TTCSI Position On Green Paper

On The Trinidad & Tobago Investment Policy

 

  • INTRODUCTION

The Trinidad and Tobago Coalition of Services Industries (TTCSI) wishes to congratulate the Government of the Republic of Trinidad and Tobago for attempting to put the philosophical and operational aspects of its Investment Policy under one document.  TTCSI also wishes to applaud the Government on attempting to canvass views on the document from a wide range of stakeholders. We therefore welcome this opportunity to comment on the Green Paper on the Trinidad and Tobago Investment Policy (2007 – 2012).

We at TTCSI believe that the Services sector can play vital roles in boosting investment and diversifying the production base of the economy. In this respect, services offer three major advantages from our viewpoint. Firstly, while Terms of Trade for commodity-type exports have exhibited negative long-term trends, services offer the opportunity to engage in high value-added activity.  Secondly, there are often low barriers to entry for new service providers with resulting low cost per job created, providing an affordable entry point, especially for youth (Services is an ‘intensive youth employment sector’, according to the ILO, requiring new concepts that are easily grasped by young people), women and the disabled into the discipline and rewards of the work force. Thirdly, in the context of a fragile island ecosystem, service jobs are often ‘green’ and allow for the planned deployment of the population between urban, rural and ‘peri-urban’ areas.

Our comments on the Green Paper will cover the objectives of the Investment Policy, comments on the actual policies contained in the document and a statement of some important prerequisites for success.


2.0  OBJECTIVES

The objectives of the Green Paper are set out [p8] and will be referred to in that order:

      • (Sustainable growth and development) : This is an incontestable objective.  Although from our perspective, any investment will lead to even greater demand for services, we share Government’s objective of growth via diversification.

      • (Investment-friendly environment) :  The achievement of this objective will require, as stated, new legislation and effective, investor-friendly administrative arrangements.

      • (Building internationally competitive firms) : This objective raises a number of issues.  Firstly, it will be almost impossible to create competitive firms in the absence of adequate supporting infrastructure (human resources, transportation/ports, ICT).  Secondly, the document will need to address, specifically and unequivocally, the role of domestic investment, especially its role as a platform from which to launch our bid for international competitiveness.

      • (Spatial balance in development) : The TTCSI strongly supports efforts to diversify both the nature and spatial distribution of the economic base of the society. We further support calls by other stakeholders, for urgency in this effort, while it may be funded by financial flows from the hydro-carbon sector.

      • (Transparency) :  TTCSI fully supports this objective.

 

 

General

While the objectives expressed in the Paper are laudable individually and collectively, none can stand on its own, as they are all a “means” to an end.  We suggest that the “end” be a measurable entity whose accomplishment or lack thereof is simple to be determined.  This we further recommend can be achieved by setting quantifiable investment targets in the short, medium and long terms that will cover:

  • Total investment
  • Non-energy investment
  • Emerging sector Investments

 

POLICIES / STRATEGIES

The Trinidad and Tobago Coalition of Services Industries (TTCSI) wishes to endorse several of the stated and underlying policies in the Green Paper.  We are of the view that in some instances the policies may be deepened.  We further believe that some critical dimensions may be added and have so identified these.

Legislation

There are several pieces of legislation mentioned in the document that gives a comprehensive picture of the legislative support for Investment.  TTCSI urges continuation of this legislative framework as well as the ongoing monitoring of their effect reflective to the intended objectives.  Accordingly, we are in support of the proposal to introduce a new comprehensive Foreign Investment legislation to replace the Foreign Investment Act 1990.  This legislation must be guided by an Investment Policy which in turn will reflect the overall objectives of sustained economic development. Competition Law, which is being considered, is also a mechanism that would guide the conduct of investors and we urge its speedy implementation. 

Overseas Missions

We endorse reviewing the work of overseas Missions and Consulates relative to supporting Trade and Investment activities.

Stimulating Entrepreneurship

Education: The Green Paper calls for the introduction of ‘entrepreneurship’ at the secondary level of the education system. Hopefully, such efforts will not be restricted to the ‘business studies’ curriculum but will be expanded to include reports of  entrepreneurial successes and the reality of entrepreneurial activities (risk/uncertainty, an earning trajectory different from salary-based careers). ‘Entrepreneurial’ education, in addition, needs to be accompanied by a solid grounding in the basic sciences, mathematics, English (and hopefully at least one foreign language). First and foremost, the potential entrepreneur must have a mindset that searches for needs (markets) and it is an advantage to have a working knowledge of the relevant science or technology with which to provide the Service.

Economic environment: It is the economic environment and support for entrepreneurial activity that determines whether or not a country’s talented people start firms, innovate and foster growth. In this area the Paper points to the role of the Ministry of Trade and Industry, eTecK, TDC and BDC. In addition, the investment policy must include a statement on the procurement policies of Government, to source services (and goods), locally. For this, Government needs to balance the need for urgency in delivery schedules, against the need to use the considerable spending power at its disposal to stimulate and develop this vital sector. Government may, having identified a service provider, specify the quality of service to be delivered and monitor progress towards the achievement of stated quality goals. In addition, Government may reserve a portion of its expenditure for the procurement of services from specified categories of service providers (e.g., Tobago, rural Trinidad, SMEs). TTCSI holds the view that SMEs and NGOs can be extremely effective in the delivery of social services on behalf of the Government.

