In a paper published by the Harvard Business School the late Professor Emeritus Bruce R Scott dealt with the idea of what is a national economic strategy and why it is so important.
Professor Scott simply describes it as a vision of a desired future state of the economy, a timeframe within which that state is to be achieved, and a set of policies and institutions for influencing the mobilisation and allocation of resources and for promoting their efficient utilisation.
For Professor Scott such a vision must provide the frame of reference for establishing priorities for the mobilisation of resources.
He said national economic strategies are articulated and implemented through institutions. The structure and culture of these institutions determine in considerable measure how the strategy will be implemented as well as its potential effectiveness.
For Professor Scott a vision helps establish goals that in turn animate an economic strategy.
“Thus, economic strategies are based on differing roles and responsibilities for the economic actors as well as differing notions of resource mobilisation and allocation,” Professor Scott posited.
If we dispassionately look at the Finance Minister Colm Imbert’s 2021/22 budget, can we honestly say that he espoused an economic strategy for the country, or where it fell in a previously articulated national economic strategy?
If the Government has a coherent economic strategy then it is being missed by many.
For sure there is a political strategy.
That strategy is to keep the population believing that the economic challenges that confront us are not as grim as some of those “pseudo intellectuals and anti government economists” are suggesting and that it is only the Rowley administration that knows what is best or what is the true state of play. After all if the doctor say so is so.
The other political strategy is to kick the can down the road for as long as possible. So the issue of an over-valued, uncompetitive exchange rate should not be dealt with because it will cause hardship on people, even though it makes the economy uncompetitive, encourages capital flight and hurts the very economy we are trying to transform.
We are not prepared to reign in our spending because that signals the bogey man called the IMF that is seeking to create political disturbance and hardship for the most vulnerable. We will do our own structural adjustment, which is no structural adjustment but rather debt financing and gratuitous reductions in some areas.
So the political strategy is clear, but the hard work of economic transformation, the need as professor Scott noted for institutions to also be transformed to ensure they can carry out the strategy is absent.
I wrote last week that we should not be hopeful that the Minister of Finance would chart a course forward. I made the point that in some ways Minister Imbert was being asked to carry too much responsibility of what we need to do as a country.
I called on the minister to pay close attention to the issue of transfers and subsidies. It is true that Government intends to allow people to pay the economic price for water and electricity but if that is the case how do you implement such a measure without a guarantee of an adequate and reliable supply of water in particular, and fewer disruption of electricity.
Minister, the reason I suggested last week that attention be paid to the expenditure side of the budget is because if we have a strategy that says we must get value for money, we must cut out the corruption and cost overruns in projects. We must do feasibility studies before we build a new airport terminal in Tobago, or port in Toco, this will help us get more things done with the same expenditure. It is not about generating more revenue in this instance. It is about the more efficient use of our resources. It is not impossible to do, it is not about reinventing the wheel. The government did it already with the Curepe interchange and scored political points, why not do it across the board and score economic points?
You see Minister Imbert politics is never good economic policy.
The measures announced to encourage digitisation and grow the Fintech economy is a start but even in that the Government seems to be hedging its bets. Minister this is the future of our economy and we have to see it as a broader strategy of economic transformation .
You have not articulated a strategy, but transformation of the economy could look something like this.
Let us say we want tourism to be part of our economic transformation. We have selected tourism because it will earn foreign exchange and has the potential to create significant employment. There are real forward and backward linkages, agriculture, marketing, performances, tour operators, taxi and transportation generally, media you name it. Government earns taxes, it allows the national airline to make money, reduces subsidies on aircraft seats in Tobago and combined with domestic tourism could be sustainable all year round. It is part of the strategy for earning significant revenue and forex from multiple sources and attracting both domestic and foreign investment.
But if we see tourism as merely building a hotel and not a strategy of encouraging those linkages and maximising returns then we are doing ourselves a disservice. We must articulate it and we must create the enabling environment for the private sector to invest in it, to have confidence it is a workable plan and that we are committed to it in the short, medium and long term.
What we have had from this government is a strategy, which is no real strategy, of hoping oil and gas prices rebound.
The Minister told the Parliament that “in 2020 and early 2021 a major local gas producer encountered unexpected technical difficulties resulting in a substantial decline in gas production. Such matters are outside of our control.”
This is the same minister who tried to rubbish the alarm raised by the Business Guardian when it broke the story two years ago, claiming it was only one well. Well time is longer than twine and here we are calling it technical difficulties rather than what it is, a realisation that the amount of gas expected was just not there.
The Finance Minister also said he envisages a rebound in oil and gas production driven by new discoveries with oil production rising from 64,859 barrels per day in 2021 to 86,163 barrels per day by 2022 and gas production from 2,773 MMscf per day in 2021 to 3,368 MMscf per day in 2022, stabilising thereafter at 3,600 MMscf.
He added that amid the strengthening global recovery oil prices and expected to rise close to 60 percent above their low base in 2020. The average price of oil was US$41.29 per annum in 2020 and is projected by international institutions to rise to US$64.68 in 2021 and to US$66 in 2022-2024.
Minister, I can tell you today that your production numbers are wrong and T&T’s crude production will not average more than 75,000 barrels of oil per day next year. Its gas production will not average more than 3.1 bcf/d and even that is a stretch. You have been consistently wrong on those numbers and I have consistently had to encourage you to face the facts that those projections are not correct. Perhaps if you look at the bpTT numbers that I shared with the country some weeks ago it may help inform a more conservative approach.
In closing I think the Minister of Finance and the Minister of Everything Stuart Young should consider what the former country manager of BHP in T&T had to say about energy transition and how brutal it is likely to be.
It is why I have consistently articulated a disappointment in the failure of the ministry to have bid rounds. Perhaps they will listen to Vincent Pereira because to this Government the messenger is more important than the message.