Greater
diversification needed
By Driselle Ramjohn
Trinidad Express
Port Spain
Petroleumworldtt.com
09 04 07
THE
Trinidad and Tobago economy was in 2005 approximately
60 per cent dependent on the revenues from oil
and gas for economic growth and development.
The recent Ryder Scott Report, an audit of the
nation's natural gas reserves, indicated that
the country only has approximately 12 years of
natural gas left in reserves with the existing
industries.
Prime Minister Patrick Manning said in his presentation
of the 2007/2008 national budget that several more
industries are to be added to the country's already
full portfolio. These industries will also run
on natural gas which means the nation's reserves
will last an even shorter time, experts have said.
The experts have added that the budget presentation
was devoid of any plans for the diversification
of the economy or any thrust for the development
of the non-energy sector.
So the question that has been in the minds of
the public at large is what will this country do
when/ if oil and gas run out.
The overwhelming response has been a call for
a greater diversification of the economy using
the excess revenues that we are now fortunate to
attain thought oil and gas.
Speaking
at the Trinidad and Tobago Chamber of Industry and
Commerce post-budget
panel discussion,
senior economist at RBTT Bank, Hayden Blades said, "The
Trinidad and Tobago economy is one I like to refer
to as being bi-polar and that is conditioned on
the fact that essentially there is a high degree
of duality between the energy-sector and the non-energy
sector".
"Our economy has demonstrated enviable growth
over the past five years. Indeed between 2003 and
2007 it is estimated that the country received
an annual growth rate of 9.2 per cent, which by
any standard is a significant level of growth for
a small developing country," he added.
Blades explained that the rate of growth in the
energy sector has declined for 2007 compared to
2006 and this may be an indication of things to
come in the future.
To safeguard the economy from pitfalls in the
energy sector and to ensure sustainable development
in the economy, the diversification of the economy
must be aggressively pursued.
"Even if a turnaround in (oil and gas) exploration
should occur, the elimination of the volatility
in the growth of the economy is a must. Volatile
growth statistics sends the wrong signal and it
negatively affects confidence. Confidence drive
behaviour and behaviour drives investment. Investment
creates jobs and higher incomes," he added.
Blades said the argument for greater diversification
is always there, but in what areas should the country
diversify?
"The IMF just announced that we should grow
the economy using the energy sector. I say that
that too sends the wrong message to policy markers
but the answer is right before us," he said.
The economist explained that the services sector
presents some of the greatest opportunities for
economic diversification.
Health costs are escalating globally, he said
and if this country were to develop a vibrant and
world-class health sector it can actually export
health services.
Another area ripe for development is arts, culture
and entertainment; fondly refer to by Blades as
the ACE industries.
"Should we not focus more resources on the
development of these industries? Arts and culture
is not about building more building to have better
institutions. Institutions are not really about
the physical infrastructure. Institutions are about
how you manage people. How we organize processes
and how we envision the future," Blades said.
The Prime Minister in his capacity as Minister
of Finance indicated that the Government would
be building more academies for the development
of arts, culture and entertainment in this year's
budget presentation.
"What about a vibrant tertiary education
sector? UTT, UWI and the host of private tertiary
institutions must increase their level of collaboration
and focus increasingly on regional and extra-regional
markets. Is this not another avenue for the creation
of knowledgeable, non-energy economy that is independent
of the varies of global oil and gas prices, and
the volatility of oil and gas volumes," Blades
said. The non-energy sector in this country is
the area in which employment, wages and income
growth are generated that is independent of transfer
and subsidies, he added. "If we have not yet
figured out yet that the agriculture sector is
critical to national development then we have a
lot of figuring out to do. Agriculture has to be
elevated to its rightful place, right alongside
national security. Anything less and we endanger
the future of the Republic," the economist
said.
However, not every economist shares Blades' view
that not enough is being done for the development
of agriculture in this year's fiscal policy.
Ronald Ramkissoon, senior economist,
Republic Bank said, "I think that the budget allocation
for agriculture is a great leap - a few hundred
million to $1.2 billion".
"I think there were some very good ideas
in the budget like growing food in Guyana. That
is a suggestion that I have made a very long time
ago. If we don't have the land space then we can
go there. This initiative can even bring Caricom
together. I think we don't need to say if we want
larger farms or small farms that is the wrong debate.
The debate has to be what size farms are important
to deliver more food for Trinidad and Tobago".
Head of the Department of Economics Dennis Pantin,
in his budget analysis at the Caribbean Money Market
Brokers (CMMB) annual budget seminar last week
said that he strongly believes that the Government
needs to desperately move away from a dependence
on oil and gas for revenues for economic development
or face another economic bust like the country
experienced in the 1980s.
The economist explained that having a natural
resource is sometimes more of a curse than a blessing
as countries become solely dependent on the revenues
from these reserves and sustainable economic growth
and development is seldom ever achieved.
"The critical challenge we face is to exorcise
the resource curse which simply means we have to
find a way of using the opportunity of these few
sums of money which we are either receiving or
can potentially receive if we are able to ensure
that we can get our fair and just due from our
production and we have to find ways to invest this
in a range of sectors both here and abroad," Pantin
said.
This is necessary to ensure that "when -
not if but when" the hydrocarbon boom comes
to an end, it will not be as traumatic as it was
for this country in the late 1980s early 1990's
when it experienced an economic bust.
History will repeat itself if Trinidad and Tobago
does not learn from its mistakes of the past when
it experienced an oil and gas boom from 1972 to
1984.
"Basically, we live on borrowed time and
we need to accept that these are conditions that
prevail in the economy," Pantin said, adding
that economic transformation is necessary now.
Some of the solutions Pantin provided was that
Government should invest in overseas oil and gas
companies for when this country's reserves run
out.
While diversification is key to the sustainable
development of the local economy so is savings.
Pantin said that during the 1980s and the 1990's
during the depression the Government had some US$3.2
billion is savings which the country ran through
trying to maintain the standard of living during
the boom.
In the value of the currency today that money
would be approximately US$6 to US$7 billion.
However, more than a decade later the country
has less than US$2 billion in the Heritage and
Stabilization Fund, this Pantin said is not enough.
The current level of savings by the Government
also needs to improve and be regulated with the
appropriate legislation.
Trinidad
Express
Wednesday, August 29th 2007
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©2007 Trinidad Express. All Rights Reserved.
