By
Deryck Omar
The
T&T economy sits on a fault line of finite energy
resources. Take away our energy reserves and approximately
80 per cent of our exports, 40 per cent of our GDP
and 50 per cent of our fiscal revenues are gone—comforting
isn’t it?
Yet,
even before the oil and gas is depleted, there are
still the powerful threats from trade liberalisation,
global warfare and fluctuating commodity prices to
contend with.
When
fortune swings the other way, as history shows it
inevitably will, there will be little to cushion the
fall if we do not seek to broaden our national revenue
mix by investing in our all important manufacturing
base and strategic service sectors, eg finance.
Unfortunately,
T&T’s over-reliance on energy resources
has not only affected the country’s growth performance
but also the capacity for building sound policy foundations
for growth.
Economic,
political and social policies have favoured spending
over investment. Energy sector growth is twice that
of the non-energy sector and there does not appear
to be anything significant in train to reverse that
ratio.
Foreign
direct investment in the last 25 years has been overwhelmingly
directed at the energy sector. Yet, in each passing
year, this investment gets more and more expensive
and less likely to bear competitive returns.
Competitive
advantage
We
have recently achieved international advantage by
leveraging our cheap and readily accessible gas reserves
to produce commodity products in the main.
But
prosperity is ultimately temporary because physical
assets are inherently limited and substitutable by
a competitor.
In
the energy sector, our initiatives still only attract
multinationals in the primary and intermediary processing
stage who extract raw resource (either oil or gas),
refine or liquefy respectively and then export.
With
no value added beyond that, we totally ignore the
more sophisticated and premium paying side of the
market.
The
bad news for us is our manufacturing sector also has
severe chinks in its armour. Exports are consumed
primarily by Caricom, whose members are poorer than
us and arguably attracted by low prices, not high
quality and innovative products.
Sustainable
wealth will really only be generated by our ability
to foresee the needs of the wealthier extra-regional
markets and leverage our comparative advantages to
deliver high value added differentiated products and
services at premium prices. To do this we must build
a knowledge economy, the four pillars of which described
by Professor Carl Dahlman are education and training,
modern information infrastructure, effective innovation
systems and a conductive economic, institutional regime.
All
of these take time, money, effort, research and development,
partnerships and patience.
Cluster
development
One
stepping stone to building a “knowledge-conductive”
regime for us could be found in the developmental
economic instrument called clustering.
Clustering
can be loosely defined as the art and science of geographically
concentrating firms that produce and sell related
and complementary products in order to increase their
likelihood of networking for collective action, learning,
innovation, productivity, commercial enterprise and
competitive advantage. Clusters have proven to be
highly successful worldwide.
But
research strongly suggests that clusters do not manifest
by themselves and thus private and/or public sector
external catalyst agents are often required.
In
mobilising a cluster initiative in T&T, one of
the first steps would therefore be to form a Cluster
Network Brokering Unit (CNBU).
This
organ of development will necessarily have to be “staffed”
with experienced multinational facilitating-agency
professionals, research-oriented local consultants,
appropriate public sector representatives and relevant
business supporting institutions (public and/or private
sector).
After
securing the necessary research grant, cluster profiles
need to be built so that potentials can be identified
and a pilot selected.
Cluster
profiling entails identifying emerging cluster groups
and for each, the CNBU needs to develop cluster maps;
describe the associated industry, product structures,
government incentives and trends; qualify and quantify
the strengths, weaknesses, opportunities and threats
of the cluster; compile statistics on the contribution
to economic and social development; recognise leader
firms and scan them; and understand if the forces
for change/economic upgrading is present.
Part
of this cluster audit will necessarily entail matching
business support services available against the cluster’s
needs.
Having
selected the maiden cluster, or more precisely, embracing
the cluster that is the natural winner due to its
competitive readiness, the CNBU promotes its insights
and foresights within the cluster community and enlists
key stakeholders to become members.
The
CNBU then enters the planning stage in which the cluster
opportunities, constraints, vision, objectives, network
and development projects, priorities and timeframes,
resources, execution agenda and monitoring mechanisms
are ironed out.
Of
necessity, this must be a transparent, highly inclusive
and iterative process.
At
this juncture, it is also worthy to formulate and
make known the exit strategy of the CNBU, as the ultimate
objective is to really teach groups within the cluster
the mechanics of identifying and co-operating on joint
development projects, rather than continuously do
it for them.
In
the first stage of mobilising the cluster into action,
a high profile commercially beneficial project that
has the opportunity for a quick win is selected and
executed in a measurable manner, while marketing the
success and the value chains built.
Next,
the focus changes to initiating and implementing more
medium-term strategic projects that facilitate the
specialisation and complementarity of firms at the
logistics, production and marketing levels.
The
final stage of developing the cluster would, of course,
be ensuring that appropriate structures are put in
place for system integration to continue in a facilitated
manner when the CNBU exits.
Attention
must therefore be given to the documentation of best
practices and lessons learnt and assisting government
agencies and business support institutions to enact
the appropriate policies and implement the required
levels of services.
Additionally,
the CNBU must facilitate the cluster with the development
of a self-financing cluster specific networking agency
to continue its work.
The
clustering success of Costa Rica’s technology
initiative, Ireland’s pharmaceutical industry
and Australia’s wine trade is not unachievable
in this country.
We
can diversify.
