The current recession has renewed the call for the diversification of the economy.
The recent budget acknowledges the need for such an economic reconstruction but says that the immediate task is to stabilise the economy, ie, to bring the negative trade deficit into balance and in so doing, does not hurt the economy too much–with little unemployment or inflation and even stimulate the economy a bit. Again, the Budget suggests that the private sector is expected to diversify the economy and the Government will give the necessary initiatives to those who are willing to take the risk. In the meantime, the Government is going about building hotels, highways, ports, investing in part in a methanol DME plant, encouraging foreign investment in aluminium products manufacture–all the while expecting the energy sector to recover by 2018.
The private sector on the other hand, a victim of its history, has no intention of taking the financial risk to reconstruct the economy; the financial sector is as risk-averse, and both are incapable of diversifying this economy. The plantation is what they know and are comfortable to import, markup and sell in this open economy that cannot, in the short to medium-term, produce new exports or replace a substantive set of imports by local production.
If the energy sector prices and production do not recover, the economy will continue its downwards slide to at best balance the export/import trade whatever the exchange rate or the austerity measures put in place.
The one and only important task ahead is to build a new economy that can produce goods and services for export that are globally competitive. There is general agreement that such an economy will depend on innovation, on exploiting the emerging disruptive technologies (massive automation, artificial intelligence, cheap sensors and connectivity) of the so-called fourth industrial revolution. Some talk about a knowledge based economy that can learn, can implement its knowledge via dynamic business clusters of highly skilled people.
In fact the aim is to duplicate the US Silicon Valley experience, an attempt which has failed in many parts of the world simply because it duplicated the institutions (R&D universities, private sector relationships and venture capitalists) but ignored the generation of the highly motivated and skilled personnel that worked together, taught and inspired each other, attracted the best talent available and so invented, innovated and generated spin-off company clusters. There are few people actually and potentially available locally, hence we have to train some. Simply giving laptops to all and sundry may make the recipients into digital consumers but is a far cry from producing this highly skilled resource; even our universities are not producing these skills and if they are, they are emigrating–some 79 per cent of our graduate workforce emigrates.
Still, we cannot work in every field. We have, via a foresighting exercise, to choose a few areas, eg energy efficiency, digital medicine, and house them in centres of excellence that are designed to create the network of highly skilled inventors, innovators, the eventual entrepreneurs for the new economy. Again, the accent is not on building a specific plant or factory but on developing high skills in particular areas, technologies or industries.
These centres and the supporting institutions form a national innovation system which has to be funded in the acquisition and creation of the knowledge, its application and culmination in start-up SMEs. Given the risk-averse private/financial sector, this task falls to the Government as the financier of last resort. The funding can be raised through bonds and some of the heritage part of the HSF. The funding should be recouped and recycled into the national innovation system by offering IPOs for successful companies on the stock market. This will take time and will most likely run across governments of different political parties. Hence the processes of this economic transformation have to be protected, even by parliamentary decree.
Serendipity initiatives like the 'i2i' and its recent clone announced in the recent Budget, the Entrepreneurial Talent Competition, may throw up here and there an SME, but such schemes are incapable of building the cadre of highly skilled personnel, of diversifying the economy, replacing/complementing the foreign exchange earnings of the energy sector.
Mary K King
St Augustine