Published:
Friday, September 12, 2014
Opposition leader Dr Keith Rowley responded to the Finance Minister's budget statement on September 12. Following is the full text of his response.
Mr Speaker this would be the twenty-fourth occasion that I would have had the opportunity of participating in a budget debate in this honourable house. For the fifth time as opposition leader, I am privileged to be called upon to respond to the budget statement of the minister of finance. This I consider not just as a duty but also an honour as I act on behalf of all the people of T&T.
Mr. Speaker T&T is not a basket case. In fact, for decades our favourable circumstances have placed us among the more fortunate in the region and I dare say the world. That having been said Mr Speaker, the people of T&T have every right to harbour expectations of a better life as we proceed to develop our nation from year to year and from administration to administration. Along the way on this journey there have been and will always be highs and lows, twists and turns—for that is life, but how we cope with the inevitable hurdles will largely depend on the quality and effectiveness of the leadership which is brought to bear on our circumstances whatever they may be.
It is against this background that whatever else we do today September 12, 2015 we cannot properly address this assignment without reviewing and assessing this government and the national challenges as they existed or were perceived in 2010 (four budgets ago) as against where we are today. In short, Mr Speaker, we compare what we set out to do as against what we have accomplished. It is here that the budgeting process is located, that is, what we have earned what we have spent and how well we have obtained value for money in fixing the nation’s problems as we pay our way forward.
This is an opportune time to remind you, Mr Speaker, that we on this side, in a unique demonstration of cooperation for the national good, voted for the 2010 Budget as presented by this government. Armed with this “send-off”, the government proceeded to fail, and to do so spectacularly and regularly. That is why, knowing that they have failed, last weekend, on the eve of the government’s fifth budget statement, the Prime Minister sought to preface this budget by repeating their election campaign mantra of “the treasury empty”. The Prime Minister said the PNM left the country with a fiscal deficit of six percent of GDP. Nothing is further from the truth Mr. Speaker! Here are the facts based, in part, on information from the Central Bank’s Annual Economic Survey and the Central Bank’s Economic Bulletin, July 2010, Central Bank Statistical Digest, Dec 2010:
• At the end of the fiscal period 2008/2009 there was an overall deficit balance of $ 6.6 bn T&T, which was about five percent of GDP
• At the end of May 2010, just when the PP took office, the deficit had dwindled to $77.9 mil T&T and not 6% of GDP as stated by the Prime Minister
• At the end of September 2010 the overall balance from government’s fiscal operations was a surplus of $188 mil T&T
In the face of record high oil prices (at over $100 per barrel) and sustained gas prices well above the budgeted levels, this government has operated a significant budget deficit in every year of its existence. With that embarrassing fact as its legacy the Government is now looking for PNM company by attempting to mislead the population so as not to held accountable for its own fiscal irresponsibility. We will have none of it! The truth must be told our children, notwithstanding the best efforts of the Prime Minister and the Minister of Finance, to tell them differently.
Contrary to what they are now trying peddle to the population, except for 2009, the year of the Global Collapse/Recession which affected us here, the previous PNM Government had been consistently running budget surpluses as follows
Year
Surplus / (Deficit )
2004
1.51bn
2005
5.0 bn
2006
7.713 bn
2007
2.298 bn
2008
12.132bn
2009*
(6.686bn)
2010 May
(77 million)
2010 September
188 million
Source: Central Bank Annual Economic Survey
Compare that with data from the Ministry of Finance’s own Review of the Economy generated by the budget division which show:
Year
Surplus / (Deficit)
2011
(2.8 bn)
2012
(3.5 bn)
2013
(5.18 bn)
2014
(4.87 bn)
The Prime Minister’s statement on this matter and the numerous instances of the Minister of Finance not coming clean in this budget confirms that we cannot trust anything this government tells us. What they do not attempt to hide by omission they misrepresent in naked untruths.
In order to have us at their mercy on these matters they have virtually shut down the Central Statistical Office (CSO) so that for the first time, in my memory, there is no independent CSO data on which to base our references and reviews. We are confined to the Ministry of Finance and the Central Bank for statistical information about the economic and other performances of the country. The CSO doesn’t even have usable office space, with its staff demoralised, drifting in the streets with or without placards. The government just does not care.
Mr Speaker 2006/2008 were the peak years of this country’s earning and development just prior to the 2009 global economic collapse. That occurrence found our country engaged in a series of progressive development initiatives all of which were roundly condemned by this UNC government coalition. Today after years of condemnation and scorn, not only heaped upon the individuals involved in the projects by on the very ideas themselves, this shameless government, after humiliating and firing people, shutting down here, there and everywhere, delaying, bad-mouthing everything, now in the 2015 budget, have embraced and is now presenting as “new” concepts and programmes, the very things which they stalled and delayed.
They now thump the desks for the Diego Martin highway which they stopped in 2010 and restarted only after the Member of Parliament for Diego Martin North East was thrown out of Parliament for agitating for the restart. Carenage Fish Market is now to be their major accomplishment after four years of spiteful neglect as a construction project. After four years the abandoned partially constructed Bagatelle Community Centre and the Diego Martin Sports Complex do not warrant a mention. Today we are told that the abandoned multimillion-dollar Tarouba Stadium cannot be used for cricket because the soil is bad and Calder Hart built it.
