Our various commentators are unanimous in their calls for the diversification of the economy, its reconstruction in the supply of goods and services for export by the onshore sector.
However, many approaches are suggested or used and these include choices ranging from inducing the private sector to take the higher risk of exporting, attracting foreign investors to locate in Trinidad and Tobago, including the construction of industrial parks, to encourage SMEs (small and medium-sized enterprises) and local entrepreneurs through various subsidies and support from government agencies, the government’s plan to produce green hydrogen to support its petrochemical sector, to improve its ease of doing business (EoDB), even a one-step competition, “i2i”, to encourage the creation of innovative ideas by the population.
Some even call for a deliberate attempt to include Venezuelan immigrants in our economic development drive, given our declining workforce participation, old negative list initiatives to eventually encourage the development of local exporters and even the construction of Point Lisas initially to encourage the onshore private sector to go downstream of the raw materials produced.
We have attracted significant foreign investment in the energy and petrochemical sectors, as a result have seen strong growth in the economy and earned a lot of foreign currency, all without any real improvement in the development of the economy. Although small manufacturers in Germany are big exporters, the Mittelstand, our onshore manufacturers are more oriented towards non-tradable goods.
We have invested a lot of capital in the eTeck park in Tamana, in the hope that foreign investment will settle there, nothing significant to date. We are now engaged in the construction of another in Phoenix Park, with the promise that some Chinese companies will locate there, others will follow? The problem is that unless we put in place an innovation system to use the presence of these foreign companies and their technologies to develop our own export businesses, like China has done, we risk getting economic growth but no real development (reference Richard Baldwin, The Great Convergence).
Some insist that a major problem is our poor performance in EoDB. It is indeed a bit of a deterrent, but we have onshore companies engaged in non-tradable goods, importation, mark-up and sale, which operate in low risk areas and make good profits despite the downside of the EoDB.
Our history as a plantation economy is opposed to this type of economic development where the local private sector is seen as the main actor in economic adaptation and must be encouraged to act through incentives. Professor John Foster of the University of Queensland, Australia considers such a sector rigid and non-adaptive due to its history. Yet the performance of our onshore private sector which provides the majority of jobs (96 percent) lags the educational process in which some 70 percent of the graduate workforce emigrates because they cannot find locally adapted jobs. However, the first task of rebuilding the economy is not to find jobs for these graduates, nor to ensure that the current economic activity on land, which does not earn much foreign exchange, is adequately supplied with manpower and skills required.
Instead, the first task of reconstruction is to decide on the few technologies / industries in which T&T is believed to be able to export globally competitive goods / services to such a level that at least money for them. essential imports is won. The following is a quote from one of my 2017 articles:
“Professor Calestous Juma, a famous economist from Harvard University, USA, told us at UWI about economic diversification – the economic leap. He stressed that the transformation of economies today requires the use of knowledge. He said that once a country becomes the best in a certain technology, its application in products and services depends only on the imagination and innovation of its people. Imagination without the mastery of technology is useless. This ties in with what Professor Ricardo Hausmann told us in his report from the IDB (Inter-American Development Bank) that if the country had the necessary skills to operate in the dense productive space of the world market, that is to say As he was fluent in the languages of the relevant technologies of the product space, it was easy to move from tree to tree, producing new goods and services as technologies evolved.
This ties in with the ideas of the Solow residue and Cobb-Douglas total factor productivity which consist of many elements, in particular technology, knowledge and innovation, necessary for the success of any innovative economic activity; build competitive advantage (based on innovation and product differentiation) instead of simply relying on comparative advantage.
Therefore, in building a national innovation system, the first step is to conduct a foresight exercise – choosing the few industries / technologies – by a panel of expert advisers, on behalf of the government, of the areas in which we are the most likely to be globally competitive. An appropriate model on which to base this national innovation system is the triple helix, an integrated effort of government, private sector (new and existing) and R&D institutions (research and development), with government playing the role of leader. file. (Reference: “Then all fall down” by Mary King, Express October 13, 2019).
Such an approach will define the capital and labor required, as well as the international business networks that need to be developed, in rebuilding our onshore economy, the hinterland.
—Mary King is a former government minister