Home' Trinidad and Tobago Guardian : August 3rd 2017 Contents AUGUST 3 • 2017 guardian.co.tt BUSINESS GUARDIAN
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One of the interesting things
about the discussions that
surround the diversification
of the T&T economy is the
sheer lack of consideration
for how this process actually
happens and into what areas T&T can realis-
Every segment of society trumpets its own
view, but none seem to be able to distill what
is certainly a complex issue with the level of
clarity needed to make diversification of the
economy seem remotely possible.
It goes without saying that diversification is
not an overnight process, but much of the rhet-
oric seems to indicate that the thrust of the di-
versification effort should be government-led
or that any success or failure at achieving the
diversification "unicorn" should fall squarely
at the feet of the State.
That is where the problem begins and such
thinking is clearly unfair.
History has shown that successive admin-
istrations have been equally as bad at picking
winners as they are at managing enterprises.
Additionally, the role of the private sector
cannot be left out in any serious discussion
on economic diversification.
The private sector is much better at ferret-
ting out opportunities and certainly much
more nimble at capturing them than the State
could ever be.
Yes the State should facilitate (through basic
infrastructure and policies), but it should do no
more than that. In fact, one can argue that the
State is already too involved in the economic
affairs of T&T and should begin removing itself
in many areas.
It's also important to recognise a major dis-
tinction in issues that seem to get conflated.
This involves how economic diversification
is defined in the first place.
One school of thought suggests that having
more and "diverse" industries, generating more
revenues and profits and creating more jobs
can be considered "diversification."
That's a noble definition, but inherently
Any real economic diversification of the T&T
economy has to be focused on generating for-
While having a thriving domestic economy
with profitable enterprises is great, if these
businesses are not capable of generating for-
eign exchange, they will not offset the current
currency conundrum T&T faces, unless of
course, they are capable of saving the country
Put differently, generating more TT dollars
is pointless unless it can help us save or reduce
our demand for US dollars.
Open economies like T&T need US dollars
Incidentally, this logic represents the second
school of thought proffered by the chairman of
the Economic Development Advisory Board,
Dr Trevor Farrell.
Farrell goes even further by suggesting that
40 per cent of forex generation should reside
outside of the energy sector for T&T to be con-
sidered truly "diversified" (the energy sector
contribution to foreign exchange is close to
80 per cent today).
That said, the real question that stares us, as
a nation, in the face remains: diversify where?
Any real diversification should have two
things: the ability of industries of scale to
capture more foreign exchange and some sort
of competitive advantage.
The transition from T&T being an essentially
agricultural economy pre-independence, to
an energy economy post-independence was
driven by the fact that the country possessed
both characteristics at that time, along with
focused government policies towards the in-
Where can we find those elements and in
what industries today?
Objectively, not many of such opportunities
seem to exist given the rapid pace of global
innovation and the fact that T&T is still playing
Industries such as ICT, the creative sector
and tourism have been suggested as possible
options.Fundamentally, though, one has
to ask if there has been enough
research done and data gathered
to support these suggestions?
It is something of a cultural
norm in T&T to pick a path and
justify it later because of the paucity of data
Where economic diversification is con-
cerned, however, that cannot and must not
be allowed to happen.
T&T no longer has the luxury of throwing
stuff at the wall and observing what sticks.
A good example of an oil- and gas-based
country that has managed the diversification
process better than most is the United Arab
Since the UAE was formed in 1971, diver-
sification of the economy away from the
petroleum sector has been a clearly stated
The UAE has become a global financial and
major trading centre, is a location of choice
for multinational companies, and a desired
destination for international tourists.
In fact, the contribution of oil revenues as
a percentage of GDP has declined from 70 per
cent in the 1970s, to below 40 per cent in the
Certainly T&T's oil and gas earnings pale in
relation to the UAE, but much of their diver-
sification effort was guided by collecting the
right data and acting on the results.
Unless research and data guides the pro-
cess, our society is destined to meander from
misadventure to misadventure in search of the
holy grail of economic diversification.
Generating more TT dollars is pointless unless it can
help us save or reduce our demand for US dollars.
Open economies like T&T need US dollars to survive.
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