Developing a county is impossible without developing the country’s human resource capacity. One cannot happen without the other as human resources are a country’s only real asset. Saying it, however, is easier than translating this idea into a coherent policy and then taking the necessary action to achieve that objective. Economic theory is not often helpful in this regard. Entrepreneurship, productivity, labour force participation rate, ease of doing business and other catchphrases are helpful ideas. What matters is how they are deployed in practical ways.
There is no shortcut to developing a world-class athlete. It takes years of consistent practise, refining technique and performances. Similarly, there is no easy way to develop a successful economy. Periodically some ideas take precedence and are encapsulated in labels, like “Industrialisation by Invitation”, import substitution or more recently “dollarisation” and “game-changers”. However, whilst an idea may be developed to solve a unique problem, development requires a multimodal approach as no single policy will cure every impediment. A single approach, like the single story in literature, is a very inadequate explanation. In its simplest terms, Industrialisation by Invitation assumed that an economy had neither the capital nor the skills required to grow the economy. Developing a manufacturing capacity was the key to achieving industrial growth. Foreign capital would provide the impetus to economic growth and development and in time, labour would learn the tricks of the trade and replace foreign skill sets and ultimately accumulate (save) enough to replace foreign capital.
The theory had practical limitations as evidenced by the T&T experience in the energy sector. After billions of direct investments by foreign firms’ exports grew as did tax collections and GDP. Indigenous capital accumulation has not taken place in the energy sector and associated areas to displace foreign capital. Citizens own a very small percentage of the energy sector. Similarly, whilst nationals can operate the plants and are quite knowledgeable, they are not developers of the technology.
Heritage is a classic example. The state energy sector company does not have the capacity to carry out exploration activity on its own and must partner with a multinational to carry out exploration as evidenced by recent agreements with Shell. There are no titans of industry here, but a raft of small operators and contractors who, with the best will in the world, cannot put Petrotrin back together again. Neither can the State.
There has been industrialisation. But the current challenges in the energy sector demonstrate that natural gas is no holy grail. Things never remain the same. Game changers come and go and as times change, human systems must also adapt to respond to those changes. It is simplistic and self-serving to attack the local private sector for not being “risk-takers” or manufacturers. This approach misses the point that even in highly industrialised countries manufacturing accounts for less than 30 per cent of the economy at best meaning that services and distribution account for the lion share of any economy.
The point is that development is not a simple matter and importing capital goods (factories) and using foreign capital has achieved transformation of the natural gas sector. But to survive and compete in a changing world the sector needs other attributes for its success. All actors in this space must adapt and change. Nor is “development” simply about manufacturing, transferring capital, technical and administrative know-how or increasing savings.
By criticising the private sector, politicians/commentators implicitly assume that the State (the Government) has a sensible and coherent set of policies and market distortions are the result of failures by the private sector. However, the State has created many distortions, despite its “best” intentions. For example, maintaining an overvalued exchange rate encourages perverse importing arrangements. Similarly, retaining VAT and other tax refunds and trade payments for years amount to forced transfers/loans to the Government thus penalising the private sector’s investment and expansion capacity by reducing their cash flow. Incentives to the construction sector neither facilitate change nor improve the country’s export potential.
It is inevitable that a government will make mistakes. Government needs to find ways to learn from those mistakes. Institutional and people development is important in both the private and public sectors. But knowledge accumulation is difficult to achieve and explain. A successful exporting energy sector has not been enough to result in or supplement the creation of a strong indigenous learning process. The education system has been built around academic teaching and the presumption that graduates will find a place in an expanding system. But the process is more complex than this and more than 70 per cent of the region’s graduates emigrate in search of relevant opportunities in other countries.
The key task is to build knowledge in its widest context in institutions and ensure that these institutions are sustainable. The ideas of tacit knowledge, on-the-job learning, learning by doing incorporating technological change are not now part of the education system. There are many successful family businesses that have continued to grow and transform providing a base for future development. This creates an opportunity for a less formal learning process. Strong institutions in the private and public sector are the key to facilitating development and growth.