter part of the year. Of the scenario of oil falling to US$60 and gas staying at US$2.75, Howai said this would cut revenues by $2.4 billion per year. “This will be partially offset by savings on the fuel subsidy which will be reduced by $676 million,” he said. The minister further stated, “Our own expectation is for the price to decline initially closer to US$60 per barrel but eventually average between US$65 and US$70 per barrel. We expect that the price of gas will come down in tandem with this decline in the price of oil but we expect that it will remain above the US$2.75 reference price used in the Budget.” Howai continued, “Using a scenario therefore of US$65 per barrel and US$2.75 for gas, the reduction in total revenue will be $1,879 million on an annualised basis. This will be offset by savings on the fuel subsidy of $507 million. The overall fiscal deficit will increase by $1,372 million or 0.7 percent of GDP.” Larry Nath resigns The First Citizens Group was one business that featured prominently in 2014. In December its CEO Larry Nath resigned in order to “pursue other career opportunities” which require “at least 90 days” between his now former post and his future one. Speaking with Newsday shortly after his resignation was made public, Nath assured “the bank had wonderful results this year (which) are coming out next week and I wanted to ensure that I had a proper ‘cooling off’ period before my next assignment.” Nath joined the bank in 2011 as Deputy Chief Executive Officer, Banking Operations before taking over the position of Group CEO in 2012 following the resignation of Larry Howai, who left to become Finance Minister. In the wake of Nath’s resignation, First Citizens’ chairman Anthony Smart, an attorney, assumed an executive role to manage the group’s operations while the search for a new group CEO takes place. First Citizens, in a statement announced Smart, “has been appointed by the board to function as executive chairman of the bank, subject to regulatory approvals, with immediate effect and for a period of up to six months. He will take over the ultimate responsibility for the day-to-day operations of First Citizens.” In addition, to support Smart during the transition to a new CEO, the board hired retired banker Steve Bideshi, a former managing director of Citibank’s (Citi) operations in Trinidad, Turkey, Israel and Central Asia, to serve as the executive chairman’s consultant. Nath yesterday said his decision to leave “had nothing to do with the IPO (Initial Public Offering) issue”. “The IPO was not central to my decision, if that were the case, then this (resignation) would have happened six months ago,” he said. Nath was referring to the controversial purchase of 659,588 shares of First Citizens’ IPO earlier this year by the bank’s then Chief Risk Officer, Hassan Philip Rahaman, who later sold 634,588 of those shares to family members and to five companies owned by the Rahaman family. The transaction is under investigation by the Trinidad and Tobago Securities and Exchange Commission (SEC). When Newsday sought to determine if his future post would involve a company with regional or international operations, Nath revealed, “There is a particular one — potentially, yes, both.” He then explained, “I’ve chosen to leave now to ensure that I have the ‘cooling off’ period before my next assignment.” Howai, confirming the changes in a later statement, said Smart’s temporary post “is intended only to give the organisation the necessary time and space to conduct a thorough recruitment process for a new CEO.” Howai added that with Nath’s resignation, the bank “had to move with some alacrity to ensure the continued smooth running of this important financial institution. At the same time, the bank is moving to ensure that the best possible candidate is sought.” Howai said he had no comment on Nath’s departure because the ministry does not get involved “in such matters. So I think whatever the bank has said would be the full statement of what needs to be said.” Asked whether other executives would be leaving the bank, he said he was not aware of any further impending departures. Howai said the investigation launched by First Citizens Bank into the IPO was completed “some time ago.” He said the new board reviewed its findings but did not institute a new investigation. Asked whether there would be any attempt to recover any “ill gotten gains” in the transaction, he said the country would have to await the conclusion of the investigation being undertaken by the SEC to see whether anyone had profited