Manufacturers Losing Ground

A: The Board asked, and I accepted. I was flattered – and appalled! But really, this is not the first time a president has served two terms, and since we have a new board at the TTMA – none of the members have served before — staying on for a second term will provide continuity. That’s important given the need to continue the TTMA’s strategy, and the various initiatives we have begun. I have been extremely fortunate that Kiss is willing to afford me the additional time to serve at the TTMA, Kiss deserves kudos for their commitment to the sector – the Group has produced three TTMA presidents, Robert Bermudez, Wayne Yip Choy, and me.

Q: At the recent TTMA press conference, you talked about business men putting away money to deal with foreign exchange shortages. The Central Bank calls it hoarding. Why do you feel the need to go that route? Is it a lack of confidence in the Central Bank?

A: I don’t think manufacturers lack confidence in the Central Bank. What I will point out is that the Central Bank has not published any figures showing where the foreign exchange is going. In the absence of any data, we are all speculating. The general consensus seems to be that our monetary policy is sound.

Let’s talk about the issue of businesses “putting away money.” To be competitive, manufacturers buy volume and make payments within specified timeframes. Volume purchasing means lower prices. If a payment is not made to your supplier then the manufacturer is exposed to additional costs. If commercial banks do not have money readily available, and you miss a payment by a day or two this jeopardises your credit rating, which means you end up paying more.

It’s like a credit card — miss the payment date and you’re charged interest. If foreign exchange is not readily available, the logical step for a business is to put aside $US to pay the bills.

By the way, forward buying of foreign exchange is very costly to us as businessmen and it is NOT a preferred way of doing business. The only reason you do it is to ensure that you can pay the bills on time and keep your credit lines open – and the driving force is uncertainty as to whether you’ll actually be able to get the foreign exchange you need. Let me also point out that manufacturers earn Forex (foreign exchange).

They have the right to use it to pay their suppliers. Converting money to TT dollars and then buying back $US makes absolutely no business sense!

Q:What’s the biggest challenge facing local manufacturers right now?

A: Oil and Gas. There is abso-lutely no policy focus on the manufacturing sector, which means that the necessary upgrading of the bureaucratic and institutional infrastructure that manufacturing success depends on is just not happening. I’m talking about customs, the bureau of standards, the ports. Without that policy focus the sector is swimming against the tide in the race towards competitiveness.

I’ll give you a good example: the TTMA submitted very considered and essential suggestions and requests for the last budget which speak to the necessary policy focus. Not a single suggestion was incorporated into the budget! The Government’s focus is simply not on manufacturing.

It’s amazing, we seem not to have learnt anything from the last boom and bust cycle. Instead of really leveraging this energy boom to transform the T&T economy through diversification and by strengthening manufacturing, we’re doing the same old same old. It’s disappointing and disheartening.

In terms of specific challenges — Our transport and logistics costs are burgeoning, we’ve seen freight rates increase by over 100% in the last two years. Plus we’re facing major efficiency issues when it comes to regulatory bodies, standards etc… and now we’re facing exchange rate issues.

It is increasingly difficult to keep the cost of manufacturing down in an inflationary climate, and employee productivity is a very real concern. We are not internationally competitive in terms of the availability and cost of labour. And we’re competing with our own government for manpower, which is being drawn away from manufacturing and other sectors to massive construction projects, and to CEPEP and the URP. Night shifts are increasingly difficult because no one wants to work late — for reasons of personal safety, which in turn, comes right back to the unbelievable level of crime.

Q : You’ve had reduction on corporate taxes and CSME is expected to give that added punch.

A: What more can government do to push the sector forward ?

The reduction of corporate taxes is welcome. It allows for greater re-investment in your business — but it does not improve efficiency or lower the cost of goods, and you’re still left with the question of whether re-investment in manufacturing is attractive in and of itself as a business decision given the social and economic situation.

The reduction in taxes certainly does not offer peace of mind to managers, supervisors, and employees who work at night! Nor does it increase productivity. The CSME is also welcome, but again it has not had any impact on the sector to date and the benefits will be long term.

In terms of what the Government has to do, they need to sit down with the manufacturing sector in a very serious way and brainstorm and set national policy targets for growth in the non-oil manufacturing sector. It is a matter of political will.

