Infrastructure development to diversify Trinidad and Tobago's construction sector

 

Although the sector has a long and successful history in Trinidad and Tobago, construction remains heavily dependent on government spending. Partly due to a number of large-scale projects reaching or nearing completion, the sector’s economic performance has contracted in recent years, with negative growth of 1.6% in 2015, 5.2% in 2016 and 4.8% in 2017. However, in its “2017 Review of the Economy”, the Ministry of Finance forecast that the uptick in public construction projects in late 2017 would boost the sector moving into 2018. Despite its contraction, construction remains the sixth-largest economic sector in T&T, contributing 5.5% to real GDP in 2017, down slightly from 5.7% in 2016.

Recent Performance

One of the major factors that contributed to the poor performance in 2017 lies in the delays in implementing the Public Sector Investment Programme initiatives. Construction in the private sector also fell in 2017, further compounding the decline in activity.

The sector’s sluggish performance is reflected in the lowering costs of construction materials. In its “2017 Annual Economic Survey” report, the Central Bank of T&T noted that there was a general 0.4% drop in the retail price of building materials in 2017, compared to a drop of 0.3% one year earlier. Cement output, meanwhile, fell by 3.1% in FY 2017, and Trinidad Cement – which is the only domestic cement producer – noted a 14% decrease in its cement sales within the country.

Employment is another telling indicator. Due to the significant cost-cutting measures taken by various entities involved in construction, sectoral unemployment has increased substantially. As of June 2017 there were 89,700 construction jobs, but the sector had the highest rate of unemployment at 9.6%, losing 8300 jobs in the first half of the year. By comparison, the sector employed 101,000 people in 2016, with an average unemployment rate of 6.3%.

However, the new activity that is being driven by the public sector is expected to help turn these indicators around. “With a raft of new government projects picking up steam, we should see the construction sector improve towards the latter half of 2018 and into 2019,” Imtiyaz Adam, managing director of Adam’s Project Management and Construction, a local company, told OBG.

Major Projects

The “Improving Productivity through Quality Infrastructure and Transportation”, which is a key pillar of the National Development Strategy, outlines a number of major infrastructure projects that will help to stimulate wider economic growth. In the medium term, particular infrastructure projects have been prioritised for completion over the 2015-20 period. Notably, these include hospitals in Point Fortin, Arima and Sangre Grande, as well as a range of transport projects, such as the extension of Point Fortin Highway to Manzanilla; upgrades of the beach facilities at Maracas, which were completed in July 2018; a new road running from Valencia to Toco on the north-east coast; the construction of the Curepe interchange; the modernisation of ANR Robinson International Airport, including a new terminal building; and the widening of the Western Main Road; among others.

Housing

Housebuilding is another potential driver of growth given the strong demand. As of October 2017, 150,000 applications for public housing were lodged with the Housing Development Corporation (HDC). The budget for 2018 outlined new initiatives to reduce this backlog. For example, upon the successful completion and sale of a housing unit to a qualifying applicant on the HDC list, the government will pay developers a cash incentive of up to TT$100,000 ($14,800) per unit, depending on the difficulty of construction. In his speech announcing the budget, Colm Imbert, the minister of finance, said the government had allocated TT$50m ($7.4m) to provide cash incentives for 1000 affordable housing units, which would be financed and built by private firms. The income from unit sales under this incentive programme for private developers will be tax-free and the government will contribute a cash bonus or state land, as appropriate, to all approved developers who construct housing developments in accordance with designs, specifications and prices set by the state. It is hoped that this standardisation will improve the efficiency of the approvals process. Imbert also announced that a new Ministerial Oversight Committee would be created to expedite the processes for obtaining building approvals and registering approved housing developers.

Although these measures are hoped to increase the use of public-private partnerships (PPPs), there has been a lack of clarity as to how this programme will be implemented, while others have raised concerns about the effectiveness of the PPP model in matching demand. According to Kit Kennedy, managing director and vice-president of engineering consultancy WSP Caribbean, annual applications for housing outstrip supply by a factor of three to five. “We need to look to some of our Caribbean neighbours for answers. For example, Jamaica has been leading in this area, doing more with less resources. Lessons can be learned here,” he told OBG.

