An aerial plan of the new Port of Spain waterfront
Photographer: Courtesy T&T Business Guide
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Trinidad Business & Economy
Trinidad: the Regional Business Centre
Trinidad is the business capital of the region, owing to its natural hydrocarbon reserves. With those reserves quickly being consumed, this “Caribbean Tiger” has moved to diversify its economy.
Diversification is the theme of the new government of Trinidad and Tobago, elected in May 2010, as it looks to keep the country afloat in challenging economic times. The former PNM administration (voted out in the May 2010 elections and replaced by the People's Parnership) had planned to make Port of Spain an International Financial Centre (IFC). The current administration temporarily shelves those plans, opting instead to make it an International Business Centre, but in 2011 reverted to the idea of an IFC – emphasising investment and the growth of financial services.
Trinidad's natural resources, location, communication links, financial system, and strong democratic tradition have made it the Caribbean’s most secure investment location. Dozens of the world’s leading corporations are active here. The economy has been liberalised and virtually all barriers to trade and investment have been eliminated.
So while Tobago concentrates mainly on tourism, Trinidad is rolling out the welcome mat for business travellers and investors, with expanding conference facilities, high-speed Internet access, and hotels with all the amenities for a busy executive.
Still: an Oil & Gas Economy
Blessed with reserves of both crude oil and natural gas, Trinidad and Tobago has been “monetising” these as fast as it can, and living largely off the proceeds. It became a world leader in methanol, ammonia and liquefied natural gas (LNG); it produces steel, and contemplated an aluminium smelter fuelled by natural gas.
With double-digit growth for much of the past five years (until the economic slowdown that began in 2008), Trinidad and Tobago has the Caribbean’s wealthiest economy, built on Trinidad’s huge (but fast declining) oil and gas reserves. These hydrocarbons contributed 62% of government revenue in 2006, and 91% of foreign exchange earnings, while LNG is now the largest contributor to the near US$20 million GDP. The United States receives two-thirds of its LNG imports from Trinidad and in 2007 two-way trade totalled US$10.4 billion.
The burgeoning energy sector has encouraged growth in downstream areas. At Point Lisas (the island’s massive industrial complex and port), there has been investment in methanol and petrochemical production, manufacturing, food and beverage, steel and electrical goods projects. Other industrial estates are also taking shape further south on the same coast.
But new oil reserves have become increasingly difficult to find; last year’s blowout in the Gulf of Mexico dramatised the risks of deepwater exploration; and concern has been growing about just how long the natural gas will last.
Diversification
The world economic crisis that developed in 2007-8 has shown just how vulnerable Trinidad and Tobago is to oil and gas price fluctuation, and how urgent it is to reduce reliance on energy. This is familiar territory for the island, which benefited from the 1970/80s oil boom – and suffered the subsequent recession. Hence the drive towards diversification and more sustainable development.
The former government identified seven sectors for special development: the film industry, music and entertainment, seafood, food and beverages, leisure and merchant marine activity, and printing and packaging.
The Evolving TecKnologies and Enterprise Development Company (eTecK) had also been charged with developing eight new industrial parks (five in central Trinidad, three in south), primarily for organisations engaged in light manufacturing. Information technology, for example, is the focus of the new Tamana Intech Park at Wallerfield in east Trinidad. This state-of-the-art science and technology park is designed to attract investment into established and emerging companies in ICT, software development, high-tech manufacturing and agro-processing. Additionally, the Business Development Company (BDC) works at fostering economic growth through assisting start-up enterprises and entrepreneurs. The Trinidad & Tobago Film Company is working to make Trinidad an attractive location for international filmmakers. The Trinidad & Tobago Entertainment Company (TTEnt) is working to help market Trinidad's cultural and creative capital. The Tourism Development Company oversees the development of tourism.
Though up for review, all of these state-owned companies that have been charged with diversifying the economy continue to operate. Given the country’s large food import bill, agriculture and food production have moved quickly up the priority list.
Conference Centre
Trinidad is also aiming to be the leading meetings and conferences capital of the Caribbean, and in 2009 hosted two mega-events: the Fifth Summit of the Americas and the Commonwealth Heads of Government Meeting. Both were supervised by the new Trinidad & Tobago Convention Bureau.