In this budget of shame they say “we have no shame”. All that has happened at the end of their tenure, is that we as a people have had our development derailed and valuable time has been lost in the process. In our developmental history 2010-2015, this period will long be known as “the missing years”.
After promising to bring new ideas and solutions to our problems and producing nothing but stumbling, bumbling disasters as alternatives, this Government which deliberately refused to build on the foundations now turn to some well-known elements of Vision 2020 for salvation. Permit me to quote for you Mr Speaker from the budget statement of 2005 and I want you to listen very carefully:
“We are also targeting a number of specific areas for further commercial expansion including:
Yachting;
Fish and fish processing;
Merchant Marine;
Music and entertainment;
The Film Industry;
Printing and Packaging; and
Food and beverage.”
Minister of Finance Patrick Manning PNM 2005
Nine years later, listen to this Mr Speaker, “The Government proposes to provide incentives to develop the following “new” sectors which we are targeting
Firstly, food and beverage industry
The creative arts and entertainment sector in particular film, fashion and the music industry
Thirdly, the maritime sector
Finally, the yachting industry
The Government proposes to strengthen this industry by introducing at the University of Trinidad and Tobago (UTT) advance training for yacht building and maintenance.”
Larry Howai 2014
Professor Andrew Ramroop of Savile Row London was slandered and driven away from UTT for wanting to impart his international image and knowledge to the fashion program there. Four years later today we recognise fashion for diversification.
After $350 billion dollars and no new ideas of their own they shamelessly resort to plagiarising that which they despised and attempted to destroy. In this town without pity this is the budget without shame.
We on this side consider the document presented here last Monday to be nothing more than an extensive spending list. It was a testimony to gross negligence in the management of the country’s economic affairs that has been the hallmark of the PP administration. Mr Speaker, the proposed budget is an election gimmick constructed and presented in the hope that the government could give as much as possible in the expectation that this would wipeout the unpleasant memories that we have been living through for the last four years. The Government places its future on the misguided belief that the people of T&T are not intelligent and responsible.
If budgets of $35 and $40 billion under the PNM were condemned as “squander mania”, then what can we say about an almost $65 billion budget? At least during that period of expenditure we could have seen what was being done even when we didn’t agree with the priorities. Today not even the Govenor of the Central Bank could say where the money is going.
We expected the government to come with an election budget and they did not disappoint. We expected them to go into overdrive on expenditure and they surely surpassed that!! Furthermore, we expected them to be short on revenue ideas and again they lived up to all of our very low expectations of them!
Mr Speaker, what was presented on Monday can best be described as the most irresponsible, reckless and dangerous approach to fiscal management that this country has ever seen.
What is even more frightening is that they are proud of this!!!!
Mr Speaker, we need to set the record straight, we have had enough of their outright dishonesty about PNM governance of this country!
Let me begin on this note on which they are working hard to re-write the history of Trinidad and Tobago.
In the six years when energy prices were above the budgeted price, from 2003 to 2008, the PNM’s track record is far superior to anything they can dream of. Our management of the country’s fiscal affairs was reasonable and responsible. Let me read into the Hansard record the following:
Year Revenue Expenditure Budget Surplus Oil Price Economic growth
Budgeted
2003 $16.76 bn $15.80 bn $958 ml $22 14.4%
2004 $20.63 bn $19.12 bn $1.5 bn $25 7.9%
2005 $29.65 bn $24.64 bn $5.0 bn $32 5.4%
2006 $38.91 bn $32.20 bn $7.7 bn $45 13.4%
2007 $40.06 bn $37.77 bn $2.3 bn $72 4.8%
2008 $56.85 bn $44.72 bn $12.1 bn 2.4%
So accumulated budget surplus for the 6-year period is $29.3 billion
This represented very important additions to national savings! This is what fiscal responsibility is all about. In fact Mr Speaker, this huge national saving was instrumental in allowing them to be on the massive spending spree that they have been on during their entire term in office!
Mr. Speaker, we all know what happened in 2008 to 2009, the financial crisis hit and the world economy went into a serious recession. We were not immune to it however because of our strong fundamentals we were able to weather the storm and bounce back very quickly. The real tragedy was that this period coincided with a change of Government where unpreparedness was their main distinction.
Oil prices dropped from an average of $100 to about $60 over that period in 2009.
This resulted in an almost catastrophic fall in Government revenue from about $56 billion to $39 billion in 2009, a decline of $17 billion in one year! So it is hardly surprising that T&T, like most of the world, ran a deficit in that year.
As a result, in fiscal 2009 the deficit of $6.7 billion was about fiveper cent of Gross Domestic Product. This was after six consecutive years of accumulated surpluses of over $29 billion!
A budget statement is a one-year spending plan, so no Government “inherits” a deficit in the true sense of the word. Deliberately deciding to run a fiscal deficit is purely up to the Government of the day, it has nothing to do with what happened under any previous Government, it is their policy decision to do or not do it!
What successive Governments “inherit” is national debt!!! The Government seems to be confused about the difference between the two things! Hence they are trying to play us for fool, once again, while embarrassing themselves parroting economic gibberish!
As I noted above Mr Speaker, what they actually inherited was a fair amount of national savings built up by the PNM over six years of budget surpluses!
This included over $9 billion in foreign exchange reserves at the Central Bank. And this motley crew has the audacity to still be talking about meeting an empty treasury when they came into office and they keep referring to the levels of savings as though it grew under their stewardship! How dishonest can that be?
