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Tobago’s Economy: Investing in Diversification

For some years now, Tobago has been trying to reduce its dependence on tourism. The diversification model seeks to maintain the island’s pristine beauty and stay true to its slogan—“clean, green, safe and serene”—while finding new sources of employment and revenue.

Tobago looks to new economic horizons

Tobago’s economy is service-driven and dominated by leisure tourism and associated activity. The island has won several World Travel Awards for its tourism product, including Top Eco-destination (2003-6) and Best Caribbean Destination (2004).

In his budget statement for 2009, the THA’s Secretary of Finance and Enterprise Development, Dr Anselm London, was upbeat about Tobago’s progress. The island’s economy had grown by around 5.5 per cent in 2007, he said. It was “experiencing quite an economic boom” with “incomes rising substantially”. Spending on cars had risen by 67 per cent between 2003 and 2005, and there was “growth and expansion in domestic savings and investments”. However, headline inflation had risen from less than 5 per cent in February 2007 to 9.5 per cent a year later. Food price inflation had risen much faster, to 10 per cent year-on-year in June 2007 and almost 25 per cent in February 2008, though some of this was imported.

[Of course, the post-2008 economic slowdown certainly affected Tobago’s promising growth, though the economy is expected to rebound.]

Diversification

For some years now, Tobago has been trying to reduce its dependence on tourism. The diversification model seeks to maintain the island’s pristine beauty and stay true to its slogan—“clean, green, safe and serene”—while finding new sources of employment and revenue. The most visible result so far is the island’s first industrial estate, the Cove Eco-Business and Industrial Park in the southwest of the island, where investors are being invited to set up plants ranging from furniture making to agro-processing.

Tobago investors receive the same investment incentives as their Trinidad counterparts. Tax holidays, exemptions from import taxes and import duty, and exemptions from corporation taxes, taxes on dividends and value added taxes are some of the perks that make local investment attractive.

Land Ownership

Land ownership in Tobago, however, has been a challenge. The Foreign Investment Act of 1990 specified that “a foreign investor may acquire land […] which does not exceed one acre for residential purposes and five acres for the purpose of trade or business without obtaining a licence”. The most noticeable effect of this piece of legislation was that foreign speculators bought up attractive sites and pushed prices to the point where, according to the THA’s Chief Secretary, Orville London, “Tobagonians could not buy land, and the same piece of land was being sold several times without being developed.” Seeing no benefits, incentives or opportunities for Tobagonians in this scenario, the THA moved to change the regulations.

As a result, foreigners who want to buy land in Tobago must now apply for a licence from the finance ministry in Port of Spain (this does not apply to the Cove estate). Applications are reviewed by a THA-appointed committee which makes recommendations to the ministry.

Since this measure was implemented in February 2007, no licences have been issued. According to the chief secretary, the resulting problems are “being addressed”. Update [November 2010]: While a backlog of foreign investors remains waiting for licences to be issues, and many foreign buyers reportedly have abandoned the idea, the first licences to foreign real estate investors was issues earlier this year.

Infrastructure Development

Tobago’s infrastructure is better than most of its Caribbean neighbours, the THA’s former Tourism and Transportation Secretary, Neil Wilson, has boasted. There are three landline, mobile and broadband service providers, one of which, the Telecommunications Company of Trinidad and Tobago (TSTT), is 51 per cent owned by the government. The other two are privately owned. The Trinidad and Tobago Electricity Commission (T&TEC) provides Tobago with electricity via a marine cable, though the island will soon generate power of its own from a plant at the Cove estate.

Tobago has a fairly good road system, allowing easy access to most of the island. The most developed areas are Crown Point and Mount Irvine in the southwest, where the airport and most of the tourism facilities are located. The main highway, the Claude Noel Highway, runs from Crown Point and the airport to Bacolet just beyond Scarborough, the capital, then branches off into the Windward Road which winds up the Atlantic coast to Charlotteville, the northeastern tip of the island. The Northside Road from Scarborough leads to the Caribbean coast and links up with the Windward Road in Charlotteville.

