Share the article
twitter-iconcopy-link-iconprint-icon
share-icon
DatabankJuly 1 2014

Trinidad and Tobago's maritime solution

Trinidad and Tobago has much to do to improve its business climate in the non-energy sector, but the Caribbean country already has ambitious plans, which include developing its maritime economy.
Share the article
twitter-iconcopy-link-iconprint-icon
share-icon
Trinidad and Tobago's maritime solution

The latest World Bank Doing Business report is not particularly flattering towards Trinidad and Tobago. The country slipped three places to 66th position overall in the 2014 ranking, mainly because of indicators such as the availability of credit information, administrative burden of paying taxes and dealing with construction permits, all of which dropped three or four points.

Other factors, however, improved in the Doing Business ranking, such as the ease of starting a business, which ranks better than it did in 2013, in 67th place up from 71st, helped by the reduction in the time it takes to open a business, from three days to one. Trinidad and Tobago’s minister of trade, industry and investment, Vasant Bharath, says of the work done to reduce bureaucracy: “We’re working hand in hand with the World Bank to ensure that we remove a lot of the bureaucratic obstacles. At the same time, we are putting in place the legislation that will allow [business] sectors to thrive once investors come in."

“Last year, both Scotiabank and Royal Bank of Canada wanted to put some of their back-office functions in Trinidad. We were able to go to parliament and change pieces of legislation – for example value-added tax legislation, the Free Zones Act and the Corporation Tax Act – to allow the benefits to accrue to these organisations,” says Mr Bharath.

Facilitating investment

The Inter-American Development Bank (IADB) acknowledges the government’s efforts and, through loan facilities, it also supports the development of outsourcing centres not related to the energy sector in the country. Michelle Cross Fenty, the IADB’s representative in Trinidad and Tobago, says: “The government is on the right track by making efforts to attract foreign investment in non-energy services. It is looking not just at foreign investors, but also the development of home-grown industries that can then go on to export.”

Much more has to be done, however, as the bulk of foreign direct investment (FDI) into Trinidad and Tobago is still directed at energy-related businesses, according to the IADB. The bank calculated that inward net foreign investment is equivalent to about 7% of gross domestic product over the seven years to the end of 2013. Greenfield investment database fDi Markets estimates that total FDI to Trinidad and Tobago between January 2003 and April this year amounts to $6.76bn, with 13 out of a total of 41 projects related to energy (with the remaining a miscellany of investment into business services, financial services, metals and manufacturing, among others).

While Trinidad and Tobago is considered one of the best countries in the world for oil and gas production because of its political stability and long tradition of collaboration with oil majors, the situation is not true of other sectors. Manufacturing and retail businesses, for example, complain that security and judicial challenges affect the business climate, according to the IADB, which also notes that the government is taking these challenges seriously. The bank warns that labour productivity in non-energy must also improve.

Maritime push

One initiative likely to accelerate the diversification of the country’s economy, besides the development of its international financial centre, is the development of its maritime sector. Trinidad and Tobago’s geographic location offers shelter from natural disasters, such as hurricanes and earthquakes that affect other Caribbean countries. “This presents us with a great opportunity to encourage the maritime sector,” says Mr Bharath.

“Also, because of our geographical location, we have several thousand ship voyages taking place just 20 to 25 nautical miles off our coast,” he adds. “Many of those ships never stop in Trinidad and Tobago – they are on their way to Brazil or other parts of South and Central America. What we want to do is to encourage those vessels to either stop off in Trinidad and Tobago as a trans-shipment port or for dry-docking facilities.”

The soon-to-be-completed extension of the Panama Canal also offers opportunities that the Caribbean country is keen to take advantage of, such as creating facilities to serve the significantly larger vessels that can traverse the new canal. “Many of those vessels will have to go back to Asia for servicing and, in many instances, the cost of fuel outweighs the cost of the repair,” says Mr Bharath. “So we feel that we are very strategically located to take advantage of that new industry.”

There are high hopes for such initiatives. Antonio Alves, head of short-term finance at the World Bank’s International Finance Corporation, believes this would be a turning point for Trinidad and Tobago. Furthermore, the development of ports would very likely benefit the country’s exports and international trade too, he says.

But in a highly competitive and globalised market, there is a feeling that the country needs to focus on sectors and expertise where it has a clear lead – whether this concerns physical goods or technical expertise. “Manufacturing is a sector where Trinidad and Tobago has an advantage in the Caribbean, but when you’re competing with China or Thailand, where cost of labour is so different, you have to look at areas where your particular skill-set adds value,” says Anya Schnoor, Scotiabank’s chief executive in the country.

“Manufacturers here that have done well are in beverages [specific brands for children, for example], and manufacturing that supports oil and gas,” adds Ms Schnoor. “Suriname, Guyana and even Colombia are now getting into offshore drilling, [something that] Trinidad and Tobago has been doing for years. We can take the technology we’ve developed and local know-how, and sell it.”

Trinidad and Tobago FDI flows

Was this article helpful?

Thank you for your feedback!

Silvia Pavoni is editor in chief of The Banker. Silvia also serves as an advisory board member for the Women of the Future Programme and for the European Risk Management Council, and is part of the London council of non-profit WILL, Women in Leadership in Latin America. In 2019, she was awarded an honorary fellowship by City University of London.
Read more articles from this author