Procurement

Ensuring a transparent contracting process is key to meeting demand in housing and other infrastructure. Given that the government is the largest procurer of services in construction, sector stakeholders have sought to make the process more efficient. An important step towards better regulation of public procurement and creating a more competitive process for the tendering of government-funded projects came in January 2018 with the appointment of a procurement regulator and board. Former president of the Chamber of Industry and Commerce, Moonilal Lalchan, will lead the board, which is responsible for running the Office of Procurement Regulation. Its remit includes implementing international best practices, maintaining a database of tenders and contracts, and conducting audits and reviews on projects where state funding has been spent. Another central task of the board is to set up the necessary structures to allow for a seamless transition from the former Central Tenders Board Act of 1961 to the Public Procurement and Disposal of Property Act of 2015.

Oversight

In another effort to boost collaboration between the government and players within the sector, Prime Minister Keith Rowley announced in January 2018 that the Ministerial Committee for the Construction Industry was being re-established. The committee, which will be chaired by Prime Minister Rowley, will comprise officials from relevant ministries that engage with the sector, members of the Joint Consultative Council for the Construction Industry (JCC) and representatives from relevant professional associations. The aim of the committee is to facilitate communication between all the various stakeholders in the industry, allow for the sharing of information and provide policymakers with valuable input and feedback for its proposed plans and strategies. Additionally, it will allow the JCC to highlight the issues and challenges that it considers most in need of the government’s intervention.

On a more local level, the Urban Development Corporation of T&T (UDeCOTT) is responsible for city planning. As of August 2018 it was involved in 65 projects, including building 12 new community centres; restoring the parliament building; reconstructing the President’s House; and building new police and fire stations. Additionally, UDeCOTT’s remit has grown beyond construction and project management into facilities management and even commercialisation. According to Frank Barnes, CEO of UDeCOTT, the organisation is undergoing structural changes to account for its evolving role. “It is not just about completing more projects, but rather, focusing on developing UDECOTT’s ability to deliver,” Barnes told OBG. To this end, various initiatives are being pursued to build capacity within UDeCOTT.

Building Codes

Given that natural disasters – including earthquakes, volcanic eruptions, wildfires, floods, hurricanes, landslides and tsunamis – pose a severe threat to T&T, building codes are a key component of regulation. T&T lies in an area of high earthquake activity for the Caribbean, having six seismogenic zones. Infrastructure and buildings in T&T are particularly vulnerable to this, a national building code that dictates the standards for building materials and structures to withstand earthquakes has not yet been established.

Industry stakeholders have called not only for the creation of enforced national building codes, but also for clear guidelines that outline how these should be implemented and managed to ensure compliance. T&T is particularly in need of measures to enforce safety standards in the building of residential units, as most commercial buildings already comply with international standards.

Establishing a national building framework – including wind codes, seismic codes, drainage codes and stormwater management codes – is one of the central goals of the newly formed Ministerial Committee for the Construction Industry. In order to avoid bureaucratic bottlenecks in seeking approvals for these new standards, the national government has signalled its intention to incorporate these standards into its local government reforms.

Contractor Debt

Enforced building standards will inevitably add costs for contractors, which may be challenging given the history of government non-payment. The current debt owed by the state to contractors is estimated at TT$4bn ($593m) to construction firms, and TT$6bn ($890m) when including auxiliary firms, such as suppliers, architects and engineers. Some contractors have closed down as a result, while others have scaled back operations, with many working at 35-40% of their capacity, according to Ramlogan Roopnarinesingh, president of the Trinidad and Tobago Contractors Association (TTCA). The repayment of debts, however, could kick-start activity. “Should these payments be forthcoming, it is anticipated that we would see corresponding re-investment in the sector, which would, in turn, bolster confidence within the wider economy,” Roopnarinesingh told OBG. The TTCA provides services to assist its members in having valid claims of debt paid, such as offering guidance on documentation for claims and legal issues surrounding claims that have been statute-barred.

