(Presentation at CMMB breakfast panel on the T&T budget
on Friday 26)
The Trinidad and Tobago economy is analogous to a twin-engine
turbo prop plane, not a 747 jet. Let us utilise this as the
framework for discussing the 2008/09 budget.
The twin propeller engines that keep the economy
afloat are oil and natural gas.
Currently, hydrocarbon exports contribute 91 per cent of merchandise
exports and a little over 60 per cent of government revenue.
Its share of gross domestic production has jumped from 26
per cent in 2002 to 43 per cent last year.
Types of fuel?
These twin engines of oil and gas run on the complementary
fuels of foreign investment and foreign demand.
Virtually all of the foreign investment coming into T&T
is targeted at the hydrocarbon sector.
As a result, the vast majority of the firms involved are foreign-owned.
(Exceptions are Petrotrin, NGC/NEC and the Clico group of
World oil and gas demandand hence priceshave been
growing for much of the last decade, providing the complementary
fuel to the engines.
Four main forms of longer economic turbulence
can be identified as facing the T&T turbo-prop economy.
First is climate change, with its likely negative impacts
in terms of storms, hurricanes, food production, breeding
ground of vector diseases, etc.
Anticipatory action needs to begin now, not when climate change
is upon us: particularly as the impacts are not likely to
Second, the T&T population is ageing. Today, there are
ten working people for every one retired person. By mid-century,
a dramatic fall is projected to some two or less working people
for every retired.
The time to begin to address this is now.
Third, the oil and gas reserves engines are beginning
to sputter in economic time terms. Oil production
has been in secular decline since the late 1970s.
While natural gas reserves have grown, this has been counteracted
by gas guzzling consumption, particularly from
the liquified natural gas (LNG) industry.
The remaining years of proven oil and gas reserves, relative
to existing rates of use, range between 12 and 15 years.
While, some people point to large, unexplored reserves, a
conservative banker understands the distinction between the
bird in the hand and the one thought to be in the bush.
The fourth area of turbulence is that of inadequate
national savings, which needs to be located with the above
three factors of the likely substantial costs required to
adapt to climate change/natural disasters; prepare for the
ageing of the population and also address likely declines
in oil and gas production.
As pilots many times warn passengers, there is something called
clear air turbulence, which is difficultif
not impossibleto anticipate, and hence avoid.
We already are on to the speed bumps from the
US financial meltdown and its likely contagious spread to
other OECD countries. These countries are now almost certain
to dip into economic recession.
There is an outside probability that it could even get worse,
and we could be looking down the wrong end of an economic
The US Government and Congress are groping for a solution
to a problem created by a quarter century of greed as ruling
philosophy and marked by the gutting of independent regulation,
including in the auditing industry, the equity markers and
the financial markets.
There also is turbulence within the passenger cabin. Terrorists
threaten to crash the entire turbo-prop economy as a result
of several festering sores on which only plasters are being
First is the persisting weaknesses in the security system,
in terms of arresting Messrs Big (ie the drug
Second is the failure to fully grasp and treat with the underlying,
long-term neglect of communities that create the conducive
environment for a culture of gangs, guns, violence and death.
To this we can add the internal turbulence resulting from
fiscal profligacy and its inflationary impacts, together with
the persistent inadequacies in the health, education and traffic
Proposals for addressing turbulence
The forms of turbulence identifiedparticularly the immediate
and withinare so potentially huge, that this turbo-prop
economy can quickly become a chi-ke-chong.
A responsible pilot with a full passenger load would assume
the worst and take evasive action.
I, therefore, propose, first, a slashing of the assumed oil
price in the coming year to US$40-45. Second, the establishment
of a multi-stakeholder advisory group drawn from business,
labour, NGOs, academia and the public service technocracy
to prepare a turbulence preparedness plan.
Third, this advisory think tank to report to an all-party
committee mandated to draw up a consensus based on its findings
As the US has shown, in times of grave economic uncertainly,
partisanship needed to be tempered: That is a key sign of
a mature, developing society.