Point Lisas needs tune-up
BG
Editor
Trinidad Business Guardian
Port Spain
Petroleumworldtt.com
09 09 07
On Monday Finance Minister, Prime
Minister Patrick Manning announced in the budget
speech that the
T&T’s total production went from $55
billion in 2001 to $114.5 billion in 2006 and per
capita income increased from US$7,100 in 2002 to
US$14,790 in 2006.
I have written on a number of occasions, and in
various ways, that I consider Point Lisas and Point
Fortin to be outstanding successes in their contribution
to the local economy.
And I am clear in my own mind that the economy
would not have doubled in the space of six years
had it not been for Point Lisas and Point Fortin.
I am also clear that were it not
for Point Lisas and Point Fortin the economy
would not have created
about 84,400 jobs in the last six years, sending
the rate of unemployment down from 11.7 per cent
in 2001 to five per cent at the end of 2006, the
lowest in our nation’s history.
The fact that the State has been able to lower
corporation taxes from 35 to 25 per cent and individual
taxes from a top marginal rate of 35 per cent to
a flat rate of 25 per cent is largely due to the
contribution made by Point Lisas and Point Fortin.
As well, the fact that there are 300,000 more people
today whose income is tax free must be attributed
to the contribution made by the exports of LNG,
ammonia, urea, methanol and steel.
So while these industrial estates may be part
of what Professor Dennis Pantin describes as the
rentier economy, even in the absence of audited
accounts and full State accountability, one would
be hardpressed to argue that Point Lisas and Point
Fortin have not contributed significantly to the
$69.7 billion in tax revenue from the energy sector
collected in the last six years.
And one would be hardpressed, therefore, to argue
that Point Lisas and Point Fortin have not contributed
to the $162.7 billion in total tax revenue that
the State has collected in the last six years.
If the industrial estates contribute as much as
20 per cent of total revenues, it would mean that
about $32 billion would have come from Point Lisas
and Point Fortin in the last six years.
One wonders whether the rentier economists or
the plantation theorists or the proponents of diamond
clusters could come up with a package of non-resource
industries which could have contributed $32 billion
in the tax revenues in the last six years. And
if there would have been private sector investors,
either local or foreign, willing to fund these
non-energy ideas.
Having said that, the Point Lisas model is by
no means perfect. In fact, in many ways it is a
model in need of a thorough and efficient tune-up
so that it would be able to operate as smoothly
in the future as it has done in the past.
Tune-up #1
As recently as Monday, during the
budget speech, the Prime Minister boasted that
T&T was the
leading exporter of methanol and ammonia in the
world and the leading exporter of LNG in the hemisphere.
He’s right and there is no
doubt that the economy has benefited tremendously
from its exports
of these products, especially at a time when these
products command high prices.
It’s nice to be the No 1 exporter of methanol
in the world, but why aren’t we the No 1
exporter of biodiesel fuel in the world or the
top exporter of dimethyl ether, which burns like
natural gas and handles like LPG (cooking gas)
according to the Methanol Institute Web site.
Instead of exporting all of our
methanol, why aren’t members of the Manufacturers
Association beating down the doors of the methanol
companies
at Point Lisas with ideas for the establishment
of companies producing fuel cells for the world
market.
It’s great to be the leading exporter of
ammonia in the world, but T&T still imports
large amounts of finished fertiliser from companies
that use T&T ammonia in its production.
The fact that T&T is not THE
major exporter of fertiliser in the world is
a major deficiency
of the Point Lisas model. That deficiency may be
as a result of the fact that, with two exceptions,
the ammonia companies are foreign owned and export
the product at high prices in the world market
or to their vertically integrated fertiliser plants.
But even when the plant is majority
state-owned (as Tringen is) there has been NO
ATTEMPT to develop
a branded fertiliser export industry using T&T’s
ammonia.
In other words, there has been no attempt by the
local private sector to create an onshore, export
industry from the offshore, export industry.
Why is that?
Why do we have young men—who inherited their
father’s agricultural products business and
who import tonnes of processed fertiliser from
the US made from T&T ammonia— opting
to use the surplus of the family company to invest
in a franchised restaurant but not in a small,
hi-tech fertiliser plant using T&T ammonia.
Has the local private sector done enough to create
new industries out of the methanol, ammonia and
steel produced at Point Lisas.
Why?
I guess the answer is that we have not broken
the back of the traditional plantation economy.
It is true that some companies on the estate resisted
selling product to the local market. These companies
know themselves.
Tune-up #2
The other major critique of Point Lisas is that
the State has not done nearly enough to facilitate
the ownership of that plantation by local capital.
Apart from NEL, there is no vehicle
for direct or indirect ownership of the wealth-creating
industries
in T&T by credit unions, pension plans, workers,
mutual funds, insurance companies, investment clubs,
individuals, companies and even sou-sou hands.
Even when there have been explicit, contractual
provisions for the sale of shares in Point Lisas
companies to the local public, they have been able
to thumb their noses.
Again, a certain company on the estate is the
poster-child for this attitude as there was a specific
provision in its 1994 sales agreement that 40 per
cent of the equity in the plant should be placed
on the local capital market with the workers being
given first preference.
Trinidad
Guardian
Thursday 23rd August, 2007
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©2007 Trinidad
Guardian . All Rights Reserved.
