Mariano Browne
Since Independence, the economy has experienced several difficult periods all of which have been occasioned by developments in the energy sector. In the late 60s Shell and BP left, thereby creating revenue and unemployment issues. In 1986, oil prices fell precipitously forcing T&T into an IMF adjustment programme. Energy prices fell from late 2008 to 2010 forcing expenditure cuts and again in 2014 causing a sharp decline in GDP.
Rescue came from the energy sector each time. In 1973 from new oil and gas finds by AMOCO (now BP) coupled with OPEC price hikes; in 1999 with the export of liquefied natural gas; in 2011 from an energy price surge; in 2018 gas production recovered due to fiscal incentives and energy prices improved. Should one expect announcements of new deepwater finds in time for the 2020 election?
The key takeaway is that the main surges in economic growth (1974 to 1985 and 1999 to 2008) were “fuelled” by Foreign Direct Investment (FDI). The recovery in gas output in 2018 follows the same trend though at a lower level of economic activity. In sharp contrast, T&T's involvement in oil, embodied in Petrotrin, has ended. Despite any protestation to the contrary, Petrotrin's successors all seem to be classed as available for sale assets. This exit decision was precipitated, in mid-term to boot, and does not appear to have been an agenda item at the beginning of this administration.
It is important to reflect on T&T's dependence on FDI for a moment as it contains serious implications for T&T's economic growth and development. According to the 2019 State Enterprises Investment Programme (SEIP), a budget document, the State Enterprises Sector comprises 55 companies of which 43 are wholly owned, eight are majority owned, and four in which GORTT has a minority shareholding not counting Petrotrin's successors or Clico/CLF.
The size of the asset base is not disclosed though government's shareholding is listed at $13.9 billion with a 3.1 per cent rate of return for 2017. The rate of return calculation is dubious as the 2019 SEIP lists a net loss from all enterprises at -$273 million for 2017 giving a negative rate of return of -1.96 per cent. The situation would be worse if PTSC, WASA, and TTEC were included. Total assets for NGC, Petrotrin, and FCB amounted to $43 billion, $41 billion, and $42 billion respectively at June 30, 2018, per the consolidated quarterly financial statements. Therefore, state enterprises control over $125 billion in assets making the State the largest “business” segment and employer.
What gets measured, gets managed
The SEIP did not include the assets acquired by the liquidation of CLF (Clico) making the State the largest landowner by far (Caroni Lands, Clico Lands, Petrotrin land and marine entitlements, Eteck's 20 plus industrial estates and of course state land).
The Scottish physicist William Thomson noted that “when you can measure what you are speaking about, and express it in numbers, you know something about it; but when you cannot express it in numbers, your knowledge is of a meagre and unsatisfactory kind; it may be the beginning of knowledge, but you have scarcely, in your thoughts, advanced to the stage of science, whatever the matter may be”. Loosely summarised; what gets measured, gets managed.
It is clear that the State has neither the systems and procedures required to manage these assets, nor can it ensure that the country is getting a proper, or indeed any return. In evidence, the SEIP cannot calculate the rate of return on its shareholding in state enterprises in the third sentence of the introduction! It was that important!
State enterprises were largely created to effect changes which could not be done by ministries. Many are tasked with procurement on behalf of ministries, (for example EFCL for Education, Nidco for the Ministry of Works), a task rendered useless by the Procurement Act since the act requires the same procurement procedures for both ministry and state enterprise. To avoid the rigorous transparency required by the act we have already seen the move to “government to government” arrangements.
Some state enterprises were formed to take advantage of economic opportunities; NGC Petrotrin, FCB, NFM, TSTT are examples. Most are losing money and are challenged by the changes required to make their business model sustainable.
The same difficulties affect the management of the State's land assets. The Greenvale development is a clear example of the State's failure as a developer, a failure shared by both PNM and UNC administrations. It is not unique. Is the Ministry of Planning delivering in accordance with its mandate? The annual flooding everywhere is a sign that drainage systems have neither kept pace with development, nor have we begun to address climate change priorities. Are water courses cleared annually in advance of the rainy season? Is the Anti-litter Act enforced?
What we are now doing is not working; How should state assets be managed in the future? The 21st century is one of rapid technological change. Yet the State has been slow to co-opt artificial intelligence to address its needs and establish priorities. To survive and prosper, the State assets must be managed much more efficiently than we have done in the past. Leadership, accountability management, and productivity improvements are critical to this effort but not in evidence.