The business sector is calling for a stimulus package which seems to include among other things tax relief, drop in interest rates and, like in the days of PM Chambers, some encouragement to allow them to ’retool’.
A US-like stimulus package for local business is out of the question. The Central Bank Governor saw the need for a stimulus package but with strict fiscal discipline, without defining what this stimulus could be. However the Governor did recognise that the major markets for our manufacturers are the Caribbean-they are in a worse economic state than we are and will recover sometime after us.
He advised that if our manufacturers are to ’retool’ it should not be in the conventional sense but they should invest in the production of innovative products for the new global market. In other words the on-shore sector should look to recreating itself into a knowledge-based economy. The Government and Central Bank should avoid any stimulus that would reduce interest rates, increase liquidity without accompanying productive and innovative investment since these would simply exacerbate the existing situation re: inflation and pressure on the exchange rate. The stock market is down, credit is down and the only game in town is the Government bond market; the Government’s last billion dollar bond was over subscribed.
Prime Minister Manning is either the eternal optimist or has completely misread the global economy. This is not a traditional boom-bust cycle, his economic ’blip’. On its recovery the global economy, with respect to petroleum demand, will change. The world recognises that it is at, or, near to peak oil and gas production for economic, political and geological reasons.
The producers will be unable to meet traditional demands for cheap oil/gas that would have kept the global economies expanding according to the old paradigm. Hence economic recovery will be slow and countries will be looking at new energy mixes (nuclear, low carbon alternative/renewable energy), energy efficiency etc.
President Obama of the US, our largest market for petroleum and its products, intends to make the US self-sufficient in energy. Recall the absence of any real discussion on a regional energy supply policy at the last excuse for a summit-the reason why President Evo Morales of Bolivia refused to sign any declaration.
We in T&T are past peak oil production and our proven gas reserves are 17 tcf, which can last us for some 12-15 years. It is not good enough to have faith that God will provide and we will find more gas, even if the PM has leanings towards being a pastor.
I have already said that we need to prepare a local energy policy which will among other things address energy security, energy efficiency and the exploitation of our resources considering renewable energy and our carbon impact on climate change.
It is uncanny how our leaders are avoiding facing the reality of the inevitable depletion of the energy sector resources and the need to reconstruct the on-shore sector. This will also take us 15-20 years.
Any Government stimulus package should be aimed at this reconstruction, at building a national innovation system. The country needs not only to control liquidity by the Central Bank freezing money-liquidity is necessary if it is used to improve both the efficiency and quantity of tradable products and services. Hence the Government has to gather up this liquidity via bonds and redirect these ’savings’ into the reconstruction of the on-shore economy. We have local savings but no investments!
It is easy to build an aluminium smelter but it is a horse of a different colour to build a national innovation system. Though many countries have done the latter over the years-Singapore, Israel, South Korea etc, repeating their models is not a viable option. Our models have to suit the new global demands and it is not about building Tamana Park and hoping that IBM or GE will relocate there-they have absolutely no reason for doing so. Further, Pt Lisas flourished because of FDI and this came because we had cheap natural resources for exploitation.
The PM boasted at the recent summit that we have attracted the most FDI in the region. Yet we are still in a depression! Unfortunately the reconstruction of our on-shore sector cannot be done with foreign investment. Like Willie Demas tells us it has to be done with our own local savings.
The current energy sector is still earning income. We have to spend judiciously and invest in reconstruction. Haiti in its desperation burnt all of its trees for firewood. T&T, in its illusion of being a rich country, will use up all of its natural resources. Unlike Haiti these are not renewable and cannot be replaced.
maryking@tstt.net.tt
