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Barriers to diversification

Experts see many challenges facing T&T
Published: 
Thursday, July 5, 2018

As T&T slowly forges ahead to economic diversification, is the country on the correct path?

Is expanding business portfolios the answer or are deeper discussions between the Government and the private sector to ensure the country is steered in the right direction?

According to Ronald Hinds, president of T&T Chamber of Industry and Commerce, “We have confused having more businesses with diversification. It’s not the same thing. What has happened in T&T is we have become accustomed to thinking about the inflows of the energy sector in a particular way.

“We are talking about how can we make any of these additional industries internationally competitive but the reality is we often don’t. We want to develop industries on our own terms except nobody buys on your own terms and that’s the basis we sell internationally competitive things. There’s a willing buyer who you cannot force to buy.”

Discussions on diversification, he advised, should centred around the international market.

“Every time we have a discussion on diversification the first question you have to ask is whether that economic activity that you’re talking about has any realistic hope of being purchased on the international market. If the answer is no then it’s is a nice additional business, it’s another store. I’m not opposed to another store but it’s not going to diversify the economy,” he said.

Hinds was part of a panel at a pre-budget discussion, Diversification and Confidence for T&T, hosted by the T&T Group of Professional Associates Ltd at the Hilton Trinidad and Conference Centre.

He said one of the biggest imperatives, even before diversification can begin, is ensuring T&T is in a position to export internationally competitive goods and services.

“It’s not what you feel will be nice, it’s what somebody will actually pay you for and not somebody whose arm you could twist, not somebody you could block off by protection, it’s somebody who you’re competing with the rest of the world with,” he said. 

“We have been able to export a range of globally competitive commodities but relying on a narrow range of commodities that are exposed to the same type of risk leads to the boom and bust. It’s guaranteed to happen. So even if this economy was to recover and oil was at US$150 a barrel, we are supposed to know for sure that the US$30, US$15 and the US$8 is going to come back again.”

Diversification, therefore, speaks to holding a portfolio of assets that are not subject to the same risks.

Using Ariapita Avenue as a reference, he noted the popular entertainment strip is largely supported by locals. At St Lawrence Gap, Barbados a similar setting to the avenue, 90 per cent of the patrons are foreigners.

“On one level it’s the same kind of thing but it’s very different in terms of its role to the respective economies. It’s the same business but Ariapita Avenue is subject to the identical risk like the rest of the economy. When energy prices decline, the economy declines and all other things being equal, Ariapita Avenue will decline.

“The issue is not Ariapita Avenue, it’s what is the role in the economy. What is it dependent on. If you’re not focused on that we are not talking about diversification,” Hinds said.

If a change in discussion does not happen, no substantial benefit will be achieved, he said.

“We have to change the discussion. We have to realise that the things we are saying are the solutions is just a manifestation of what the problem is and, until we do that, we’ll come up with more lists on diversification, another list of incentives to avoid the disincentives and we will have Tamana Intec Parks 20 years after conception still largely unoccupied,” Hinds warned.

Tourism in crisis

Poor customer relations, bureaucratic red tape and competition from the Government are leading to a worrying decline of the tourism sector.

Stephen Broadbridge, vice president of the T&T Incoming Tour Operators Association, who brought these issues to the fore, described the industry as rewarding yet frustrating.

After being n the business for 25 years, he sees lack of investment as the biggest impediment.

“Marketing is something in Trinidad we seem to refuse to do. We resist it. Improving the facilities at Maracas—that’s not going to bring tourist. Let’s not fool ourselves.

“Whatever you spend on the beaches, it’s not going to bring anybody. The marketing is going to do that,” Broadbridge said..

He was critical of the Tourism Ministry’s Stay To Getaway campaign, saying this strategy is not a foreign exchange generator.

“This doesn’t have any meaning. It does not affect hotel rooms, it does not affect people in restaurants,” he said.

Broadbridge, who brings groups to T&T, said this as a viable means of generating jobs and showcasing the many offerings of T&T.

“This also has an impact on the smaller businesses. When visitors leave the hotels and hire taxis, go to the bars and seek guides. I am dumbfounded when I think of the wasted opportunity,” he said.

Customer service, especially in the cities and built-up areas, is daunting.

“When visitors go to the country areas the feedback is the hospitality is amazing. My guests tell me that when they went into the mall to buy something the staff would be talking or walk away. There’s a massive difference in attitude and service between the rural and built-up communities,” Broadbridge added.

