Diversification of Trinidad and Tobago's industries focuses on earning foreign exchange


The economic downturn of recent years has served to strengthen calls for diversification beyond the energy sector in Trinidad and Tobago, with manufacturing often singled out as a potential driver of the economy. In his 2018 mid-year budget review, Colm Imbert, the minister of finance, indicated that the economy was on the mend, with the turnaround being heralded by “economic expansion in both the energy and non-energy sectors”. Manufacturing plays a key role in the non-energy economy, of which it is the second-largest component, according to newly classified categories recorded by the Central Statistics Office (CSO). It is also a significant employer, accounting for 8% of the active workforce as of the third quarter of that year, per the most recent central bank figures.

Reclassification of Activity

In its 2017 “Review of the Economy”, the government reported that the CSO conducted a rebasing exercise using 2012 figures, and had adopted the international standard industrial classification of businesses, revision 4 (ISIC Rev. 4) for classifying entities according to their type of economic activity. In so doing, certain entities that are involved in transformation of goods, such as liquefaction of natural gas and refining of petroleum products, which would have previously been classified within the energy sector, are now grouped within manufacturing under the subheader of “petroleum and chemical products”.

As a result, the rebased figures for the manufacturing sector for the period 2012-17 are now significantly larger than those reported over the 2010-16 period, rising by more than 10 percentage points from 7.8% in 2016 to 18.3% in 2017. This puts manufacturing second only to mining and quarrying, which contributes 19.1% to real GDP. The composition of the sector has also changed. Whereas the largest subsector under the manufacturing banner previously would have been food, beverages and tobacco, the petroleum and chemical products segment now leads the way, consistently contributing over 70% to manufacturing GDP between 2012 and 2017.

Given these significant changes in the classification of economic activity data, Roger Hosein, senior lecturer of economics at the University of West Indies questioned if some of the growth within the non-energy sector announced in the 2018 mid-year review was the result of the reclassification of activities previously accounted for under the energy sector rather than the growth of revenues from traditional non-energy manufacturing businesses. He warned that overall economic activity was still primarily oil-and gas-based and that more needed to be done to spur activity in non-hydrocarbons activities to encourage more sustainable economic growth.

Sector Indicators

Despite a wide manufacturing base, the sector’s output steadily declined from a peak of $TT31.2bn ($4.6bn) in 2014 to $TT28.2bn ($4.2bn) in 2017. The sector’s contribution to GDP followed a similar trajectory in the period between 2012 and 2017, with a dip of 3.2% expected in 2017, according to the government’s economic review of the year, though this represents an improvement from the fall of 5.5% in 2016. The overall decrease has been attributed in part to the continued effects of the economic downturn, which have resulted in subdued consumer demand in the local market.

Examination of manufacturing’s subsectors reveals projected declines in the share of GDP represented by three of the four segments in 2017, according to the state’s annual assessment. The contribution of petroleum and chemical products is expected to contract by 4.2%, though it still represents the bulk of sector activity at 12.9% of GDP. The second-largest subsector by some distance is food, beverages and tobacco products, which is due to remain largely stable, declining by just 0.1% to remain at 3.5% of GDP. The category of other manufactured products, the third-largest, is expected to see its contribution to GDP fall by 4% to 1.4%. Meanwhile, textiles, clothing, leather, wood, paper and printing, the smallest of the four, is projected at 0.4% of GDP, a 3.1% increase, following on from stable growth the preceding year. Despite the overall waning of performance, it is important to note that the manufacturing sector remains a net foreign exchange earner, and therefore represents a critical pillar in stabilising the economy.

Foreign Exhange 

Manufacturers face increasing challenges in obtaining adequate foreign exchange to satisfy obligations to foreign suppliers, which has had an impact on production and costs. According to the March 2018 Economic Bulletin published by the Central Bank of T&T (CBTT), an analysis of sales of over $20,000 showed 30.8% of the distribution going to the retail and distribution sector, while credit cards received an allocation of 29.7%. Manufacturing received only 10.9%, and companies in the automobile segment rounded off most of the remainder, receiving 7.4% of sales. This highlights a disparity in the allocation of valuable foreign exchange and has often been a point of contention between the manufacturing and retail subsectors, the latter of which has traditionally been focused on imports and distribution.

In response, the government officially launched the Export Import Bank of T&T forex facility in May 2018, which is set to assist manufacturers seeking foreign exchange to facilitate export-oriented activities. The facility has been capitalised with $100m, which is intended to help local manufacturers meet their import requirements for raw materials. To qualify for funding, firms must show that at least 30% of production is dedicated for export and agree to repatriate an appropriate sum from foreign exchange earnings. Start-ups or fledgling manufacturers with a lower level of export production but a feasible export plan will also be considered for support.

