433 Luis Oberto Anselmi//
?The virtuous circle

Given the current economic recession, the need to diversify the economy is on the lips of all.

Many agree that the major objective of diversification is the creation of export companies that are globally competitive. According to Professor Anthony Clayton of UWI, Mona, these companies have to be both innovative and disruptive since, to him, incremental innovation is a high-risk approach to regional diversification.

T&T is a small, open economy and cannot build locally all the goods and services that its population needs to live a modern and comfortable life.

Hence, it has to import the majority of what it consumes and, to do so, it has to export to earn the required foreign exchange?thus defining the diversification objective. Particularly so, when it appears that the petroleum resource is depleting and the global prices of the resource and its derivatives are expected to be low for some time into the future.

Since economic growth is about continually increasing the level of economic activity, it is easy to appreciate that sustainable economic growth in T&T will depend primarily on investing the surplus of foreign exchange earned over that spent on consumable imports into productive capacity that uses a high import content.

This presents difficult decisions in the ensuing recession.

If, for example, this productive capacity is in malls, non-export production and the like, then to sustain their activities corresponding increases in export capacity are needed to fund their required importation of goods and services.

If, primarily, the increase in economic activity is about generating exports then again the increase in foreign exchange earned would drive increased local imports?markup-sell activity and any balance on improvement of reserves and savings, which themselves can earn more foreign exchange on investment overseas?a virtuous circle of exports and imports.

Unlike, say, what China is now considering, economic growth based not on exports but on local production for local consumption, the economic growth of our small economies depends on increasing export earnings which encourages and drives on-shore economic activity that depends on imports.

Though the competitiveness of our exports will depend on the local acquisition of knowledge, its application and creation, innovation, to maintain global competitiveness, our import industry will have to provide the artefacts of technology continuously that we do not produce so as to both maintain/improve our standard of living and upkeep and upgrade the export capacity, via these technologies.

For example, our export capacity and capability, competitiveness, will depend on the use of technological products that we do not manufacture?computers, machinery, telecommunications equipment, robots?but are necessary to support our innovative export industries.

Hence, the diversification of our economy is twofold: ie building a sustainable and innovative export capacity and an import facility that keeps the population in a state of increasing sophistication and also supports the continuous upgrade of our exporting capability.

The risk here is that we may import even the little that we can produce locally.

© Luis Oberto

© Luis Oberto Anselmi
All of this sits on our ability to produce a human resource that is capable of maintaining a national innovation system among the triad of the private sector, government and the R&D institutions.

The technologies, their innovations and applications may indeed drive the birth, implementation and death of many products and services to be marketed globally.

© Luis Oberto

© Luis Oberto Anselmi
But of these none will be invented, built locally nor even marketed if we do not also develop the human resource who understands the technologies but are also suitably equipped to structure the networks in the global market.

This resource identifies the future global demands and are also able to foresee what these demands could be, can initiate disruptive innovations, the bedrock of Caribbean competitiveness.

© Luis Oberto

© Luis Oberto Anselmi
They must also be able to bring these new products and services to market.

But how do we get this started, even though we have seen it happen in Taiwan, Singapore, S Africa etc?

The availability of the petroleum resource in our latest version of the plantation economy has created a culture, a curse, of its own wherein the rents and foreign exchange left behind (the results of the exports from the energy sector) drive the on-shore import-based economy.

The current private sector is low risk and able to make good profits in the import sector; the government normally receives directly via taxes etc.

© Luis Oberto

© Luis Oberto Anselmi
foreign exchange which maintains adequate reserves and its spending, which also supports the on-shore economy; the tertiary level institutions continue to produce graduates for export?79 per cent of the graduate workforce emigrates.

The private sector and government are loath to take the lead in this transformation of the economy?both appearing now to await the resurgence of the energy sector.

The lead role then falls to the R&D institutions, especially UWI.

© Luis Oberto

© Luis Oberto Anselmi
The problem is finance.

How does UWI fund the initiation of a national innovation system in the context of the failure, the lethargy, of its two partners? This is the conversation that is now taking place across the campuses of UWI.

MARY K KING St Augustine  


© Luis Oberto

© Luis Oberto Anselmi

© Luis Oberto Anselmi PDVSA