Vol.19 No.1 – March 2019
The Voice of Business in Trinidad & Tobago
Aldwyn Wayne of WiPay
BOLD
ROANNA MARAJ of SHUPHUB
NEW
JEAN-MARC AIMEY OF SUN TIXX
ECONOMY
Future of oil & gas | Business environment for growth Resilient manufacturing | Attracting investment
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Vol.19 No.1 – March 2019
Contents
Editor’s note 7
Natalie Dookie introduces this issue of CONTACT
The future of fossil fuels
8
Energy strategist Anthony Paul explores the future of oil and gas, taking us from challenges to opportunities
The economic outlook
44
Prospects for Trinidad and Tobago, the Caribbean, and the global economy in the year ahead
Energy update
46
The state of the energy sector in figures
Welcome to new members
Special CONTACT Survey: Blueprint for a bold new economy An inconvenient truth
14
In an economy lacking growth, Hayden Blades suggests how we can create an enabling business environment for long-term sustainable development and prosperity
Selling our services
18
The Trinidad and Tobago Coalition of Services Industries has a road map for going global. Learn about their new national exporters’ services registry and internationalisation initiatives
Where are all the tourists?
23
Manufacturing the future
26
The T&T tourism success story is still waiting to happen. John Bell looks at the Sandals saga and lessons to be learnt. How can we save the sector? According to the Trinidad & Tobago Manufacturers’ Association, there is still much to be done in order to create a more resilient sector geared for success
Empowering our artists
28
Keith Nurse and Alicia Shepherd make the case for greater investment in the creative/cultural sector
Towards a renaissance of agriculture
32
How prepared is our agriculture sector for climate change? Steve Maximay guides us on how to re-align the sector
The challenge of renewable energy
36
Dr Zaffar Khan and Atiyyah A. Khan discuss the challenge of maximising renewable energy and increasing energy efficiency in T&T
Attracting the investor
40
InvesTT tells Joel Henry about its success stories and how it is engaging with the diaspora
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The Chamber extends a warm greeting to members who have recently joined
On the cover: Aldwyn Wayne, Chief Executive Officer, WiPay (Trinidad and Tobago) Limited; Roanna Maraj, Managing Director, Keystone Designs Limited/ ShupHub; and Jean-Marc Aimey, Chief Executive Officer, Sun Tixx Caribbean Limited (Photos by: Dos Imagery)
The voice of business in Trinidad & Tobago
Published by
The Trinidad and Tobago Chamber of Industry and Commerce
Columbus Circle, Westmoorings, Port of Spain, Trinidad and Tobago PO Box 499, Port of Spain • Tel: (868) 637-6966 • Fax: (868) 622-4475 Email: chamber@chamber.org.tt • Website: www.chamber.org.tt
Tobago Division: ANSA McAL Building, Milford Road, Scarborough, Tobago Tel: (868) 639-2669 • Fax: (868) 639-2669 Email: tobagochamber@chamber.org.tt
Produced for the Chamber by MEP Publishers (Media & Editorial Projects Ltd)
6 Prospect Avenue, Maraval, Port of Spain, Trinidad and Tobago Tel: 622-3821 • Fax: 628-0639 Email: info@meppublishers.com • Website: www.meppublishers.com
Natalie Dookie Caroline Taylor Halcyon Salazar Kriston Chen Evelyn Chung, Tracy Farrag, Mark-Jason Ramesar Production Jacqueline Smith Editorial assistant Shelly-Ann Inniss
Editor Online editor General manager Page layout & design Advertising
COURTESY CHRISTINA MORELLO / PEXELS.COM
DISCLAIMER Opinions expressed in Contact are those of the authors, and not necessarily of the Trinidad and Tobago Chamber of Industry and Commerce or its partners or associates.
CONTACT is published quarterly by the Trinidad and Tobago Chamber of Industry and Commerce (TTCIC). It is available online at www.chamber.org.tt/ media/the-contact-business-magazine. ©2019 TTCIC. All rights reserved. No part of this magazine may be reproduced in any form without the written permission of the publisher.
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COURTESY INVESTT
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Editor’s Note
Editor’s note In this issue of CONTACT, we have assembled a team of experts to build a Blueprint for a Bold New Economy
Trinidad and Tobago’s energy sector is expected to have contributed 36.1% to GDP in 2018, in stark contrast to the highs of 50% and more in past decades. Economic growth in 2018 is projected to reach 1.9%. In the face of these sobering statistics, coupled with volatile global oil prices and depleting resources, there is a lot of uncertainty regarding our future. Economic diversification of the energy and non-energy sectors must therefore become a priority, especially as the process can take decades before it brings real change to the bottom line. Does Trinidad and Tobago have enough time to transform its economy before oil and gas run out, and what path should it take? In this issue of CONTACT, we have assembled a team of experts to build a Blueprint for a Bold New Economy. We begin by examining how to maximise our remaining resources and enhance the energy services sector for export. Next, we develop a business environment geared for economic growth. We look at how to further champion the services sector, already a strong contributor to GDP, and include a detailed review of the challenges and solutions for tourism. Manufacturing has many cross-sector linkages, and making it more resilient is critical to our future. And what about new sectors – does the creative industry present an opportunity? How will we achieve food security and counter the effects of climate change? We tackle these issues alongside improving energy efficiency and exploring renewable energy. Investment will be needed in all of these sectors – InvesTT tells us how to attract this. We look forward to your feedback on this packed issue: let us know if you agree with what our experts say.
Natalie Dookie, Editor
On the cover
Technology is already transforming every sector of our economy, and it will play a key role in diversification efforts, creating new industries and opportunities for solutionoriented entrepreneurs. On the cover, we feature three finalists in the Trinidad and Tobago Chamber of Industry and Commerce’s Business Technology Award 2018. WiPay has removed a significant barrier for online payments, offering great benefits for small- and medium-sized enterprises. Its free platform can be integrated into any merchant’s website to facilitate credit card payments. In 2016, WiPay also introduced its Top-Up Service, a form of digital cash, which offers financial inclusion for the unbanked or under-banked. It is now the number one online payment platform in the Caribbean. ShupHub.com is an e-commerce platform that brings together vendors and customers. Prior to its launch, there were hardly any portals available locally for vendors to distribute their goods and services online. Entrepreneurs will no longer need brick and mortar stores as this online platform allows them to market products throughout the Caribbean – this year, Shuphub’s service will be available in every Caricom territory. Sun Tixx provides a technology-driven service which manages the generation, distribution and sale of tickets for events. It uses secure ticketing and access control technology, making it easier for patrons to collect tickets and for event hosts to collect payments. Sun Tixx has expanded into St Lucia, St Vincent, Grenada and Barbados, becoming the largest ticket distribution network provider in the Caribbean.
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COURTESY PIXABAY.COM
Energy
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Energy
The future of fossil fuels Trinidad and Tobago’s energy industry is more than a century old, and the country depends heavily on it for revenue. It will still have its place in the future economy, especially if its current constraints are addressed
by Anthony Paul Principal Energy & Strategy Consultant, Association of Caribbean Energy Specialists Limited
None of these factors suggests that the global life of oil and gas will be over in the next 50 years
T
o paraphrase Mark Twain: “The rumours of the death of oil are greatly exaggerated.” Outlooks for the global energy mix over the next 20 to 30 years, from major international oil and gas companies like BP, Equinor (formerly Statoil), ExxonMobil, Shell and Total, as well as consultancies, research institutions and the International Energy Agency, all point to a future where energy demand grows, and the greatest increase in market share is taken by renewables. Interestingly, in that same timeframe, while the share of oil and gas declines, actual demand for both is predicted to grow under current global policy scenarios, with gas replacing oil as an energy source to reduce harmful effects on the environment. As technology advances rapidly on many fronts, it makes renewables more efficient and competitive, and the discovery and production of more oil and gas easier; it also reduces the impact of fossil fuels on the environment. These factors point to a dynamic range of scenarios, none of which suggests that the global life of oil and gas will be over in the next 50 years. There is still enough time to invest and benefit.
Maximising our remaining resources At government’s stated sustainable production levels of 4.2 billion cubic feet per day, new reserves may be able to support existing plants for decades to come
But what about Trinidad and Tobago? How long does our industry have again? The Ministry of Energy and Energy Industries uses its annual Scott-Ryder audit to better understand the energy industry’s growth. This approach is an unnecessary public expenditure, as exploration companies are required to do the same, and the ministry has the authority to dictate how this is done so that it meets their requirements. Further, the approach taken grossly understates the potential of our already discovered fields and geological basins, dissuading investment in exploration and indigenous research and development. The reserves audit has limited scope, relative to the potential of the basins.
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Blueprint for a Bold New Economy
10
Oil and gas exploration and production opportunities 1. 2.
