Recently in the House of Representatives, Finance Minister Colm Imbert stated that more Trinbagonians are making purchases online. Imbert also added that local financial institutions used a total of US$1.205 billion to meet credit-card foreign obligations in 2018.
US dollar outflows due to online shopping have steadily increased in recent times; in 2010 it was US $343 million, in 2011 $376 million, in 2012 $539 million, in 2013 $531 million, in 2014 $641 million and in 2015 $776 million.
Even the implementation of a seven per cent online sales tax in 2016 could not stem the deluge. This is a growing trend globally and highlights the fact that local businesses will face increasing pressure from online competitors across various industries, and especially in the retail sector.
The demand for US dollars by the population is steadily increasing but what about supply?
Without a balance, there will be continued justification for a devaluation of the T&T dollar and all the hardship that comes with that. A sound industrial policy built on our competitive advantages is one way to increase essential foreign exchange inflows and create sustainable jobs.
With a projected downward trend in revenues from the energy sector, a heightened emphasis must be placed on diversification. The cornerstone of such a plan will invariably come from T&T’s industrial policy, due to our natural advantages in this sector. Make no mistake, the greatest industrial advantage in T&T’s arsenal is the ability to generate low-cost electricity (energy) from natural gas. A huge portion of the country’s economic fortunes hinge on a steady supply of natural gas. This fact has fuelled government’s dogged pursuit of a confirmed Dragon Field agreement and motivated multinational energy companies being granted tax breaks based on their investment in further exploration. Low-cost energy is king and has been for a very long time. The question is: how do we use these resources?
What we are currently subject to is an outdated energy based economic model which regularly leaves us vulnerable to forces beyond our control.
We extract a dwindling supply of oil and gas from our shores, then sell this valuable resource to developed countries to fuel their manufacturing sector so that they can produce goods which are then sometimes sold to us at exorbitant prices.
With the advent of shale oil drilling (causing oversupply in energy markets) and the proliferation of energy alternatives this model is irretrievably doomed. T&T had at one point supplied 70 per cent of the natural gas needs of east coast USA. Today the United States is a net exporter of natural gas. The reform required to insulate our economy from global energy price shocks would mean using our oil and gas domestically.
T&T would produce low-cost energy for energy intensive industries to be used in the production of competitively priced basic commodity inputs (iron, steel, aluminum and plastics) so T&T can develop a globally competitive manufacturing sector. This had been the previous plan with Point Lisas and Labidco in LaBrea being earmarked as the epicentre of this economic revolution.
The infrastructure in Point Fortin and La Brea was being upgraded for expressly this purpose; the billions of dollars spent on the Point Fortin highway would have been offset by the additional revenues generated by the aluminium smelter project and the Labidco industrial estate.
Without these projects, the Point Fortin highway has saddled T&T with billions in debt that have to be paid with decreasing energy revenues and a Trinidad Generation Unlimited (TGU) power plant which regularly produces more electricity than the country can use. More and more debt to be repaid by a dwindling source of revenue.
Using our natural resources locally to produce internationally competitive, value added goods will usher in an era of wealth and sustainable jobs the likes of which we have not seen before as a country. The possibilities are endless; look around you right now, which product is not made of some combination of iron, steel, plastics and aluminium?
Think of the value added, downstream possibilities and the jobs created across a myriad of skill levels. That is what T&T needs going forward. One-off projects in a handful of sectors won’t protect the economy from the currency and debt crisis that are possible if we do not remain vigilant. We need to create new industries in high revenue generating fields and train our people so that they can access the jobs created. These measures would also have great social impact.
The recently reported fact that gangs in T&T have been fighting over turf to improve their access to more government contracts should not have come as a surprise to anyone who has been paying attention.
The gangs have controlled contracted work in many of these at-risk communities for years and no sensible contractor without gang affiliation would even bother tendering for work or they would have wished they hadn’t. Even if these gang leaders were all imprisoned and gangs no longer were awarded contracts it wouldn’t solve the problem.
What alternatives are there to make gang membership seem less attractive?
Without decent jobs that can sustain a respectable lifestyle any crime initiative will only have temporary results. We must offer a better way and access to the skills required for a better life. Building more prisons won’t achieve a better society.
It sounds like a broken record by now: diversify, diversify, diversify. The truth is it is exactly what we need to avoid an economic and social crisis in T&T. The clock is ticking and oil and gas prices are not expected to dramatically increase any time soon. The energy sector is also notorious for not creating a significant number of jobs either way.
Without a sound diversification plan buttressed by a sensible industrial policy T&T will run into a series of cascading crises which will threaten to unravel the economic and social fabric of our country.
An industrial policy based on our competitive advantages as a country is one way in which the we can move towards solving several of our most pressing challenges.