The Report: Trinidad & Tobago 2016

Although low oil and gas prices in 2015 had a negative economic effect on the Trinidad and Tobago, the current government is pursuing a series of reforms aimed at both strengthening the important energy sector and diversifying the wider economy.

Country Profile

Trinidad and Tobago stands out in the Caribbean and the Americas as a comparatively wealthy, hydrocarbons-based economy with rich and diverse cultural traditions and a robust democratic system. The twin-island country has a population of 1.35m people and a per capita GDP that places the country among the wealthiest in the Americas, behind the US and Canada, and ahead of most Caribbean and Latin American countries. T&T’s abundant oil and gas reserves have driven this prosperity, and have underpinned its strong economic growth rate. While excessive reliance on the oil and gas sector is problematic at times of low international hydrocarbons prices, the country has managed to achieve a degree of diversification into other sectors such as financial services, tourism and manufacturing.

This chapter contains interviews with Prime Minister Keith Rowley and Hanna Tetteh, Minister of Foreign Affairs and Regional Integration, Republic of Ghana.

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At first glance, the newly elected government of Trinidad and Tobago faces a formidable first year, marked by one of the deepest slumps in energy prices seen in recent decades. According to provisional data by the Central Bank of T&T, the twin-island economy contracted by 2.1% in 2015, with GDP down 3% year-on-year in the fourth quarter of the year, reflecting a 5% contraction in the energy sector and a combined 1.8% decline in non-energy sectors. Meanwhile, government revenue fell by 6.2% in FY 2014/15, with a 35% decline in energy collections outstripping increases in non-energy and capital receipts. As a result, authorities have embarked on a programme of fiscal austerity and are ramping up efforts to diversify the TT$175.99bn ($27.1bn) economy. According to IMF projections, GDP growth is expected to resume in 2017, but not before an estimated contraction of 1.1% in 2016.

This chapter contains interviews with Paula Gopee-Scoon, Minister of Trade and Industry; Jorge Familiar, Vice-President for Latin America and the Caribbean, World Bank; and Gervase Warner, President and Group CEO, Massy Holdings; as well as a viewpoint from Jeffrey Sachs, Director, the Earth Institute at Columbia University.

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The smaller island of Tobago has a history of colonial rule by a succession of different European powers, including Spain, France and Britain, and in 1889 the British government first grouped the island with Trinidad under a single colonial administration. Trinidad & Tobago sought and achieved independence from British colonial rule in 1962 and became a repub¬lic in 1976. A significant proportion of the population has, however, consistently sought greater autonomy for Tobago within the existing constitution of the twin-island republic, and from time to time a smaller group on Tobago has argued for full independence. Tourism remains the strongest single economic activity in Tobago. The 300-sq-km island offers beautiful beaches, tropical forests and a wide range of leisure activities. Attractions include the Tobago Main Ridge Forest Reserve, a candidate for UNESCO World Heritage status, and Pigeon Point Beach, which has been ranked among the world’s best beaches by media outlets such as CNN and the UK’s The Guardian. This chapter contains an interview with Orville London, Chief Secretary, Tobago House of Assembly (THA).

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Despite economic growth slowing in 2015 and 2016, Trinidad and Tobago’s banks remain profitable and may even see benefits from the end of a long period of very low interest rates. According to the Central Bank of T&T (CBTT), for the past five years growth in the financial sector (including finance, insurance and real estate) has outpaced economic expansion. In 2015 the nation’s GDP contracted by 2.1%, while the finance sector grew by 1.9%. Meanwhile, the share of GDP accounted for by finance, insurance and real estate has held largely steady at around 11% since the start of the decade. Total assets of the country’s commercial banks inched up by 0.82% in 2015, reach¬ing TT$134.8bn ($20.8bn) at the end of the year, up from TT$133.7bn ($20.6bn) in December 2014. T&T banks had TT$18bn ($2.8bn) worth of cash reserves at the end of 2015, which exceeded the statutory minimum reserve level of TT$13.3bn ($2bn) by a total of TT$4.6bn ($708.4m). This chapter features an interview with Nigel Baptiste, President, Republic Financial Holdings.