North Coast Marine Area: gas fields, deep water Northern Gulf of Paria / Northern Basin: small oil & gas fields, sub-anhydrite imaging 3. Southern Gulf of Paria: enhanced imaging, deep drilling/older horizons, heavy oil, enhanced recovery, deeper and older (incl. cretaceous) prospects, stratigraphic plays 4. Offshore South Coast: small gas & oil, enhanced imaging, cretaceous shelf edge 5. Southern Basin: deeper and older (cretaceous) prospects, stripper fields, oil sands, enhanced recovery, 3D seismic for new projects, field extensions, stratigraphic plays 6. Central Range Thrust Belt 7. East Coast Shelf: deep drilling, small & medium sized gas fields, JV/farm-ins, enhanced recovery, shallow gas imaging challenges, possible participation in Venezuelan border fields, infrastructure-led E&P 8. East Coast Slope: deep water, underexplored, adjacent to existing production & infrastructure (EC Slope) 9. Ultra Deep Water, East Coast: oil - structural & stratigraphic traps (reservoir modelling & petroleum system research needed), natural gas/small field challenge, gas hydrates 10. Tobago Trough: deep water, underexplored, continuation of C. Range/Angostura trend
1
9
2
3
6
8
5
7
4
Source: Association of Caribbean Energy Specialists Limited Fig. 1: Across multiple geological basins, Trinidad and Tobago still has a wide range of oil and gas exploration development and production opportunities.
That said, in October 2018 the ministry announced that, according to the most recent audit, for the first time since 2004 reserves had grown, with 154% replacement of reserves produced in 2017. This was welcome news, but Trinidad and Tobago still needs to take urgent steps to maximise its remaining energy resources, alongside investing capital to fund economic diversification. Aside from new exploration in deepwater acreage, Figure 1 shows other areas where oil and gas can be found including onshore, the Gulf of Paria, and shallow water off the north, east, and south coasts. The use of new technologies, field depletion policies consistent with national interests and industry best practice, suitable investors and/or commercial models, can enable production from small fields, lower pressured reservoirs, tight reservoirs, deeper older formations and trapping types, and heavy oil. In addition, by applying the phenomenon known as “creaming curve”, whereby oil and gas basins typically contain as much reserves in multiple small fields as they do in the few large ones, basin development would translate into over 50tcf in smaller pools, given currently producing fields. In a mature gas market like ours, small fields can be commercialised as their development is not burdened by the need to invest in pipelines and other infrastructure, or to guarantee the long-term supply needed to satisfy financing requirements for new plants. Given that our gas processing plants have mostly been paid off and are still relatively very efficient, they can
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compete with new plants in global markets, even with higher prices. Because our resources are mostly onshore and in shallow waters, they can provide opportunities for local investors, contractors and suppliers to participate, and for the government to give incentives for investment that can be translated into benefits to the economy via increased local revenue flows, taxes and employment. Indigenous supplies aside, development and exploration opportunities on the Venezuelan side of our borders can provide potential inputs for refining at Pointe-à-Pierre and Point Lisas, at costs lower than most other options – though geopolitics and uncertainty over the refinery present immediate challenges. Implementing these initiatives can bring tens of trillions of cubic feet to market. At the government’s stated sustainable production levels of 4.2 billion cubic feet per day of gas, new reserves may be able to support existing plants for decades to come. Positive developments taking place in Guyana and Suriname also present opportunities for the local sector to provide assistance in developing indigenous capabilities in services, skills enhancement, infrastructure and natural gas industries.
Enhancing energy services for export How do we maximise our remaining resources, while ensuring the growth and development of domestic firms? As local reserves become depleted, the energy services sector will take on even greater importance. Enhancing competitiveness and investing in capacity development of
Energy
UPSTREAM ACTIVITIES fabrication
engineering & construction
subsurface services
logistics-boats
rigs/wells
maintenance
$ upstream spend job creation potential
CHARACTERISTICS
cyclical nature gas/oil price sensitivity value-added skill content innovation potential technology potential knowledge transferability non-energy transferability jv attractiveness High sustainability sectors
High impact sectors
High
Moderate
Low
Fig. 2: Multiple areas have been identified for local content to support diversification. (Source: Association of Caribbean Energy Specialists Limited)
local firms will be fundamental to improving their export capability. Although we have a robust local content policy and supporting regulations, foreign individuals and companies are often brought in to do work for which locals are fully capable and qualified. Other work that can and should be done here is sent overseas, thus facilitating revenue leakage, transfer pricing, and tax avoidance. The Trinidad and Tobago Local Content Policy of 2004 identified areas in the oil and gas sector that had significant projected demand and could support the competitiveness of local companies, encouraging them to export their services, while contributing to diversification efforts.
Work that can and should be done here is sent overseas, facilitating revenue leakage, transfer pricing, and tax avoidance Areas such as big data management, seismic processing, design engineering and fabrication were identified as opportunities, and were pursued to the extent that several international firms set up operations locally, some serving foreign-based clients while partnering with locals. Unfortunately, this initiative found itself on a collision course with the decision to engage Chinese contractors at the expense of local industry. The oil and gas local content policy was quarantined as a consequence, and the affected
companies folded up. Policy decisions favouring mega-projects and foreign investment, preventing access to natural gas and gas-derived products, resulted in the door being shut on locals wanting to invest downstream in small plants to convert methanol and syngas by manufacturing, and small-scale LNG for export to regional markets. Figure 2 demonstrates how investment in high sustainability and high impact energy services can contribute to job creation and knowledge transfer.
Improving administration and tax collection Aside from the direct impact on the economy and business, the energy sector traditionally provided the biggest share of government revenue and foreign exchange, until recent times. As highlighted at the Ministry of Energy and Energy Industries March 2018 “Spotlight on Energy�, failures in government taxation policy and tax collection resulted in over TT$120 billion of uncollected taxes. This tax avoidance was facilitated by weak regulatory capacity and governance systems. Recent assurances by the government that they are going after this, supported by bold, if long overdue, measures to institute a transparent and consistent royalty regime, will result in much more foreign exchange being available to the domestic economy. While these developments are encouraging, they do not do nearly enough to address the core issue that has plagued the industry and led to its slide. A woefully underresourced and opaque Ministry of Energy and Energy Industries, lacking in self-confidence, denuded of authority and perpetually avoiding the legal strictures in place to
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Blueprint for a Bold New Economy Fig. 3: Recommended measures to increase activities, production and revenue in the T&T oil and gas sector. ➤ Good governance • Clear, consistently applied policies • Enhanced institutional capacity i. Technical ii. Commercial (incl. negotiating) iii. Technology iv. Funding • Transparency & accountability, as prescribed by the Petroleum Act & Regulations • Enlightened tax regime – close loopholes • Industry standard procurement processes - Simple, predictable, transparent - Easy analysis and decision-making - Quick response ➤ Clear exploration & depletion strategies • Resource management • Contract/licence management • Improved data availability
ensure it conducts its role in a transparent manner, must be fixed. With 100% excess power generating capacity fired by natural gas, the road to renewables is a policy minefield. Unless we are willing to think differently, make bold decisions and act decisively, we shall lose that battle. Ideas like selling electricity to industries in eastern Venezuela, or limiting CNG to just fleet vehicles and focusing instead on electric and hybrid vehicles for most other forms of private transport, should be explored.
The way forward Implementation of the key measures in Figure 3 will ensure that Trinidad and Tobago’s oil and gas sector gets back onto a healthy growth path, and will provide the stimulus to diversifying the rest of the economy which we so desperately need.
The Petrotrin situation brought the sector into the sharp glare of public scrutiny as nothing else has done for a long time Ongoing negotiations for contract extensions locally will allow government to leverage beneficiary clauses in existing agreements, such as the return of all assets to the state at the end of a contract’s life. We can also learn from Azerbaijan, where BP, ExxonMobil and partners recently paid US$3.2 billion into the Sovereign Wealth Fund in order to be allowed to continue exploiting producing fields. Service companies are required to be licensed and registered, and to pay taxes in Trinidad and Tobago. That is not happening reliably, so billions of dollars in profits
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➤ Indigenous R&D (T&T Ministry of Energy & Energy Industries has an R&D Fund in excess of TT$100 Million, that has not been used!) ➤ Clear and consistently applied national priorities • Well defined expectations ➤ Local Content & value addition • Access to product for value addition ➤ Clear and transparent investor selection & partnering strategies ➤ Rule of law
Source: Association of Caribbean Energy Specialists Limited
have been untaxed. We need a stronger rule of law which enforces these regulations more effectively.
In Azerbaijan, BP, ExxonMobil and partners recently paid US$3.2 billion into the Sovereign Wealth Fund, in order to be allowed to continue exploiting producing fields The Petrotrin situation brought the energy sector into the sharp glare of public scrutiny as nothing else has done for a long time. Decision-making without public consultation, when dealing with state assets, involves risk, if any lessons are to be learnt here.
For further reading Oil to Gas and Beyond – A Review of the Trinidad and Tobago Model and Analysis of Future Challenges. Editors Trevor M. Boopsingh and Gregory McGuire. University Press of America, 2014. See Chapter 7 (“Future Hydrocarbon Resources”) and Chapter 13 (“Taking Trinidad & Tobago Forward & Abroad – The Technical Challenges”).
KEVIN SAMMY
Blueprint for a Bold New Economy
An inconvenient truth Trinidad and Tobago’s commodity-based economy is heavily reliant on global market prices, and continually caught in a cycle of boom and bust. What structural adjustment is needed to avoid future volatility?
by Hayden Blades President, Business Insight Limited
I
n Trinidad and Tobago, clarity regarding national objectives which define the way forward in a rapidly evolving global economic environment has all but escaped political and public discourse. Sensible macro-economic management in small open economies such as ours must achieve the following outcomes for long-term survival:
• • • •
sustainable growth general price stability socially acceptable income distribution patterns investor and consumer confidence.
