In a bid to wean the economy off a dependency on oil and gas, Prime Minister Dr. Keith Rowley is looking to attract investment in a number of priority sectors, including manufacturing, tourism, business process outsourcing and financial services. The nation’s strategic location and English-speaking, well-educated workforce make it an ideal gateway to reach the Latin American market of 600 million consumers
The impact of the dramatic fall of oil prices on OPEC giants has been well documented. But smaller producers, such as the Caribbean island of Trinidad and Tobago, whose economy depends heavily on oil and gas, has also greatly felt the effects.
In 2016, GDP (which is 40% made up by the oil and gas industry) contracted 2.3%, with growth predictions coming in at between 0% and 1.5% this year. Besides the drop in prices, decreased production has been a factor in lower oil and gas revenues.
“The country is in a very difficult position,” says Dr. Thackway Driver, President and CEO of The Energy Chamber of Trinidad and Tobago. “Our production has been declining, particularly our gas production. That has put a major strain on the country’s economy. Our gas production has fallen by about 20% since 2013 while it is the main driver of our economy. It therefore puts great strain on government finances.”
Energy-related government revenues fell to only 1% of GDP in the 2016 fiscal year from 8% of GDP in the previous fiscal year, and current revenues declined 28% over 2015-16.
The situation has served as a stark warning to the government of Prime Minister Dr. Keith Rowley to urgently diversify the economy away from a dependency on oil and gas. At the same time, the government wants to put in place a more conducive business environment to ramp up investment in upstream oil and gas production, as well as to develop a robust downstream oil and gas industry, revenues from which could be used to boost other sectors of the economy, as part of the diversification drive.
The 2017 budget, titled ‘Shaping a Brighter Future: A Blueprint for Transformation and Growth’, calls for greater participation of the private sector to boost economic diversification.
“Diversification requires that government provides the necessary infrastructure and incentives that will enhance the productivity of labor and capital in the economy,” said Minister of Finance Colm Imbert in his budget statement.
“Diversification also requires that the private sector changes its mindset, from commerce to industry, from a focus on the domestic market to seeking to explore global markets, from consuming foreign exchange to earning foreign exchange, from avoiding risks in new ventures and technologies to taking on new risks and facing new competitive pressures to conquer new fields.”
Dr. Keith Rowley’s administration has prioritized several sectors for economic diversification, namely financial services, manufacturing, business process outsourcing and tourism.
The country already has a robust financial services industry, which serves as a hub for the region and contributes 14% to GDP. The financial sector in Trinidad and Tobago has been growing despite slowing economic growth in 2015 and 2016. Banks remain profitable, according to the Central Bank of Trinidad and Tobago, with comfortable cash reserves.
The government is committed to the creation of an enabling environment in which the manufacturing sector would play a greater role in driving economic growth and export diversification. It is supporting the thrust to expand the country’s exports with the establishment of the Special Economic Zones Policy, which will replace the current Free Zones regime; the establishment of agro-processing parks in Moruga; and the introduction of incentives to support the maritime industry.
Trinidad and Tobago could become an ideal gateway to the Latin American market of 600 million consumers. It is well placed to host investment in the region because of its geographical proximity as well as growing trade links with Latin America. Another attractive factor for U.S. investors looking to the nation as an export base to reach Latin America is the nation’s well-educated and English-speaking workforce.
Long neglected by previous administrations due to abundant oil and gas revenues, the tourism industry is another focus area for the government of Dr. Keith Rowley. Several large-scale investments in infrastructure are being made to support the growth of tourism. These include: the rehabilitation of the existing ANR Robinson International Airport; construction of a new International Airport Terminal at Crown Point in Tobago; and the construction of a Sandals Resort, also in Tobago.
Sandals Resorts operates all-inclusive resorts for couples in the Caribbean. The government is confident that the new Sandals Resort in Tobago will bring in around $500 million per year, as well as attract other tourism investments in Tobago, encourage the upskilling of the workforce, boost agricultural production and deliver better and more effective marketing of Trinidad and Tobago as a preferred tourism destination.