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Capital Markets

Trinidad and Tobago’s capital markets have developed against a background of strong energy sector growth. Therefore, the current lower price environment for oil and gas is expected to translate into slower and more modest stock market growth in the near term. A total of 38 stocks were traded in 2015 – 20 recorded advances, 13 experienced declines and five held steady – with share prices remaining broadly flat on the T&T Stock Exchange. Though stock exchange activity has been muted in recent years, some optimistic investors believe this is a good time to start taking positions for an eventual recovery. The government is committed to divesting some state-owned assets, which could lead to new initial public offerings and stimulate the market. In the fixed-income segment, increased levels of activity are expected, with government bond issuance set to grow.

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While Trinidad and Tobago’s insurance industry was affected by a slower economy in 2015, most of the largest insurers remain prof¬itable. Key metrics suggest the industry is resilient, although companies will have to adapt their business models to keep abreast of market developments. At the end of 2015 there were seven active life insurance companies, 17 active general insurance companies and seven active composite companies. According to figures from the Association of T&T Insurance Companies, which represents most insurance companies operating in the country, gross written premiums received by its general insur¬ance reporting members in 2014 stood at TT$3.58bn ($551.3m), an increase of 7.1% on the preceding year, but still below the TT$3.69bn ($588.3m) registered in 2012. Although T&T’s national economy could be facing difficult headwinds in the coming years, industry experts believe that, overall, the future of the sector looks promising.

This chapter features an interview with Robert Trestrail, Executive Vice-President and General Manager, Sagicor Life.

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For the past four decades the energy sector has been the backbone of Trinidad and Tobago’s economy. On average, the industry’s contribution to national GDP has been around 40%, although this has ranged from a high of 50.8% in 2008 to a low of 32.1% in 2015. In the fourth quarter of 2015 GDP was down 3% year-on-year, reflecting a 5% contraction in the energy sector. In addition to lower prices, the sector was affected by dwindling output from mature oil fields and plant shutdowns for maintenance and infrastructure work. Results in the downstream sector were more mixed. LNG output fell in the second half of 2015, although refinery output increased after the completion of upgrades at the state-owned Petrotrin plant, and ammonia and urea production was up from a relatively low base in 2014.

This chapter contains interviews with Andrew Jupiter, Chairman, Petrotrin; Norman Christie, Regional President, BP Trinidad and Tobago; and Gerry Brooks, Chairman, National Gas Company of Trinidad and Tobago (NGC).

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In his October 2015 budget speech, newly appointed finance minister Colm Imbert underscored the fact that Trinidad and Tobago’s manufacturing sector had fallen below 10% of national GDP. Estimates from the Central Statistical Office put the figure at 8.1% in 2015, with food, beverages and tobacco accounting for around 4.5% of GDP. Despite having the largest manufacturing base of any CARICOM country, the government focus on energy and relative neglect of manufacturing, as well as a shortage of unskilled labor, has held back the sector in recent decades. Nonetheless, T&T holds many comparative advantages that have yet to be fully exploited. It has a handful of globally recognized industries, a strong food and beverage segment, and a strategic geographical position for the maritime industry. The coming two years will see a renewed focus on diversifying the economy away from hydrocarbons, providing alternative pillars of growth during times of low oil prices.

This chapter contains interviews with Arthur Lok Jack, Executive Chairman, Associated Brands, and Racquel Moses, President, InvesTT.

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Real Estate & Construction

The Trinidad and Tobago real estate market’s fortunes have long been tied to those of the oil sector. Between 1991 and 2006 house prices more than quadrupled as the country’s hydrocarbons and petrochemicals industries grew strongly. This stoked a construction boom that led to the rapid development of grade-A office and residential properties. Following the 2008 financial crisis, prices dropped by 20% but recovered strongly up to 2014, with residential properties reaching 8.7% year-on-year growth by the third quarter of 2014. Falling oil prices have since led to a slowing economy and the oversupply of grade-A residential and office space has depressed rents and valuations. Meanwhile, affordable housing projects have seen cost overruns and industrial estate projects have been slow to get off the ground. Even so, in the Ministry of Finance’s “Review of the Economy 2015” the construction sector was forecast to have a strong 2015, growing 3.4% and accounting for 5.3% of GDP.