Trinidad and Tobago is a small, open, resource-rich economy with a narrow productive base
Trinidad and Tobago is a small, open and resource-rich economy. Its narrow productive base is dominated by global market prices and the domestic output of its key export commodities – oil, gas and petrochemicals. This economic structure lacks diversification, and has fostered income, employment and inflation patterns that are closely correlated with the global market prices of carbon-based commodities. The economy has suffered from generally declining output levels in its dominant energy sector, further exacerbating the volatility of key economic aggregates such as real GDP growth, international reserves, public debt and sustainable employment levels. It is an economy subject to the extremes of a boom-bust-recovery-boom business cycle.
The economy is subject to the extremes of a boom-bust-recovery-boom cycle
The inconvenient truth is that Trinidad and Tobago has not been proactive in structurally adjusting its energy-dependent economy to minimise volatility after more than 56 years of independence. Furthermore, the fiscal space does not easily accommodate necessary and sufficient public sector investment. Technological, knowledge-based industries, and arts, culture and entertainment industries, which all represent drivers of youth employment, are still in their infancy.
Current economic assessment
An economy lacking growth In the absence of adequate economic growth, it is inevitable that unemployment will rise in Trinidad and Tobago
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In the absence of adequate economic growth, it is inevitable that unemployment will rise in Trinidad and Tobago, and this will be exacerbated if such conditions are prolonged. A further complication is the absence of a strong growth impetus from the energy sector; based on current output and price trends it is not expected to provide the growth stimulus it did in the recent past. With Trinidad and Tobago’s growth rate expected to creep to 2.13% by 2021 (see graphic), restoration of economic growth ought to be the most important
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Business Environment
pillar of any future fiscal package, with the role of the non-energy sector taking on even greater importance in stabilising and growing the economy. Currently, government is intensely focused on recovery of output in the energy sector, with some success, though the volatility of global market prices will create a significant headwind in this regard. Trinidad and Tobago: Growth rate of real gross domestic product (GDP) from 2012-2022 (compared to the previous year) 2.7% 2.13%
1.71%
1.56% 1%
0.88%
1.24%
2012
2022
-1.19% -1.75% -2.6%
-6.08%
Source: ©Statista 2019 – The Statistics Portal
The intensity of government’s focus on the recovery of the energy sector must be replicated across the non-energy sector. The creation of an enabling environment that facilitates new and sustainable growth within the non-energy sector is therefore critical if we are to avoid: • • • • • •
persistent fiscal deficits and rising public debt persistent balance of payment deficits and a weakened TT dollar increasing rates of unemployment low investor and consumer confidence an economy perpetually confined to zero to low growth outcomes lost generations of young citizens.
Trinidad and Tobago’s economy comprises four critical sectors: energy, services, manufacturing and agriculture. Of these, services and energy have been the major contributors to Gross Domestic Product (GDP). In 2008, Trinidad and Tobago had an estimated GDP (at constant 2000 prices) of TT$93,024.5 million, with the services and energy sector accounting for 51% and 40.3% of GDP respectively. The manufacturing and agriculture sectors contributed 8.4% and 0.5% to GDP. Since then, the economy has contracted and there have been adverse changes to its GDP composition.
The way forward The creation of an enabling environment that facilitates new and sustainable growth within the non-energy sector is therefore critical
Our services sector is robust and diverse, with each sub-sector contributing significantly to GDP. Although labour-intensive and a small contributor, the agriculture sector possesses significant opportunities for new growth and employment creation. Stimulating rapid agricultural growth will provide the opportunity to reduce our food import bill and create greater domestic price stability. Other sectors which hold prospects for new growth in new markets are manufacturing and tourism. However, the key to attaining sustainability, price stability, acceptable income distribution and market confidence will be the services sector, which can then support employment creation and growth in agriculture and manufacturing.
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COURTESY FRANK MCKENNA / UNSPLASH.COM
FX-eating imports or FX-earning exports?
While agriculture, manufacturing and services can provide new platforms for economic growth and employment creation, this will require implementation of the appropriate policy framework Based on these characteristics, several national strategic issues come into focus: • What aspects of the services sector are exportable? How can these sub-sectors become more competitive, and do we have access to key markets, traditional and nontraditional? • How can the services sector be positioned to enhance growth in agriculture and manufacturing? • If sustainable job creation is predominantly located in the services sector, then what type of services and service providers should we develop? • Can we wean the exportable components of the services sector off state funding and thus create a cadre of competitive service providers who will strategically seek out export markets as part of well-crafted growth strategies? • Are we getting value for money from the services sector, both public and private, and is there a need to revisit the way in which we organise the production of services and manage service quality and consistency?
Implementation deficit To avoid or minimise the implementation deficit, government must explicitly address these new sources of economic growth, even as we continue to diversify the energy sector and create higher value-added exports. This can be achieved through the establishment of tripartite sector working committees, supported by permanent secretaries. The output of these committees should be a list of short- and medium-term development strategies, to be adopted as government policy for execution by ministries.
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These working committees can include institutions such as: • the Caribbean Industrial Research Institute (CARIRI) • exportTT • business stakeholders such as Chambers of Commerce • Eximbank • the Bankers’ Association of Trinidad & Tobago • labour stakeholders • the tertiary sector • an industrial park operator • the Ministry of Trade and Industry. The creation of an enabling environment for growth and development of the non-energy sector ought to be prioritised as we seek to enhance competitiveness in traditional and non-traditional export markets. This enabling environment should address: • development of appropriate labour force skills • provision of funding for business growth and development (predominantly exportable sectors) • enhancing critical infrastructure • provision of key business support services. While agriculture, manufacturing and services can provide new platforms for economic growth and employment creation, this will require implementation of the appropriate policy framework and a commitment to enhancing compet-iveness, both on a national level and at the level of the individual firm.
COURTESY CHRISTINA MORELLO / PEXELS.COM
Services
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Services
Selling our services The services sector is turning in a strong performance, but is yet to become a viable exporter. A national exporters’ services registry and export training are just two of the initiatives TTCSI will launch in 2019 to help grow the services economy
by Vashti G. Guyadeen General Manager, Trinidad and Tobago Coalition of Services Industries
T
his year’s World Economic Forum held in Switzerland in January focused on the “Industrial Revolution 4.0”. This refers to the significant role that automation and data analytics play in transforming manufacturing processes. IR 4.0 has not only impacted manufacturing. According to Professor Klaus Schwab, Executive Chairman of the World Economic Forum, “the Fourth Industrial Revolution, finally, will change not only what we do but also who we are. “It will affect our identity and all the issues associated with it: our sense of privacy, our notions of ownership, our consumption patterns, the time we devote to work and leisure, and how we develop our careers, cultivate our skills, meet people, and nurture relationships.” Without a doubt, IR 4.0 will also impact the services sector. The question is, how prepared are Trinidad and Tobago services providers and industries for these changes?
Strong local performance But despite the services sector showing a strong performance locally, it is yet to become a viable foreign exchange earner: its export performance has been poor compared with manufacturing and energy
In Trinidad and Tobago, services’ contribution to GDP in 2017 was estimated at 50.8%, while agriculture and industry stood at 0.4% and 48.8% respectively (TTCSI, 2016). The services sector, unlike the hydrocarbon sector, has experienced significant growth despite external shocks attributed to the recent fall in global oil prices. But despite a strong performance locally, the sector is yet to become a viable foreign exchange earner: its export performance has been poor compared with manufacturing and energy. While the sector has been earmarked to fasttrack national diversification, it falls short in its ability to increase its trade and earning power – a situation reflected in Trinidad and Tobago’s negative trade balance (exports minus imports) in international trade in services. For the period 2011 to 2016, there was a reported negative trade balance in regard to international trade in services, with services accounting for only 28% of exports in 2011 (TTCSI, 2016). Clearly there are great opportunities to accelerate growth in the services sector.
