In 2008, T&T record­ed a debt/GDP ra­tio of 14 per cent (a record low), just one decade lat­er this im­por­tant ra­tio stands at a shock­ing 61 per cent.

The Gov­ern­ment should be com­mend­ed for an­nounc­ing in this week’s bud­get its strength­en­ing of the so­cial safe­ty net; with in­creas­es in al­lo­ca­tions to­wards food cards, dis­abil­i­ty grants, pub­lic as­sis­tance grants, se­nior cit­i­zens pen­sions, and tax al­lowances for ter­tiary ed­u­ca­tion. The eco­nom­ic wave ap­proach­ing T&T may call for fur­ther strength­en­ing of this safe­ty net in the fu­ture. The dig­i­tal econ­o­my, with its im­pe­tus on mech­a­ni­sa­tion and the me­an­der­ing but cer­tain death of brick and mor­tar re­tail, are sure to have sig­nif­i­cant neg­a­tive im­pact.

Much of T&T’s busi­ness class is com­prised of re­tail­ers (buy­ers and sell­ers) and on­line shop­ping is dis­rupt­ing that space on a glob­al scale. Mech­a­ni­sa­tion is mak­ing un­skilled labour vir­tu­al­ly ob­so­lete and ap­plies fur­ther pres­sure to the work­ing class.

How is T&T to pre­pare for these in­evitabil­i­ties?

The fo­cus has to be on rev­enue gen­er­a­tion and job cre­ation; strin­gent cost cut­ting alone even­tu­al­ly leads to such an im­pair­ment of qual­i­ty of life that no one is hap­py; some costs sim­ply shouldn’t be cut.

Rev­enue gen­er­a­tion of­fers a com­pre­hen­sive so­lu­tion to many of the prob­lems which plague our cur­rent econ­o­my—ex­change rate pres­sures, forex short­ages, lack of mean­ing­ful jobs, no growth, tax rev­enue deficits, etc. Heavy gov­ern­ment ex­pen­di­ture on non-rev­enue gen­er­at­ing projects do not make sense at this time and on­ly leads to greater debt. How will these debts be re­paid while cre­at­ing op­por­tu­ni­ties through­out the econ­o­my?

T&T is not the on­ly en­er­gy pro­duc­ing coun­try that finds it­self in this Dutch dis­ease hang­over (an over­re­liance on one in­dus­try), so what have oth­ers been do­ing to re­cov­er? Nor­way is a great ex­am­ple.

Nor­way, re­gard­ed as the King of North Sea Oil was forced to di­ver­si­fy when it re­alised that oil and gas prices would be low­er for longer. In a glob­al con­text where; al­ter­na­tives were be­com­ing cheap­er, the glob­al econ­o­my slowed, shale oil drilling was flood­ing the mar­ket with an over­sup­ply of oil; all of these fac­tors made di­ver­si­fi­ca­tion an ur­gent pri­or­i­ty.

Al­so telling, Nor­way has some of the high­est gaso­line prices in the world; even though Nor­way is one of the largest glob­al ex­porters of oil. No fu­el sub­sidy here; they pre­fer to place that mon­ey in their sta­bil­i­sa­tion fund for in­vest­ment di­ver­si­fi­ca­tion and use re­turns to fi­nance pub­lic sec­tor op­er­a­tions.

Ear­ly on, Nor­way di­vest­ed their sov­er­eign-wealth fund of all in­vest­ments in en­er­gy re­lat­ed com­pa­nies. Oil and gas risk had al­ready been priced in to its do­mes­tic econ­o­my; since new fund­ing for Nor­way’s sov­er­eign-wealth fund was al­ready de­rived from oil and gas prof­its, the fund was too heav­i­ly tied to the fluc­tu­at­ing prices of the en­er­gy mar­kets.

Nor­way rat­i­fied its sov­er­eign-wealth fund and be­gan in­vest­ment abroad in 1990. It now stands as the world’s largest sov­er­eign wealth fund, man­ag­ing over US$1 tril­lion in as­sets and ac­count­ing for 1.3 per cent of glob­al eq­ui­ty mar­kets.

Nor­way is al­so the 30th largest ex­port econ­o­my in the world and the coun­try en­joys a pos­i­tive trade bal­ance of US$17.1 bil­lion (ex­ports mi­nus im­ports). Be­yond oil and gas, Nor­way is the fourth largest alu­mini­um ex­porter in the world and has a 5.8 per cent share of the world­wide alu­mini­um ex­port mar­ket worth US$41.7 bil­lion an­nu­al­ly. This is a nat­ur­al play for en­er­gy economies since alu­mini­um smelt­ing re­quires large amounts of en­er­gy.