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Telecoms & IT

In the past decade the Trinidad and Tobago telecoms and broadcasting industry has expanded into a dynamic sector of the economy. The Telecommunications (Amendment) Act of 2004 acted as a catalyst for the industry, with all segments of communications and entertainment liberalized simultaneously on the principle of fair competition. At present, T&T has four fixed-line and two mobile telephony companies, seven international incoming and out¬going phone companies and eight internet service providers. In addition, there are 13 subscription television companies, seven free-to-air TV channels and 38 radio stations. Though increasing numbers of Trinidadians are connected to the internet, greater uptake of ICT solutions is required from both the private and public sectors for the economy to take full advantage of the benefits of connectivity. T&T has so far been slow to develop local software businesses and train the human talent needed to support ICT. Nevertheless, the sector remains a key focus of attempts to diversify the economy. 

This chapter contains an interview with Cynthia Reddock-Downes, Acting CEO, Telecommunications Authority of Trinidad and Tobago (TATT).

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As the largest exporter in the Caribbean, Trinidad and Tobago’s transport network is vital to the performance of its economy. The country is already a fast-growing air passenger and cargo hub in the southern Caribbean and is now looking to spur growth in the maritime sector, where it intends to take advantage of its sheltered location below the hurricane belt and its proximity to shipping lanes serving North, Central and South America. The transport sector has not, however, been immune to the ramifications of the country’s current economic downturn. According to the Central Bank of T&T, the country’s GDP contracted by 2.1% in 2015 on the back of lower oil and gas prices. With public revenues significantly reduced as a result, the government was forced to abandon plans for a multi-billion-dollar mass transit project and to announce the phasing out of the long-standing subsidization of super gasoline and diesel.

This chapter contains an interview with Ashley Taylor, President, Point Lisas Industrial Port Development Corporation (PLIPDECO).

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As Trinidad and Tobago continues to feel the impact of lower energy receipts, the tourism sector is emerging as a strategic development priority. Elected in September 2015, the government of Keith Rowley is placing a renewed emphasis on economic diversification to help the TT$175.99bn ($27.1bn) economy weather the downturn in the global energy market. Tourism, along with agriculture and manufacturing, has been identified as strategic in that quest. Despite the recessionary environment, T&T saw an upsurge in visitor arrivals – which increased by 6.6% in 2015 to reach 439,749 visitors – highlighting the sector’s resilience. The US accounted for 39% of international arrivals, followed by Canada (13%), the UK (9%), Scandinavia (2%), Ger¬many, Austria and Switzerland (2%), India (1%), the Caribbean (18%) and the rest of the world (16%). To accelerate growth a number of efforts are under way to raise the profile of key tourist sites, improve service standards and develop human capital. 

This chapter features an interview with Shamfa Cudjoe, Minister of Tourism.

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Education & Health

While education remains one of the great strengths of Trinidad and Tobago’s economy, a scenario of negative growth is raising questions of quality, cost effectiveness, efficiency, and the relevance of higher education and skills training for the country’s changing labor market and broader macroeconomic environment. To assess the state of the education system, the newly elected government launched a National Consultation on Education (NCE) in early 2016, an initiative authorities hope will enable the country to arrive at a strategic vision to guide successful future sector development. Meanwhile, a push for comprehensive health care reform could see the country’s health care sector undergo significant changes in the medium term, with Rowley pledging to lead the country’s transition to a comprehensive national insurance system by 2018.

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In conjunction with Aegis Business Solutions, OBG explores Trinidad and Tobago’s taxation system, examining a wide range of areas of special interest to international investors, such as income and corporate tax, petroleum profit tax, withholding tax, value-added tax and Customs tax, among others.

This chapter features a viewpoint from Angela Lee Loy, Chairman, Aegis Business Solutions.

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Legal Framework

This chapter provides an overview of Trinidad and Tobago’s legal framework, covering a range of topics including civil procedure rules, the Foreign Investment Act, free zones and public-private partnerships, among others. It also features a viewpoint from Kenneth Vieira, Senior Partner, J.D. Sellier.

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The Guide

This chapter contains information on hotels, government agencies and other listings, as well as useful tips for visitors on a range of topics such as visa requirements, currency and transportation, among others.

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