TT business running scared?

Conventional wisdom states that the absence of diversification in our economy is due to the lack of entrepreneurship within Trinidad and Tobago, and the unwillingness of the banks to support deserving ideas when they are put forward. As a result, our economy is undeveloped, and any prosperity we enjoy arises from the Government redistributing tax revenues arising from an activity that is bound to end some time in the future. So far efforts to diversify our economy have been driven from the top down. Consultants have been employed to advise us on the activities we should pursue, plans have been drawn up and publicised, incentives offered and trade agreements negotiated. All to no avail. Vibrant new industries have not sprung up in the new areas of promise, and dependence on the hydrocarbon sector continues.

Can we afford to keep on trying the same things that have not worked over and over again? Do we seriously expect a different outcome just by changing the actors and the script? I think that we have to reconsider our views on how our economy really works, and how entrepreneurship in particular is developed and practiced. In the first place, I do not share the view that Trinidadians are not entrepreneurial or are afraid of risk. An entrepreneur once told me that he thought that Trinidad was the most competitive place in the world to do business. Anyone who had a good idea that was converted into a new business would find copycats springing up around the corner in a matter of months. Staff in a Government business promotion agency, now closed, had developed a very unfortunate reputation for stealing good ideas submitted for incentives, and slowing their approval while friends or business partners got to market first.

Trinidadian entrepreneurs will get into any activity where they see others making money. Remember twenty years ago when people were leaving well paying jobs to buy and drive dump trucks or pickups? My view is that we are quite capable of entrepreneurship when we understand the risks involved, and how they can be reduced. I also believe that because of our economic history, the distributive sector is the one where Trinidadian entrepreneurs have the best understanding of risk, and that holds for the banks as well. One hundred years ago our economy revolved around agricultural commodities and distribution. Our involvement in the commodity value chain was limited to primary production and the preparation for shipment. We were not involved in the other links of the value chain – transport, conversion to end product and distribution to key markets. The distribution sector however was run by people who knew their end user markets and were able to set prices and the terms on which business was done. It should be no surprise then, that entrepreneurship continues to flourish in that sector.

It should also be no surprise that several of our larger manufacturers were started by people who had their initial success in distribution. Associated Brands, TYE, Janouras and the manufacturing activities of Vemco all had their start in distribution. Prior success in distribution gave an understanding of the markets, perhaps the most difficult area of risk to understand and manage or any new enterprise. Even when new ground has been successfully broken, it has been on the basis of a clear understanding of risk. CLICO’s foray into the energy sector was not a wild gamble. It was driven by Lawrence Duprey who had significant industrial experience in the USA before joining the CLICO group. As with the other elements of the business community, the ability of the banks to assess risk is influenced by their collective historical experience.

The enthusiasm of a potential borrower about a new opportunity is not sufficient to get a sympathetic hearing from a bank officer who does not have a clear understanding of the risks and how they will be dealt with. I do not believe that studies carried out by international consultants identifying areas of opportunity and linked incentives will generate any significant upsurge in entrepreneurs. I do not believe that new markets arising from new trading agreements. I also do not believe that entrepreneurship can be successfully taught in schools.

I believe that entrepreneurship is spread through emulation, and if the Government can make it easier for existing entrepreneurs to succeed, others will emulate and follow. There are three areas on which the Government should concentrate – reducing business transaction costs (customs and other approvals); improving the supply of skills with more relevant education and training programs; and creating a more supportive infrastructure (telecommunications, CSO, laboratories and testing facilities, industrial estates). Trinbagonians have a lot of business sense, and will find a way to prosper once they can see that the risks are manageable.

The views expressed in this column are not necessarily those of Guardian Life. Comments can be sent to guardianlife@ghl.co.tt