Opinion
- Editorial- Commentary
Business
Guardian View :
T&T’s
future remains Point Lisas
We
already produce world-class commodities at Point
Lisas.
Should we be trying to reinvent the wheel or
transforming the wheel into something that
adds more value to us in the region?
Nobody
disagrees that the T&T economy should
be diversified.
The only question up for debate is in what areas
should it be diversified.
Convinced
by some economists that T&T’s
oil and gas resources are a curse, there may be
some people who feel that T&T should “demolish,” “dismantle” or “exorcise” the
oil and gas sector and focus on IT, agriculture
or tourism.
I tend to disagree with that point of view.
The
diversification of the economy should be focused
on and centred around Point Lisas, given the fact
that T&T has significant competitive advantage,
in terms of existing plant and human resource,
in the petrochemical field.
In
other words, the way for T&T to achieve
sustainable development, this country would need
to deepen and broaden the Point Lisas model.
As
the South Chamber put it in an advertisement
last week, “The key issue for the T&T
economy is to extract greater value-added within
the domestic economy. This can best be achieved
by the types of plants currently under construction
or due to start soon, including MHTL’s AUM
complex, the Essar Steel mill and the Alutrint
aluminium complex.”
I
agree with the first sentence in that quote that
T&T’s future lies in extracting
greater value from Point Lisas. But I don’t
entirely agree with the method of achieving the
extraction of greater value.
The
steel complex, the aluminium complex and the
AUM complex should be seen as the start of the
further diversification of the Point Lisas model—not
the end of it.
What
T&T needs is the development of new enterprises
that go further downstream of steel, aluminium
and melamine.
In this model, 100 per cent of the steel, 100
per cent of the AUM and 100 per cent of the aluminium
would be used to feed new downstream industries
producing hundreds of different products.
While the steel complex is 100 per cent Indian-owned,
the AUM complex is majority owned by the privately
held CL Financial empire and the aluminium complex
is 60 per cent state-owned, the owners of the new
downstream industries should be, for the most part,
local or regional.
The money for the construction and operation of
the new factories that go downstream of steel,
melamine and aluminium should come from local and
regional credit unions, mutual funds, pension plans,
individuals, investment clubs and companies. These
new downstream companies would be listed on the
local stock market.
At
this point, T&T is a world-class producer
of ammonia and methanol and a hemisphere-class
producer of steel, oil and natural gas.
Our future endeavours should be focused on creating
new industries based on the products that we already
produce.
As
it stands, T&T has ten ammonia plants that
each export up to 97 per cent of the commodity
to global market, particularly North America and
Europe. There phosphorus and potassium are added
to the T&T ammonia and branded fertiliser is
sold back to us. The same is true to a larger or
smaller extent for methanol, steel, oil and natural
gas.
The basis of the development of the Caribbean
has been that we export what we produce and import
what we need or want. So 50 years ago, we produced
sugar and cocoa and exported those products to
England where Cadbury added some milk, sent it
through a manufacturing process, put it in a colourful
wrapper and sent it back to us as chocolate with
a 500 per cent markup.
Fifty years later, this country still does not
produce a world-class chocolate brand that is as
recognisable on the international market as Lindt,
Hersheys or Cadbury.
Yesterday, we exported cocoa and imported chocolate.
Today, we export ammonia and import branded fertiliser.
Also most of our petrochemical plants are financed
by foreign companies, insured by foreign companies,
engineered by foreign companies and constructed
by foreign companies. When the plants are completed
the product is shipped in foreign-owned ships,
marketed by foreign companies and manufactured
in foreign factories.
In other words, too much of the added value from
Point Lisas (in project financing, insurance, construction,
shipping, marketing and manufacturing) is going
to foreign sources. This is because of the ownership
structure at Point Lisas, the vertically-integrated
nature of the operations there and the fact that
the local private sector (with one major exception)
has been very slow to take advantage of the many
opportunities that Point Lisas provides.
In my view, the billion-dollar question is not
how do we exorcise the resource curse or demolish
the rentier economy.
One part of the billion-dollar question is: how
do we transform the plantation economy so that
most of what we produce here is used here and transformed
into something much more valuable. The other part
is how do we ensure that the transformation process
facilitates contractors, engineers, project financiers,
insurers, marketers and ships that are owned by
locals and regional capital.
In this globalised world, the focus will have
to be on developing industries that can be globally
competitive.
Those who argue that we should diversify into
non-energy manufacturing will have to contend with
the fact that China is likely to remain the dominant
manufacturer in the world for the foreseeable future.
Those who contend that we should diversify into
IT will have to contend with the fact that India
looks set remain dominant in IT for the foreseeable
future.
Those who feel that tourism is our future, will
have to contend with the fact that this country
simply does not have the beaches of some of our
neighbours and that attempting to build an economy
around tourism may be a case of constructing your
house on shifting sands (literally) as seas levels
rise and hurricanes become more potent.
All
of these areas, and more, may provide niche growth
poles, but are not likely to provide the
T&T economy with “full employment, a
globally competitive economy and equity” which,
as Professor Dennis Pantin argues, should be the
goal of all those interested in sustainable development.
We already produce world-class commodities at
Point Lisas. Should we be trying to reinvent the
wheel or transforming the wheel into something
that adds more value to us in the region?
Business
Guardian is
Trinidad Guardian's weekly business magazine .
Petroleumworld not necessarily share these
views.
Editor's
Note: This article was first publish in Trinidad
Guardian, Thursday 30th August, 2007. Petroleumworld
reprint this article in the interest
of our readers.
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