Lessons for Guyana from T&T: to embrace and what to avo
Dr. Graham King is a Lecturer in the Faculty of Engineering at the University of the West Indies. He serves on the Board of CARIRI, the Energy Chamber Decarbonization Taskforce and the Trinidad & Tobago Manufacturer’s Association Productivity Committee.
Commodity-rich developing countries can suffer terribly from Dutch Disease. Commodity wealth bolsters imports, making them relatively cheaper and more readily accessible to the population. Local products can struggle to compete as labour rates climb and it is more profitable for the businesses to import and resell than to create, grow or process indigenous offerings. Money flows freely, infrastructure projects abound, but the capacity of the economy to sustain itself if commodity income starts to decline remains under-developed. Dutch Disease distorts the national economy and undermines its capacity to build sustainable economic strength that can last beyond the commodity boom. It also serves as an example of the plethora of the profound challenges associated with managing influxes of commodity wealth.
Great patterns are available to Guyana in countries like Norway and UAE for effective commodity wealth management. But what of its Caribbean neighbour, Trinidad & Tobago, which itself has a century-long history as an oil and gas producer? What can Guyana learn about management of its commodity boom from Trinidad’s experience, the good and the bad?
Let’s focus first on some things that Trinidad & Tobago has done well, which have contributed to its reasonably sustainable economic growth and development:
Early mover on New Energy opportunities.
In the mid-1970s, consultation and focused dialogue led to the establishment of priority use areas for previously-flared natural gas. Trinidad latched onto a growing LNG market and at the time of its first shipment in 1999, Atlantic LNG was the largest LNG plant in the world at the time when there had been no other successful developments in the Atlantic basin. It held the record for the fastest-established LNG project. Now Trinidad is pivoting towards establishing a green hydrogen economy which could provide opportunities to produce green, or at least blue, hydrogenbased products such as methanol and ammonia.
Innovative private-public partnerships and clusters.
Trinidad created functional collaborations between nationally owned companies, multinational operators, locally owned private sector companies and private shareholders. Shareholders in Atlantic LNG are BP, Shell, the nationalised National Gas Company (NGC) and China Investment Corporation (CIC). These sometimes-complex arrangements have allowed for national interests to be retained, the general public to participate in investment opportunities, and important operational companies to be run at worldclass standards with limited political involvement. The resulting industrial base is stable and attractive to international investors.
Cheap electricity from natural gas. As early as the 1950s, natural gas was identified as useful for electricity production. Even before flared gas was captured, onshore gas fields provided the feedstock. Having natural gas as the sole power source has allowed for a less polluting electricity sector. Low-cost electricity supported the competitiveness of the industrial and manufacturing sectors. However, an unintended consequence has been energy wastefulness - very poor energy efficiency has resulted in Trinidad & Tobago having one of the lowest scores for GDP per kWh in the world.
Built a strong local technical base. Investment in education included free local tertiary education, complemented by a generous system of scholarships for international study. Specialist programmes such as the Petroleum Geoscience programme at the University of the West Indies have provided technically qualified, local leaders in the Energy sector. Skills training through the National Energy Skills Council has served to establish a broad base of certified technicians. Well over ninety percent of professionals in the sector are nationals or residents. Trinbagonian energy professionals operate in companies around the world. Expertise has been built over time and opens the opportunity for Trinidad & Tobago to transition towards having a knowledge-based energy sector.
Strong Private Sector advocacy and collaborative action through the Energy Chamber. The Energy Chamber of Trinidad & Tobago is a very well-respected voice of the energy sector, enthusiastically supported by all stakeholders. Globally unique initiatives such as its administration of mandatory certification for energy workers (The PLEA Pass); establishment of the “Safe to Work” company Health, Safety and Environmental
(HSE) certification programme required by contractors who serve Trinidad & Tobago’s energy sector; and the Local Content Management System, used by operators in their procurement and local content performance reporting. The Energy Chamber has helped to engender a highly beneficial, relational environment within the energy sector of Trinidad & Tobago, which contributes significantly to its sustainability.
Established a regulated sovereign wealth fund. Trinidad & Tobago’s Heritage and Stabilisation Fund (HSF) by an Act of Parliament that mandates that 60% of excess tax revenues from petroleum sector exports are to be invested in the HSF. It allows for economic stabilisation during times of petroleum price volatility, and it is a savings plan for future generations. Government contributions and withdraws are currently matched, at around US$2.5bn, but the value of the fund was US$5.7bn at the close of 2021 thanks to asset growth. Although a relatively small wealth fund, the HSF has certainly done its job and provided the country with an economic buffer.
What Trinidad has done poorly:
Failed to modernise its national systems. Over the years of success in establishing itself as a world-class energy player, two worlds have emerged in Trinidad & Tobago. In one we find the professionalism and efficiency of the energy sector, while in… well, pretty much all other parts of society, low productivity and a poor work ethic abound. For instance, despite the declared intentions by politicians of all shades, the public service has not been reformed and remains overstaffed and generally unresponsive to changing needs. Roads are highly congested and public transport is unreliable with a limited network. The education system gets a failing grade when it comes to producing critical thinkers who can innovate.
luggishness in waking up to the otential benefits of renewable nergy to a fossil-fuel based conomy and regulatory hurdles revent the uptake of something s simple as distributed solar. lowness to modernise has dversely affect the ease of doing usiness (Trinidad & Tobago is urrently ranked 105 in the world) and hamper the competiveness of non-energy sectors in he country.
Reliance on transfers and subidies for wealth distribution.
In s mission to share energy sector wealth to the population of rinidad & Tobago, the government has allowed transfers and ubsidies to grow in times of nergy revenue booms without a ommensurate contraction during eriods of waning energy revnues. Transfers and subsidies enerally have a negative impact n economic growth and can prouce undesirable consequences, upressing innovation and ntrepreneurship,. Unsustainable xpectations that these financial upports will remain indefinitely re, predictably, lodged firmly in he mind of the population and igorous resistance arises when hey are challenged.
Failed to engender sustained nvestment in research and develpment. Here we go with Dutch
isease again! Despite having ccrued a sovereign wealth fund,
rinidad & Tobago has failed to nvest in indigenous innovation
nd research and development hat will support diversification
f the economy in the long term. ts innovation ecosystem is weak o the point of being non-existent. Constant rhetoric about diversifyng the economy has produced lite actual diversification, putting he future economic development f the country at risk.
So, there are many lessons that Guyana can draw from the jourey of its nearest CARICOM
eighbour, as it enjoys an nprecedented windfall of energy wealth. Fortunately, many are lready featuring in the narrative
f the future Guyana. A commitment to net zero by 2050 is underinned with renewable energy chemes. US$44m of financing
as been committed education nd technical training. Plans are n place for a 250 MW gas-tohore power plant. Initial deposits
ave been made in a sovereign wealth fund. However, can Guyana avoid the negative essons of Trinidad & Tobago and hereby truly avoid Dutch disase? That remains to be seen and will require vision, great disciline and clear communication on he part of its government.