Diversification has been the theme of many a government, as it looks to keep the country afloat in challenging economic times. For several years, under two different administrations, there have been plans to make Port of Spain an International Financial Centre (IFC).
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 five years before the economic slowdown that began in 2008 (but low single digit growth as it emerged from recession), Trinidad and Tobago has the Caribbean’s wealthiest economy, built on Trinidad’s huge (but fast declining) oil and gas reserves. These hydrocarbons in 2014 contributed to approximately 45% of GDP, 58% of government revenue, 83% of exports, and 70% of foreign exchange earnings, while LNG is now the largest contributor to the near US$29 million GDP (2014 estimate, IMF). Before the shale revolution, the United States was the largest importer of T&T LNG, receiving over 90% of T&T’s LNG exports, but now just receives just 16%. By contrast, approximately 40% goes to Europe, 35% to the Americas (Argentina, Brazil and Chile), and 15% to the East (China, Japan, Korea). Still, in 2013 Trinidad & Tobago was the sixth largest LNG exporter in the world, and supplied some 74% of US LNG imports.
The 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.
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.
The Business Development Company (BDC) works at fostering economic growth through assisting start-up enterprises and entrepreneurs. However, these have been succeeded by two new state enterprises — InvesTT and ExporTT, charged with attracting foreign investment and finding new markets for Trinbagonian goods and services.
FilmTT, the Film Company of Trinidad & Tobago — now absorbed into the new state enterprise, CreativeTT (Creative Industries Company of Trinidad & Tobago), which also oversees the Music Company (MusicTT), and the Fashion Company (FashionTT) — is working to make Trinidad an attractive location for international filmmakers. CreativeTT succeeded the Trinidad & Tobago Entertainment Company (TTEnt).
The Tourism Development Company continues to oversee the development of tourism of product Trinidad & Tobago, while the Tobago House of Assembly markets Tobago specifically. Given the country’s large food import bill, agriculture and food production have moved quickly up the priority list.
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).
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 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, and has remained at that level since. The manufacturing and distribution sectors also suffered. Inflation has been a recurring problem, with rates rising to over 15% in 2009–10; by 2014, it settled at 8-9%. Food prices were identified as the main driver of the headline inflation rate.
Looking Ahead: Sustainable Development
Despite the economic challenges, Trinidad remains the business leader in the region. The immediate focus of the 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 have said that without any new finds, T&T’s gas reserves would be exhausted in 2020. Their reports showed that since 2000, proven natural gas reserves have declined from 19.7 trillion cubic feet (tcf) to 12.24 tcf in 2013, and that probable reserves stood at 5.526 tcf and possibly were 6.116 tcf of gas.
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, and existing water taxi system).
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, and now hover around 8-9%. These inflationary pressures have impacted most dramatically on the construction and food and agricultural sectors. Between 1998 and 2008, food imports increased by approximately 69% while exports increased by just 3%; food import costs grew to more than double revenue from exports. A number of initiatives, especially aimed at encouraging young people into agriculture, are coming on stream in an effort to curb this trend.
Prime Minister Kamla Persad-Bissessar has urged businesspeople to invest in Trinidad and Tobago, and has promised to develop industrial downstream programmes in methanol, ammonia and steel as well as renewable energy, and a goal 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.
GDP per capita for 2014 is estimated at US$21,462, unemployment 5%, and GDP growth: 2.2% (IMF).
- American Chamber of Commerce: 622-0340, www.amchamtt.com
- Central Bank of Trinidad & Tobago: 625-4835, www.central-bank.org.tt
- Invest Trinidad & Tobago: 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 Manufacturers’ Association: 675-TTMA, www.ttma.com
- Trinidad & Tobago Stock Exchange: www.stockex.co.tt