Currency Depreciation

Another key area of concern for export-oriented manufacturers continues to be the current value of the T&T dollar relative to the US dollar. Given intensified pressure in accessing foreign exchange locally, the nominal exchange rate against the US dollar was allowed to depreciate by about 7% in the second half of 2016, but it has been held steady since. The nominal exchange rate averaged $1:TT$0.148 in the year to April 2018.

The IMF Article IV consultation staff report for 2017 notes indications of the currency being overvalued and shortages of foreign exchange. The report recommends a “significant exchange rate adjustment” to assist in the restoration of competitiveness and bring benefits to the national economy in the long run. This perspective has been shared by export-oriented manufacturers locally whose operations have been affected by the loss in competitiveness due to the overvalued T&T dollar. Speaking to OBG, Mikaeel Mohammed, director and CEO of beverage manufacturer SM Jaleel, emphasised the distinction between export-oriented manufacturing as opposed to manufacturing for the domestic market. “To assist any export-based diversification thrust we must address our currency which is prohibitively overvalued, thus imposing a tax on exporters and an incentive for importers,” he said. Furthermore, he added that an increase to the cost of living was also an issue, stating that many goods are already priced at a higher rate of exchange. Currency concerns have also been expressed outside of the manufacturing sector, with Karen Darbasie, CEO of financial services holding First Citizens Group, calling in the local media for a balance to be achieved via rate adjustment to dampen the foreign exchange demand, despite her own concerns on the effects of a devaluation.

Market Access

Constricted by the limited local market environment, the government is looking beyond its traditional export markets in the Caribbean to develop new export opportunities for manufacturers in support of its diversification thrust. As an integral member of CARICOM, T&T enjoys market access to 17m people across the 15 members (see Regional Relations chapter). Apart from access to the CARICOM market, the country has also been exploring potential trade agreements and market opportunities with Spanish-speaking Caribbean countries, as well as in Central and South America.

In March 2018 the minister of trade and industry led a delegation of 10 local companies and representatives of the designated national export facilitation entity, exporTT, on a trade mission to Costa Rica and Panama to promote increased trade and investment. Some of the key sectors targeted on this trade mission included, food and beverages, chemicals and non-metallic minerals, wood and wood-related products, and plastics. Looking further afield the Trinidad-Saudi Chamber of Commerce moved to forge stronger commercial ties between T&T and the Gulf nation via the hosting of the inaugural annual Trinidad-Saudi Arabia Business Forum in March 2018.


As the government continues its thrust to diversify the economy away from energy sector dependency, increasing focus has been placed on the services industry to forge new levels of growth. The state remains committed to developing various subsectors within this sphere in line with the National Development Strategy, Vision 2030.


One area of focus has been business process outsourcing (BPO) and shared services given the fact that the country shares the same time zone as the eastern seaboard of the US and is well situated geographically in relation to both the North American and Latin American markets. The readily available English-speaking, well-educated workforce, which can be accessed at competitive rates compared to other local workforces, is another encouraging factor for the development of BPO and shared services.

The T&T International Finance Centre (TTIFC) has been spearheading efforts to promote T&T as a destination for BPO and shared services for finance and accounting, in addition to efforts to promote higher-level analytical skills as a form of knowledge process outsourcing. The creative industry has been prioritised given its potential for revenue and foreign exchange generation, with the state agency CreativeTT being charged with the responsibility of promoting and facilitating the growth of the creative subsector including music, film and fashion.

“A successful BPO industry has to be supported by a fairly strong local entrepreneurial ecosystem,” Richard Young, chairperson of TTIFC, told OBG. “T&T should work to attract Tier-2 and Tier-3 firms – rather than their Tier-1 counterparts – to create a more boutique-like operation for businesses willing to outsource their financial and accounting services.”

The energy sector is also ripe to export services in light of its established expertise and opportunities arising close to home, such as in Guyana where oil exploration has recently commenced. In the ICT sector, where skills are not as established, initiatives such as the Global Skills Promotion Programme are set to develop local resources to fuel IT-enabled services at home and abroad (see IT chapter).

However, technical skills alone are not enough to expand the local services industry. The workforce also requires high levels of professionalism and business etiquette, which have been noted as lacking in service-oriented positions. “The local workforce needs to understand the difference between providing service and being subservient,” Angela Lee Loy, president of the Trinidad and Tobago Coalition of Services Industries told OBG. “To develop staff sensitive to the art of service we need to change attitudes and mindsets starting from the primary school level.”

