A few weeks ago I asked the question whether Prime Minister Dr Keith Rowley and Opposition Leader Kamla Persad-Bissessar can pivot like Barbados Prime Minister Mia Mottley.
At that time I was reflecting on a speech given by Mottley in which she articulated a vision for the Caribbean. A bold vision in which the region could be a global leader in technology and one which finally moves away from an over-dependence on a singular product for its sustenance.
The question was being asked of our two political leaders because Rowley as Prime Minister and Persad-Bissessar as Opposition Leader must play key roles if this country is to move forward in the short term.
For sure both are in many ways irrelevant to T&T’s long-term future as they are both in the winter of their years and nearing the end of their political careers, but the challenge that the economy faces is that the government has such a large hand in it, the private sector cannot on its own move the economy forward.
Perhaps we can look at two examples of how government’s action plays a crucial role in how the economy performs. The first is the registration of Venezuelan migrants by the government, allowing them to live and work in this country legally, has provided an additional source of relatively inexpensive labour to the country. It is not just labour for labour sake, but the reality is that the Venezuelan migrants have proven themselves to be hard and efficiently workers and bring with them a level of productivity much needed in a society that has long suffered from inefficient workers.
That the government led by Prime Minister Dr Keith Rowley has not yet seen the strategic importance of these migrants and have not enacted the necessary laws to regulate their migration and attempt to make the best use of this valuable source of young labour is in keeping with the make it up as we go approach to governance that has been a hallmark of the man from Mason Hall’s administration.
Lest we had any doubts, it shows that the decision to allow for the registration of the Venezuelans was a knee-jerk reaction to the calls from civil society, led by the Archbishop of Port-of-Spain to do something and not a real interest in seeing opportunity in crisis and in having a strategic approach by the state.
Should we then be surprised that the Prime Minister could seek to excuse the Trumpian behaviour of his government to return children to the sea under the same Trump argument that they are being trafficked and that T&T is a nation of laws?
Can the Prime Minister ever pivot to a more humane approach to governance, one where diplomacy is to seek solutions and not to scream at and lecture people on his archaic views of what the country and world must look like?
The Prime Minister must know that the re-election of his government with a smaller majority was a direct response of the population to the majority’s inability to countenance Persad-Bissessar and her colleagues occupying the corridors of power and not in anyway an endorsement of the last five years.
Persad-Bissessar in the weeks since the Pivot column has further shown why she has consistently lost election after election as her zero sum politics, one that says if we can’t have it then mash it up, abhors those outside of her base and relegates her increasingly to irrelevance. She is the perfect leader of the opposition to a Prime Minister who needs to often deflect from the failures of his administration.
The second is the government’s handling of the downstream sector and the crisis facing the petrochemical companies.
As readers would no doubt be aware that T&T has four main sources of export revenue, oil, gas, petrochemicals and manufacturing. In a small open-economy like ours, earning foreign exchange is crucial because we need to pay with hard currency, particularly United States dollars, for many of the things we consume and the raw materials used in the manufacturing process .
The last time T&T was forced to go into an IMF structural adjustment programme, with all the attendant pain, it was because of insufficient forex to support our balance of payment position.
In that context the energy sector has for the last fifty years played a crucial role in earning foreign exchange. First it was oil, then it was petrochemicals and in the late 1990s to present also natural gas production and export of LNG.
In the case of petrochemicals T&T developed what was called the Trinidad model. T&T was one of the first countries to determine that it should monetise its natural gas. It took gas that was essentially seen as not valuable, since it was a by-product of oil production and used it as a feedstock, and generated valuable products. So it was taking cheap gas, inviting companies to set up shop here and export into the US and European markets. This strategy resulted in T&T becoming the leading exporter of methanol and ammonia in the world and contributing billions of US dollars to the treasury.
The country’s first Prime Minister Dr Eric Williams in 1976 articulated: “There have been attempts to persuade us that the simplest and easiest thing to do would be to sit back, export our oil, export our gas, do nothing else and just receive the revenues derived from such exports and as it were, lead a life of luxury – at least or some limited period. This, the Government has completely rejected, for it amounts to putting the entire nation on the dole. Instead, we have taken what may be the more difficult road and that is, accepting the challenge of entering the world of steel, aluminium, methanol, fertiliser, petrochemicals. We have accepted the challenge of using our hydrocarbon resources in a very definite industrialisation process.”
More than a year ago economist Dr Terrence Farrell presented a study in which he looked at the state of the downstream petrochemical sector.
Farrell’s study determined that there was a need for urgent government action to re-look the gas value chain, since the tectonic changes brought about by shale gas, higher natural gas prices locally and curtailment issues were increasingly making T&T uncompetitive and could lead to plant closures.
The Rowley administration attacked the study and led by its Minister of everything Stuart Young it sought to rubbish it, even attacking the former head of the Economic Development Board by suggesting that because it was paid for by a private sector entity, he would compromise his reputation for intellectual rigour and produce a study to fit the interest of its sponsor.
A year on and plants have closed, the model has run its course and on November 17 the Minister of Energy had to admit to the Parliament that the value chain was weak.
“We are analysing what we call the gas value chain, these are not just words you know, this has significant economic consequences for the country and this bravado and loose way and coming and calling $3.10, $3.25 and $3.50 you could catapult the whole negotiations you know…because of the irresponsibility. I mean I am getting fed up of it now,” thundered Khan.
Khan’s reference to the $3.10, $3.25 and $3.50 was as a result of Opposition Senator Wade Mark’s assertion that the NGC could have only afforded to pay to the Upstream producers like BPTT, Royal Dutch Shell and EOG Resources, US $3.10 per million British thermal unit (MMBTU) of natural gas but the energy companies wanted US $3.25. Mysteriously, according to Mark, a team led by Prime Minister Dr Keith Rowley forced the NGC to agree to US $3.50 per MMBTU which it cannot now sell onto the downstream.
The Energy Minister posited: “We are in a position now where the chain has gotten weak. The NGC has two choices, impose the additional charges on the downstreamers and collapse the whole of Point Lisas, or find a mechanism to work it through… We have smaller fields so the unit cost per mmbtu is higher. For the chain to survive you need upstream. Upstream is saying I cannot survive on a price less than this and the downstream is saying I cannot survive on a price more than this and the NGC is in the middle being squeezed out as the aggregator. That is the complex situation we are currently involved in.”
It is a difficult situation but had the government seen more than a year ago that there is a need to pivot, to not group think and adopt a position that if something is not complementary to the government then we must try to destroy the messenger, we might have been in a better position today.
The Trinidad model has run its course. We must now look at ways in which we can use the foundation of petrochemicals and go further downstream. We must get the fiscal situation right and we must determine once and for all the future role of the NGC, on the basis of economics and finance and not on sentimentality.
We must pivot now or face ruin.
I will be off for the next few weeks and my colleague Joel Julien will occupy this space. We shall talk again soon.