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Blueprint for a Bold New Economy Net importer of services We have a comparative advantage in several sub-sectors including education services; cultural and creative services; professional services; and health services
The European Union, in an assessment of the Economic Partnership Agreement (EPA) with Cariforum, noted that international trade in services has assumed a significant dimension in the sustainable development and economic growth strategies of Cariforum states, and commitments in external trade arrangements are critical in advancing the region’s prospects. The data in Table 1 show that Trinidad and Tobago is a net importer of services. However, in relative terms we are also a key exporter of services compared with other Cariforum states. Trinidad and Tobago’s primary services exports are travel, transport and commercial services. We also have a comparative advantage in several subsectors including education services; cultural and creative services; professional services; and health services. It is imperative that support systems and the enabling environment are developed to foster growth in these sectors Table 1: Cariforum states – value of services exports and imports, 2016-2017 Country
Value of services exports (million US$)
Value of services imports (million US$)
Barbados (2016)
1,483
743 3,354
Dominican Republic (2017)
8,476
Guyana (2017)
134
453
Jamaica (2017)
3,432
2,242
Suriname (2017)
145
516
Trinidad and Tobago (2017)
1,076
2,500 Source: World Trade Organisation
Championing the services sector The key ingredient in “going global” is ensuring that service providers and industries meet global standards and certification
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The Trinidad and Tobago Coalition of Services Industries (TTCSI) will embark on a number of initiatives in 2019 to propel growth in the services economy. Foremost on the agenda is data analytics. One of the key projects we have undertaken, with the support of the Ministry of Trade and Industry, is the development of a national exporters’ services registry. This will be invaluable in measuring the sector and giving government and the TTCSI better information, in order to provide knowledge-driven products which stimulate growth. Secondly, the TTCSI will execute a robust training schedule this year, including rollout of the Services Go Global (SGG) training programme. SGG was developed by Caribbean Export over eight years ago specifically to optimise the Cariforum region’s export of services. It aimed to develop the capacity of service providers and industries to capitalise on opportunities under the EPA, with a focus on export readiness. Participants will be guided through a four-stage road map showing how to propel their businesses onto the international stage. The TTCSI is the only certified agency locally to offer this training. SGG will be conducted in four sector clusters – creative and cultural industries including animation; tourism; health and wellness; and energy services. The key ingredient in “going global” is ensuring that service providers and industries meet global standards and certification. This issue is also being tackled by the TTCSI, and plans are in train to collaborate with the relevant agencies to ensure that our member associations and their members are equipped to trade regionally and globally.
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Tourism
Where are all the tourists?
Travel and tourism contribute less than 10% to Trinidad and Tobago’s GDP. There were high expectations with the possibility of Sandals adding its brand to the sector. But why do we need a big name?
LIDIAN NEELEMAN / SHUTTERSTOCK.COM
by John Bell Past Director General and CEO, Caribbean Hotel Association and past President, International Hotel and Restaurant Association
T
he best way to assess whether tourism has any real chance of success in Trinidad and Tobago is to determine the condition of the industry today in both islands. With that as a basis we can then project into the future. There can be little doubt that tourism is presently not much more than a basket case in Tobago, or that we have two quite separate island destinations to address.
Current state of tourism Are we presently in any position to consider tourism as a viable financial opportunity? Let’s begin with Tobago. • Arrivals in Tobago in 2005 were slightly over 90,000. Today they are well under 20,000 • As a consequence of this precipitous collapse in traffic there has been a decline in maintenance of the hotel stock, which has deteriorated significantly • In 2018 the efficiency and effectiveness of the seabridge has been disastrous • Airlift into Tobago out of the USA is virtually non-existent • The condition of the ANR Robinson International Airport at Crown Point is reminiscent of the mid-20th century in the Windward Islands.
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Tourism Now let’s review Trinidad: • With meetings and conventions growing in Port of Spain, there is a real prospect that conference tourism can be further developed • Adventure tourism is evolving slowly, but sadly with limited support thus far from Tourism Trinidad Limited • Sports tourism is also evolving slowly as a result of the government’s stadium construction programme • Golf in Trinidad remains dormant • Apart from carnival, cultural tourism remains undeveloped • Despite their obvious value, and access to several suitable bodies of water, watersports activity is sadly depressed.
Restructuring the sector In short, it seems there has been little or no planned development in tourism on either island, leaving the nature of the industry speculative at best. But this should not deter us from thinking big about where tourism can and should go. Last year there was a welcome reorganisation of the government’s administration of the tourism sector. After several years of mismanagement, the Tourism Development Company Limited (TDC) was closed down and replaced by Tobago Tourism Agency Limited and Tourism Trinidad Limited. In Tobago at least, there was recognition that the private sector was a major player in the game, with several key appointments being made to the agency’s board.
In short it seems there has been little or no planned development in tourism on either island, leaving the nature of the industry speculative at best The Sandals saga So what are the prospects for the future? A great deal seemed to depend on Sandals, which presented an exciting prospect for launching Tobago into the “real” Caribbean tourism world. There is no doubt that tourism, particularly in the northern Caribbean, has evolved separately into something quite different from what we know in Trinidad and Tobago. Tobago has long been a success story waiting to happen. The island is scenically beautiful. It has magnificent beaches and a splendid reef. Previous attempts at tourism development have resulted in two golf courses. The real problem is the airport at Crown Point, which is hopelessly inadequate. Which brings us back to the contentious issue of Sandals.
A great deal seemed to depend on Sandals, which presented an exciting prospect for launching Tobago into the “real” Caribbean tourism world Benefits of a big brand The benefit of a 900-room state-of-the-art resort opening in Tobago appeared to be enormous. Sandals offered a valuable grown-up couples experience, while its twin sister, Beaches, promised a full-blown family programme. It seemed that Tobago might at last acquire a property of the kind that Jamaica, Dominican Republic and The Bahamas have long hosted. And that was only the beginning. The overriding value that Sandals would have been able to provide was airlift access out of the United States. Sandals had the potential to attract American Airlines to Tobago out of its Miami hub. JetBlue would have been able to provide access from New York and the tri-state area. United Airlines might also have been attracted to serve Tobago out of Washington DC, Newark, or Houston. But the United States, with all its up-market worth and two or even three new gateways, remains completely closed to Tobago.
The projects and developments cited above are still very much needed to establish our tourism offering on the global stage. With the right marketing strategy, infrastructure and political will, accomplishing all of them is still entirely possible The government was prepared to provide Sandals with a location at Golden Grove, and the valuable asset that goes with that. So there was a very real expectation that the Sandals development would set off a chain reaction, stimulating development in the rest of Tobago. The ANR Robinson International Airport at Crown Point would have become a real international port of entry. However, Sandals pulled out of the Tobago deal. But all is not lost. The projects and developments cited above are still very much needed to establish Trinidad and Tobago’s tourism offering on the global stage. With the right marketing strategy, infrastructure, and political will, accomplishing all of them is still entirely possible.
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Blueprint for a Bold New Economy
Manufacturing the future An improved trading environment is needed to create a sustainable resilient manufacturing sector. Tackling bureaucratic challenges, illicit trade and an uncertain industrial relations climate are high on the TTMA’s agenda
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t is no secret that business conditions in the Trinidad and Tobago economy are less than ideal. The Central Bank reported in its last monetary policy announcement (December 2018) that “primary economic indicators are all down as growth has slackened and inflation remains sluggish because of weak domestic demand”.
The manufacturing sector provides the necessary foundation for an economically, socially and environmentally sustainable society In an environment with slow economic growth, the Trinidad and Tobago Manufacturers’ Association (TTMA) believes there is an urgent need to explore new opportunities in the manufacturing sector, which has the potential to contribute to positive economic growth and development. The manufacturing sector goes far beyond the employees, companies and investors directly involved in industry. It affects everyone. Defined by the TTMA as including all the non-energy sub-sectors, it provides the necessary foundation for an economically, socially and environmentally sustainable society. Manufacturing also drives technological innovation – the key to research and development – and the creation of new products and manufacturing processes. While the sector is critical to the local economy, it faces many challenges, one of which is operating in a dual economy that relies heavily on oil and gas revenues. The inability of the manufacturing sector’s contribution to Trinidad and Tobago’s GDP, to move beyond 9% for the past ten years indicates stagnation. This is the result of several factors, including poor policy infrastructure and too many bureaucratic procedures that cause delays or bottlenecks.
Bureaucratic agencies and procedures Manufacturers are critical of the regulatory bodies that support the trading environment, because of their recurring inability to function efficiently and effectively.
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by The Trinidad and Tobago Manufacturers’ Association
A number of agencies play key roles in fostering an enabling environment, but they are plagued by a lack of human and financial resources, and lack of access to technological advances, which can result in delays in trading both locally and internationally. Another concern of local producers is the growth of illicit trade, which has a negative impact on local manufacturing. Every year, more goods and brands are affected, from consumer products – including electronics, apparel and alcoholic beverages – to vehicle lubricants and auto parts. This undermines legitimate manufacturers, as illicit goods are cheaper on the local market. Most of the illicit traders do not pay the correct duties, and if goods are smuggled in, they do not pay any duties at all. In some instances goods do not meet national standards, and in others they do not even have free sale certificates in their countries of origin.
Agencies are plagued by the lack of human and financial resources, and lack of access to technological advances, which can result in delays in trading both locally and internationally Improving industrial relations According to local producers, labour force issues are also affecting the manufacturing sector. For example, when job openings are not filled and the work force lacks the skill sets that the market needs, manufacturers cannot maintain or increase production levels to satisfy customer demand. The fragile industrial climate of Trinidad and Tobago along with the uncertain relations between employers and employees, has had a negative impact on the manufacturing sector and the overall economy. Additionally, local companies face considerable barriers to trade when exporting. The lack of market intelligence, lengthy registration procedures, and onerous labelling requirements, are some of the major concerns for firms which aim to become net foreign exchange earners and fully contribute to the local economy.