Furthermore, in order to maintain stability, it is a fact that we did use up some of the savings to run a deficit in 2009. However, things were beginning to turn around in 2010, that is up until May, when they were unleashed on the population. That is when they promised to turn the economy around and they delivered by reversing a moderate recovery into a full blown recession in the second half of the year.
At the end of fiscal year 2010, the budget deficit came in at less than one percent. In fact, it is recorded as -.2 of a percent in the Central Bank reports! Almost close to a balanced budget!
So to boast about bringing down the budget deficit from 5 percent to 2.3 per cent can only mean one thing: the Minister is confused and doesn’t know what he is talking about, but that is no surprise to us on this side!
Mr Speaker, who is advising these people?
Now let us examine their record of the past four years and see what they have offered the country. In the five budgets they presented this is what their record is:
Budget 2011/2015
Year Expenditure Revenue Budget Deficit Oil Price Economic growth
2011 $49.02 $41.3 $7.7 $75 -2.6
2012 $54.6 $47.0 $7.6 $75 1.2
2013 $58.4 $50.7 $7.7 $75 1.6
2014 $61.2 $55.0 $6.4 $80 ?
2015 $64.7 $60.4 $4.4 $80 ?
Mr Speaker, their combined total deficits over 5 years would have been a mind-boggling $33.4 billion dollars!!! In other words they would have added this amount to the national debt!
This is what will be inherited by the next government, not whether you ran a deficit in one year or not.
Thankfully, due to their general incompetence and their inability to implement projects the actual reported deficits have been lower than what they set out to do!
So their plan is to spend almost $290 billion, generate very little or no economic growth during their term in office and without ever adding a single cent to National Savings!
Mr Speaker if this is not the height of irresponsibility and mismanagement of our country’s finance then what else can it be?
Mr Speaker, I am sure some misguided member from the other side will jump up and say “but we added money to the Heritage and Stabilisation”’ Fund”. Well, on that note the IMF reported to us!!
In last year’s Article IV Consultation Report, which the Minister authorised for release only after the budget debate in the Lower House the IMF addressed this issue and concluded that there is need for a medium term policy which would allow the HSF to be funded only when there is a fiscal surplus. The event of funding the HSF while running fiscal deficits, is in effect borrowing to save.
Manipulation of the Heritage and Stabilisation Fund Requirement
Despite the fact that oil prices have been higher than estimated in 2014, and the revenues from petroleum are therefore higher than expected, the Government has not deposited a single cent into the Heritage and Stabilisation Fund for 2014.
In fact, because of elevated oil prices, the revenue from oil should be at least 25% above the original estimates. On the face of it, this appears to be a flagrant breach, by the Government, of the Heritage and Stabilisation Fund Act, which clearly states that if the revenues collected from petroleum exceed the estimates by 10%, the surplus must be deposited into the Heritage and Stabilisation Fund.
However, in another sleight of hand and act of deception, the Government has avoided depositing money into the Fund by simply not collecting taxes from oil companies, in particular Petrotrin. And so, whereas Petrotrin is liable to pay taxes on its income from oil on a quarterly basis, like everybody else, the Minister has allowed Petrotrin to break our income tax laws and not pay its taxes in 2014, thereby suppressing the actual collection of revenues from petroleum and breaching the Heritage and Stabilisation Fund Act.
He has in fact cheated the Fund and future generations of money that should have been deposited into the Fund, and thus facilitated the mismanagement, misuse of funds and disregard for procedure that is now rampant at Petrotrin under this Government.
They are neither fooling the IMF nor are they fooling us! So Mr Speaker, they run budget deficits then borrow money to put in the HSF to comply with the law and proceed to beat their chest and boast about adding so much to our fund!
Sleight of Hand with the Revenue Figures for 2014
The original estimate of revenue for 2014 was $53.6 billion. However, the actual revenue to be collected in 2014 has been revised to $58.4 billion, an increase of $4.8 billion.
On the face of it, without drilling deeper into the figures, this sounds quite good, and gives the impression that the economy is indeed performing well.
However, a closer examination will reveal the sleight of the hand that the Minister of Finance has engaged in, since most of the additional revenue in 2014 has come from non-tax income, i.e. from what is referred to as “property income”. In particular, the “profits” from non-financial enterprises in 2014 has exceeded the budget estimates by $4.5 billion.
Again, this sounds good if you are not familiar with the terminology, but the reality is that this additional revenue was not really “earned” in 2014 at all. Instead, what the government has done is to appropriate $6 billion from the cash reserves of State Enterprises such as the National Gas Corporation. These are reserves that have been built up over the years, and instead of earmarking and using these cash reserves for their intended purposes, such as development of our energy infrastructure and diversification and expansion of the economy through prudent investments, the Government has forced these companies to pay huge dividends in 2014 to cover its recurrent expenditure and to pretend that the economy is growing.
This is in effect, a fraud on the population, because the government really did not exceed its revenue projections in 2014. Instead, it just pulled cash reserves or savings out of the state enterprises; money that had been built up over many, many years, in a deceitful attempt to cover its wanton, wasteful and profligate expenditure patterns. An examination of the figures also reveals that it intends to perpetrate this same sleight of hand again in 2015, by pulling another $5 billion out of the cash reserves or savings of the State Enterprises, and pretending that this is revenue “earned”. This approach of course is unsustainable, because by the time they lose the next election, they would have sucked the state enterprises dry.
