Opinion
- Editorial
Mary
King:
Smelters
- more of the same
The
Point Lisas and the LNG Point Fortin industrial
parks are seen as the jewels of T&T if not the
Caribbean. In this context the present Government
is intent on expanding this kind of economic development
with the building of three aluminium smelters. This
concept of industrialisation was introduced under
the watch of the late PM, Dr Eric Williams, and
initially was cast in the model used by South Korea,
which consisted of distinct stages of growth.
The
first stage was the total import of the technology,
the plants, by South Korea on a turn-key basis.
Since South Korea owned the plants they were able
to reverse engineer the designs etc and in the second
round of plant installation and/or upgrade the local
engineers were able to use in part indigenously
developed technologies. In the final stage of growth
the South Koreans were able to build/optimise/add
value to their own plants using their own Intellectual
Property (IP) and were in a position to export the
skills and IP so developed.
When
Point Lisas was first built, though we had stringent
marketing agreements as a result of the loans taken
to construct the plants, the industry was locally
owned and the first stage of growth got underway.
Then came the bust, the inability to repay loans,
the conditionalities imposed by the World Bank/IMF
and the resulting sale of the plants. The jewels
today are in general owned by FDI. This situation
has stymied the progress of the stages of growth
envisaged by the Eric Williams visionaries.
Yet,
these Bretton Woods institutions would have us believe
that FDI is necessary for the development of the
Third World, so much so that our government prides
itself on the amount of FDI it can attract. Indeed
we have been very successful in attracting such
investment to the energy sector. Goldman Sachs Economic
Research, Latin America Economic Analysis, April
2005, tells us why. Listen:
"Past
official strategies to attract FDI were based in
horizontal policies designed to maximise its volume
- via liberalisation, deregulation, privatisation
and financial guarantees. (We can add to these tax-free
holidays and concessions, easy repatriation of profits,
relaxed environmental and labour laws, innovatively
priced (i.e. cheap) natural resources and a blind
eye to transfer pricing). FDI into the mining industry
has contributed to increasing outputs and exports
but has limited technical and industrial diffusion
effect in these economies (e.g. The Point Lisas
model to date). Going forward these policies need
to be complemented by vertical strategies that involve
identifying strategic sectors and production linkages
that could increase the added value of domestic
production."
The last is indeed necessary for economic sustainability
but it cannot be accomplished without the creation
of local ability to assimilate and innovate in the
relevant technologies - via centres of excellence.
This is confirmed by our celebrated economist, William
Demas, who stated that an economy is developed when
it has acquired the capacity to proceed under its
own steam. This capacity has two components: the
ability to generate enough domestic savings and
investment and to adapt and innovate in response
to changing needs. FDI is neutral and its impact
in T&T depends on how the Government deals with
it to create a Demas environment.
The
fundamental change ahead of us is the depletion
of our natural resources. Thus to assess the success
of our current economic policy - the intent to install
three smelters funded in the main by FDI - it is
necessary to examine the degree to which the Government
has managed to generate local savings and their
investment in the creation of sustainable on-shore
enterprises and to what extent the present energy
sector has and the proposed aluminium industry could,
create the intellectual capability and capacity
to innovate and adapt in our economy.
The Goldman Sachs quote has already demonstrated
that traditional FDI as exists in T&T has had
little technical and industrial diffusion effect
in this country. LA Barclay in a UN study sees that
the foreign investor's contribution has been limited
to training nationals in operations and maintenance.
The
building of three smelters substantially owned by
FDI, one of which will provide inputs for the manufacture
of car wheels and ingots for export and another
which will export all of its output, continues in
the mode described by Goldman Sachs and Barclay.
They (as examples of the 70s economic model) will
contribute nothing to sustainable economic development
as defined by Demas. Surely as we get deeper into
the throes of the Dutch Disease, the energy sector
including the smelters will contribute to the mirage,
increasing GDP, while we become all the poorer since
our depleting natural resources (our wealth) are
being consumed without the Government using the
proceeds to re-invest in the building of a sustainable
economy.
Mary
King is
one Trinidad Express' columnist (maryking@tstt.net.tt).
Petroleumworld not necessarily share these views.
Editor's
Note: This article was first publish in Trinidad
Express on Monday,
November 6th 2006. Petroleumworld reprint this article
in the interest of our readers.
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Petroleumworld
11/12/06
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