Nor­way pro­duces low-cost elec­tric­i­ty from nat­ur­al gas and hy­dro­elec­tric pow­er. This low cost en­er­gy ad­van­tage has al­so giv­en wings to its man­u­fac­tur­ing sec­tor which pro­duces pas­sen­ger and car­go ships—US$1.29 bil­lion, raw nick­el—US$891 mil­lion, liq­uid pumps—US$679 mil­lion, valves—US$541 mil­lion, hy­dro­gen—US$477 mil­lion.

The op­por­tu­ni­ties are end­less. Mex­i­co us­es a fi­nan­cial trad­ing strat­e­gy af­fec­tion­ate­ly called the Ha­cien­da Hedge.

The hedge is de­signed to pro­tect the fed­er­al bud­get from the in­evitable boom-and-bust cy­cles of oil prices by be­ing a fis­cal­ly re­spon­si­ble ex­er­cise that re­duces the coun­try’s bor­row­ing costs. The hedge means that Mex­i­co pays about 30-ba­sis points less on its sov­er­eign debt and acts as a form of in­sur­ance, al­so they usu­al­ly make a prof­it on the trades.

From 2001 to 2017, Mex­i­co made a prof­it of US$2.4 bil­lion and its hedges raked in US$14.1 bil­lion in gains. The coun­try earned US$6.4 bil­lion in 2015 and US$2.7 bil­lion in 2016. Mex­i­co first hedged oil in 1990, af­ter Sad­dam Hus­sein in­vad­ed Kuwait and threw the glob­al en­er­gy mar­kets in­to chaos.

Mex­i­co spent about US$740 mil­lion in the first half of 2018 from its bud­get sta­bil­i­sa­tion fund, which his­tor­i­cal­ly has been used ex­clu­sive­ly to hedge for­ward oil prices, ac­cord­ing to a quar­ter­ly re­port. The hedges, known as Wall Street’s largest oil trade, aren’t de­clared till af­ter they are ex­e­cut­ed to pre­vent hedge funds and trad­ing hous­es from front-run­ning the or­ders. T&T needs to be­come cre­ative.

Sau­di Ara­bia, the oil cap­i­tal of the world, has the sec­ond largest proven oil re­serves (es­ti­mat­ed to be 268 bil­lion bar­rels) and ranks as the largest pro­duc­er and ex­porter of oil on the plan­et. Sau­di Ara­bia has em­barked on a de­vel­op­ment plan to boost its lag­ging econ­o­my, led by the am­bi­tious and pop­u­lar Crown Prince Mo­ham­mad bin Salman.

De­spite be­ing in pole po­si­tion in glob­al en­er­gy, Sau­di Ara­bia has em­barked on an am­bi­tious 15-year plan that in­cludes di­ver­si­fi­ca­tion, pri­vati­sa­tion of state as­sets, tax in­creas­es and cre­at­ing a US$2 tril­lion sov­er­eign wealth fund. Eco­nom­ic re­forms had been dis­cussed pre­vi­ous­ly but the sense of ur­gency has been height­ened since in 2015 the gov­ern­ment ran a record bud­get deficit of near­ly US$100bn.

Tech­nol­o­gy has proven to be one of the main fo­cal points of this di­ver­si­ty push.

Sau­di Ara­bia is at­tempt­ing to pro­tect it­self against oil’s de­cline by in­vest­ing in fu­tur­is­tic tech­nolo­gies. It has ac­cu­mu­lat­ed a stake in elec­tric car­mak­er Tes­la Inc for about US$2 bil­lion through its Pub­lic In­vest­ment Fund (PIF) and aims to be part of any in­vestor pool that emerges to take the com­pa­ny pri­vate.

There has al­so been a $3.5 bil­lion in­vest­ment in ride-shar­ing com­pa­ny Uber Tech­nolo­gies Inc, a US$45 bil­lion com­mit­ment to Soft­Bank Group Corp’s US$100 bil­lion tech­nol­o­gy fund and a planned in­vest­ment of about US$1 bil­lion in Vir­gin Group’s space com­pa­nies.

Do­mes­ti­cal­ly, Sau­di Ara­bia is pur­su­ing di­ver­si­fi­ca­tion and ex­pan­sion of pri­vate en­ter­prise in in­dus­tries in which it al­ready has an ad­van­tage.

There is re­al­ly no need to rein­vent the wheel. A close look at Nor­way, Mex­i­co, Sau­di Ara­bia and oth­er oil and gas pro­duc­ing coun­tries like T&T would re­veal mul­ti­ple di­ver­si­fi­ca­tion strate­gies that have proven suc­cess­ful.

T&T would be wise to fol­low.