Pursuing
diversification of the economy
Trinidad Express
Port Spain
Petroleumworldtt.com
09 04 07
Two major accounting firms have raised some concerns
regarding the outlook of the nation's economy in
the light of the proposed multi-billion-dollar
2007-2008 national budget tabled recently by Prime
Minister and Finance Minister Patrick Manning.
Noting
that it remained concerned at "the
pace and price being paid in the development process," PricewaterhouseCoopers
stated in its overview of the budget that "given
the enormous sums invested in these Government
sponsored projects we share the concerns expressed
that Government must be fully accountable to Parliament
and the people of T&T for the investment programmes
that it is pursuing in these various areas."
"We also remain concerned that, as alluded
to in the IMF Statement, the country's absorption
capacity is incapable of handling the level of
annual expenditure that such projects and programmes
entail, which if left unchecked could lead to the
further overheating of the economy with the attendant
adverse consequences," the firm cautioned.
For
its part, Ernst & Young said "the
diversification of the economy away from energy
dependence must now (more than ever before) be
urgently and energetically pursued."
Highlighting
the continued growth of the economy buoyed by
a significant expansion in the energy
sector as well as low unemployment and the downward
trend of inflation, the firm noted that "into
this economic nirvana came the recently released
Ryder Scott audit on the country's natural gas
resources" which forecast a depletion of reserves
within 12 years.
It
said that "the more thought provoking
point emanating from the report is that periods
of 12, 25 or even 50 years are immaterial in the
life of a nation and this incontrovertible fact
belies the fragility of the present economic expansion."
"When one analyses the statistics underlying
the country's financial progress, our energy dependence
becomes startlingly clear. The energy sector's
contribution to GDP has increased from 26.2 per
cent in 2002 to 45 per cent in 2006. Its share
of Government revenue has catapulted even more
strikingly from 27.8 per cent to over 60 per cent
in the same period. At the same time Government
expenditure has grown exponentially, based primarily
on the spoils of our gas resources. In short, to
borrow the words of (US President) George W. Bush,
as a nation 'we have become addicted to oil', except
that our addiction is not to its consumption but
rather to its purchasing power," the firm
stated.
Looking
ahead, it said that "Trinidad and
Tobago's first order of business must be to discover
new oil and gas resources and to do so quickly."
Underling "the critical and urgent need for
economic diversification," the Ernst & Young
review noted that "it is both interesting
and revealing that no targets were established
regarding the reduction of the country's energy
dependence whether by 2015 or as part of Government's
Vision 2020."
"Instead, we were reminded that a 1970's
Ryder Scott report gave the country a production
to reserve ratio of eight years -- an eventuality
that has obviously not come to pass. It, therefore,
seems evident that in the critically important
area of balancing energy dependence with economic
diversification, the country will continue into
the future with the same strategies we currently
employ, no doubt with the same result. We must,
therefore, collectively remain hopeful that Ryder
Scott continues to be wrong. In this regard, our
stance remains remarkably at odds with other countries
blessed with far greater known energy resources
than we have," it concluded.
In the context of the energy sector, PricewaterhouseCoopers
pointed to the petroleum tax regime and said that
the present system contains few incentives to encourage
further exploration programmes especially in the
deep water areas.
"Government needs to be mindful that T&T
is competing with other countries for the 'direct
investment dollar' and must therefore ensure that
we remain competitive in all aspects," the
firm said in its 2008 Budget Memorandum.
On
other matters, it said that "in making
reference to his Government's plans to accelerate
efforts to diversify the economy, the Honourable
Prime Minister presented little tangible evidence
of what is to be done."
"We continue to have reservations that the
seven industries targeted as the industries of
the future are capable of delivering what is expected
by Government. The industries include Music and
Entertainment, Printing and Packaging, Merchant
Marine, Film, Fish and Fish Processing, Yachting,
and Food and Beverage. Interestingly no mention
was made of any incentive measures in relation
to these special focus industries. The 'diversified
landscape' of the T&T economy still remains
something of a vision," it added.
Trinidad
Express
Wednesday, August 29th 2007
Copyright
©2007 Trinidad Express. All Rights Reserved.
