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DREADNESS Pt 2

In my last article I spoke of a meeting with some Energy company executives who told me that that the era of oil and gas will soon be over. ‘In ten years time,” they said, “this country “will look like Haiti”. This article continues to look at the implications of this warning.

There have been many who have been screaming this gospel- Lloyd Best, Gregory Mc Guire, Mary King, and Afra Raymond have for decades. The Central Bank Governor himself has been raising alarms every chance he gets. He recently spoke of the CLICO fiasco costing the region somewhere in the vicinity of 10-15% of regional GDP. He chorused recently, “We need to undergo considerable structural transformation, if we are to maintain or increase the relatively high living standards which we now enjoy… In Trinidad and Tobago real GDP is estimated to have declined by 3 per cent in 2009 remained flat in 2010 and declined again in 2011.” In my last article I spoke of the fact that education, gas, and electricity are all subsidized to the tune of billions from oil money. With oil’s collapse all these artificially low prices will escalate. Some to 1000% present levels. We will also have to subtract from our life the massive subsidies in programmes like CPEP, URP, and housing. Household goods and services that now cost $2000 will now cost $6000…

Our standard of living cannot be sustained in a post-oil economy if we do not diversify because we live in a massive welfare economy. Journalist Anthony Wilson corrected something I said in my last article when I said that the mismanagement of the $300 billion boom by the last administration was so great that that it did not trickle down substantially to the middle class. Anthony correctly positions that actually the middle class- and everybody else- benefitted from these massive invisible subsidies. He calculates that as much as 53% of the non-stolen boom money may have gone into subsidies! Everyone- except government- knew that this money was better directed into economic transformation and citizen empowerment.

The rub is this: we in T&T live ultra-consumer lives. Comparable to Americans living in cities, in our consumption of food, entertainment, cars, and consumer items. And we pay 6 to 10 times more for the same items because of the rates of exchange. Yet we earn the same dollar for dollar income! A worker here earning $6000. is working- more or less for- the same $6000 abroad. In other words we are living American lives with 1/10th of the income! A music CD cost $11 in the States but $130 here. A Range Rover costs $50,000 in the States- it cost almost $1 million here. You can eat full meals for $7.00 in the States. You’re spending $40. to eat lunch here- and over $120 if eating at a ‘restaurant’. Our Food Import Bill is $4 billion! And all we earn from that is diabetes, high blood pressure, heart attacks, and strokes…

We are at a crossroad called ‘Diversify or die.’ And this administration unfortunately is paralysed at the fork in the road. We have 50 years of hard theory- it is time for the rubber to hit the road. Government has all the feasibilities and blueprints in their hands. Sectors have fought and gotten initiatives in the last 2 budgets. To their credit this administration adopted the policies. Budget 2010 was particularly visionary, with major plans for transforming numerous sectors. Not one of these initiatives has been implemented…

We’re now 5 months before the next budget- 2 years after the first promises. Once again visionary initiatives are being betrayed. When the dreadness comes, our political classes will pay high prices… When the masses see what was stolen, squandered, and the opportunities we have lost they will not forgive…. The problem as Lloyd Best said is cultural. Diversification means breaking strongly with habits of the past. Our leaders lack the risk-taking creative DNA to make the necessary leaps. They need to prove me wrong.

Culture for instance- which currently adds $1.9 billion to the nation- can be worth $6 billion annually to us in as little as 4 years if the initiatives approved by Cabinet are implemented.

Oil’s decline means that $25 billion annually will be removed from our Budget. To maintain a semblance of our standard of living something else must take its place by hook or by crook. I have seen estimates that put T&T’s annual drug economy at $75 billion- so it might be ‘crook’. If drugs are the replacement- we can add a ‘Mexico’ to the ‘Haiti’ in our future…

We have an opportunity in the next 3 years to engage the visionary re-engineering of our economy- we must make the poetic leap and implement. This will mean empowering citizens who have ideas. I am going to again pitch my concept of a Billion Dollar Visionary Fund- a Venture Capital fund available to individuals to corporations, a fund open to every innovative idea from any member of the public. I will revisit it in my next article.

