There are two true facts: our pe­tro­le­um re­sources are de­plet­ing and get­ting more ex­pen­sive to pro­duce; and we need to di­ver­si­fy the econ­o­my.

How we do the lat­ter is still be­ing de­bat­ed. How­ev­er, all of our gov­ern­ments, giv­en the lu­cra­tive en­er­gy sec­tor's con­tri­bu­tion to gov­ern­ment cof­fers and its sup­port of the on­shore sec­tor, ap­pear to be in favour of for­eign in­vest­ment-dri­ven di­ver­si­fi­ca­tion.

The re­cent dis­cus­sion with US vice pres­i­dent Joe Biden re­con­firms the need for such Unit­ed States in­vest­ment. Hence we have del­e­ga­tions at the high­est lev­el, even led by the Prime Min­is­ter, to var­i­ous parts of the world de­clar­ing that T&T is open for busi­ness, for in­vest­ment.

Fur­ther, the pletho­ra of re­ports tells us that we have low glob­al rat­ings, for ex­am­ple, in ease of do­ing busi­ness, pro­duc­tiv­i­ty, com­pet­i­tive­ness, clear­ing things off our ports, etc. Hence, we see the Min­is­ter of Trade ap­plaud­ing Gov­ern­ment's per­for­mance for im­prov­ing the speed of set­ting up a new busi­ness, for bring­ing to fruition the Sin­gle Elec­tron­ic Win­dow project and even win­ning a prize for the Biz-Link sys­tem.

We have built Tamana Park and now a new air­port busi­ness park, hop­ing to at­tract for­eign busi­ness­es; one that pro­vides da­ta stor­age has in­di­cat­ed its in­ten­tion to lo­cate in Tamana, pre­sum­ably to take ad­van­tage of cheap sub­sidised elec­tric­i­ty.

The ob­jec­tives in at­tract­ing such com­pa­nies must be to pro­vide jobs and for­eign ex­change; the on­shore em­ploy­ment re­quire­ments are much larg­er and cru­cial than for the en­er­gy sec­tor if we are to see the last of the URP, CEPEP and oth­er pop­ulist projects.

Econ­o­mists, Prof Michael Porter and our own William De­mas, have told us that for­eign in­vest­ment may help in our thrust for eco­nom­ic de­vel­op­ment on­shore, but we have to in­vest our own re­sources in cre­at­ing a pro­duc­tive and in­no­v­a­tive na­tion.

The for­eign in­vest­ment ap­proach is high­ly rec­om­mend­ed by the well known mar­ket econ­o­mist, Alan Greenspan, the one-time chair­man of the Fed­er­al Re­serve Board of the US.

Lis­ten to him:

"The man­u­fac­tur­ing-for-ex­port mod­el that In­dia ur­gent­ly needs to em­brace has an im­pres­sive record of suc­cess else­where in Asia. It is a mod­el that em­ploys in mass ur­ban man­u­fac­tur­ing cen­tres low-wage rur­al work­ers with some ed­u­ca­tion. A crit­i­cal in­gre­di­ent has been for­eign di­rect in­vest­ment em­body­ing ad­vanced tech­nolo­gies and at­tract­ed by laws pro­tect­ing prop­er­ty rights."

Shades of our own Sir Arthur Lewis.

Nicholas Lardy, of the Pe­ter­son In­sti­tute of In­ter­na­tion­al Eco­nom­ics, said: "Chi­na's ex­port mod­el con­sists of, in big mea­sure, rent­ing out cheap labour and land to for­eign­ers."

One im­ped­i­ment to ever in­creas­ing ex­ports from Chi­na and the Asian Tigers is these coun­tries' ris­ing costs of pro­duc­tion. Viet­nam is now be­ing sought as the next low-cost pro­duc­tion plat­form for glob­al trade; the new play­er in Schum­peter's cap­i­tal­ist mar­ket of cre­ative de­struc­tion. Is this, then, the for­eign di­rect in­vest­ment mod­el we are con­sid­er­ing?

One in­ter­est­ing di­ver­gence from this mod­el is In­dia's IT in­dus­try (in Ban­ga­lore, Del­hi and Mum­bai) which by­passed this labour in­ten­sive low-wage man­u­fac­tur­ing-for-ex­port and fo­cused on the rapid­ly grow­ing sec­tor of high tech glob­al ser­vices.

Still, on the whole, the per­for­mance of In­dia lags be­hind Chi­na's, and some put this down to In­dia's pen­chant for a cen­tral­ly-con­trolled econ­o­my that in­hibits the free mar­ket.

The ques­tion be­fore us is: should we adopt the cheap labour in­ten­sive man­u­fac­tur­ing path and the ex­ploita­tion of lo­ca­tion­al ad­van­tages by for­eign di­rect in­vest­ment, or, giv­en our size, take a leap in­to the fu­ture in­to in­dige­nous-dri­ven in­no­v­a­tive, high-tech, game-chang­ing ac­tiv­i­ties, es­pe­cial­ly since we are not con­sid­ered a low-wage coun­try. The Dutch dis­ease saw to that.

Mary K King

via e-mail

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