What this means is that if this is allowed to happen these companies would be looking to the Minister of Finance for money for their own necessary investments and they would not be instruments of economics expansion as anticipated when they built up their own reserves. Their plan is that by the time the full effects of this folly is fully exposed they would have been long gone.
Tax Amnesty and Revenue Authority
Mr Speaker, their fiscal irresponsibility does not end there. They have now opted for a second tax amnesty in three years! Frequent tax amnesties are often associated with countries that are in economic turmoil, it is not a reflection of prudent management.
Nevertheless, it is clearly another feeble effort to raise money for the Government. This may be all part of their plan, along with the expected $1.5 billion from Phoenix Park IPO, so that they can go running around boasting about bringing down the budget deficit as a percentage of GDP. Again, who are they fooling?
Mr Speaker, all they are doing is degrading the revenue collection effort of the country. Instead of admitting that the Revenue Authority proposed by the PNM was the correct way to go, they rather engage in unsustainable gimmickry.
We are committing here today that under the next PNM government the establishment of a functioning revenue authority is a high priority in our country’s institutional development.
IPO – STOCK TRADING
This government’s penchant for covering up wrong doing knows no bounds. We had an IPO at FCB and the public responded with the expected enthusiasm. Unfortunately, the process has been mired in major insider trading scandals invoving elements of the management and the board of FCB. During this scandal the Minister of Finance appointed an acting chairman of the board who now has serious questions to answer to the authorities.
What does the Minister of Finance mean when he said: “Despite the concerns expressed by the National community with respect to the inordinate purchase amount by one staff member of First Citizens which is now the subject to an investigation”?
Is the Minister confirming that all the issues surrounding the acting chairman and others connected in the IPO scandal are now completely buried? Did this Minister not give the public the assurance that the entire insider trading scandal was being investigated? Why then is the Minister continuing to try to hoodwink the public that it was only one person, Mr Rahaman, who has questions to answer with respect to FCB IPO insider trading scandal? This Minister came to this job and in the eyes of many, bringing an image of trust and integrity. If this is anything to go by we might as well place our gaze elsewhere.
Challenges to sustainable growth:
The govenrment needed to adjust its expansionary fiscal policy stance to one of consolidation. It needed to take the population on board, informing them of our heavy reliance on the external energy sector which faces exposure to declining energy prices over the medium term in the face of the Shale Gas situation and other clouds which could rain on our parade with disastrous consequences for the quality of life that we have come to know.
Non Energy exports are on the decline in the face of shrinking purchasing power of regional markets, our largest trading partners. They choose instead ad hoc policy measures instead of comprehensive policy prescriptions obtained by reference to any plan of sustainability.
What we are witnessing is a baseline scenario which shows growing overall imbalance and a deteriorating fiscal position with increasing risk of unsustainable debt accumulation.
For as long as we are heavily dependent on the energy sector the economy would be put at risk if, for any reason, revenues from that sector declines. The results of the Ryder Scott report shows a continued decline in reserves.
The recent incentive programme instituted to encourage exploration and production, while necessary, further erodes revenues from the sector the effects of which are immediately felt. The benefits from any successful drilling will only be experienced 5-8yrs from discovery.
There is no stated plan to mitigate the negative effects which exacerbate the risks to the economy.
This Government promised to outline a diversification plan for the economy to support the economic transformation required for sustainable growth. Several ministers paraded but there is no discernible plan.
Whilst legislative reforms in the financial sector are moving apace, the ability to ensure compliance is sorely lacking with the level of inefficiency prevailing in a collapsing and demoralised Public Sector.
The inability of the CSO to provide quality and timely statistics severely hampers the monitoring and surveillance of the economy but more importantly it does not instil confidence in the Government’s ability to effect meaningful policy formulation.
The IMF Article IV report which the Minister has been carefully silent about also points to the pursuit by the Government of expansionary fiscal policy which puts a certain amount of pressure on the Central Bank’s ability to pursue effective Monetary policy in its effort to control the high levels of liquidity in the system.
Whilst private sector credit has begun to grow after years of stagnation, the trend is for use in consumer durables such as motor vehicles and mortgages and not necessarily in investment in productive activity.
The level of transfers and subsidies has become unsustainable with very little attempt to control its growth. Just look at WASA/water resources and see the scandalous award of contracts for huge sums with little to show for it. First it was “Water for all by 2000” now it is 24/7 Water for all by Christmas.
Last year the big item was the government’s attempt to control the gas subsidy by raising the price of premium gasoline. We were told that this vaps would push drivers to the cheaper fuel thereby reducing the subsidy. One year later not a word from the Minister of Finance as to the outcome of this policy. All we have heard about is that Petrotrin is in the invidious position of having to borrow to maintain its operating expenditure. The government has indicated its intention to eliminate existing subsidy arrears by the end of the fiscal year but has not indicated whether this would be done by direct borrowing, suppressing planned expenditure or running larger deficits than programmed. The other option here would be to request larger dividends from profitable state enterprises viz, NGC, NLCB etc., a practice that is consistently being employed, but is not sustainable.
Non-energy revenue has continued to underperform, particularly non-tax revenue and there has been an arrears build up in VAT which the government has indicate it intends to liquidate by the end of the fiscal year. The failure by the Government to implement some form of property tax, even after indicating it would do so in the last Budget continues to be of some concern that this government governs for its own poltical well-being and not for the national interest in the meantime millions of dollars are allowed to flow down the drain. Further there has been no discussion of any new revenue raising measures to offset the increasing expenditure over the medium term.
