Cocoa may be the once and future king of the TT economy but manufacturing is, at least, the heir apparent.
In 2018, according to the Review of the Economy, the manufacturing sector was projected to surpass mining and quarrying as the largest contributor to GDP, at 20.1 per cent versus 18.9 per cent, respectively, with growth expected to be 7.3 per cent.
The sector though, is still effectively a sub-set of energy – petrochemical and chemical products account for almost 75 per cent of manufacturing activity in 2018, contributing just over 15 per cent to GDP, while the next biggest manufacturing sub-industry, food, beverages and tobacco products, is expected to account for 3.3 per cent of GDP. Put into context, something as obviously related to the hydrocarbon industry as liquefied natural gas (LNG) production is considered part of manufacturing.
This clearly skews the outlook of the sector, especially as the Government continues its rhetoric about manufacturing being a key element in diversification. While the industry is buoyed by figures derived from energy, the true impact and potential of other manufacturing segments are obscured, or worse, ignored.
Now, the Government does keep trying to stimulate the sector, notably by commissioning a new aluminium production facility in Tamana last October, the Moruga agro-processing plant, still under construction despite an initial February completion date, and most recently, the proposed technology park in Point Lisas, in partnership with China. Whether any of these can in turn anchor the economy in the future remains to be seen.
The private sector remains undaunted, however, and TT Manufacturers’ Association (TTMA) president Franka Costelloe has stated her mission to lay the groundwork for manufacturing production in TT to double in five years.
Manufacturing capacity in TT for 2018, Costelloe noted in her inaugural speech in April, was 68 per cent, which should and can be improved to 150 per cent of current output.
Part of it is finding new markets, and the association, as well as the Ministry of Trade and Industry, have to their credit been courting prospective trade partners in Latin America, including Panama, Cuba and Cost Rica. Caricom still remains the main destination for manufacturers.
For years, though, manufacturers have been citing two critical challenges to growth – VAT refund arrears and limited access to foreign exchange.
Government has promised – repeatedly and most recently in the mid-year budget review – that it will settle these VAT arrears soon, “with a view to improving business conditions.”
It has also tried to mitigate forex constraints by allowing a US$100 million facility via the EXIM Bank for manufacturers who produce goods for which at least 30 per cent are for export.
It’s a start, but it’s not nearly enough to truly stimulate an industry that needs, more than anything, an environment that encourages competitiveness. TT ranks 105 out of 190 countries in the World Bank’s Ease of Doing Business Index. In the World Economic Forum’s (WEF) Global Competitiveness Index, it is 78 out of 140. The WEF’s top four hindrances to competitiveness remain, in varying order over the years, crime, poor work ethic, government bureaucracy and corruption. And the Economic Freedom Index, which considers the ability of the population to make economic decisions, ranks TT 112 out of 180 countries, placing the country squarely in the “mostly unfree” category, just one step up from “repressed,” citing wasteful government bureaucracy, a lack of transparency and corruption, which undermined investor confidence and hampered economic development.
None of these problems is new but the solutions clearly require innovation. Or at least the will, politically and culturally, to change.