The current criticisms of this government as it seeks to emerge from the recession due to our economic model and the drop in petroleum prices and their local production, centre on government’s focus on rejuvenating the energy sector with no discernible parallel activity in diversifying the economy. Indeed, government is accused of being handcuffed to the energy sector.
In another space I indicated that in the short term all any government could do was to weather the storm of adverse energy sector prices/production while using its fiscal control, renegotiation of contracts, resources and reserves to make life on-shore tolerable as the storm continues to batter our economy.
Energy prices and production appear now to have lifted somewhat and our government gleefully proclaims that the economy has turned around, even the dependent on-shore economy.
However, the economy has remained exactly the same in structure, though its local comparative advantage may have been reduced as the petroleum asset depletes. The economy has not turned around; the economic storm may have lifted a bit as the wider global happenings in politics and financial investments continue out with our control.
What one may say with some truth is that the boom-bust-boom cycle is continuing its merry way with the additional constraint that we are down due in part to old petroleum resources that are expensive to lift and those in deep waters expensive to recover.
This model of our economy, the plantation, is all that we have known throughout our history and since independence we also know that we have to change it, to reconstruct it, to diversify it.
Yet some 50 years later the refrain continues with little progress to show—an abject failure of the governance of the country, the failure of the triad of successive governments, the private sector and the knowledge based institutions to create a sustainable economy.
Prof John Foster of the University of Queensland, Australia, tells us that normally the stakeholders in a complex adaptive economic system can adapt and change their activity as required. However, the history could be such that adaptation, change, becomes virtually impossible due to certain rigidities developed. Is this true of T&T?
As a small open economy we cannot produce locally all that we need to live a comfortable life. Hence, we must import, must export to earn the foreign exchange to fund these imports; the bulk of the foreign exchange comes from the energy sector.
We had a spectacular example of how such foreign exchange could be earned by some local entrepreneurs. They were able to use local low-risk capital via the energy sector’s earnings to acquire a diversified economic cluster of companies spread throughout 35 countries and activities ranging from the manufacture of alcohol beverages, petrochemical, financial services to real estate.
Such an enterprise should have been able weather an economic storm in any one of its investment areas/ markets given the diversified portfolio of the conglomerate.
Unfortunately, given the high global prices of oil compounded with the global sub-prime mortgage fiasco, all of the markets in the world economy collapsed together causing a failure of this local entity.
These entrepreneurs approached our government for help, as others in similar positions went to their respective governments in, say, the US and the UK.
In these foreign countries governments provided a safe harbour, advanced the funds to weather the storm. When the storm abated most of these companies resumed their global businesses, repaid their debts over time and the owners/entrepreneurs survived.
We all know what took place locally with CL Financial. The endpoint today is that some of the cluster companies have weathered the storm with government help, some have been sold.
The remaining discrete assets retained by government are to be put into an investment fund which will sell shares to the public; the monies so earned by the fund is to be used to repay the government for its advances to the original entrepreneurs and to eventually repay the local low risk EFPA investors.
Ownership and entrepreneurship will pass out of the hands of those who had built something we have been crying out for, for decades: they had built a financially integrated and diversified cluster that earned foreign exchange.
The justification by the government for its destruction of the cluster appears to be that those who had built the companies were indeed the cause of their own failure during the economic storm and hence gave up any right to owning and using the surviving companies to repay debts.
The objective was that government, by selling the companies, was preserving also the investments of and returning them to the public that had initially invested in these companies.
Surely, it is more than rigidity that was engendered by history. It was more ignorance of the idiosyncrasies of global trade, global financing, risk and lack of entrepreneurship by the governments involved as they claim that they are retrieving tax payers’ money that was lent to these companies.
MARY K KING
St Augustine
