Diversification more urgent than ever

Spread the word

The TTWhistleblower begins this series today looking at the urgency of economic diversification amidst the onset of political lethargy that seems likely from buoyant energy prices.

The Keith Rowley Administration has since the 2010 to 2015 PNM Opposition made heavy weather on the need for diversification, the urgency of new support platforms for revenue and industry and a plan that many expected would be implemented after the 2015 general election.

To date, the only change in the economy has been historic decline, a range of burdensome taxes, food and fuel price increases, and increasing job losses.

Political noise

In this way Mr Speaker, we can promote trade in manufactured goods, services and knowledge, while attracting Foreign Direct Investments (FDIs), With increased FDIs the country’s economy will be further stimulated, generating greater employment opportunities and assisting our diversification programme.”

That was Dr Keith Rowley on 12 September 2014, as he waded into the People’s Partnership Administration’s 2015 budget. It was one of many statements made on diversification and in this instance;

Rowley was daydreaming about the Prime Ministership, talking on what his Government would pursue as an economic diversification programme.

Over two and a half year after his dreams came true, and three and half years since making this statement in the House of Representatives, the economy finds itself worse off and in the throes of a precipitous decline.

The Rowley Administration recorded one of the most severe periods of economic decline in history and over time, has adopted an operating modus operandi that resembles desperate survival rather than visionary and transformative management.

What makes the political noise that now comes from the Cabinet worse is that the talk of economic diversification continues, with dwindling belief in the population that it would actually happen.

The right words

In the Trinidad Guardian, 21 November 2015, it was reported that Dr Rowley chose Dr Terrence Farrell to lead the Economic Advisory Board because of his well known promotion of economic diversification: “A promoter and developer of diversification projects was how former Central Bank’s deputy governor Dr Terrence Farrell described the Economic Development Advisory Board as members were handed their instruments of appointment.”

By 27 November 2017, it was reported in the Trinidad Guardian, that Dr Rowley’s favoured choice for the EDAB questioned the Government’s seriousness on the critical issue of diversification:

Questions raised publicly by chairman of the Economic Development Advisory Board (EDAB) Dr Terrence Farrell about the Government’s decision to build a $400 million highway to Manzanilla instead of upgrading the Tobago airport in preparation for the Sandals hotel seems to signal that Government is ignoring the advice of the board.”

By 10 January 2018, Dr Farrell resigned as Chairman of the EDAB.

The shock resignation came out of frustration over a Government that seemed incapable of taking advice on how to credibly pursue a diversification programme.

The frustration could not be helped when Dr Farrell looked and listened to all of the talk of intentions, but heard little of a plan.

At the TTMA’s President’s Dinner and Awards, 7 June 2016, Dr Rowley said of diversification:

The second relevant question with respect to manufacturing and the issue of diversification is; are our firms exporting to the same markets today as they were ten and twenty years ago?”

At the Caribbean Energy Security Initiative, 22 June 2016, Dr Rowley said: “In the case of Trinidad and Tobago, the economy has been adversely affected since the oil and gas sector is the mainstay of the economy and, notwithstanding our diversification thrust, will remain so for the foreseeable future.”

The curious thing about the “diversification thrust” is that it is yet to be clearly defined.

At the PNM Convention, Sunday, November 12 2017, Dr Rowley said: “Much more activity is taking place behind the scenes to set the stage for diversification of the economy especially in the spheres of Agriculture and Fisheries, Manufacturing, the Maritime Industry, the Creative Industry, Agro-processing and ICT/Business Process Outsourcing, Setting up of a New Foreign Exchange Facility and promotion of the Eteck Industrial Park.”

A potential for sports tourism as a viable option for economic diversification and we are actively interfacing with regional and international bodies who see Trinidad and Tobago as a veritable sporting centre for hosting numerous events in a wide range of sporting disciplines.”

Curious becomes dubious when a “diversification thrust” supposedly existed in mid-2016, but by the end of 2017, “the stage for diversification” apparently still needed to be set.

Less than two months before on 27 September 2017, speaking at the “Spotlight on Trinidad and Tobago’s Financial Circumstance: The Road Ahead” at the Hyatt Regency Dr Rowley said: “It should be pointed out that there will be at least two other sets of activities which will contribute to growth over the period – the infrastructure investments planned for the period and the expected revival in the energy sector.”

“However, the truth is the government is not depending on these activities since the aim is to energize the diversification of the economy. The intention of this government is to get the economy to learn how to grow without depending on the energy sector. This, in our understanding, is what diversification requires.

What happens in energy, whilst not being neglected nor minimised, will be like a backbone or bonus to what were are doing elsewhere in the economy.”

By this time, the stage was supposedly still be set for diversification, despite claims of an active pursuit was already being made. Yet Dr Rowley spoke of “energizing the diversification” of the economy.

In his address to the nation at the end of 2017, Dr Rowley again took a bite out of a wilting diversification cherry, saying: While the achievement of strong and diversified economic growth was also considered an urgent objective, we were convinced then, as indeed we are now, that the restoration of fiscal and external stability was urgent and an essential prerequisite to economic diversification.”

Government is very committed to work towards overall fiscal balance by 2021, through continued prudent expenditure management combined with additional non-energy revenue mobilization efforts and economic diversification.”

It was as we prepared to enter 2018, that the proverbial cat was let out of the bag; that despite talking about economic diversification, and alluding to a thrust already in the offing, there is yet to be an actual plan to diversify the economy.

The facts are louder

With all the words that two and a half years have been able to expose as empty and vacuous, the single truth that remains is that the facts will always be louder, and far more stubborn.

The economy has not been stabilized and fiscal measures have only exacerbated challenging economic conditions, facts borne out in the March 2018 issue of the Central Bank Economic Bulletin.

Partial data for the last quarter of 2017 showed what was described as “sluggish activity in the non-energy sector, in particular, the distribution and construction sectors.”

Sales of new motor vehicles declined by 14.6 percent as the sales of both private (17.1 percent) and commercial vehicles (9.3 percent) showed year on year decline over October to November 2017.

In the first quarter of 2017 the unemployment rate was at 4.5 percent compared with 3.8 percent in the first quarter of 2016. The number of persons with jobs fell by approximately 6700, while the number of persons without jobs increased by 5000.

With just this brief synopsis of current conditions, in the absence of an active diversification plan, things start looking grim.

In Part 2 of this series, we look further at the present state of the economy, the global energy price environment and the existing potential for a strong economic diversification programme.

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