Major infrastructural development works include:

  • The Scarborough Redevelopment Project: still in the conceptual stage, though peripheral work is being done, such as refurbishment of parts of the port and of Fort King George, the historic military site high above the capital
  • Extension of the Charlotteville jetty, to upgrade facilities there: currently on hold pending clearance from the Environmental Management Authority (EMA)
  • The Shaw Park Cultural Complex outside Scarborough: the foundation was complete in early 2009
  • The Scarborough Library: [original completion date of 2009]

Investment Opportunities

The Cove Eco-Industrial and Business Park, taking shape not far from ANR Robinson (formerly Crown Point) International Airport, is actively seeking local and foreign investors to help Tobago diversify away from its traditional tourism base. A THA project, it is offering investment opportunities in “knowledge-based industries, light manufacturing activities, information technology and related industries, selected intermediate goods processing, agro-processing and food industries, paper and plastic packaging, furniture making and soft furnishing”. Anyone who is interested in “meaningful partnership with the THA” is welcome, chief secretary London told the Trinidad and Tobago Business Guide. About 200 spaces are being reserved for Tobagonians.

How does Tobago compare with other Caribbean investment sites? London refers to “the island’s geographical location on the Atlantic seaboard, its stable political climate, a literate population that is easily trainable and, most importantly, the availability of affordable energy” as major incentives for the right investor. Cove presents “an excellent location for investors because of its proximity to the T&TEC power plant and natural gas pipeline”. T&TEC’s power station at Cove, when completed, will be able to generate 64 MW of dual-fuel, and even export energy to Trinidad. A natural gas pipeline from Trinidad is expected to terminate at Cove.

Petro-Canada

In July 2005, Petro-Canada began a four-well exploration programme in Block 22, north of Tobago. In January 2008, the company announced a natural gas discovery of “between 0.6 and 1.3 trillion cubic feet” off the north coast of Tobago. Petro-Canada is partnering with Petrotrin, the state-owned oil and gas company; although revenue from the energy companies goes to the central government, there is likely to be some benefit for Tobago.

While it develops this find, Petro-Canda has been training the island’s fishermen and providing them with such equipment as radar reflectors, global positioning systems, life jackets, belts and first aid kits. It has also been working with the THA to minimise the impact of gas exploration activities on fishing grounds. Twelve “fish aggregation” devices have been deployed around the island to attract fish and increase catches.

Tourism

The former tourism and transportation secretary Neil Wilson is optimistic about Tobago’s attractions for potential investors. He points to the island’s human resource base, Tobagonians’ friendliness, and their ability to interact positively with visitors.

But Wilson wants to diversify the island’s traditional tourism product. Health tourism is yet to be explored, he says, and the right kind of investor could find interesting opportunities in (for example) transport, pleasure craft, nightlife, restaurants or hotel rooms.

Room stock is particularly important because of its role in maintaining and improving airlift. British Airways operates two weekly flights from the UK to Tobago during the summer, and three in the winter; Condor and Delta operate a weekly flight each from Germany and the US. Virgin Atlantic will only increase its flights to Tobago when high-end rooms are available. According to Wilson, Tobago needs 300-400 high-end rooms to sustain and improve airlift by international carriers. But room stock has actually decreased, with the temporary closure of the Vanguard Hotel, formerly the Hilton Hotel Gulf and Spa. Only one new hotel has opened, the Bacolet Beach Club, with 20 luxurious high-end rooms.

In this year of financial stress, Wilson expects a shortfall in international arrivals, but anticipates that this will be offset by domestic tourism from Trinidad.

Crime

Until quite recently, Tobago was the sort of place where you could leave your doors and windows open and your car unlocked. Its peaceful, old-time ways were a large part of its attraction. But crime has become a factor in the lives of Tobagonians and some visitors, as it has everywhere on the planet. The island now has its own police senior superintendent with beefed-up resources and support from everyone with a stake in eliminating crime, especially the THA, security services and hoteliers. Joint coast guard and police patrols have been introduced at sea, and joint army and police patrols on land.

Conclusion

Tourism will remain the key industry in Tobago for some time yet, and the global financial crisis will certainly have an impact on that industry. There is urgent need for investment to expand the island’s room stock. But projects such as Cove show that Tobago is also beginning to look further afield for its future welfare. That surely points to fertile ground.

– Camille McEachnie

Excerpted with permission from the Trinidad & Tobago Business Guide 2009-10
(C) Media & Editorial Projects Ltd. (MEP)

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A team of of writers discovering Trinidad & Tobago for 25 years and counting!

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