A Trinidadian Economist is urging Guyana not to make the same mistakes the twin island republic has made in the management of revenue generated from petroleum production, and the neglect of other sectors of the economy.
Dr. Roger Hosein, an Economist at the University of the West Indies St. Augustine Campus, said between 1999 and 2016, Trinidad received approximately 90 billion US dollars in economic rents, most of which was squandered.
Of the 90 billion US dollars collected, he said about 5 billion US dollars exist in the country’s Heritage and Stabilization Fund while 8 billion US dollars is part of the stock of international reserves. “That leaves 77 unaccounted for. That 77, I think, was just squandered and wasted. It was poorly spent,” Dr. Hosein told an audience in Georgetown Guyana, gathered for a lecture organized by the Guyana Oil & Gas Association (GOGA) last Wednesday.
He said while the “intercept of economic activity” was changed in Trinidad & Tobago the growth of economic activity remained the same.
“The Trinidad and Tobago economy today in 2017 has not grown since 2007. In fact, we had negative economic growth of -0.51% from 2007 to the present,” the Economist pointed out.
He said a country’s comparative advantage evolves over time resulting in changes in the weaknesses and strengths of certain sectors in the economy. If an economy becomes stronger in the areas it can produce well; this he said, is healthy. However, he said if in so doing, the economy is exposed to a greater amount of vulnerability from external shocks, this must be closely monitored. Intense focus on the oil and gas and related sectors of the Trinidadian economy, he pointed out, inadvertently led to the neglect of other sectors, the effects of which only became apparent when the price for oil & gas tumbled on the world market.
“Trinidad and Tobago is certainly an economy at the brink of a lengthy period of structural adjustment,” Dr. Hosein stated.
The situation Trinidad & Tobago faces today is indicative of what is referred to as the Dutch disease, which is the relationship between the increase in the economic development of a specific sector, such as oil & gas, and the accompanying decline in other sectors of an economy.
A number of economists, oil & gas experts, as well as multilateral stakeholders have been emphasizing the danger of this phenomenon and the need for Guyanese authorities to guard against making the same mistakes as others.
For its part, the Guyana government is moving to establish a Sovereign Wealth Fund and the country’s Minister of Finance has said work is ongoing on the development of both a fiscal regime and a fiscal sustainability framework to address the management of natural resources wealth.
Oil production will begin in Guyana by mid-2020.