Mariano Browne tells us in his newspaper article: "The T&T economy has been built on the following cornerstones; cheap gas, foreign direct investment to exploit cheap gas; proximity to the US market and weak supply conditions in the US."
He forgot to include foreign technology, innovation and marketing and market development. We are now looking at having the National Gas Company do its own spot marketing.
Browne continues: "Unfortunately, all of this has changed. Although the US economic recovery is weak, it has one bright spot; an expansion in its energy sector on the back of a plentiful supply of natural gas."
This gives the US proven reserves that could supply their present level of demand for the next 90 years; hence, investments that would have come to T&T from the US would stay in the US. Further, any major gas find in T&T would be in the deep and this is expensive to locate and produce. Methanex has already moved one of its plants in Chile to the US Gulf coast to benefit from cheap gas and a nearby market.
Browne continues: "But this is not the worst part. The substantial reserves give the US the opportunity to become a net exporter of natural gas by 2016... the policy matrix and the available policy options have changed significantly for T&T."
He tells us that whilst revenue derived from gas has performed admirably in difficult market conditions, this cannot continue indefinitely. Further, our expenditure is ballooning and continues to grow at a rate greater than our revenue growth or its capacity. He admits this is not sustainable and if not dealt with soon, T&T would soon face its own version of a fiscal cliff.
Though Browne talks about the Manning's regime diversification in the energy sector (more of the same that depends on petroleum), he implies that the accent on the energy sector for economic sustenance could not continue and any government regime would have had to do something new.
The PNM up to 2010 had no diversification plan for our onshore economy (Vision 2020 was but a vision with no focused strategic management plan).
Browne is correct that our own version of the fiscal cliff is ahead if nothing is done. But anyone with eyes to see must have recognised that someday, we would be on the Hubbard's downwards depletion slope of oil and an even steeper slope for gas. The something that had to be done was the reconstruction of the onshore economy and that would take large investments and a significant time.
We have saved little from our energy sector taxes and rents (our Heritage and Stabilisation Fund contains less than half of our last budget spend) for investment in the building of onshore economic drivers.
Mary King has been relentlessly telling us that because of our complex adaptive economy, the ability of our economy to adapt is constrained by its history; the history of the plantation. Further, that our universities were not created to be innovative and are, therefore, unable to participate in economic innovation.
Even international private companies, eg, IBM, had to do we have to create specialist organisations for research and innovation; we have to build centres of excellence designed for this purpose.
Further, the current private sector, again because of its history, cannot respond adequately to the challenge to diversify the economy, a point also made by Prof Ricardo Hausmann for the IDB. Therefore, a new embryonic onshore sector economy, her Innovation Diamond, should be put in place.
Still, it is interesting to note that both the PNM and PP regimes mention, en passant, the value and even the need for such a system.
Victor Darceuil
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