Opinion
- Editorial- Commentary
Mary King
:
A wealth-driven economy
The Minister of Energy told us recently that our Government intends to invest in the other areas of the natural gas industry-shipping, re-gasification etc. However, because the existing LNG plants are already tied up via supply contracts and Government's investments in these are as a minority shareholder, the building of another LNG plant is necessary if T&T is to exert any kind of control of the international industry.
The question that immediately presents itself involves the Government's intention to further increase its revenues via foreign exchange-earning assets over the rents it already collects, and in so doing, exacerbate the existing model of economic development of high non-energy deficit spending and the concomitant Dutch disease. Is this indeed the best usage of our investment resources?
Prof Michael Porter in his book, Competitive Advantage of Nations, defined the typical stages of economic growth of a nation. One of these is the investment stage in which the country invests in its people and companies so as to develop the more advanced factors of production. However Prof Kari Levitt also tells us that economic development is about producing well-paying jobs for the general work force of the country.
Hence the proposal of the Minister of Energy and others in the industry to invest in re-gasification plants in North America for example, may pay dividends to the Government, but its focus is not on producing directly the jobs for the citizens of the country (currently the energy sector employs some three-four per cent of the population).
Barack Obama in his election campaign was strident in his condemnation of the American companies that lacked innovation and exported jobs overseas simply to reduce the costs of production while Americans lost the means to provide for their livelihood-the US multi-national companies had become paramount. So much so, that Mr Obama promised tax breaks to companies that provide jobs at home.
The anomaly is that the American market still is-the evidence is the international contagion of the US recession-the major market for the world's production and this depends on the US consumer having the money (i.e. jobs) to purchase the goods and services.
Though Prof Porter tells us that it is not nations that compete, it is companies, it is nations that need jobs from these competing companies. Investment has been globalised, i.e. it can cross borders freely but labour's mobility to follow jobs is still largely restricted i.e. it is important in the economic development of a country to provide in-country employment which in turn drives the market. The relevance of this to us is that the first call on our investment capacity is to provide sustainable jobs at home.
Foreign investment of our limited funds in the petroleum sector (a term that in T&T's parliamentary language includes natural gas) may provide the Government with increased dividends but this is surely not what Profs Porter and Levitt, and our own William Demas, had in mind when they discussed the investment stage of the growth of a nation.
Further, the so-called new economic growth model as discussed by Bo Carlsson and Skyrme sees instead the provision of an Experimentally Organised Economy (EOE) discussed at length in this column, in which the investment in the country is to create and strengthen institutions that form in general a national innovation system. This is in keeping with the now-accepted view that global competitiveness depends on the creation and exploitation of knowledge.
One of the early stages of growth defined by Porter is the exploitation of natural advantage via cheap labour and imported technology generally using foreign capital-our typical plantation economy. Today in the global market companies do indeed take advantage of cheap labour even though this may be temporary (e.g. China) but the optimum exploitation of natural resources in developing countries-steel, petroleum, aluminium etc.-usually done by foreign investment, increasingly demands imported technological and business innovation. The tremendous global success of Mittal (Arcelor) Steel is a case in point.
Minister Enill's model of economic development continues the Government's spending that drives the on-shore economy. The current high inflation rate, the monetary mess we are in, the move of the private sector towards non-tradable goods and services are concomitant disadvantages.
Investment is critical to the economic development of T&T but investing abroad with the hope of earning dividends is equivalent to the non-competitive wealth-generating stage of growth as defined by Porter.
Further, our Government continues to live like Alice in Wonderland when one considers that our natural gas reserves are minimal, the reduced demand for energy in our major market, and, the move towards the use of alternative fuels that do not damage the environment. (to be continued)
Mary King is a columnist of the Trinidad Express (maryking@tstt.net.tt). Petroleumworld does not necessarily share these views.
This
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