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DREADNESS Pt. 1

A few weeks ago I was in a meeting with some Energy company executives. We were talking frankly about a number of things, and this is what they said: ‘Rubadiri, there is no more gas. If we find some, it will be great, but…. And do you think we are going to wait until we are sucking fumes out of the ground to leave? No. Before that period comes all these fancy buildings here will empty out of us. Ghost-towns… Very soon, life in Trinidad-as-you-know-it will be over. In ten years time this country will look like Haiti…”

Haiti. Not Antigua or Barbados. But Haiti… And he didn’t mean ‘Haiti’ as in the noble nation of Toussaint and Boukman. He was talking about dread violence and poverty ‘Haiti’.

Now this could just be the old talk of men in a board room lime- but it invokes a dread reality that no one seems to be trying to come to terms with. Especially our politicians. Our life as a nation is about to fundamentally change. The ride of oil and gas is over. Another future is waiting for us. What we do in the next 3 years will decide what that future is…

I can hear some people saying, “Diri like to exaggerate eh! Haiti…” But the Scott Ryder Report at the end of 2010 says there’re proven gas reserves equivalent to 9 years of production and proven oil reserves equivalent of 14 years production. The doomsday scenario is not far off. But why doomsday? What will happen when oil and gas start to disappear?

Oil and gas make up 40% of the T&T economy. BPTT alone is worth almost 20% of our GDP. Our government makes up at least 70% of all economic activity in the country. Most of that is income derived from Oil and Gas. When that money disappears so does all the economic activity supported by the State. We’ve just been through a boom estimated to be worth over $300 billion. We failed to diversify away from Oil and Gas in that period. Instead we concentrated on big buildings badly built. During that period many foreigners and certain classes of locals made tremendous wealth. It did not trickle down meaningfully even to our middle class. At the end of that cycle of waste (when we missed an opportunity completely) we found our country operating at an annual deficit averaging $13 billion- in a budget of $50 billion. We now borrow money just to pay our wages- with money set aside for capital investments. The problem is that the money set aside to diversify the economy is not being spent on that. Almost none of the progressive programmes in the Budget are being implemented by government. We do not have time for this stupidity.

The reason that we are on a very slippery slope is this. Most of Trinidad and Tobago has a standard of living that cannot be sustained. We have a false standard of living built around the fact that oil money subsidises our life in invisible ways. Let me just mention three. Gas prices for our cars rely on a $4.8 billion gas subsidy. You remove that and all of a sudden a tank of gas that takes $130 to fill may cost $600… Can you calculate the cost of living that will multiply once that happens? Every single item flies upwards. T&T also now supplies free medicines at the cost of billions- including HIV medication that would cost an individual hundreds of thousands. What happens then to our health care? And there is no way that government can afford to continue its GATE programme. Tertiary level institutions will need tuition monies to survive. And I’ve not even begun to talk about the end of free primary and secondary education. Things are about to change…

These things will start changing in the years leading up to the doomsday scenario. Add to this picture our uncertain global economic times. Many established economies in decline are ones we depend on for preferential treatment or as places to suck up our surplus population. They will no longer be able to do this. I have been told that a lot of the Grants and Funds we currently have access to (but have not been utilizing) from EU countries will disappear in 2- 3 years. Those agencies are being pressured by domestic politics to stop giving away free money when they have problems at home.

I hope you’ve been doing the maths: Education. Health care. Gas. On top of this private companies and the State will not be able to pay their current wage-bills for the size of their workforce. We are therefore due for interesting labour times…

We have a short window in which to re-engineer our economy. It will require bravery. This administration is pussy-footing with plans in the last 2 Budgets to start the transformation. Nothing is being implemented. The new Petrotrin oil find must be used for reserves, savings, and for diversification. ‘Haiti!’ It is literally ‘Diversification or Death’.