Domestic Investment vs. FDI

The Green Paper, at the very beginning [p7], states the intention to promote both foreign and national investments. The subsequent language of the document however, does not consistently stress the value of domestic investment. This needs to be addressed in order to counter the impression of bias in favour of FDI.
 National Treatment : The policy should reserve special and differential treatment for Nationals, (especially SMEs, women, youth, the disabled) and specifically recognize Tobago and rural Trinidad as special development zones, with special incentives for investment in these areas. The TTCSI calls for a specific commitment that any incentives offered to foreign investors do not place the investor from Trinidad and Tobago in a position that is any less favourable. The Green Paper suggests [p7] the reservation of a number of services sub-sectors for nationals. The TTCSI suggests instead, the opening of all sectors to competition and providing support for investment by nationals (especially SMEs, women, youth, the disabled), in any sector.

Special Incentives for Investment in Designated Industries

The Trinidad and Tobago Coalition of Services Industries (TTCSI) is of the view that the Green Paper may be strengthened with the addition of  special incentives to the identified ‘Emerging Sectors’. While the Green Paper, correctly in our view, identifies the diversification of the economy as one of its  priorities and equally correct, further identifies seven (7) areas for special forms of diversification, there appears to be no special incentive to push investors in that direction.  This, in our view needs to be corrected. 

Quality

Missing from the Green Paper is a statement on quality. Relative new-comers such as Trinidad and Tobago need to establish a reputation for high quality services (and goods). The TTCSI recommends an aggressive programme of quality certification (such as ISO 9000) for services and the adoption, in the domestic market, of international standard business practices.

 

Support Services (General)


Incubators. The creation of Tamana InTech Park is a giant step in the right direction, of providing ‘incubator’ support for service providers.
Consultancy Support. Potential small and medium investors in services will also require assistance in bringing an idea through the pre-feasibility and feasibility stages. There are a number of options:-

  • The establishment of a consulting practice (possibly funded by the state, e.g., Legal Aid Clinics, agricultural extension services), to provide assistance until the SME has a Business Plan or a ‘Bankable Project’.
  • The pre-qualification of consulting (and web design) firms to provide specific advice to SMEs, costs to be allowed as tax deductions by the SME or paid by Government as a grant. This has the advantage over a State-funded consulting practice in that the firms (SMEs in their own right) would have to compete for the business of investors.
  • Extend the On-The Job Trainee (OJT) programme to include employment of graduates for a period in approved SMEs and possibly a lump sum grant and supervision, to University graduates who wish to explore a business opportunity. 

 

Skills Data Base : There is a need for the development, in conjunction with the Ministries of Labour and Small and Micro Enterprise Development; Science, Technology and Tertiary Education, of a catalogue of the technological skills base of Trinidad and Tobago.

E-marketing : Little-known firms can become instantly visible on the internet, through a polished and sophisticated web presence. This is a powerful tool, the investment policy should specifically encourage the establishment of web-designers who will help SMEs in exploiting the potential of the world wide web.

 

Support Services (Finance)
The Green Paper notes the reluctance of the commercial banking sector to provide financing for service providers, the role of NEDCO and VCIP will be vital.
Protection and or incentives to local investors : We support the view, expressed in the Green Paper, that any incentive packages to investors in the services sector are in the form of a differentiated basket of incentives that cater to Small, Medium and Large domestic investors. The incentives (and any protection offered) must be transparent.
Approved Small Company : Service providers who qualify for tax credits under this act should be encouraged to apply.
The Income Tax (In Aid of Industry) Act : This Act should be extended to include training and marketing expenses incurred by service firms.

 

Technology Transfer

The Paper states the importance of FDI in terms of technology transfer and issues a pertinent warning as to the pitfalls of attempting to coerce technology transfer out of foreign investors by policies that involve, inter alia import restrictions, local content and joint-venture requirements. It seems that Trinidad and Tobago, with a group of good quality universities and research institutions is well on the way to fostering positive and long-term FDI relationships that involve the transfer of technology. These institutional resources must be further developed so that we bring to the table technological capabilities (human resources and educational/technological/research facilities), infrastructure and business practices that augment or at least support the technological capabilities, interests and Research and Development needs of the foreign investor. Government should create and manage a research fund, where all universities, research institutions and the private sector must compete, annually and on a case by case basis, for Government Research and Development funding.

 

4.0 PREREQUISITES

The TTCSI notes that one objective of the policy is the creation of an investment-friendly environment.  Legislation and incentives alone will not create a friendly investment environment.  Critical to this, among other things, would be the state of the country’s human and physical infrastructure.  The policy needs to recognize this and steer other institutions that are responsible for these areas into activities that will achieve desired outcomes, within specified time-frames.

The Trinidad and Tobago Coalition of Services Industries joins with the other organizations that have urged the recognition of our deficiencies in these areas. TTCSI argues that crime and transportation are deterrents to investment and therefore we hold  the view that the effective management of these areas is integral to investment and so must find a place in a comprehensive investment policy.

In addition, The Green Paper makes no reference to Information and Communication Technologies.  However, robust development of the services sector, whether driven by FDI, domestic service providers or joint ventures will be slowed by the relatively (by world standards) low levels of penetration, poor quality (capacity) and high cost of Information and Communication Technologies.  Policies to address these issues and provide high quality, affordable and widely available telecommunications access, must also form an integral part of an investment policy, especially as it relates to Services.

 

5.0 CONCLUSION

The Trinidad and Tobago Coalition of Services Industries is of the view that the current Green Paper is a good starting point for the discussions that are taking place on the Green Paper on Investment.  We, however, feel that significant areas have been omitted and urge continued consultations among the stakeholders in the short term to inform a more comprehensive investment policy document, that will be sent out again for comments before a final version of the Green Paper on Investment Policy is produced.  The TTCSI pledges its full support to the MTI in these ongoing consultations.