Stakeholders on PM’s project-based funding: What is Tobago’s vision?

Businesswoman Diane Hadad -

Businesswoman and former chair of the Tobago branch of the TT Chamber of Industry and commerce Diane Hadad commended the government on its plans for project-based allocations for Tobago, as was proposed by Prime Minister Kamla Persad-Bissessar at a special sitting of the THA on November 4.

However, she said a few things must be considered before changing the fiscal policy for Tobago. She said Tobago needs to have a plan for its development and future.

“As far as I see it, Tobago has never properly represented itself to Trinidad in order to get the place developed, because I don't know that they actually sat and said, 'This is the plan for our 116 square miles and this is what we want to do with it,'” Haddad said while speaking to Newsday on November 5.

“This is why, for me, I don’t understand the conversation of autonomy – total autonomy, all kinds of autonomies. We never sat down and worked out what that investment is.

“I cannot go to the bank for money unless I can show them clearly what my plan is and where I am taking my business in order for them to have confidence, to lend me the money to buy into my ideas and my way forward. That is why I think Tobago is about five steps back. They need to go and plan before they start to speak about anything else.”

On November 4, Persad-Bissessar announced plans to do away with set percentages in budget allocations for Tobago. She said the government plans to develop a fair and transparent mechanism for allocations to Tobago based on an agreed “fair-share model.”

“This equalisation model, in the first instance, will allow for a moving away from the current population percentage-based budgeting for development but will move instead to percentage-based budgeting for development, to project-based budgeting.”

This, she said, would guarantee larger sums from the Infrastructure Development Fund for the Public Sector Investment Programme to fund THA-approved strategic development planning.

Persad-Bissessar recalled that in 2013, in her first term as Prime Minister, she had offered Tobago eight per cent of the national budget.

Hadad said the plans were a step in the right direction, especially since Tobago has seen more than two decades of allocations under a PNM-led government with little to show for it.

“That has been one of the downfalls for years, in that Tobago gets its allocation and it is meant to run the island with it. Where we have the problem… the island needs certain infrastructural facilities… there are things that need redevelopment or enhanced development and then there are things that the island is lacking altogether to really carry your people to the next level or to speak economics or tourism at another level.

“That can’t be funded in the monies allocated to Tobago through the budget.

“We have had 21 years of PNM, but we can’t see the money in terms of infrastructure on the island. Neither can we see it in the human capital, in terms of the quality of who we have invested in. Now we come to this administration and we are on the same level or skating backwards.”

Mariano Browne: The devil is in the details

Former trade minister, senator and current CEO of the Arthur Lok Jack School of Business Mariano Browne noted that the Prime Minister’s contribution only outlined a broad idea of what an “equalisation module,” would look like in the context of Tobago.

Noting the government’s current fiscal capacity, its expenditure and promises already made by the government, he said while the idea may sound good on paper, the devil is in the details.

In simple terms, he said resources have to come from somewhere and the projects, if funded though this new module, must meet objective criteria.

“The reality is that the nation’s fiscal capacity as currently constituted has been exceeded,” he said. “Expenditure exceeds revenue by plenty. This is not sustainable.

“The current fiscal deficit is understated and the government will have difficulty meeting the 2026 projected expenditure, including the new ten per cent wage settlement put on the table. Therefore if there is the intention to give Tobago more funding, where will the funding come from?”

Browne explained that an equalisation fund is a financial mechanism that can be used in various contexts to ensure fair treatment and distribution of funds among participants.

“In investment funds, it ensures new and existing investors receive an equal share of the fund's income, while in public finance, it redistributes government revenue to equalise the quality of services between different regions.

“In public finance, equalisation refers to the transfer of funds from richer to poorer sub-national governments to reduce disparities in their ability to provide public services.”

He said equalisation funds ensure citizens in different regions can get similar levels of service regardless of the local tax base. It offsets differences in fiscal capacity and expenditure needs.

“The payments are calculated based on a region’s fiscal gap – the difference between its fiscal need and its fiscal capacity,” he said.

He admitted that he was not clear on what Persad-Bissessar meant by an “equalisation module” in regard to Tobago. He noted that, as it stands now, the funds paid to Tobago under the percentage-based module is higher than Tobago’s fiscal capacity or the taxes generated in Tobago.

“The movement to project-based budgeting suggests that individual projects will be funded,” he said.

“The question that follows is who will determine the projects or the project scope. What happens if the projects are ill conceived or the project scope is considered overambitious? What are the investment hurdles that determine project suitability? For example, technical feasibility (Can it be built?), financial (Is it cost-effective?), operational (Can it be run effectively?), market (Is there demand?), and legal (Does it comply with the law?).”