Linda Hutchinson-Jafar, Contributor
MANNING
PORT-OF-SPAIN, Trinidad:
ALTHOUGH TRINIDAD and Tobago's economy continues to grow at a phenomenal rate with most of the macro-economic indictors reading positive, debate continues over whether the country's revenues from the buoyant energy sector were being well managed to sustain future generations.
After thirteen con-secutive years of economic growth, the twin-island state is poised to record its highest growth level of over 10 per cent at the end of the year, driven primarily by LNG exports.
Prime Minister Patrick Manning said while the country pursues its development programme, Government is mindful of the importance of saving some of the surplus energy income for future generations and has established the Stablisation and Heritage Fund into which surplus revenues were being placed.
"In the last fiscal year, we achieved an overall surplus of five per cent of GDP and transferred some TT$2,593 million (TT$6.20-US$1) to the Fund. The budget for the current fiscal year provides for an overall surplus of TT$1.9 million, after a significant allocation to the fund, which currently amounts to just under US$1billion," Manning said this week.
Trinidad and Tobago now boasts of 10 ammonia plants, seven methanol plants and four LNG Trains. The most recent plants, LNG Train IV and the M5000 methanol plant, were commissioned in the fourth quarter of 2005 and are the largest of their kind in the world.
Manning said these investments have transformed Trinidad and Tobago into the world's largest exporter of methanol and ammonia, and the largest exporter of natural gas to the United States.
AMBITIOUS DEVELOPMENT PROGRAMME
" In respect of the next several years, the Government of Trinidad and Tobago has planned a very ambitious development programme out of which we can expect another wave of new investments in our energy sector.
"Indeed construction will start this year on six plants including two aluminium and one steel smelter and four more next year, representing an investment of US$11.37 billion and generating a demand for approximately 19,800 jobs in the construction stage and 3,300 permanent direct jobs," he said.
Although the picture appears quite rosy from the outside, businessman Paul Quesnel warned that Trinidad and Tobago cannot afford to make the mistakes of the early 1970s when high oil prices led the economic growth, sustained at over nine per cent for a five year period.
The downturn in oil prices in 1982, however, plunged the economy into deep depression until 1987 after successive governments were forced to take tough fiscal restraint decisions to stem the economic haemorrhage.
Negative growth peaked in 1984 when the economy contracted by nearly 11 per cent.
"Are we doing anything different today than we did 20 years ago?" Quesnel, president of the Trinidad and Tobago's Manufacturers Association questioned.
"Because of the number of massive construction projects currently under way in the country, there's high demand for imports, which has prompted commercial banks to ration supplies of foreign exchange. Add this to the rising cost of food."
Stating that the country was experiencing an 'illusion of an affluent society' former Central Bank Governor Winston Dookeran noted that poverty is rising, real income levels falling, local production of food in decline, infrastructure support in decline and the overall cost of doing business increasing.
"We are experiencing the reversal of the economic reform process, with more state-directed activity, the return of controls to suppress market forces, no changes in implementation capacity, a missed opportunity in second generation reform," said Dookeran, who is also a former finance minister.
Although the country's macro financial indicators were sound, Dookeran, also political leader of the opposition United National Congress (UNC) said the country was experiencing rising interest rates, persistent inflation, exchange rate realignment and a rising gap in the domestic budget deficit.
He described the Government-led construction boom as 'an archaic concept of development' since it was not towards building a diversified economy that will be sufficiently resilient in the downturn of energy prices or after the depletion of hydrocarbon resources."
ECONOMIC REFORM PROGRAMME
With substantial resources at its disposal, Dookeran said the Government should proceed with a well articulated economic reform programme and towards aggressively constructing a new economy.
"This country should be using the windfall energy income to become a globally competitive, technology-driven and diversified economy that will sustain full employment, equal opportunity, growing prosperity, a secure life and a higher standard of living for all our citizens."
"In a time of windfall revenues, the responsible thing for the Government to do is to ensure a stable economy and to use the windfall for current infrastructure transformation, development of our human capital and provision for future stability, " said Dookeran.
Another former finance minister Wendell Mottley said the opportunity of plenty resources has to be properly managed to make the opportunity blossom for the people.
He also urged the Government not to give in to temptations of spending money recklessly, as done in the past and cautioned restraint.
According to Mottley, between 1973-1983, revenues increased by 1,259 per cent while expenditure kept pace rising by 1,193 per cent. The big expenditure increases were wages and salaries, subsidies and transfer payments. The capital development programme increased by a modest 111 per cent.
"In 1974, the Government began stashing away large sums in funds for long-term development, thereby running large budget surpluses. The Government knew what had to be done in the country?s interest but it was under serious pressure to maintain the spending," said Mottley, now a visiting fellow at the Centre for Global Development, a U.S. think tank.
SUBSIDY ON GASOLENE
In the current period, government subsidy on gasolene has moved from TT$450 million in 2000 to TT$1.66 billion in 2005 and will reach TT$2 billion at the end of the year.
Mottley predicts 'riot in the place' if government moves to dampen the gasoline subsidy.
Questioning the political incentive for fiscal restraint by the Manning Government particularly in the face of up-coming general elections, Mottley used Jamaica as a case in point of what the Trinidad and Tobago Government should not do.
"Jamaica has consistently done this. Jamaica is run properly for four years and just before election, reverse everything, mash up the place and then start from scratch all over again consistently and you see the end result, " said the former finance minister.
Admitting that it is difficult to govern Trinidad and Tobago in the current period, Mottley added, "There is an edginess, a feeling of the society on the edge, out of control, where it's every man for himself ... I genuinely believe it would be easier to govern this society if government took its foot a little bit off the accelerator."
Senior economist at Republic Bank, Dr. Ronald Ramkissoon noted that government's policy to the present economic windfall was some savings towards the fund, massive expenditures in housing, roads, job creation among others representing 30.5 per cent of GDP from 24.7 per cent in 2003, facilitating further energy sector development and promoting diversification.
"What is missing? There is need for stock-taking, the cost/benefit approach to rapid expansion and recognise that there are trade-offs, appreciation of the concept of absorptive capacity and appreciation of the lessons of the 1970s and 1980s," said Dr Ramkissoon.
