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Kicking the can down the road!
The purpose of any government is to improve on the performance of its predecessor. That should have been a low performance bar for this administration given the populist excesses of the UNC. The Prime Minister and his deputy (heir apparent?) both claimed expert knowledge given their experience in the 1990’s and during the 2002-2010 Manning administration. However, their performance to date has been underwhelming.
It was always going to be hard going, given the dramatic decline in energy revenues following the sharp decline in international prices and gas production. Although the decline in gas production occurred whilst the UNC was on duty, its genesis lies at the feet of the PNM administration which took its eyes off the ball 2005-10.
Well production does not decline overnight. It requires continuous investment and we under-invested when prices were buoyant, and times were good. It also demonstrates the weak institutional arrangements at government level for managing our energy resources from a country perspective. What works for BP does not necessarily work for T&T and BP’s investment hurdle rates are not necessarily in accord with T&T developmental needs. This requires us to overhaul the capacity and accountability of our energy regulators. By cutting costs we cut capacity in the Ministry of Energy and the Inland Revenue and handed additional profit to the energy sector companies.
This is a systemic weakness. It is evidenced by the fact that everyone leading the state agencies and state-owned energy sector are retirees and the second layer of management needs significant exposure to reach the required performance level. Whilst NGC has made changes recently, two people are not enough.
The UNC administration, in attempting to address the revenue shortfall, gave incentives which worked. Those incentives were poorly designed because the enabling framework is poorly designed and in need of significant overhaul. The PNM would have made the same mistake were they in office.
Poor design or not, those incentives had the desired effect of increasing gas production. It is the height of irony that the main reason that the Finance Minister can point to a more upbeat outlook for the energy sector is due to a decision of which he was highly critical; that is, the fiscal incentives for energy sector companies.
The Finance Minister cannot be credited for external factors which benefit the country. The change in oil prices is due entirely to a change in the geopolitical environment and US President Donald Trump’s decision to exit the Iran nuclear deal and reimpose sanctions. This ought to have a beneficial impact on gas, methanol and ammonia prices which are currently depressed.
The Minister noted that “our core revenues from taxation are fragile while we are running a $50 billion…” expenditure profile. The energy sector revenues should improve and taxation too. But this does not solve either systemic or process issues which remain unaddressed and therefore prevent us from reaching the potential the Finance Minister hopes for; “as long as we as a people are disciplined and productive our country will recover grow and prosper.”
The mid-year review was an important opportunity to demonstrate where the increase in tax revenue came from; increased compliance, from the 30 per cent band or from the energy sector? What are the expenditure priorities? Are the ministries and state enterprises operating efficiently and if so, what was changed to achieve these results? Are the social programmes harmonised and targeted? How are we measuring their impact? Are they achieving their objectives?
Are the oversight bodies to examine ministries and government expenditure properly resourced to address issues competently, or are they majoring in the minor with amplified sound-bites? Where is the commitment to deal with important issues? When pressed by Ancel Roget on what should be a major discussion point, the adequacy of the NIS system and the retirement age, the minister side-steps the issue altogether.
What of the non-energy export sector, or the development of local energy sector capacity to address the export potential occasioned by Guyana’s development; are the rigs going to be produced in Mexico, Louisiana or T&T? What has been done to facilitate this “disciplined and productive” people? By lumping the petrochemical sector with domestic manufacturing, the domestic sector is dwarfed, swallowed up by the sheer size of the petrochemical manufacturing. To speak of an increased manufacturing output masks the substantial weaknesses that currently exist in the non-energy sector.
The strength of any country is the productivity and ingenuity of its people. Petrotrin and NGC are national assets, not BP. Improving the management of our resources, energy and all else, is the responsibility of the government. The mid-term review, like the budget speech before it, is silent on these matters.
As an engineer, and by bitter experience, Minister Imbert knows the importance of structural integrity and a well-defined work plan communicated to all involved in the project. This is the task on which he must be evaluated. The inflexion point we have now reached is not due to any conscious effort, or policy, on his part.
Leadership is about doing the right things and management is about doing things right.
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