illegally from the transaction. SEC chairman Dr Patrick Watson said there is no link between the course of the SEC’s ongoing probe into the First Citizens IPO and the recent resignation of Nath. New board appointed Seven months before Nath resigned as First Citizens Group CEO, the Group appointed a new board of directors. At First Citizens’ first annual general meeting as a public company at the National Academy for the Performing Arts (NAPA) in Port-of-Spain on May 12, Corporation Sole, represented by permanent secretary in the Ministry of Finance, Vishnu Dhanpaul, voted against the re-election of and refused to support directors Nyree Alfonso, Rishi Baddaloo, Shobee Jacelon and Marlene Juman. Alfonso was First Citizens chairman at the time. Juman is the Permanent Secretary in the Ministry of the Attorney General. The new directors were Smart (who was appointed the new chairman), Witco managing director Jean Pierre Du Coudray, Joel Pemberton, Michelle Durham-Kissoon, Courtenay Williams and Hazar Hosein. Despite all of the challenges the group faced during the course of 2014, First Citizens declared a profit before tax of $773 million and after tax profit of $627 million for the financial year ended September 30, 2014. Mega merger looms On November 6, Cable and Wireless (CWC) announced that they had reached a conditional agreement to acquire Columbus International Inc, parent company of local cable television provider, FLOW, at a cost of US$3.025 billion. A joint statement issued by both companies said their combination supports CWC’s new strategy and its four primary areas of focus-drive mobile leadership; accelerate fixed mobile convergence; reinforce TV offer and grow business to business and business to government sectors. Digicel Group CEO, Colm Delves, said, “We are naturally concerned to ensure that this proposed transaction will not result in an un-level playing field in the Caribbean.” The Irish based Digicel group, and the British-owned CWC are regional rivals in the telecommunications industry. Recently Digicel acquired Jamaican network, SportsMax, which broadcasts on Flow. Telecommunications Authority of TT (TATT) CEO Cris Seecharan said the proposed acquisition “will certainly attract the attention of the authority.” Seecharan said CWC owns 49 percent of Telecommunications Services of Trinidad and Tobago (TSTT) and is now seeking to purchase Columbus, the provider of the FLOW service in this country, Jamaica, Barbados and Curacao. Noting the types of services provided by CWC, Columbus and Digicel within the domestic telecommunications sector, Seecharan said this acquisition could raise concerns about the creation of a duopoly — a form of oligopoly occurring when two companies control all or most of the market for a product or service. An oligopoly is a situation in which a particular market is controlled by a small group of firms. He said TATT will undertake the necessary investigations and analysis to determine what impact this proposed acquisition will have on competition within the domestic telecom sector. CWC shareholders voted overwhelmingly in favour of the merger at a meeting in London on December 6, 2014. Finance Minister Larry Howai met with the management of State-owned TSTT and its line minister, Public Utilities Minister Nizam Baksh on the possible implications of the merger on TSTT. CWC holds 49 percent shareholding in TSTT. Howai stressed that Government, which holds the remaining 51 percent in TSTT, will ensure the interests of taxpayers are protected with respect to this matter. Howai has also said the issue of any sale of CWC’s shareholding in TSTT would be a matter for Cabinet to decide on. Howai met with O’Brien on December 11 at the Eric Williams Financial Complex in Port-of-Spain. During that meeting, Howai assured O’Brien that Government will make a decision soon on the proposed US$3 billion acquisition of CWC. Prior to their meeting, O’Brien spoke at the opening of the Caribbean Telecommunications Union (CTU) Forum at the Cascadia Hotel in St Ann’s on December 10. O’Brien said regional regulators simply must get this process “right” because “the consequences of getting this wrong are too dire to contemplate.” O’Brien provided data which showed it “will lead to a very substantial lessening of competition” in Jamaica, Trinidad and Tobago, Barbados, St Lucia, St Vincent and the Grenadines and Grenada. Year in Review continues next week. newsday.co.tt/businessday/0,204997.html
Posted on: Fri, 02 Jan 2015 12:10:57 +0000
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