He said no government has done anything meaningful for tourism and the Tourism Minister is yet to hold talks with his association.

Broadbridge who facilitates international camera crews like BBC and National Geographic to shoot documentaries in T&T, complained that bringing equipment into the country is often problematic.

“The red tape you have to go through to get any kind of tax relief is almost impossible. They are slowly dismantling the tourism industry,” he said.

“They are taking away the concessions we had before. It’s a funny thing with T&T. When we have oil, we don’t want tourism. When the oil goes we no longer have money to invest in it and then we remove more tourists. We are in a real lose-lose situation,” he said.

He also accused the Government of competing with tourist organisations, dealing another deadly blow to the sector.

“We have the PTSC who are running substandard tours. Why is the Government trying to compete against us? Is it fair that the Government is regulating us by telling us what kind of vehicles we can use, how many vehicles we can import? How can the people that’s competing against you be allowed to regulate you? Why is the Government partaking in the tourist industry. They are facilitators, they are not supposed to participate,” Broadbridge asked.

T&T, biggest polluters in region

More than six years ago, a proposal was put forward to establish wind farms along T&T’s eastern coast. This, experts had then advised, was crucial for energy regeneration.
It represented sound research conducted by the University of the West Indies but no implementation followed.

Solar expert, physicist and lecturer at the University of the West Indies, St Augustine, Dr Indra Haraksingh noted that if the initiative was put into action it would have not only reduced T&T’s carbon footprint but propelled the diversification strategy.

“In the east coast of Trinidad we found very good wind regime and it’s an area we are targeting for setting up wind farms. We are looking at Manzanilla. A student has already completed his master thesis and did an excellent study on this. We have the information but no implementation.

“The Government has also been looking at a wind resource assessment programme and the UWI works with stakeholders like the UTT. We are responsible for the technical aspect of it.

There have been problems with it. It has been planned but not facilitated as yet,” Haraksingh said.

But T&T is far from achieving its ten per cent target of electricity regeneration from renewables by 2021. It has only achieved some two per cent.

The problem, simply put, is the will to get it done, she said.

“Some of the policies are in place but the enabling environment is not necessarily in place,” Haraksingh said as she appealed to the Government to look at alternate forms of energy, especially since T&T is a huge polluter.

“We may have a small carbon footprint than the rest of the world but with respect to the Caribbean region we are the biggest polluter. We are highly industrialised,” Haraksingh noted.

Saying that the entire region has great possibility to harness solar and wind energy, Haraksingh explained that renewable energy can lead to a host of positive factors such as job creation.

Profits can also stay within the region or country and not flow out to external investors.

“In T&T, in particular, we need to look at conservation and energy efficiency because it’s cheap. We waste a hell of a lot.

“Our focus should be solar and wind and, perhaps, biomass. We need to look at climate smart technologies and climate smart agriculture. If there are renewables injected into the agricultural sector it can work very well to the benefit of this sector and make it more attractive for people to get into this area,” she said.

But for T&T to really move forward regarding diversification, it must overcome several challenges.

Barriers to growth, Haraksingh identified include:

• Lack of access to finance/credit/land
• Ineffective support programmes
• Exacerbating social inequities
• Corruption and political instability
• Customs and trade regulations
• Lack of economies of scale
• Lack of operational efficiency
• Higher rates of failure
• Longer-term returns on investments
• Inadequately educated workforce

Training and having the correct skillset are also key if T&T is to develop its solar energy sector.

Referencing solar water heaters, there’s the need for more plumbers in this field, for instance.

While she noted that Caricom has been doing its part in terms of promotion of renewables, Haraksingh said T&T must be competitive to ensure access to modern, clean and reliable energy supplies.

“There are institutional frameworks that must be put in place to get this on board. A steering committee to look at renewable energy development in the region, co-operation with and strengthening of regional institutions, co-operation with external agencies, financing mechanism and co-ordinated regional approach.”

There must be the political will to ensure implementation.

Overcoming challenges include:

• Provide access to finance and natural resources
• Provide policy support
• Adopt and support collaborative approaches among SMEs (small and medium-sized enterprises) among support agencies, and between SMEs and support agencies
• Explicit support in greening of SMEs
• Adopt and support collaborative approaches among SMEs, among support agencies, and between SMEs and support agencies
• Mentoring and coaching to change consumer behaviour and build capacity
• Conduct training programmes for different categories of population—short courses, degree programmes
• Expand school curriculum, university programmes
• Set up incubation investment facility/Green Fund

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