The con­tin­ued de­cline in nat­ur­al gas and oil pro­duc­tion sig­nals that hy­dro­car­bons are stalling as T&T’s eco­nom­ic growth en­gine. The mid-year bud­get re­view con­firmed that nat­ur­al gas prices are 40 per cent be­low the 2024 bud­get pro­jec­tions.

Nev­er­the­less, the IMF 2024 Ar­ti­cle IV re­port in­di­cat­ed that growth should be about 2.4 per cent. Re­cent­ly. The Cen­tral Bank has al­so in­di­cat­ed “mod­est­ly” favourable prospects of eco­nom­ic growth for 2024.

Is this growth sus­tain­able, and where will fu­ture growth come from?

Eco­nom­ic growth is sim­ply an in­crease in the size of GDP. Be­tween 2021 and 23, in­creased nat­ur­al gas and petro­chem­i­cal prices led to “growth” de­spite falling pro­duc­tion, a tem­po­rary phe­nom­e­non.

Price move­ments are cycli­cal, volatile, and an un­sta­ble spring­board for an econ­o­my. Giv­en the com­ments from the en­er­gy and fi­nance min­is­ters, the em­pha­sis seems to be that we should dou­ble down on de­pen­dence on the en­er­gy sec­tor by work­ing on the cross-bor­der Man­a­tee project and the Drag­on project across the bor­der in Venezuela wa­ters.

While this may be an im­por­tant tran­si­tion­al mea­sure, it is not a strate­gic long-term re­sponse. Ul­ti­mate­ly, hy­dro­car­bon re­sources are a wast­ing re­source and can­not be re­plen­ished. In­evitably, pro­duc­tion from the Drag­on and Man­a­tee fields will even­tu­al­ly de­cline. Pro­duc­tion de­clines can on­ly be off­set by con­tin­u­ous suc­cess­ful ex­plo­ration which means con­tin­ued de­pen­dence on multi­na­tion­al en­er­gy com­pa­nies in an un­equal arrange­ment. Fur­ther­more, giv­en the im­pact of glob­al warm­ing, the world is al­so re­duc­ing its de­pen­dence on hy­dro­car­bon us­age.

The sky will not fall in to­mor­row, but there is a nar­row win­dow of op­por­tu­ni­ty to plan and im­ple­ment al­ter­na­tives. T&T’s eco­nom­ic sur­vival re­quires a trans­for­ma­tion over the medi­um to long term, a dif­fer­ent set of eco­nom­ic ac­tiv­i­ties to fa­cil­i­tate eco­nom­ic growth and de­vel­op­ment.

Ul­ti­mate­ly, eco­nom­ic de­vel­op­ment is a high­er-or­der con­di­tion than eco­nom­ic growth and is de­fined as a sus­tained im­prove­ment in the ma­te­r­i­al well-be­ing of so­ci­ety. It refers to the ca­pac­i­ty of a coun­try to sur­vive and grow on its own and is de­pen­dent on the in­ge­nu­ity, ca­pac­i­ty and pro­duc­tiv­i­ty of its peo­ple. This can­not be achieved with­out pro­duc­tive work, train­ing, and tech­no­log­i­cal ca­pac­i­ty. It re­quires so­cial, cul­tur­al, po­lit­i­cal and eco­nom­ic change to con­tribute to ma­te­r­i­al progress.

It in­cludes im­prove­ment in the rate of cap­i­tal for­ma­tion, in size and com­po­si­tion of pop­u­la­tion, in tech­nol­o­gy, skills and ef­fi­cien­cy, and in­sti­tu­tion­al and or­gan­i­sa­tion­al set-up. How can this be achieved? At in­de­pen­dence, it was thought that man­u­fac­tur­ing would ig­nite de­vel­op­ment us­ing learn-by-do­ing as ad­vo­cat­ed by Arthur Lewis. Man­u­fac­tur­ing was con­sid­ered im­por­tant be­cause it ab­sorbed un­skilled labour and helped train the labour force with new skills. It al­so brought new tech­nol­o­gy and helped coun­tries to be more pro­duc­tive.