The commitment to a balanced Budget by 2016 is still being touted but there does not appear to be any planned activity to do so. To put this in context, the present budget outturn is expected to see a deficit of approximately 1.5-2.0 per cent of GDP therefore there would have to be at least a five per cent increase in revenue to accommodate the growing trend in expenditure or a cut in expenditure by a similar amount. The government does not say what are its expectations in this regard.
The underperformance of the Capital Programme is another area of concern since it reduces the level of government investment in infrastructure development which is necessary to provide the platform for economic growth and development.
ENERGY
During the last three responses to the budget presentation made by the Minister of Finance, I made the point that the energy sector, by far the most important economic activity of the country, contributing 42 per cent of our GDP was facing a looming crisis—a crisis that was worsening. So far our precarious position have been masked by consistent high oil prices and good gas prices for errant cargoes.
At that time, I pleaded that the Government direct substantial efforts towards averting that crisis.
The Government’s response has been the Prime Minister’s announcement, about two years ago that “God is a Trini,” whilst displaying a bottle of crude oil from the so called “new find” of light sweet crude from the “Jubilee field” which they said lie in shallow formations and should be in full production by as early as October 2012. This they held up as the answer to our declining oil production which has flattened out at 80,000 barrels per day, down from 100,000 in 2010.
Of course, no “Jubilee oil boom” has been heard of since. We have had several expensive oil spills instead.
We also had the Minister of Energy and Energy Affairs predicting that in five years, presumably based on his extensive experience in the energy sector, substantial oil and gas will be flowing. The current reality is that the long awaited BP Juniper field to the rescue will not come on stream until 2017. Other anticipated new gas from BG will come on sooner but will only be keeping existing supplies stable.
What all of this mean is, contrary to what we have been led to believe, the gas supply would remain a major issue at ALNG and at Pt Lisas for some time to come. In typical UNC style they will tell you that it is PNM who didn’t do this and the PNM who didn’t do that but they will take no responsibility for not concluding crucial discussions about “cushion gas” or other arrangements to protect the load demands of the existing users at ALNG and Pt Lisas.
Many of our downstream plants are regularly operating in fits and starts well below capacity to the detriment of profits and equipment.
What is worse is that many of our major gas supply contracts are coming up for renewal in or around 2018 with the major issue of gas pricing not being addressed by the government. Apparently this government is waiting until we get to the edge of the precipice before we deal with this issue when we have virtually no negotiating room with the upstreamers who are required to keep our industries in Pt Lisas in business.
This environment of gas shortage coupled with pending gas pricing issues being ignored make very negative conversations in investor boardrooms abroad.
We have read recently that the Ryder Scott report has indicated that the gas reserves of the country have dropped by another 17%.
This is the climate in which we must review our competitiveness and our response to challenges associated with hydrocarbons as the mainstay of our economy.
The Government knows about the role of revenue generators in the energy industry and that is why they repeatedly announced numerous intentions to grow the investment in downstream operations but like everything else they talked a lot, praise themselves lavishly but delivered absolutely nothing. No AUM II, no SABIC, no CARISAL, no nothing!
In an environment of gas supply issues and gas pricing challenges they were announcing projects one after the other. Not one has materialized. In this budget they appear to have given up. We are left with one hopeful project, the Mitsubishi plant, and two big questions. Where is the gas? What is the gas price for the project?
Country’s Historical Development
The country needs to compare this situation with the development that took place in the late ‘70s and for the decades 1980 to 2000, when Trinidad and Tobago under the PNM was able to establish itself as a leading international player in the gas intensive industries.
“The Trinidad model”, as it is sometimes called, was greatly admired particularly by gas rich developing countries which witnessed the growth of an international gas industry in a very small country with limited gas reserves of less than 1% of the total world gas reserves. During this period (later 70s and decades 1980-2000), the country moved from a production utilisation of 150 million cubic feet of gas per day in 1978 to a current level of over four billion cubic feet of gas per day.
Also during this period, with the establishment of one iron and steel complex, nine fertiliser plants and seven methanol plants, the country has exported 18.6 million tons of ammonia, 2.4 million tons of urea and 23 million tons of methanol in the last four years alone.
Since 1999, approximately 147 million tons of LNG have been exported and over 100,000 tons of melamine from the AUM1 plant commissioned in 2010.
A remarkable story by all standards of comparison and evaluation, from a country dominated by oil production and refining of oil.
One major ingredient which made all this possible was certainty and confidence in a good investment climate. That situation is changing and the Government is oblivious to the disastrous consequences if things don’t get better soon. T&T’s economy is now driven by natural gas accounting for 44% of GDP.
Erosion of Country’s Success
However, notwithstanding those successes, the country is now witnessing a set of circumstances that have begun to erode Trinidad and Tobago’s position as a leader in the gas intensive industries. The concern which I want to share with you is that the erosion is happening more quickly than anticipated.
As we review the past four years, we are confronted with the following facts:
Gas production has dropped.
The production of methanol, fertilisers and steel has also dropped.
Since the commissioning in 2011 of AUM1, which construction began in 2008/2009, the country has not been able to attract any new major projects that utilise gas.
The AUM2 project, which had been approved and gas contracts finalized, has not been realized and, with the potential investors involved in arbitration with the government, very likely will not be realised in the near future.