While the government acknowledges the burden that this debt places on local contractors, there are several factors contributing to either delays or non-payment. Aside from the limit of available funds due to the current economic climate, the practices employed by the government’s administration to ensure proper accountability in keeping with established rules and procedures also have the effect of slowing down the approval and payment process. In addition, there are discrepancies in claims certified by professional bodies in anticipation of payments, and in some instances the documentation of payment requests by contractors is absent or inadequate. However, the government has asserted its commitment to shortening processing times.

Building Materials 

In recent years construction companies have also been restrained by a shortage of materials needed to complete projects. For example, the limited supply of red sand, which is used for all types of construction work, has led to delays in the completion of several projects. The authorities have sought to resolve the shortage of certain building materials by regularising the quarrying industry to ensure that only legal companies can use state lands for quarrying. The Ministerial Committee for the Construction Industry expects that once the new, highly regulated structure is in place, the formal quarrying industry will be able to improve the output volume and quality of materials.

Environmental Concerns

In addition, the sector is in need of environmental preservation, according Colvin Chen, director of Gillespie+ Partners, a locally based architecture firm. “The construction of the highway to Manzanilla, for example, is encroaching on the protected Aripo Savannas forest reserve. Construction efforts must be made with consideration for the protection of the environment,” Chen told OBG. This project has already resulted in the clearing of forest reserves, sparking concerns among environmentalists. The matter is being pursued via legal challenge by the activist group Fishermen and Friends of the Seas, which is contending that the Ministry of Works and Transport breached its Certificate of Environmental Clearance with its construction work in that area.

Notably, the HDC’s proposed North Grove project, which seeks to construct public housing on arable agricultural lands in the Curepe area, has brought land management concerns to the fore. The earmarked site shares land with the St Augustine Nurseries, which produces high-quality planting material for fruit crops and works to conserve key germplasm of useful plants. The Agricultural Society of T&T, which advocates for the preservation of lands used for the research and development of agriculture, has led the opposition against the proposal. However, the Ministry of Housing and Urban Development has defended the project, stating that the housing units would not encroach on the work of the St Augustine Nurseries, but would be built on land that was currently unused on the site.

Preservation

In terms of cultural assets, a number of preservation efforts are under way. The TT$441m ($65.4m) restoration of the Red House is one of the most complex jobs being undertaken by UDeCOTT. This is due to the efforts involved in preserving intricate architectural aspects that date back to 1907. It is expected that the building will reopen in November 2018 and resume its status as the seat of Parliament in 2019.

In 2016 UDeCOTT completed the TT$48m ($7.1m) restoration of Stollmeyer’s Castle. Stollmeyer’s Castle was the first of a set of mansions around the Queens Park Savannah that are collectively known as the Magnificent Seven, all built between 1902 and 1910. These buildings are listed as heritage properties of interest and are protected via the National Trust Act, but they have historically been plagued with issues of maintenance. Unoccupied since completion of restorations, the government announced in March 2018 that Stollmeyer’s Castle will be used as an arts and cultural centre, managed by a board under the remit of the Ministry of Community Development, Culture and the Arts. Although this is a positive development, the preservation of other historical sites has fallen behind. For example, the Queen’s Royal College, which is another of the Magnificent Seven, had a roof collapse several years post-restoration due to a lack of maintenance.

Outlook

The 2018 mid-year budget review noted that the economy was showing signs of modest recovery, with additional revenue being derived from higher global energy prices and tax collection rates. The sector has the potential to satisfy the housing demands of Trinbagonians, improve the transport infrastructure and support economic growth over the long term. Local professionals have been largely responsible for the built environment of T&T until recently, and the domestic sector still has strong potential to develop local capabilities outside T&T. However, proper planning is required to ensure that the sector can advance in a way that safeguards the interests of T&T’s future generations. Looking ahead, political resolve and continuity between successive administrations could impact the longer-term vision for planning and construction works.

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The Report: Trinidad & Tobago 2018

Construction & Real Estate chapter from The Report: Trinidad & Tobago 2018

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