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Resilient manufacturing In spite of these challenges, there are real opportunities in the manufacturing sector. The food and beverage sub-sector, for example, is dynamic and innovative. In 2018, a 5.6% increase in food, beverage and tobacco production demonstrated its continued growth. There are also opportunities in chemicals, printing and packaging, and construction. In order for these opportunities to advance, however, a resilient, sustainable manufacturing environment needs to be developed. Certain strategic initiatives are required:
A resilient, sustainable manufacturing environment needs to be developed The bottom line Every economic sector faces challenges, and the manufacturing sector is no exception. The TTMA believes that the way in which the challenges of the manufacturing sector are addressed holds the key to progress. The above recommendations can go a long way in building a future sustainable economy and contributing to economic growth.
• a globally competitive regulatory framework • improved performance by government processes • a supportive international trade position. Other key prerequisites for success include: • the development of a science, technology and innovation policy which promotes local manufacturing • promotion of innovative/technological entrepreneurship • adoption of an education and workforce policy that develops superior talent • furtherance of economic diversification strategies • more collaboration between manufacturers and universities.
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Creativity
Empowering our artists The creative sector was identified by Trinidad and Tobago as a priority sector for growth in 2011. What has it achieved since then, and how far does it still have to go to become a viable contributor to GDP? by Keith Nurse Senior Fellow and WTO Chair Sir Arthur Lewis Institute of Social and Economic Studies, The University of the West Indies Alicia Shepherd Sir Arthur Lewis Institute of Social and Economic Studies, The University of the West Indies
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he Caribbean region is by no means short of globally recognisable artists; and for decades now Trinidad and Tobago has stood out as one of the region’s major artistic sources, with the likes of Michel-Jean Cazabon, Sir Vidia S Naipaul, Sparrow, Geoffrey Holder, Boscoe Holder, Billy Ocean, Peter Minshall, Heather Headley, Nicki Minaj, Meiling, Bunji Garlin, and Machel Montano. These artists have generated global reach beyond what the country’s size would suggest. And in recent times, new digital, mobile and internet technologies have offered creatives alternative business models and markets, creating the space for new areas of employment such as animation and gaming.
Growth of the sector In recognition of the industries’ vast potential, Caribbean governments have recently begun to carve out strategic pathways to develop the industries with the aim of diversifying their economies
By way of contributions to GDP, exports, employment and intellectual property earnings, the cultural/creative industries, even amidst global economic setbacks, continue to outperform most other sectors in Caribbean economies. In tandem with other key stakeholders, and in recognition of the industries’ vast potential, Caribbean governments have recently begun to carve out strategic pathways to develop the industries with the aim of diversifying their economies. The government of Trinidad and Tobago, for example, in 2010 highlighted the creative industries as growth poles in its quest for “consensus building, advanced social and economic prosperity and sustainability, and successful diversification” (GORTT 2011).
Capturing carnival’s contribution The country’s carnival activities, for instance, generate on average about 12% of arrivals and visitor expenditures on an annual basis, a spectacular return on investment considering its official events span a three-week period. Its impact on other sectors such as media, retail, food and beverage, and ground Striking design from the Lush
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transport are also quite significant. In 2017, the estimated total visitor expenditure was measured at US$50 million.
The country’s carnival activities, for instance, generate on average about 12% of arrivals and visitor expenditures on an annual basis It can be argued that through their synergistic relationships with other sectors in the local economy, the creative industries rank among the top revenue earners in Trinidad and Tobago. In 2006, the music industry was reported as having earned US$28.2 million and employed some 5,500 people. In film, between 2007 and 2016, foreign filming on the island contributed some TT$37 million.
Going forward, there is need for governmental agencies to monitor and evaluate existing policies and support mechanisms, and to allocate greater capital investment There has also been growth in the festivals sector (e.g. the Bocas Literary Festival, the Trinidad and Tobago Film Festival, Animae Caribe) and in the export expansion of some sectors, particularly mas (carnival), fashion, music, animation and film. Export facilitation by way of entities such as CreativeTT, exporTT, TTBizLink, the drafting of a national cultural policy, and the Cariforum-EU Economic Partnership Agreement (EPA) also create valuable space for industry expansion.
Trade flows
Outlook
According to the Minister of Planning and Development, Camille Robinson-Regis, the internet technology sector, which has significant influence in the creative industries, has the potential to surpass its present contribution to GDP of TT$5.5 billion (CreativeTT, Trinidad Guardian 2018). Invariably, the spend in these and other creative industries doesn’t capture the synergistic impact of intellectual property branding and destination branding. On closer examination of trade flows, however, Trinidad and Tobago is found to have a substantial and widening trade deficit in cultural goods. We import more than we export. Trade in services (e.g. live performances, tours, concerts, designers’ fees etc.) and earnings from cultural, heritage and festival tourism are the significant sources of export earnings; but unfortunately these are the areas where there is limited reporting and data capture, and so the sector is not adequately represented in national accounts. Other challenges to business development include the lack of access to fintech services and capital from the local financial sector.
Going forward, there is need for governmental agencies to monitor and evaluate existing policies and support mechanisms, allocate greater capital investment, and provide adequate and appropriate training programmes for both business start-up and business expansion. Another critical area is financial sector reform to reflect the needs of this industry. Such approaches would require the collaboration of key stakeholders, the mapping of sectoral performance, digital innovation, and the adoption of a managerial culture that prioritises improved quality and global competitiveness.
On closer examination of trade flows, however, Trinidad and Tobago is found to have a substantial and widening trade deficit in cultural goods Recommendations and next steps Nonetheless, strategies followed in previous years have yielded positive outcomes. The Copyright Music Organisation of Trinidad and Tobago (COTT), for example, has been critical in areas of revenue generation by securing royalty income for authors and composers, and in the deepening of the institutional structure of the sector. As the global cultural economy is further aligned with digital trade, the role of COTT and digital aggregators will become even more important.
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References “Businesses get $3.2 million for innovation”. Trinidad Guardian, May 4, 2018. Accessed August 30, 2018. http://www/guardian.co.tt/business/2018-04-15/ businesses-get-32m-innovation CreativeTT, accessed January 1, 2018. http://www.musictt.co.tt/ and http:// www.filmtt.co.tt/ Government of the Republic of Trinidad and Tobago, Ministry of Planning and the Economy, Mid-Term Policy Framework 2011-2014, Innovation for Lasting Prosperity. Accessed November 21, 2018. http://www.finance.gov.tt/ wp-content/uploads2013/11/medium-Term-Policy-Framework-2011-14.pdf
Creativity
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Agriculture and Food Security
Towards a renaissance of agriculture If there is one good thing to come from climate change, it will be a radical rethink of agriculture and agro-processing and a shift towards a “climate-smart” industry
by Steve Maximay Managing Director, Science-Based Initiatives
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ou could be forgiven for for thinking you have heard this talk about diversification before. Successive, but by no means successful, governments have touted diversification efforts, which included agriculture as part of a magical restructuring of the Trinidad and Tobago economy. Early efforts were concentrated on producing more food to offset the ever-increasing import bill and to bolster exports. Prior to the volatile food price crisis of 2008-2009, the Trinidad and Tobago government’s idea of food security revolved around “months of cover”, where the amount of foreign exchange held in the Central Bank was divided by the monthly food import bill to determine how many months of imports were achievable. Once worldwide food prices and food availability returned to less cataclysmic levels by 2010, the prioritising of substantial local production became less important. A review of agricultural trade statistics, local production data, pronouncements by officials, and the heralded benefits of diversification, is insufficient to explain the lack of success to date. It will take more than an urgent need, worthwhile individual efforts, fledgling agro-industrial enterprises, and a declining oil and gas sector to propel agriculture to equitable stature within the local economy. At the core of diversification is change, which is dependent on the production of a “positive vision of the future”, which in turn evolves when dissatisfaction with the status quo exceeds the natural human resistance to change. It is safe to conclude that, notwithstanding the work of the Vision 2020 agriculture sub-committee and other attempts at articulating a vision of a modern agricultural sector, the outlook is still less than positive.
Climate-smart agriculture Notwithstanding the work of the Vision 2020 agriculture sub-committee and other attempts at articulating a vision of a modern agricultural sector, the outlook is less than positive
Previous attempts at diversification were ostensibly driven by economic development, but the 2019 version must be circumscribed by climate concerns. Diversification will not only be about change, but about climate change. The United Nations Framework Convention on Climate Change (UNFCCC) describes economic diversification as “the process of shifting an economy away from a single income source toward multiple sources from a growing range of sectors and markets”. Traditionally, it has been applied as a strategy to encourage positive economic growth and development. In the context of climate change adaptation, diversification takes on a new relevance as a strategy to move away from vulnerable products, markets, and
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Bold New Economy
Local produce at the Arima market
jobs towards income sources that are low-emission and more climate-resilient. It is in that context that agriculture and agro-industry will continue to attract the kind of propulsion needed to attain pride of place. Adapting to climate change will necessitate the type of climate-smart agriculture that is steadily being incorporated into local agricultural efforts. The current dean of the Faculty of Food and Agriculture at The University of the West Indies, St Augustine, Dr Wayne Ganpat, understands this. In 2018 the Faculty hosted a very successful international conference on “Climate Change Impacts on Food and Nutrition Security”, showcasing the ongoing efforts of UWI and other stakeholders. There are significant, designated, international resources for industry support to make local agriculture and agro-industry more climate-resilient. On a positive note, the UNFCCC’s Green Climate Fund opened a regional office in Grenada last year. Trinidad and Tobago has yet to meaningfully engage with its team for project support.