The ESSAR sponsored project, which involved an investment in the iron and steel industry of over US$1.5 billion, was cancelled.
There was the dispute over Agreements with the German Consortium and the German Development Bank which led to protracted ongoing arbitration over the past three years the Government was accused of oppression over a minority shareholder and lost the case now we have been forced to sell CLICO methanol shares under the guiding hand of an arbitrator. This matter was concluded yesterday. I’d like the Minister of Finance to tell us what is the valuation the Government had put on the MHTL shares as of budget day. While the Government is salivating over the incoming windfall from the sale, this plus the cancellation of high profile contracts such as the OPVs and the Aluminum Smelter and Alutrint could only have tarnished the country’s image as an investment location.
Committed investors to the creation of an aluminum industry, including the downstream production of high valued products, have been prevented from making these investments as the Government took a political decision, prior to any Court of Appeal decision on the matter, to abandon the project. The aftermath of this has led to:
Two ongoing arbitrations between these investors and the Government where we are facing claims of hundreds of millions of dollars.
A rejection by the Government of US$400 million on concessionary loan terms, towards financing the development of the aluminum industry.
The loss of attracting into Trinidad and Tobago, the largest private industrial conglomerate of Brazil.
A power plant whose major load has disappeared causing a significant payment by T&TEC without having the full benefit of the power plant.
The effective abandonment of the Union Estate at La Brea.
In all of this we lost good jobs and we lost significant earnings.
Shale Gas
To compound these internal difficulties, the country is now faced with the rapid development of shale gas production in the USA which brings a new challenge to our gas industry. The reserves of shale gas in the USA are now in excess of our proven reserves and the projected number for such reserves could exceed 600TCF.
Already T&T has begun to experience the negative effects. Our sale of LNG to the USA now stands at 11% of Atlantic LNG’s production compared to over 90% in earlier years.
It is recognised that Atlantic LNG is seeking and has developed new markets but the competition from the USA will increase as that country could become an exporter of LNG.
Competition is also expected from Nigeria, Qatar, Angola and other new entries in LNG production.
Petrochemicals
As regards petrochemicals (ammonia/urea, methanol) plants of similar production in the USA, attracted by the competitive price of shale gas, are being restarted. For the first time in about 30 years, plants are being approved for construction within the United States.
Of greater significance is the fact that companies, including some with stakes in Trinidad and Tobago, are now actively planning or building new plants in the USA in direct competition with our own plants here.
Gas reserves
Over the past twenty (20) years, prompted to some extent by our success, outside of Trinidad and Tobago there has been an extensive search for gas reserves that has met with a great deal of success.
For example, in addition to Nigeria, there are at least six (6) countries in West Africa and possibly four (4) countries in East Africa that now have estimated gas reserves – possibly, in excess of the remaining gas reserves of Trinidad and Tobago.
Hard Facts
A criticism can be that, as Leader of the Opposition, I am a prophet of doom but let me present you with some hard facts which I am certain the honorable Minister of Energy will confirm.
Over the past four (4) years, the drop in production of
petro chemicals at Point Lisas exceeded 4 million standard tons.
This loss in production, translates to $1.5 billion USD in loss of
revenue to the country.
In more specific terms, the NGC, through its loss of sales of
gas, would have experienced a drop of its revenue of over
$600 million USD.
And, most importantly the corporation tax paid directly to the Government, dropped by almost $300 million USD.
Crisis?
Under these circumstances and the recent Ryder Scott Report that shows a drop in the gas reserves the problem is further compounded. Not only will Trinidad be unable to attract any new gas intensive industries but, we face a danger that some of the existing plants may be in jeopardy.
Is there a crisis? The PNM believes there is.
The PNM has been addressing solutions to the lessening of this crisis and has developed a policy with appropriate strategies that will lead to an improvement in this situation, which is currently taking on disquieting proportions. In the meantime the Government takes its sweet time to develop a gas master plan for decision-making in a changed environment. Policy by vaps and National games and baby milk make great talking points but policy by vaps in Energy “they go kill we”
PNM Energy Policy and Strategy
The PNM Energy Policy and Strategy will involve:
Re-establishing the credibility and the image of our country internationally with special effort focused on such relationships in the USA, UK, Venezuela, Brazil, Germany, China, Saudi Arabia, India and the Caribbean countries.
Engagement with both current and potential producers of our hydrocarbon resources.
Treating with the problems that now face the companies involved in the petrochemical sector.
Identifying the key roles to be assigned to the energy state enterprises, including Petrotrin and NGC, in meeting these challenges and grasping these opportunities. This includes an immediate and comprehensive Tripartite (Government/ Petrotrin/ Labour) audit of Petrotrin from safety to economics. It will also include a review on the role of possible restructuring of NGC/NEC in an anticipation of partnership investment opportunities at home and abroad.
Ensuring that the Ministry of Energy and Energy Affairs is once again staffed with experienced and qualified professionals.
Revisiting the use of the Union Estate and the marine facilities at La Brea.
Preparing development plans for both the South West and South East peninsulas from which our oil and gas are produced. This to include an updated review of the 2007 development plan, which exists for the Southwest peninsula.
Supporting both UWI and UTT, the education and training of personnel to support the energy sector.
Reviewing the legislation that governs the petroleum sector with the objective of encouraging the expansion of that sector of each element of the value chain and encouragement of more local content.