Ex­port­ing prod­ucts so pro­duced was al­so prof­itable. How­ev­er, the ear­ly ef­forts at man­u­fac­tur­ing in T&T us­ing the “in­dus­tri­al­i­sa­tion by in­vi­ta­tion” mod­el were un­suc­cess­ful.

The rapid de­vel­op­ment of the Asian Tigers demon­strat­ed that man­u­fac­tur­ing in­dus­tri­al prod­ucts for ex­port was both pos­si­ble and prof­itable. T&T re­vamped its ap­proach to in­dus­tri­al man­u­fac­tur­ing us­ing “cheap” nat­ur­al gas to at­tract for­eign di­rect in­vest­ment. This led to the Point Lisas project and the de­vel­op­ment of the man­u­fac­tur­ing ca­pac­i­ty on the es­tate in the form of IS­COTT and the petro­chem­i­cal man­u­fac­tur­ers. This ap­proach be­came the fo­cus of our in­dus­tri­al de­vel­op­ment for many years based on nat­ur­al gas un­til the de­ci­sion to di­vert nat­ur­al gas to the de­vel­op­ment and ex­port of liqui­fied nat­ur­al gas in 1995.

One rea­son why the LNG and the petro­chem­i­cal sec­tors did not trans­form the do­mes­tic econ­o­my is that they are not in­te­grat­ed with the rest of the econ­o­my. They are cap­i­tal-in­ten­sive and re­quire high­ly trained and skilled op­er­a­tives and the trick­le-down ef­fect is lim­it­ed.

Whilst these seg­ments have made a sig­nif­i­cant con­tri­bu­tion to the coun­try’s eco­nom­ic growth and deep­ened skill lev­els, it has not led to a high lev­el of em­ploy­ment or de­vel­op­ment. Now that gas pro­duc­tion has de­clined sharply, ap­prox­i­mate­ly half the petro­chem­i­cal plants are closed and the ex­pan­sion of this sec­tor is now at an end. The same is true of the LNG trains as Train 1 is closed, and the oth­er trains are op­er­at­ing be­low ca­pac­i­ty.

Sup­ple­ment­ing the do­mes­tic gas sup­ply with gas from Man­a­tee and Drag­on will not de­liv­er enough gas to repli­cate the high pro­duc­tion of the past. It will keep the sec­tor op­er­at­ing for some time. Ul­ti­mate­ly, T&T must work to­wards de­vel­op­ing oth­er growth en­gines that will have a wider im­pact on the econ­o­my lead­ing to de­vel­op­ment, not just growth.

The re­dis­trib­u­tive mod­el em­ployed by suc­ces­sive gov­ern­ments, that is dis­trib­ut­ing tax re­ceipts from the en­er­gy in­dus­tries to the rest of the econ­o­my by way of trans­fers and sub­si­dies has nei­ther de­vel­oped nor trans­formed the econ­o­my. In­stead, it has been dys­func­tion­al, rais­ing ex­pec­ta­tions and ce­ment­ing de­pen­dence on the state with­out im­prov­ing pro­duc­tiv­i­ty.

Chang­ing this dy­nam­ic re­quires a dif­fer­ent ap­proach to the ed­u­ca­tion and train­ing of na­tion­als to cope with the more com­pet­i­tive de­mands of trans­form­ing an econ­o­my. Whilst non-en­er­gy man­u­fac­tur­ing has ex­pand­ed, T&T’s abil­i­ty to com­pete in­ter­na­tion­al­ly is lim­it­ed by its small re­source base and pop­u­la­tion. At 1.5 mil­lion peo­ple, T&T is not large enough to be­come a dom­i­nant world play­er.

Our lead­ers and plan­ners must re-en­vi­sion a fu­ture that in­cor­po­rates the ex­port of ser­vices as an al­ter­na­tive to hy­dro­car­bon ex­ports. Dig­i­tal­i­sa­tion is not just about im­prov­ing the gov­ern­ment’s ef­fi­cien­cy. It is about a new ap­proach to en­gage the busi­ness world. 

Mar­i­ano Browne is the Chief Ex­ec­u­tive Of­fi­cer of the UWI Arthur Lok Jack Glob­al School of Busi­ness.