Resource conservation The nascent local agriculture sector will be predominantly a producer of goods enhancing food security
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Pursuant to a positive vision of the future, local production efforts should be concentrated in two symbiotic streams: intensive production for nutrition security, and specialised/niche production for value-added export. One challenge which Trinidad and Tobago faces is that it does not have the land area to produce commodities for export, as Prime Minister Dr Keith Rowley reminded us in 2018. There is not enough land for agriculture to compete successfully on the global stage. Therefore the nascent local agriculture sector will be predominantly a producer of goods enhancing food security, with a significant trade in services. The future agriculture sector will include intensified crop and livestock production which will require rationalised use of land, water, energy, and other inputs produced by using fossil fuels. Practitioners will increasingly need to monitor resource conservation, safety, biodiversity support, and greenhouse gas emissions. The major production of carbohydrates will be via root crops that feed into the processing industries. The preponderance of animal protein will be sourced from small ruminants including neo-tropicals, pigs and poultry. Refitted grain legume and vegetable production, using layered and vertical multi-crop systems,
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Agriculture and Food Security will provide the protein and vitamin components of the nutrition security project.
The devastating floods of 2018 and other challenges including praedial larceny and land availability will make businessas-usual a very costly option Skill-sets There is an expanding reservoir of technical expertise to service the climate-smart agriculture required for the future. There are internationally recognised experts based in Trinidad and Tobago. Prominent examples are: Erle Rahaman-Noronha of Wa Samaki Ecosystems, Alpha Sennon of Whyfarm, and Wendy Lee Yuen of El Carmen Estate. Climate change impacts will provide the external stimuli needed for the agriculture sector’s realignment. In addition, Trinidad and Tobago is likely to move forward if there is an articulated, attainable vision for the sector. The devastating floods of 2018 and other challenges including praedial larceny and land availability will make business-as-usual a very costly option.
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Blueprint for a Bold New Economy
The challenge of renewable energy Depleting oil and gas resources, and a 79% growth in Trinidad and Tobago’s carbon footprint: these alone should provide enough impetus to resolve the many problems associated with renewable energy and energy efficiency by Dr Zaffar Khan Programme Director UWI-Arthur Lok Jack Global School of Business Atiyyah A. Khan Energy Consultant Econsultants Limited
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or fifteen years, Trinidad and Tobago has been adversely affected by natural gas curtailment issues, despite recent increased production resulting from attractive capital allowances in the oil and gas fiscal regime. In addition, the recently signed MOU with Venezuela for the supply of natural gas has its risks and challenges, especially in terms of security of supply and regional geopolitical considerations.
Fig. 1: Trinidad and Tobago’s high energy consumption per capita in kilograms of oil equivalent in comparison to other countries
Nations using the most energy 9,707
United Arab Emirates
9,566
Kuwait
8,553
Trinidad and Tobago
8,240
Canada
7,843
United States
7,204
Finland Sweden
5,754
Belgium
5,701
Australia
5,668
Saudi Arabia
5,607 Source: Ugursal 2011; Wall Street Journal 2013
Trinidad and Tobago’s low electricity cost of US$0.06/kWh in some cases is at least ten times cheaper than other Caribbean and Latin American countries
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Trinidad and Tobago has the third highest energy consumption per capita in kilograms of oil equivalent in the world (Figure 1), and currently uses natural gas to generate most of its electricity. While natural gas is the cleanest of all the fossil fuels, it emits atmospheric greenhouse gases. This, coupled with the CO2 emissions from the transport sector, has led to a 79% growth in our local carbon footprint (Figure 2).
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Renewable Energy
Fig. 2: Estimated levels of carbon emissions (million metric tonnes) from Trinidad and Tobago’s transport sector, 2002-08
2.4 2.31
2.13
2.15
2.0 1.97
1.76 1.67
1.6
Jan ‘04
Jan ‘06
Jan ‘08
Source: US Energy Information Administration 2013
It is therefore essential for Trinidad and Tobago to urgently increase its use of renewable energy (RE) and develop its energy efficiency (EE) initiatives. These will provide the following benefits: • lower levels of energy consumption, resulting in lower energy bills for residential, commercial and industrial consumers, which can improve the reliability of the electricity generation, transmission and distribution system • reduced need for investment in new power generation infrastructure • new employment opportunities, from research and development to manufacturing. Fig. 3: Comparison between Trinidad and Tobago and other developing nations in terms of trends between GDP growth per capita and carbon intensity growth
3.5
42,000
25.0 22.5
2.10
Trinidad and Tobago has increased its carbon footprint by 79% because both its GDP per capita and its carbon intensity have increased.
15.0 12.5
Trinidad and Tobago
Developing countries
16,800 12,600 8,400
0.70
4,200
0.35
GDP per capita PPP US$
Carbon intensity of growth CO2 emissions per unit of GDP Kt CO2 per million 2000 PPP US$)
CO2 emissions refer to energyrelated emissions. Emissions from deforestation are not included.
2.5
Developing countries have increased their carbon footprint by 41.2% because its GDP per capita has increased faster than its carbon intensity has decreased.
Carbon footprint CO2 emissions per capita (t CO2)
Source: United Nations Development Programme 2013
Barriers to RE and EE development Despite its many benefits, the implementation of local RE and EE initiatives is challenging. The sector is hampered by several barriers (Figure 3): • • • • • •
high capital and transaction costs the low price of electricity and fuel as a result of energy subsidies inability to implement appropriate legislation and regulations limited government support via fiscal incentives lack of public awareness limited access to EE technologies and measures
Source: UN Advisory Group on Energy and Climate Change 2010
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These obstacles increase the financial risks associated with RE and EE investments. Fig. 4: Barriers to renewable energy and energy efficiency in Trinidad and Tobago Natural conditions
Technical
Technological constraints Infrastructure Price/cost
Economic
Financial aspects
Barriers
Market failure/distortion Policy
Political
Institutional capacity Regulatory Consumer behaviour/awareness
Social
Interaction networks Cultural Psychological/moral
Subsidised fuel and electricity prices Trinidad and Tobago’s low electricity cost of US$0.06/kWh in some cases is at least ten times cheaper than other Caribbean and Latin American countries (Figure 5). This acts as an enormous disincentive to the development and utilisation of RE and EE mechanisms locally, making it uneconomical for RE and EE to penetrate the local energy market.
0.7
0.4
0
Source: Shirley et al. 2013
Culture, education, and lack of awareness Popular attitudes towards energy, and its resultant wasteful use, have stemmed from its low cost. This, along with lack of education, supports a culture of “wastage and inefficient use of the natural gas that generates our
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Tackling the issues These issues can be addressed through several measures: policy, legislation and regulation; standards; and mandated fiscal incentives and financing institutional capacity strengthening. The 1994 United Nations Framework Convention on Climate Change (UNFCCC) and the 1997 Kyoto Protocol were developed to enable member countries to reduce their greenhouse gas (GHG) emissions and in turn decrease atmospheric GHG concentrations. Trinidad and Tobago is a ratified signatory under both of these mechanisms as a non-Annex 1 country: it is not obligated to reduce its emissions, but can do so on a voluntary basis. A number of fiscal incentives (see sidebar) were introduced in the 2010-11 and 2011-12 national budgets, in an effort to promote alternative energy use and EE. A number of these incentives required revisions to the Customs Act, the Income Tax Act and the VAT Act (Energy Chamber of Trinidad and Tobago 2011).
RE policy In 2011, a draft RE policy was formulated, which recommended the implementation of various initiatives and fiscal incentives to promote the use of RE and increase EE locally. The framework also set a target of producing 5% or 60MW of the country’s peak electricity supply from RE sources.
Climate change policy A draft climate change policy document was prepared and discussed at public consultations before finalisation. This covered GHG emission reduction via RE use and EE measures.
Carbon emission reduction framework The Ministry of Planning and Development, UNDP and Factor CO2 consultants will embark on the formulation of a draft policy to address CO2 emissions from our power generation, industrial and transportation sectors. The consultants will conduct policy reviews, design business-as-usual (BAU) emission trajectories, recognise low CO2 opportunities, and devise low CO2 scenarios for possible implementation.
Trin ida d Bel ize St Luc i Jam a aic a Bar The bado s Ba ham as St Vin cen t An gu illa Gre nad a Cu rac a o Do min Ca ym ica an Isla nd An s tig ua Ber mu da
Avg. domestic electricity tariff ($US/kWh)
Fig. 5: Comparison of electricity tariffs among various Caribbean islands
electricity” (Energy Chamber of Trinidad and Tobago 2013), which is hostile to EE and must change.
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EE policy The National Energy Corporation of Trinidad and Tobago has been mandated by the government to produce a draft EE policy targeting industrial plants within the Point Lisas Industrial Estate. The UWI-Arthur Lok Jack Global School of Business offers an MBA in sustainable energy management, the only one of its kind in the Caribbean. It allows students to contribute to the successful “planning, execution and monitoring” of energy projects and organisations. It establishes a framework for the economic diversification
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Renewable Energy
Trinidad & Tobago’s fiscal incentives for energy efficiency and renewable energy Solar energy incentives included: • • • • •
How long does it take to get serious about solar energy?