In addition to a vast increase over the last few years in high-quality room stock, there has been a corresponding increase in conference facilities. Most of the major hotels offer sophisticated meetings space backed up by the facilities which business travellers expect, from high-speed wi-fi to fitness centres. Most business hotels are situated near shopping and leisure facilities such as golf courses and restaurants, in and around Port of Spain, San Fernando and the airport (which is now a wi-fi area, as are some restaurants, ice cream and coffee shops).
In addition to a vast increase over the last few years in high-quality room stock, there has been a corresponding increase in conference facilities. Most of the major hotels offer sophisticated meetings space backed up by the facilities which business travellers expect, from high-speed wi-fi to fitness centres. Most business hotels are situated near shopping and leisure facilities such as golf courses and restaurants, in and around Port of Spain, San Fernando and the airport (which is now a wi-fi area, as are some restaurants, ice cream and coffee shops).
According to former Prime Minister Patrick Manning of the PNM, the hosting of those two major international events (held at the Hyatt Regency on the newly constructed waterfront) would position Trinidad & Tobago for significant benefits, including increased investment flows in all areas of the economy – energy, tourism, manufacturing, agribusiness, entertainment, services, and particularly international conferencing and finance.
Weathering the Storm
In fiscal year 2009, Trinidad recorded its first deficit in seven years, which amounted to TT$7.4 billion. The Central Bank reported that GDP growth was -2.7% in 2009, down from the 3.5% of 2008. In fiscal year 2010, the economic conditions improved slightly, though the economy still contracted by about 0.6%.
The robust energy sector was an early casualty of the global downturn that began in late 2008, followed by shrinkages in the manufacturing sector and the government’s budget cuts across the board. Rising unemployment, and a slow-down in real estate and construction provided a sharp contrast to the situation a year earlier when all sectors were booming.
The robust energy sector was an early casualty of the global downturn that began in late 2008, followed by shrinkages in the manufacturing sector and the government’s budget cuts across the board. Rising unemployment, and a slow-down in real estate and construction provided a sharp contrast to the situation a year earlier when all sectors were booming.
Although analysts predicted that Trinidad & Tobago would weather the adverse economic climate better than other Caribbean countries, there have been challenges. Some energy investment was lost in 2009–10 due to the economic downturn. With the recession in the US (Trinidad’s main natural gas client) reducing demand for LNG, coupled with competition from bigger, lower-cost suppliers, Trinidad has been seeking new LNG markets in Europe, Latin America and the Caribbean.
The government has also had to bail out three heavily indebted financial subsidiaries of CL Financial, a conglomerate with interests in media, energy, spirits, banking, insurance and real estate around the Caribbean. Reimbursing its policy holders has become a major concern for both the government and CLICO's former investors.
Declining and fluctuating oil prices have also adversely affected the economy. As the economy contracted, the energy sector slowed down and construction activities ground to a halt as major projects reached completion. This contributed to an increase in unemployment figures. The rate of unemployment rose to around 6% in 2009–10 compared with 4.9% in 2008. The manufacturing and distribution sectors also suffered. Inflation has been a recurring problem, with rates rising to over 15% in 2009–10. Food prices were identified as the main driver of the headline inflation rate, though inflation fell to the low single digits in 2011.
Declining and fluctuating oil prices have also adversely affected the economy. As the economy contracted, the energy sector slowed down and construction activities ground to a halt as major projects reached completion. This contributed to an increase in unemployment figures. The rate of unemployment rose to around 6% in 2009–10 compared with 4.9% in 2008. The manufacturing and distribution sectors also suffered.
Looking Ahead: Sustainable Development
Despite the economic challenges, Trinidad remains the business leader in the region. The immediate focus of the new government is to revitalise the economy to stave off the effects of borrowing for recurrent expenditure and create avenues for long-term sustainable development. Diversification, particularly in the non-energy sector, seems particularly urgent since the US-based Ryder Scott Petroleum consultants unveiled a report in July that said that without any new finds, T&T’s gas reserves would be exhausted in 2020. The report showed that since 2000, proven natural gas reserves have declined from 19.7 trillion cubic feet (tcf) to 14.4 tcf in 2009, and that probable reserves stood at 7.8 tcf and possibly were 5.9 tcf of gas.
Under the previous administration, it had taken the role of regional godfather. In 2009, then Prime Minster, Patrick Manning, announced a stimulus package to help some beleaguered CARICOM countries weather the economic storm. Notably, at a 2010 CARICOM meeting, however, the Persad-Bissessar announced the Trinidad & Tobago could no longer be "the region's ATM card", and that all countries in the region needed to be considered equal. She also sparked regional outrage by stating that any aid given to Caribbean neighbours had to have a tangible benefit to Trinidad and Tobago given the country's own financial challenges.
