One of the more enjoyable aspects of my job is the chance to share experiences with friends and colleagues in Chambers of Commerce and trade associations in the countries we visit regularly on trade missions.
Last month, I had the pleasure of spending some time with leaders of the Suriname Chamber and other business leaders in the country. I’ve been visiting Suriname regularly since the late 1990s, and the Energy Chamber has taken numerous trade missions there over the past decade, so we have some very good and long-standing relationships in the country.
Suriname had a general election in May 2015, and the party of the incumbent President Dési Bouterse has been returned with an increased share of the vote that means he no longer needs to govern with the help of coalition partners. Most of the business leaders I spoke with saw this as a significant change for Suriname, where coalitions have been the norm for some time.
While the Surinamese economy has performed very well in recent years, there is also a common view that some hard decisions needed to be made if this economic transformation is going to be sustained. One of the major issues at the top of people’s minds, especially for leaders in the energy sector, is electricity prices.
Suriname and Trinidad and Tobago both have very low electricity prices, especially compared to the rest of the Caribbean. In the case of Trinidad and Tobago, the low electricity prices have been possible because of low-cost natural gas purchased from the upstream producers via the National Gas Company.
Trinidad and Tobago is one of the few countries in the world where 100 percent of electricity generation is from natural gas.
In the case of Suriname, cheap electricity has traditionally been supplied by the hydroelectric dam at Afobaka. This hydroelectric generation was originally installed primarily to supply the Suralco alumina refinery and aluminium smelter, with the excess supply coming at low costs to what was originally a small electric grid primarily in the capital city of Paramaribo.
However, the growth in demand for electricity in the country, coupled with strong economic growth, means that the installation of additional generation capacity has been necessary.
In the absence of other fuel sources, the additional capacity has come from fuel oil-fired thermal power generators, one of the more expensive ways to generate electricity. The average cost of generating electricity has therefore increased significantly, but the cost to the consumer has remained very low, with the state subsidising the difference.
Much of the conversation amongst the business leaders in Suriname was that this situation is unsustainable and that the state cannot go on subsidising these costs. Prices to the consumer will therefore have to increase, one of the tough decisions that the newly installed government is going to have to consider very seriously.
In Trinidad and Tobago, whoever takes over the reins of government in September 2015 will also have some tough decisions to make, one of which pertains to our subsidies, especially for transportation fuels.
There is a near-consensus amongst economists and other informed commentators that Trinidad and Tobago has to seriously begin a programme to eliminate our transport fuel subsidy, especially the subsidy on diesel. But this is a hard sell to the general public, and no political party is going to want to tackle this issue in the run-up to the general election.
With a national budget due right on the heels of the election, it will be interesting to see if the government will be willing to make the necessary but unpopular decision on transport fuels.
It will also be interesting to see if they begin to look at our electricity prices. With continued gas shortages hampering our LNG and petrochemical industries, there are serious questions about the current policy of allocating precious molecules of natural gas to cheap electricity generation.
This issue has hardly been discussed in the country so far, but I wonder how much longer we can continue to turn a blind eye to such a major economic issue.
In Trinidad and Tobago, there are serious issues regarding subsidies and cheap electricity or transport fuels that must be addressed in the immediate post-election period.