Wind energy incentives included:
and development of regional clusters, particularly in the context of reduced dependence on oil and gas revenues (ALJGSB 2012).
• • •
Recommendations to improve EE
•
There are plenty of low-hanging fruit which could improve local EE in the power generation, residential, petrochemical, transportation and manufacturing sectors (Energy Chamber of Trinidad and Tobago 2013).
• • •
In the area of power generation, for example, we can: improve the efficiency of existing power generation improve operational efficiency enable open access to the grid by RE generators reduce emissions improve efficiency of LNG production implement energy-saving opportunities and standards.
import duty reduced to 0% on imports of wind turbines and related equipment 0% VAT rating on wind turbines 150% wear and tear allowance on the cost of wind turbines and supporting equipment wear and tear allowance of 150% on equipment used to manufacture wind turbines
Energy efficiency incentives included:
Popular attitudes toward energy, and its resultant wasteful use, have stemmed from its low costs • • • • • •
import duty reduced to 0% on regional imports of solar water heaters (SWHs) 0% VAT rating on SWHs 25% tax allowance on the value of SWHs up to a maximum of $10,000 150% wear and tear allowance on the cost of SWHs 150% wear and tear allowance on plant, machinery and equipment used to manufacture SWHs and solar photovoltaics (SPVs)
• • • • • •
150% tax allowance on the cost of commissioning energy audits and the design and installation of energysaving systems accelerated depreciation of 75% on acquisition of smart energy-efficient systems 25% wear and tear allowance on plant, machinery and equipment acquisition
greater petroleum product exports lowered dependence on petroleum imports increased employment opportunities compliance with COP 21 ratifications crucial support for national development technological progress.
In the area of residential buildings, we can: • implement electricity quotas: design homes to be more energy-efficient and to use less electricity • improve the efficiency of existing households, reducing electricity consumption.
Future initiatives for RE and EE must address issues related to feed-in tariffs, net metering, grid capacity, infrastructure issues, and safety considerations
Future initiatives for both RE and EE must address issues related to feed-in tariffs, net metering, grid capacity, and infrastructure, as well as safety considerations.
The benefits Implementing these recommendations will benefit Trinidad and Tobago in many ways, by creating: • increased energy security • climate change mitigation • conservation of domestic hydrocarbon supply
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InvesTT
Attracting the investor When it comes to inward investment, whether for export or not, InvesTT is the key support agency to deal with
by Joel Henry Writer/Freelance journalist
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For those who understand the needs of the economy, something exciting is happening
Opportunities are abounding right now and will continue over the next two decades
n 2015, the US business process outsourcing giant iQor opened a contact centre in Trinidad and Tobago. The investment brought in US$4 million and created hundreds of jobs at its local headquarters in the Tamana InTech Park. New investment, new industry, new employment and foreign exchange – the deal was a major success for policymakers and facilitating agencies such as InvesTT, and for the country itself. But what’s better than a success story? A successful second act. In 2017 iQor re-invested, opening another contact centre (this time in Barataria) and employing hundreds more. In total the company has invested well over US$7 million and employed up to 700 people. The iQor investment is only one of many. News briefs on foreign investment and the exploits of state agencies tend not to hold the public’s attention, but for those who understand the needs of the economy, something exciting is happening. Trinidad and Tobago, after much groundwork, is becoming recognised as a fabulous destination for investment. “There is a lot of interest in Trinidad and Tobago,” says Christopher Lewis, president of InvesTT. “We closed eight investments for the fiscal year. Our target was four.” Lewis puts the value of the investments at US$180 million, which is impressive, but their true worth goes well beyond that. Locked in dependency on its energy sector for many years, the country has been seeking ways to develop new industries and diversify the economy. It is the role of state agencies such as InvesTT, created in 2012, to facilitate that process. Success has been limited. But the times appear to be changing. “Opportunities are abounding right now and will continue over the next two decades,” says John Hadad, co-CEO of the HADCO Group. HADCO has partnered with businessman Paul Gabriel on a multi-million-dollar ice cream manufacturing venture, Creamery Novelties, which includes a TT$35 million plant. “HADCO has opportunities coming at us every single day. I would unequivocally recommend Trinidad and Tobago as an investment destination.”
The role of InvesTT As analysts will point out, the country has been an attractive destination for investment for some time. Among its standout features are its low energy cost, a well-educated labour force, strategic location (near the US, Canada, Latin America and Europe, and just outside the main hurricane belt), relatively strong
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COURTESY INVESTT
Blueprint for a Bold New Economy
industrial base and infrastructure, stable government, and an enticing culture. At heart, Trinidad and Tobago’s problem with attracting foreign investment is that, outside the energy sector, the country hasn’t been spending a great deal of effort looking for it. This legacy manifests itself in the bureaucratic hurdles to doing business. “Inefficient government bureaucracy” is listed as one of the most problematic elements of doing business in Trinidad and Tobago in the World Economic Forum in the Global Competitiveness Report. Flagship building, Tamana InTech Park
The problem with attracting foreign investment is that the country hasn’t been spending a great deal of effort looking for it “From an investment point of view it is challenging,” says Ashley Parasram, founder of Trinidad and Tobago Fine Cocoa Company (TTFCC), a bean-to-bar chocolate manufacturer headquartered in Piarco. “But I think people are aware of the challenges and working to address them.” Being the bridge between the investor and the many offices of the state is one of InvesTT’s most important functions. “That’s one of the main reasons investors come to us,” says Christopher Lewis. “We help them navigate
InvesTT’s investment picks
Where does InvesTT see strong investment potential? ➤ Maritime services “Transshipment has been big for us,” says Christopher Lewis. “One investment that we closed this fiscal was with Transocean for a cold stacking (parking of merchant vessels and oil rigs) concern.” ➤ Tourism “We have had major strides in tourism in Tobago, and now we are trying to bring Trinidad on board.” ● ➤ High-value manufacturing “A study was conducted on our behalf by PriceWaterhouseCoopers and investment briefs were prepared on various sectors … LED manufacturing, battery energy storage, aluminium recycling.” ● ➤ ICT/IT-enabled services “ICT is a strategic sector for us because with the advances in technology we cannot afford to be left behind. So we make a special emphasis on trying to increase the ICT capacity of the country through the types of investment we pursue.” ● ➤ What do investors want to do? “You never know where potential investors will come from. They may be in a totally different sector, and we will judge that on its merits.”
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the bureaucratic path.” InvesTT helped TTFCC in its pre-launch phase, providing vital information on the market and procedures for setting up business in Trinidad and Tobago; it introduced them to key players in relevant agencies and operated as their guide.
Engaging the diaspora TTFCC is a particularly interesting venture because it was founded by a member of the diaspora. Ashley Parasram is a Trinidadian who has lived in the UK since childhood. And although the chocolate manufacturer is a business concern, he is also guided by the urge to resuscitate the country’s cocoa industry and contribute to national development. “Attracting inward investment from the diaspora and its networks is where I see the future to be. Those networks are like gold sitting there,” he says, adding that, despite the challenges of establishing a new business, “I am definitely enjoying the fact that if I wanted to, I could get to a beach very quickly.” InvesTT and its sister agencies exporTT and CreativeTT are very aware of the potential of the diaspora. In February 2018, InvesTT launched “iloveTT”, an initiative to engage the diaspora, beginning with an online survey for citizens based outside the country.
Attracting inward investment from the diaspora and its network is where I see the future to be “We have built up a database of about 600-plus diaspora members,” says Lewis. “That’s InvesTT alone. By the time we add exporTT and CreativeTT, we hope we will have about 1,000 names.” So far InvesTT has received over 382 responses to its diaspora survey, 92% of which expressed interest in receiving more information. Another 32% were interested in trading with Trinidad and Tobago, and 23% in investing. At the time of this writing, Lewis and his counterparts at the other agencies were planning a webinar with diaspora members for February 2019, following a successful event in 2018 at which they were able to obtain qualitative information on diaspora interests.
InvesTT
Christopher Lewis President, InvesTT
What an investor can expect “Currently we have an investor interested in a BPO (business process outsourcing project),” says InvesTT president Christopher Lewis. “They reached out to us. We sent them information relevant to the sector first, before they arrived – salary range, locations of people seeking work in the BPO field, commute times, rental costs for setting up operations. If or when they come, we meet and greet them at the airport, and facilitate their entry with Immigration. We arrange transportation. We take them to two or three potential sites, based on their requirements. Depending on the length of their stay, we will introduce them to key people – maybe in Town and Country Planning, the Ministry of Trade and Industry, and so forth. And we will of course follow up afterwards. There may be supplementary information that they need.”
Lewis sees great potential in this initiative. “They know Trinidad and Tobago, and generally they are predisposed to assist. They are a skilled diaspora, skilled and well connected.”
Potential “Potential” is a word that comes up often in conversation, both with InvesTT and investors themselves. There’s a fresh energy and enthusiasm for the prospects of the nonenergy sector. The InvesTT president is quick to point out that securing new investment takes time, often up to two or three years. Some of the gains being realised today are the result of efforts started years ago. But he is confident that much more can be achieved. “We are a small team but we are very impactful,” he says. “Our people are talented and have good relationships with the ministries and other agencies. We play a critical role.” And they are selling a valuable product, world class.
