Home' Trinidad and Tobago Guardian : July 4th 2013 Contents JULY 2013 • WEEK ONE www.guardian.co.tt BUSINESS GUARDIAN
COVER STORY | BG5
Gonsalves gave a description of the sectors the exporting
companies belong to.
"About 15 firms that export belong to agriculture and livestock.
About 19 in art, crafts and accessories, about 17 in base metals,
iron and steel. About five firms belonging to the bio-technology
sector, two in ceramics, 18 in the computer sector and about
78 firms that export from the food and beverage sector, There
are also about 25 companies from the oil and gas sector."
He called Caricom T&T's "natural and protected market."
"That is so because we have a tariff there and because T&T
understands the distribution network there and also the culture
that works in T&T's favour."
For those companies that export out of Caricom, there are
two companies in mining and machinery, 11 in oil and gas,
nine in paper and printing, 18 in textiles and 19 companies
in food and beverage.
"In my view, these are the really competitive firms that
have been able to develop a capacity to compete with the
wider world. These firms are exporting to South America and
the rest of the developing world," Gonsalves said.
He spoke of non-energy products being exported to the
"Although iron and steel are based on natural gas, I place
those in the non-energy products that are exported to Europe,
and also beverages, like rum, beer and Angostura Bitters. Then
there are cereals, which are competitive. There are also soaps,
candles and lubricants."
Out of the 500 companies that export, 324 export only to
Caricom markets, but are reluctant to go global.
"These firms are not competing with the rest of the world.
If you ask them if they can be internationally competitive,
you will find that about 50 per cent will say it is too risky
to go out of Caricom as this will involve developing new
business plans, new technologies and they say they are happy
exporting merely to Caricom. The next half of firms will say
they want to export beyond Caricom, but they need the assis-
tance from the Government to do so."
Gonsalves outlined the market share globally for T&T exports,
which roughly broken down shows the US market takes about
48 per cent of those exports, Caricom takes about 19 per cent,
The EU eight per cent, South America eight per cent, Canada
two per cent and the rest of the world eight per cent.
"Up to 2010, T&T exported up to $10 billion in goods world-
wide and just about $5 billion to the US, $2 billion to Caricom,
$1 billion to the EU, $850 million to South America, $409
million to Central America, $307 million to the non-Caricom
Caribbean countries like Cuba and Martinique. About $176
million to Caricom and the rest of the world takes $921 million
of T&T's exports."
T&T's investment in its productive capacity has been on the
decline, a leading economist has said.
"Gross Fixed Capital Formation (GFCF) in T&T has been
declining since 2005," RBC Caribbean group economist Marla
Dukharan said on June 26 while speaking at the release of a
foreign direct investment (FDI) study at the Arthur Lok Jack
Graduate School of Business (Lok Jack GSB) in Mt Hope.
"This is not a good trend.GFCF measures total investment on
a national scale, and is linked to growth potential -- and has been
declining since 2005," her power point presentation said.
GFCF is higher in Cuba, the Dominican Republic and Jamaica.
Only Suriname is growing its productive capacity at a slower
pace than T&T.
"They are still adding to their productive capacity whereas we
are not," she said. It begs the question, the Lok Jack GSB auditorium
heard, what is T&T spending on if not GFCF? She said there
is a downward trend in capital expenditure by Government, and
an upward trend in government expenditure on "transfers and
Dukharan said: "It is clearly a cause for concern that we have
the capacity to spend on capital, but it is not being spent in that
In 2010, T&T's GFCF stood at about 12 per cent (see graphs)
of gross domestic product (GDP).
"We have a situation here where we are seeing increases in
the level of net FDI inflows, yet we are seeing declines in Gross
Fixed Capital Formation. GFCF is made up of two broad com-
ponents: foreign and domestic. We know the foreign component
is rising. So if overall GFCF is falling, then the domestic component
is falling faster than the foreign component is rising. Hope you
are following me here.
"And if the domestic component is falling, why? The domestic
component is made up of two things -- private and public (gov-
ernment). Just like we, (the nation) cannot directly control the
foreign component, we cannot directly control the level of domestic
private component of GFCF," she said.
"But we (the nation/Government) can control how much it
spends on its capital budget. So we look at government spending,
and we see that the Government is spending much less on capital
than it had, during 2008-09, and also, they are spending increasing
levels on transfers and subsidies, for example, which does not
directly add to the productive capacity of the nation (GFCF),"
"If GFCF continues to decline, and we are therefore adding
less and less over time to the productive capacity of our nation,
we limit the country's future potential to grow and create employ-
Dukharan said: "Note also that we are running fiscal deficits,
which means we are borrowing, raising debt to finance this
expenditure. If we were borrowing to add to the productive
capacity of the country, and therefore give us the means by which
to repay this debt in the long term, then this approach would
make sense. However, if we are borrowing to spend relatively
more on transfers and subsidies, this does not add to our capacity
to service the debt we have incurred."
The Central Bank's Annual Economic Survey for 2012 reported
an overall fiscal deficit for 2011/12 of $1.78 billion or 1.2 per cent
of GDP, which was well below the target of $7.6 billion, Dukharan
said in the June 2013 edition of the bank's Caribbean Economic
For the current fiscal year, the Government now estimates that
the budgeted deficit of $7.7 billion (or 4.6 per cent of GDP) would
actually rise to $9.2 billion, based mainly on increasing recurrent
expenditure. It is estimated that the balance of payments recorded
an overall deficit of US$622 million in 2012, versus a surplus of
US$752.6 million in 2011---an overall year-on-year deterioration
of US$1.375 billion.
T&T's productive capacity declining
Continued from page 4
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