We take credit for the fact that Juniper platform can now be built at LABIDCO. We establish LABIDCO and resuscitated it after political opponents had spitefully shut it down for five years.
TRANSPORTATION
Mr Speaker this country, nationwide has a huge and growing traffic problem. In fact in some areas the situation has reached gridlock. It is true of side roads, arteries and it is true of the main corridors. In the last budget debate I outlined in detailed the PNM’s approach in treating with this issue.
The question still remains, which date in which year can the population expect this problem to be solved? The problem is getting worse with each arrival of the monthly shipment of motor vehicles. The Government’s solution is purchase of 100 flying buses. These will escape the traffic.
Today I reiterate the PNM’s position. In 2015 we would immediately invite the IDB to provide a technical reviews of this issue and report to us on the technical feasibility and economics of a mass transit system. Once the outcome of this review is positive the PNM would build the rapid transit system. We would engage the IDB for long term funding and tie some aspects of the repayment of this concessionary loan to the gradual and sustained reduction in the gas subsidy expenditure.
We view this eventual establishment of this piece of infrastructure as a major economic driver, which, over a five-seven year period can change the face of the economic and social justice landscape of Trinidad and Tobago and become a welcome legacy to bequeath to the next generation.
The contribution of local content like concrete, steel, technical expertise, labour and finance are just some of the positives associated with any construction of this infrastructure. The millions of man hours lost in traffic and the loss of sleep by the super early risers and the opening up of real estate away from the expensive and currently crowded communities are but a few of the overall benefit of this investment initiatives.
The PNM will do it as we have boldly done with the purchase of BP, SHELL and Texaco: when we established ALNG; when we floated the currency; when we built the Eric Williams Medical Sciences Complex and created FCB and the Unit Trust even as others thought differently at the time. We in the PNM continue to have boundless faith in our destiny as a country and as a people.
EDUCATION
GATE
When the PNM introduced the GATE programme it was underpinned by a policy which said that the country would invest in the maximum development of the human capital of the nation in such a way that no genuine desire for young people’s self-advancement and willingness to participate in the nation’s economy should be frustrated because of the individual or families’ inability to pay the cost of the associated tuition. The PNM reaffirms that position today so GATE remains a flagship legacy and a featured forward-looking policy.
However, after years of operation we are now certain that there are some waste, inefficiencies, sharp practice and misdirection associated with the programme. So as we commit to the continuation of the programme as a major part of the top of the education expenditure the PNM would immediately conduct a value audit to significantly tighten the operations to ensure sustainability.
The monies spent must deliver the stated objectives of keeping the door wide open to educational opportunities, particularly for the needy, whilst protecting the tax payer from unnecessary burdens imposed by opportunistic extractions, duplication and inequity.
Commensurate with what we have initiated at the top of the pyramid with respect to GATE and other avenues of expenditure and post-secondary education which we now say must be subjected to quality and efficiency reviews, the PNM now commits to an immediate major shift in focus to the primary school system. It is our view that many of the well-known major shortcomings, which reveal themselves in the Secondary School system, have their origins in the primary school system. It therefore follows that if we are to get maximum returns for the continuous large capital outlays, which are expended in the secondary and post-secondary levels, then the time has come for major targeted intervention at the primary foundation level of the overall structure.
Experience has been teaching us that the existence of school houses and staff on the payroll do not by themselves guarantee teaching, learning or the moulding of the respectable citizen. We also know that in many of our communities the social stresses of the homes and streets flow into the primary school classrooms, often times branding young innocents as failures even before they get their first chance.
This is where the state now needs to direct attention and additional human and financial resources to prepare a new curriculum to encourage teachers and principals and to engage and insert the local communities into the preparation and nurturing of their children. To this end the PNM would formalize and fund operational links between the Social Services arm of the state with the local government arm and the education ministry in community council arrangements.
What we anticipate would arise out of this approach is effective community involvement with specific responsibilities for child-raring accompanied by adequate resources and set targets determined after consultation with the educators and the local beneficiaries whom they are committed to serve.
We will introduce the wider management concepts of school districts and accelerate the placements of school boards to rapidly involve local community personnel with time and expertise to get involved in this plan in which the Government would lead the way in redirecting the people. This will create an era of hope rather than the despair and helplessness which now pervades our society.
It is our view that we need to break the cycle of supply and frustration which feed the criminal component with what some call a “lost generation” who may increasingly see their portion as an embrace by the gang leader, a fast dollar and a beautiful casket in an early grave. We as a people can and must do better than that. We must intervene now with a sense of purpose and that sense of urgency in this “Operation Lifeboat” aimed at the primary schools for onward transmission to the rest of the Education System.
SPORT
Mr Speaker permit me a comment on budgeting and sport, a subject very close to the heart of the Minister of Finance. So much has been said before, all bad, that the Minister was unsurprisingly silent on his role on this subject. In 2007/2008 at a cost of approximately $10 million per year the PNM initiated and maintained a programme of support for our promising elite athletes in preparation for the 2008 Olympics and beyond. The results of this programme were that we soon saw an upsurge in our national participation at the Olympics and other international events. Instead of building on this and the sister pathway programme the government chose to “shut down”, starve and fight with sporting personalities and bodies.
The government also shifted focus and in its search for the elusive crime plan, decided to use sport as a crime-fighting tool. Nothing was inherently wrong with such an idea but whatever was put in place this UNC initiative soon became a crime in itself—organised crime. The real scandal was that the Minister of Finance through the Sport Company and the Ministry of Sport secretly funded LifeSport to the tune of approximately $400 million worth of borrowed money for organised crime which is currently engaging a large contingent of the police service in one way or the other.