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State of the Nation
Economic outlook Latin America and the Caribbean
The domestic landscape
The year 2019 is poised to be a better one for the Latin American economy, after a tough 2018 characterised by a chaotic election cycle, a decline in emerging market assets, and a U-turn towards global protectionism. Regional growth (excluding Venezuela) is projected at 1.7% in 2019, 2.4% in 2020 and 2.5% in 2021. An improved labour market, reduced political noise, and the faded impact of the truckers’ strike in Brazil will chiefly fuel the region’s acceleration. To a lesser extent, faster economic growth in Chile and Peru will boost regional growth. The acceleration of growth in 2019 will be supported mainly by a rise in private consumption. Investment growth will accelerate, but at a slower pace in view of tight financing conditions and planned reductions in public spending across a number of countries. Decelerating global trade will also limit export growth during the forecast period. In the Caribbean, financing conditions have tightened against the backdrop of rising US interest rates, dollar appreciation, and weaker investor sentiment towards emerging market and developing economies (EMDEs). The region experienced a fall in equity prices and capital inflows, particularly bond flows, through the third quarter of 2018.
In September 2018, the International Monetary Fund (IMF) said it expected the Trinidad and Tobago economy to slowly recover from a deep recession, underpinned by a strong recovery in gas production. On the other hand, weak activity in construction, financial services and trade, along with foreign exchange shortages and the slow pace of public investment, continue to dampen non-energy sector growth. The IMF forecast Trinidad and Tobago’s growth in 2018 at 1.0%, up from a contraction of 2.6% in 2017, and 2019 growth of 0.9% (see Table 2).
Regional growth (excluding Venezuela) is projected at 1.7% in 2019, 2.4% in 2020 and 2.5% in 2021 Table 1: Latin America and the Caribbean — real GDP growth at market prices (%)
Projected
2017
2018
2019
2020
Latin America
0.8%
0.6%
1.7%
2.4%
Caribbean
3.4%
4.4%
4.0%
4.0%
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2017
2018
2019
IMF
-2.6%
1.0%
0.9%
Global outlook According to the World Bank, global economic growth is projected to soften from 3.0% in 2018 (revised downwards to 2.9% in 2019). International trade and manufacturing activity have also softened, while trade tensions remain elevated and some large emerging markets have experienced substantial financial market pressures.
Economic growth rates 2018-2019 (%)
Current account deficits have widened in most commodityexporting and commodity-importing economies. Several Caribbean economies which were not significantly damaged by hurricanes in 2017 registered narrowing deficits or widening surpluses as a share of GDP in 2018 due to strong tourism inflows and rising oil prices (e.g. The Bahamas, Belize, St Vincent and the Grenadines, and Trinidad and Tobago).
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Real GDP growth forecast
Table 3: Global growth rates
Growth among advanced economies is predicted to drop to 2% in 2019
Year-end
Table 2: Trinidad and Tobago growth (IMF forecast)
2018
2019
3.0
2.9
Growth among advanced economies is predicted to drop to 2% in 2019. Slowing external demand, rising borrowing costs, and persistent policy uncertainties are expected to weigh on the outlook for emerging market and developing economies.
Rest of the world The IMF maintained its US growth forecast at 2.5% and China at 6.2%; but lowered the euro-area outlook to 1.6% from 1.9%, and boosted Japan’s outlook to 1.1% from 0.9%. The Economist Intelligence Unit (EIU), however, revised its forecast in light of the impasse over the Brexit withdrawal agreement. With the possibility of a second referendum, it is predicted that a “no deal” Brexit is a less likely scenario. The US-China trade war has begun to weigh on Germany’s economy, with both exports and imports struggling in November 2018. Industrial production contracted in November, and as a result the 2019 real GDP forecast for Germany has been revised downwards from 1.6% to 1.2%. The euro zone as a whole is expected to expand by
METAMORWORKS/SHUTTERSTOCK.COM
Economic Outlook
1.5% in 2019, down from 1.7% as previously forecast. Fluctuations in global oil prices in 2018 have led to the revision of our local oil price forecast. Prices of Brent crude (from the North Sea between the UK and Norway) are expected to ease from US$71.1/barrel in 2018 to US$66/barrel in 2019 (the previous forecast was US$70/ barrel), owing to greater than expected supplies from Iran and weaker demand growth. We expect oil prices to slump further in 2020, to an average of US$60.5/barrel (from the US$67.5/barrel previously forecast for 2020). South Asia is set to remain relatively insulated from some of these global uncertainties, and will retain its top spot as the world’s fastest-growing region in 2019. However, the deceleration in commodity exports will stall economic growth at a weaker-than-expected 4.2% this year in the South Asian region.
FDI
References “Expectations for Latin America’s Economy in 2019: Economic Forecasts from the World’s Leading Economists.” Focus Economics, 18 December 2018, www.focus-economics.com/blog/expectations-for-latin-americaseconomy-in-2019. “Trinidad & Tobago Holds Rate, Slack Growth, Low Inflation.” Central Bank News, 28 December 2018, www.centralbanknews.info/2018/12/trinidadtobago-holds-rate-slack-growth.html. “Darkening Prospects: Global Economy to Slow to 2.9 Percent in 2019 as Trade, Investment Weaken”. World Bank, January 2019. www.worldbank. org/en/news/press-release/2019/01/08/darkening-prospects-globaleconomy-to-slow-to-29-percent-in-2019-as-trade-investment-weaken. Country Forecast – Global Outlook. The Economist Intelligence Unit, 13 January 2019.
According to the United Nations Conference on Trade and Development (UNCTAD), inflows of global foreign direct investment (FDI) continued their decline in 2018, following a 23% decrease in 2017 from the previous year, with a 41% decrease estimated for the first half of 2018.
In September 2018 the International Monetary Fund (IMF) said it expected the Trinidad and Tobago economy to slowly recover from a deep recession Following tax reforms implemented by the US government, the decline in global FDI in developed countries was mainly due to large repatriations of foreign earnings from affiliates of the US.
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State of the Nation
Energy update ➤ Figure 1 shows that the top 3 oil producers have remained unchanged from Q3 2017 to Q3 2018. It is important to note that, for the same period, Trinidad and Tobago was actually a net importer of crude oil, as shown in Figure 2.
Fig. 1: Top oil producers (avg. bopd) 20,511
Q3 2017
Trinmar
17,137 11,820
11,592
Petrotrin
Perenco
Q3 2018
Trinmar
11,984
10,219
Petrotrin
Perenco
Fig. 2: Imports vs exports of crude oil (bbls) 7,218,718
7,752,250
1,881,494
1,987,342
Q3
Q3
2018
2017
Imports ➤ As can be seen in Figure 1, when comparing Q3 data from 2017 and 2018, between the top three producers there was an average decline in oil production of 10.43%. Over the same time period there was an average 8.28% increase in natural gas output (Figure 4). Figure 3 also shows that the LNG sector continues to be the major user of natural gas locally, accounting for almost 56% of total production.
Imports
Exports
Fig. 3: Natural gas utilisation by sector Q3 2018 (avg. mmscf/d)
Fig. 4: Top local natural gas producers Q3 (avg. mmscf/d)
LNG (1,817) Ammonia (547) Methanol (444) 3,269
1,993
Q3 2017
Other (109)
BPTT
513
527
Shell
EOG
531
474
Shell
EOG
1,974
Power (257) Refinery (96)
Exports
Q3 2018
BPTT
Source: MEEI Consolidated Report 2017 & 2018
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ILLUSTRATIONS (ICONS): THE NOUN PROJECT
Local crude oil and natural gas production and usage
Energy Update
A comparison of Q3 2017 and Q3 2018 production and export levels for energy and downstream products Natural gas production (mmscf/d)
Q3 2017 Q3 2018
Crude oil condensate production (bopd) 80
4 Thousands
➤ A comparison between Q3 2017 and Q3 2018 shows that monthly natural gas production levels improved, with the exception of September 2018 where production levels declined drastically
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3
➤ Downstream products on average show decreases in production levels in Q3 2018
July
August
September
0
August
September
Ammonia export (mega tonnes)
Ammonia production (mega tonnes)
➤ Crude oil production shows a downward trend in Q3 2018
July
500
Thousands
450
400
250
350
0
July
August
September
July
600
500
Thousands
September
Methanol exports (mega tonnes)
Methanol production (mega tonnes)
300 300
0
0
July
August
September
July
70
August
September
Urea exports (mega tonnes)
Urea production (mega tonnes)
Thousands
August
90
50 40
0
0
July
August
September
July
August
September
Source: MEEI Consolidated Report 2017 & 2018
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The Chamber and Its Members
Welcome, new members! The Chamber extends a very warm welcome to companies and individuals who have become members in recent months
MCS Software Limited 91 Cascade Road Cascade 627-0114 kent@mcssoftware.biz
Dr John Gedeon
Jieovane Investments Limited O’Meara South Main Road Arima 725-2929
HR Management made simple.
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COURTESY SIMONE ANDREWS
Maracas St Joseph 764-8113
chamber.org.tt chamber.org.tt/CONTACT-MAGAZINE
March 2019
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