At a business luncheon in Miami, Prime Minister Kamla Persad-Bissessar urged businesspeople to invest in Trinidad and Tobago. She spoke of her young government’s plans to develop industrial downstream programmes in methanol, ammonia and steel as well as renewable energy. She also revealed her cabinet’s approval for a National Innovation System Management to make the country more competitive and innovative in its current industries.
Under the previous administration, it had taken the role of regional godfather. In 2009, then Prime Minster, Patrick Manning, announced a stimulus package to help some beleaguered CARICOM countries weather the economic storm. Notably, at a 2010 CARICOM meeting, however, the Persad-Bissessar announced the Trinidad & Tobago could no longer be "the region's ATM card", and that all countries in the region needed to be considered equal. She also sparked regional outrage by stating that any aid given to Caribbean neighbours had to have a tangible benefit to Trinidad and Tobago given the country's own financial challenges.
The previous large-scale projects planned by the previous administration for an aluminium smelter in La Brea and infrastructure for a rapid rail system have been either been scrapped (the smelter) or placed under greater scrutiny for feasibility and efficiency (as with the rapid rail system, existing water taxi system, and construction projects like the National Academies for the Performing Arts).
Efforts are being made to boost the tourism sector as part of the economic diversification programme. In 2009, the government implemented stimulus and upgrade projects for the islands' tourism stakeholders, particularly in the accommodation sector.
Undoubtedly, high inflation will remain a key policy concern in the coming years. Headline inflation and high food prices remain the islands' biggest challenges for average citizens. Inflation had passed 16% by August 2010, the highest rate in over a decade. These inflationary pressures have impacted most dramatically on the construction and food and agricultural sectors. Between 1998 and 2008, food imports have increased by approximately 69% while exports increased by just 3%; food import costs are more than double revenue from exports. A number of initiatives, especially aimed at encouraging young people into agriculture, are now coming on stream in an effort to curb this trend.
Undoubtedly, high inflation will remain a key policy concern in the coming years. Headline inflation and high food prices remain the islands' biggest challenges for average citizens. Inflation had passed 16% by August 2010, the highest rate in over a decade. These inflationary pressures have impacted most dramatically on the construction and food and agricultural sectors. Between 1998 and 2008, food imports have increased by approximately 69% while exports increased by just 3%; food import costs are more than double revenue from exports. A number of initiatives, especially aimed at encouraging young people into agriculture, are now coming on stream in an effort to curb this trend.
The immediate focus of the new government is to revitalise the economy to stave off the effects of borrowing for recurrent expenditure and create avenues for long-term sustainable development. Diversification, particularly in the non-energy sector, seems particularly urgent since the US-based Ryder Scott Petroleum consultants unveiled a report in July that said that without any new finds, T&T’s gas reserves would be exhausted in 2020. The report showed that since 2000, proven natural gas reserves have declined from 19.7 trillion cubic feet (tcf) to 14.4 tcf in 2009, and that probable reserves stood at 7.8 tcf and possibly were 5.9 tcf of gas.
At a business luncheon in Miami, Prime Minister Kamla Persad-Bissessar urged businesspeople to invest in Trinidad and Tobago. She spoke of her young government’s plans to develop industrial downstream programmes in methanol, ammonia and steel as well as renewable energy. She also revealed her cabinet’s approval for a National Innovation System Management to make the country more competitive and innovative in its current industries.
Nonetheless, Trinidad remains a regional business hub and continues to forge partnerships with international investors on favourable terms, and that should continue long into the future.
Useful Contacts
- American Chamber of Commerce: 622-0340, www.amchamtt.com
- Central Bank of Trinidad & Tobago: 625-4835, www.central-bank.org.tt
- Invest Trinidad & Tobago (eTecK): 638-0038, www.investtnt.com
- South Trinidad Chamber of Industry & Commerce: 652-5613, www.southchamber.org
- Trinidad & Tobago Chamber of Industry & Commerce: 637-6966, www.chamber.org.tt
- Trinidad & Tobago Entertainment Company: 624-0514, www.ttentonline.com
- Trinidad & Tobago Film Company: 625-FILM (3456), www.trinidadandtobagofilm.com
- Trinidad & Tobago Manufacturers’ Association: 675-TTMA, www.ttma.com
- Trinidad & Tobago Stock Exchange: www.stockex.co.tt
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