Then he comes to the Parliament to report on budgeting and spending and says not a word about this major budgetary disaster for which he as paymaster is personally responsible. What is particularly painful about this is that even as all this was going on the real sporting fraternity has been severely hampered by the insensitivity and neglect with respect to their aspirations, allocations and disbursements.
I want to give the sporting bodies, our athletes, patrons and fans the assurance that from 2015, after the next general elections, sanity and decency will return to address our sporting potential and their appropriate well thought out initiatives will be funded for maximum development of our young people at all levels with particular emphasis on junior development and international standard competitions. Programmes by vaps such as the hastily announced National Games for Elections will not be advanced but instead better planning and execution to ensure success will be the yardstick by which all will be measured.
LOCAL GOVERNMENT
There are three arms of the State: the judiciary, the executive and legislature. Members of Parliament are elected to the legislature to represent their constituents, make laws and to oversee the executive. If MPs find themselves in the executive then they have a separate additional function and they are answerable to Parliament. When you provide money to be spent directly or on the say-so of MPs then the lines become blurred and accountability becomes the first casualty. An additional layer of supervision is now required or these funds can be spent in a poorly supervised manner thereby opening the way for unacceptable and corrupt practices of all kind. This is not only my analysis but the findings of reviews in India and other places where they have had cause to experiment with this variant. Do we need this in the face of our existing structure of local government?
The PNM Policy on Local Government Reform to come into force within the first year of a new administration begins with the absorption of local government initially into the Ministry of Finance. That is, the abolition of the Ministry of Local Government as the first part of a wider reform process beginning with the reduction of the size of the Cabinet. The staff at the Ministry of Local Government will be assigned to a division in the Ministry of Finance which would provide and supervise the allocation of financial and training resources to the 14 corporations, boroughs and cities in Trinidad. Some of the technical staff and professionals currently in Local Government could be used to beef-up the management capacity of local government units as these bodies assume a greater role in the governance structure of the country. The Ministry of Finance will also be required to operate a General Accounting Office (GAO) to actively monitor implementation and audit compliance through local authorities for funds provided.
The executive bodies of Local Government will receive greater autonomy coupled with increased responsibilities which they must now discharge in a new paradigm shift of governance in Trinidad.
SOCIAL / COMMUNITY REFORM
The goal is for T&T to become a responsible, self-reliant, and caring society.
We have always known that the PP has no conception of government or governance, no sense of our past as a society, nor any capacity whatsoever to articulate and/or anticipate where it wants to take our society. The PNM is the only party in the living memory of our country that has offered a coherent sense of where it wishes to take our population, articulated in a major document called “Vision 2020.” It is something we will return to in the not-too-distant future. However, we confidently expect that a revised and reinvigorated Vision 2030 will put us back along the path of prosperity and progress beginning in the year 2015.
As we review our situation as a nation, we are confident that there are two things which no honest, objective person can dispute: First, no other party has ever laid out a comprehensive roadmap as to where it wants to take our society within a well-defined period. Second, and I have said it publicly, no one in this country can honestly say that everything he or she has achieved, has been achieved without the assistance of the programs the PNM has implemented over its fifty-nine years of its existence and the forty-five years that we have governed this society.
But PNM is not about yesterday’s news. PNM is about today’s reality and tomorrow’s dreams. You ask, Where do we wish to take the society? In the first instance we can say that the PNM is not committed to a “gimme-gimme” society and is not any “gimmick-to-win-an-election” party. The free for all that was manifested in the Budget speech that was presented on Monday demonstrates this inherent capacity of our colleagues on the other side to be only concerned with the next election.
The PNM is about the maintenance of a responsible, self-reliant, and caring society where every person can realize his or her destiny. There is a talking point that the PP will create a baby fund” with $500 to help expectant mothers in need. At first blush this vaps seems to be a generous gesture, but as we examine it more closely we discover the deeply retrograde and irresponsible social engineering that such a program generates. The Prime Minister says: “We are looking at October 1, once the budget process goes through. We will have to create the criteria. It is not for every single family, it is for those most in need. Within the Ministry of the People we will create the criteria” (Sunday Express, September 7, 2014).
This is the level of irresponsibility we hear from the other side. Within four sentences, two vaps, with different variations, repeat themselves: we will create a fund; we will establish the criteria. Such a statement suggests that in making this announcement—the PP did not think through the implications of its ideas. It is merely something they expect to do without having any sense of how such a proposal can affect the people it purports to serve. Such considerations are not important to the PP. It’s just give away, spend, thief and the devil take the hindmost.
We, in the PNM, suggest the devil is always in the details. It is the small aspects in these projects and schemes, often overlooked, which cause enormous problems in the future. What at first appears to be the epitome of caring and benevolence—a Baby Fund—turns out to be “false generosity,” a way of acting and thinking that makes the poor poorer and the dispossessed the object of helplessness and dehumanization. Such false generosity simply leaves these unfortunate peoplein a perpetual state of groveling, crying out, as Oliver Twist did, “Please sir, can I have some more.”
By being self-reliant, we encourage people to have confidence in their own abilities, self-assurance in exercising their own power, and the courage to accept the consequences of their actions.
Today, however, I want to argu