We’d like to see promotion of manufacturing to our youth, that’s a good start. Very few new manufacturers are entering the market because, frankly, the incentive is small.

Why would someone want to invest in plant equipment in these uncertain times when he can possibly import and distribute with less risk? Promoting manufacturing is essential to channel the entrepreneurial spirit, to ensure the sustainable growth of our economy and the generation of sustainable employment, and to ensure that the nation’s wealth is shared by all – so that no citizen of this country is left behind.

Q: How is crime impacting on the manufacturing sector?

A: Crime has affected us in the same way it has every other citizen of this country. The population is living in fear, and are close to despair. Nothing seems to be getting better. It has increased the cost of doing business in terms of security for staff and customers.

Q: Have more business people left the country?

A: I can’t quantify that. Certainly it’s a major topic of conversation within the business community. But really and truly Trinidadians love their country and we keep seeing it as a last resort. As things deteriorate the option becomes more viable. You hear about people leaving and running their businesses from overseas, but that can’t work in the manufacturing sector.

You need to be physically on the spot at your plant, so manufacturers will be among the last to head out. And when they do, they’ll be selling or shutting down their businesses.

Q: The TTMA has been vocal over the crime surge. Do you see yourselves taking it up a notch as a sign of protest — shutting down operations for a day, for instance ?

A: We will continue to press the Government to do something meaningful and permanent about reducing crime. The tactics we use will be based on what TTMA members deem to be appropriate. The pressure will not diminish. This is make or break. We want our country back.

Q: There is the perception that business people are contributing to the shortage of foreign exchange by converting it to investing their money outside TT. Is this true? What’s you take on this?

A: As I said before, in the absence of any data, we’re speculating. With all due respect to the Central Bank Governor, he seems to be blaming businesses for taking money out the system, while at the same time saying there is no shortage of $US. This alone is creating uncertainty in the market, and you should note that there are people out there who make money on hedging of the exchange rate.

Now, it is our belief that the high demand for foreign exchange is a direct result of capital projects initiated by the government. Overseas suppliers do not accept TT$ as payment, and all of the construction projects are draining foreign exchange from our economy.

So, let’s enter the realm of speculation! Ask yourself why would someone hoard? The answer would have a lot to do with loss of confidence in the country, due to say, crime and their opinion of the country’s future in the long term. Even the act of the Central Bank accusing businessmen of hoarding, could initiate capital flight. Hoarding does not initiate itself.

Let’s talk facts now. Trinidad and Tobago’s economy is liberalised. There is nothing illegal in the ownership of assets in other countries. Businesses are investing throughout the Caribbean and the returns are very positive — look at RBTT, Sagicor, Guardian Life, Asso-ciated Brands, Bermudez … they’re all stronger for investing overseas. Plus, money flows where the returns are highest, so it’s likely that people are investing their funds in high yielding economies like India, for instance.. What we need is to create a situation where investment in this economy is seen as offering a high yield.

Q: Observers point to the fact that manufacturing contribution to GDP has declined. What’s your view on this?

A: This goes back to the issue of having sound data. Has manufacturing GDP declined or has it grown more slowly relative to an overall economy that is overheated by oil and gas, and the construction sector?

I don’t have the answer. But there’s very little incentive to (1) form a new manufacturing enterprise or (2) re-invest in an existing manufacturing operation — for all the reasons of competitiveness, labour shortages, crime, faith in the long term direction of the economy, the spiralling cost of doing business. We need incentives and encouragement to pull small and medium investors into the manufacturing sector. It comes back to policy.

Q: The economy is in a boom right now, with the construction sector in overdrive. Any bad vibes?

A: The overheating of the economy is driving up the cost of doing business, making many manufacturers uncompetitive. We’re concerned about tendering rules. Are foreign firms carrying out construction projects in Trinidad and Tobago sourcing their supplies outside TT and bypassing local suppliers.

We would like to see a developmental policy that emphasises the development of our PEOPLE not just government office buildings and stadia.

The use of foreign labour, supplies, and expertise should be clearly justified. Transfer of technology must be a pre-requisite, and provision must be made for SUSTAINABLE growth and continued maintenance and operation of whatever we build.