Productivity & Labour

For the January-March period of 2016, overall worker productivity across all industries fell by 4% year-on-year (y-o-y). For the same period in 2017, the productivity decline was steeper at 7.6%. In isolating the non-energy sector, for January-March 2016, the drop was 17.1%. The first quarter of 2017 showed less of a decline y-o-y, down 9.1%. The issue of productivity was further highlighted by the CBTT in its March 2018 bulletin, which showed that labour productivity in the manufacturing sector fell by 1.1% y-o-y during the third quarter of 2017. Loss of productivity is a well-known factor that inhibits production locally with several root causes, including the current state of industrial relations. Gabriel Faria, CEO of the Chamber of Commerce, told OBG the predicament that the country is currently facing “makes it necessary for the government, the private sector and labour force to work together for the ultimate benefit of T&T”.

In commenting on the state of industrial relations locally, Nirad Tewarie, CEO of the American Chamber of Commerce, told OBG that greater levels of accountability were required, and that employers and workers need to engage in mutually respectful relationships where both parties have right of fair redress should infringements occur. He also called on the government to enable horizontal policy reforms, including “solving traffic and transportation woes and other business and societal problems such as crime”. It is conservatively estimated that many commuters spend at least two hours per day getting to and from work, contributing to mental frustration. This traffic congestion also slows manufacturers’ transport of goods, as the number of containers that can be sent for export daily has been reduced given the volume of traffic on the nation’s roads.

Coupled with the issue of productivity are labour concerns, with a number of industries reporting a lack of labour and skills shortages due to competing make-work programmes, which are more attractive to many potential labourers. For the first quarter of 2017, the working-age population was 640,200. Of this total, 611,100 were employed, representing an unemployment rate of 4.5%, up from 3.2% in the same period in 2016. While the unemployment rate remains below 5%, there have been calls from various sectors for policy development around the issue of skilled and unskilled migrant workers.

Rising Costs

Outlining the challenges faced by manufacturers in the current business environment, Mahindra Ramdeen, CEO of the Trinidad and Tobago Manufacturers Association, highlighted that businesses have encountered rising costs in the past two to three years, including increases to the business levy, green fund, corporate tax and value-added tax (VAT), alongside a reduction in fuel subsidies. Further duties may be introduced on other business requirements, causing further consternation from local manufacturing businesses.

“At present there is ambiguity around the issue of property tax being applied on plant and machinery,” Ramedeen told OBG. “If there is a diversification thrust and you’re depending on the manufacturing sector to take the economy forward, you should not place additional tax on plant and machinery, the very tools that are needed for expansion and growth in the non-energy manufacturing sector.”

Though the reintroduction of the property tax, last collected in 2009, is widely accepted by the manufacturing sector, industry stakeholders have advocated for an exemption specific to the potential of plant and machinery being taxed due to the impact this would have on their bottom lines and ability to drive economic growth. In an environment of rising tax liability for local corporations, the issue of the tardiness in state-issued VAT refunds, estimated at TT$5.5bn ($815.8m), represents another significant challenge for the business community.

Other Concerns

Continuity between successive regimes continues to be perceived as hindering implementation of strategies designed to support economic development. Suzanne Lau, managing director of Infotech, told OBG is was necessary for more to be done towards achieving “bipartisan agreement for the long-term execution of strategic initiatives”.

Another concern, as indicated by Tewarie, is the escalating crime rate. This has forced some businesses to allocate additional capital to secure their operations, employees and customers. Apart from the cost of hiring private security, businesses have also incurred increased costs in procuring security equipment and acquiring additional insurance to mitigate the risk of robbery and theft. For example, though distribution operators have taken advantage of technology that enables cashless transactions, accompanied by signage indicating an absence of cash on board, the practice of employing armed guards when distribution vehicles visit areas deemed to be crime hotspots remains relatively common. Higher spending on security has the effect of shifting monies away from activities that could improve productivity and ultimately benefit the consumer.

Despite concerns about these aspects of the operating environment, positive developments are being made in other areas to support sector growth. Among these are the government’s establishment of a procurement board and the proposal to create a revenue authority. The latter is especially important for exporters in light of T&T’s labelling by the EU in December 2017 as a “non-cooperative jurisdiction for tax purposes” as it would bring further transparency to the operating environment.


While the outlook for manufacturing remains challenging, performance figures indicate some measure of success in broadening the country’s economic base, using manufacturing as a key driver. Building momentum and sustainable growth will be dependent on the government’s continued focus on diversification. At the same time, leadership from the private sector can be used to develop entrepreneurship as a means of generating employment and foreign exchange. In recognising the current economic climate as an impetus for much needed change, the Chamber of Commerce has gone further than improving the environment for existing businesses and is working with the authorities to enable entrepreneurship. As well as offering support and mentoring, it is creating a pathway from start-up funding, through to exit opportunities on the bourse.

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The Report: Trinidad & Tobago 2018

Industry & Retail chapter from The Report: Trinidad & Tobago 2018

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