The
other side of the coin
PORT SPAIN
Petroleumworldtt.com
03 09 08
No
one can dispute the fact that Trinidad and Tobago's
energy sector is booming or that the economy has
benefited from the windfall of energy-related revenues.
However, there is another side of the coin says
Dr Patrick Watson, Director of the Sir Arthur Lewis
Institute for Social and Economic Studies SALISES.
Speaking with Business Express in a recent interview,
Watson discussed the booming energy sector, in
the context of a study conducted by SALISES on
its negative impact on the Trinidad and Tobago
non-energy sector and, by extension, the economy.
The Open Forest Analysis research conducted by
Watson looked at the potential of the diversification
of the Trinidad and Tobago economy using countries
with similar growth rates including Chile, Costa
Rica, and Mauritius as bench marks.
According to Watson, when compared to other Latin
American countries local firms produced fewer products
than its Latin American neighbours, as well as
less new products.
This, he said is because the growth of the local
economy is led by the energy sector, which is unbalanced.
"Over
the past several years investments have been
made mainly in the energy industry; all
of the big international investments are in the
energy industry and, based on the analysis, this
is not at all healthy for the non-energy sector."
Watson
noted that the country's non energy fiscal deficit
continues to get wider and wider, which
is dangerous for the economy since the comfort
zone for most countries is usually below 10 percent
of GDP. " We are closer to 20 per cent."
He said that, for balanced growth, the energy
sector should account for only 20 per cent of the
country's GDP. It actually accounts for 50 per
cent of the GDP. It also accounts for 80 per cent
of the country's exports but only 4 per cent of
employment.
"The non-energy tradeable sector should be
accounting for considerably more of the country's
GDP and its exports," he said.
That, he added, was one symptom of the of Dutch
Disease- a rapid growth in the energy sector and
not so much growth in the non-energy sector.
This is something which he believes all countries
that are rich in natural resources are affected
by because of price fluctuation of the natural
resource which makes the economy volatile.
Watson also identified the extreme spending patterns
of both the Government and the citizens of the
country as a spin off from the energy boom.
"The
flow of the easy-ish money in the system has
been pushing up the inflation rate and all
of these things are contributing to the non competitiveness
of the non-energy sector."
He argued that the Government is presently not
earning enough revenue from the non-energy sector
because what it spends on the sector is more than
it earns from it.
"This
country's non-energy sector has become a net
user of foreign exchange. It has become less
competitive because the only firms exporting are
the energy based firms."
This, he insisted is likely to remain that way
unless drastic measures are taken to change the
current trend.
"Now
is the time to use the revenue from the windfall
to diversify and cut back on those
exgrandos plans because we are not doing well at
all in fact we are doing worse."
"There
is a need for innovation. More new products in
the non-energy sector is what is needed.
We need to encourage the diversification of the
economy and make financial backing to do so easier."
Watson added that although Government has identified
several sectors for diversification, he is not
sure that any of them are the ones which will develop
substantially because so far the foreign investors
have not bought into any of them in the way they
have the energy sector.
Story
by Camille Bethel from Business Express
The
Trinidad Express
Wednesday, March 5th 2008
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