Angostura Holdings Limited
Results for the Year Ended December 31, 2002

Angostura Holdings (AHL) net sales totalled $1.034 billion in 2002 compared to $1.018 billion made in 2001.  This represented an increase of 1.6 percent.  Gross profit was 2.6 percent higher at $396.9 million in 2002, up from $386.8 million a year earlier.  Operating profit declined by 9.9 percent to $124.4 million in 2002, down from the $138.1 million recorded in 2001.

The gross margin was virtually unchanged at 38.3 percent in 2002 compared to 38.0 percent in 2001.  In the period under comparison, the operating margin declined to 12.0 percent from 13.6 percent.  Pre tax profit was 30.4 percent lower in 2002 at $67.7 million from the $97.3 million made in 2001.  In 2001 AHL reported a gain on sale of investment of $27.2 million, in 2002 there was no such gain.  After tax profit decreased by 7.4 percent to $58.6 million when compared to the $63.2 million achieved in 2001. 

AHL was unable to consolidate the results of Burn Stewart Distillers plc as the transaction was largely completed during the first quarter of 2003.  These results will be consolidated in 2003 and the first half report would give an indication of the level of benefit to AHL.  We would also expect contributions from Burn Stewart to be offset somewhat by increased finance charges and goodwill amortisation. 

The Chairman pointed to an ‘extremely competitive’ international trading environment.  He stated that AHL has yet to realise the ‘full potential of our top and bottom line growth opportunities’. Earnings per share reached 28 cents in 2002.  In 2001 the earnings per share disregarding the extraordinary gain on sale of investments was 18 cents.  Therefore AHL posted a 55.6 percent improvement in EPS on income from core operations.  A final dividend of 6 cents per share has been declared, payable to shareholders on May 16, 2003.  The total dividend paid in respect of fiscal 2002 would be 11 cents, compared to 8 cents paid in 2001.  At the current price of $6.30, the P/E ratio is 22.5, above those of its peers in the manufacturing sector. 

ANSA Finance and Merchant Bank Results for Year Ended December 31, 2002.

Interest income declined by 11.4 percent for ANSA Finance and Merchant Bank (AFL) in the fiscal year ended December 31, 2002.  Interest income was $83.4 million in 2002 compared to $94.1 million made in 2001.  Net interest income increased however by 12.1 percent in 2002 to $28.6 million from the 2001 figure of $25.5 million.  Interest expense declined 20.1 percent in 2002 to $54.8 million, down from the $68.6 million incurred in 2001.  This suggests that AFL has been able to efficiently manage its interest rate risk in an environment of weak credit demand together with declining margins. 

AFL’s effective tax rate declined to 12.6 percent in 2002 compared to the level in 2001, which was 14.0 percent.  Net income increased 11.5 percent in 2002 to $21.2 million, up from the $19.0 million achieved a year earlier.  Earnings per share totalled 68 cents in 2002, improving from 61 cents made in 2001. 

Furness Trinidad Limited
Results for Year Ended December 31, 2002.

The Group’s results for the financial year ended December 31, 2002 showed a marked improvement in the performance of the company.  Group turnover increased by 13.01% from $25.42 million in 2001 to $28.73 million in 2002. The key contributors to the Group’s improved operations were Furness Chemicals Limited which experienced increased business from a number of bottlers and brewers in the Caricom area and Furness Rental Limited the rental leasing company.  The Marketing and Distribution sector also performed well as a result of the addition of a range of new lines and an increase in customer base. 

The Cold Storage facilities also enjoyed high occupancy in 2002, making a worthwhile contribution to the Group’s performance. Operating profit grew by 46.84% from $2.73 million in 2001 to $4.02 million in 2002.  Profit before taxation moved from $3.30 million in 2001 to $4.42 million in 2002, an increase of 33.78%.  The Group’s effective tax rate fell from 35% in 2001 to 31% in 2002, due to a decline in deferred taxation of 64.78% reflecting the reduction in the corporation tax rate.  Profit attributable to the Group increased by 43.04% from $2.13 million in 2001 to $3.04 million in 2002. Earnings per shares (basic and diluted) moved up 38.89% to 25 cents in 2002 from 18 cents in 2001. The Board of Directors earlier in the year approved the payment of a 5 cents interim dividend in respect of the financial year, which was paid to shareholders on March 15, 2003.  The Board has recommended no further dividends despite the improved performance of the company.

Major Advances
Furness up 10 cents (+3.17 percent)
ANSA Finance up 5 cents (+0.61 percent)
WITCO up 9 cents (+0.49 percent)
Lever Brothers up 10 cents (+0.36 percent)

Major Declines
BWIA down 5 cents (-2.22 percent)
JMMB down 1 cent (-1.06 percent)
Readymix down 5 cents (-0.70 percent)

Major Advances
CCN up 80cents  (+24.17%)
National Flour Mills up 50cents (+15.87%)
PLIPDECO up 34 cents (+3.19%)
Furness up 10cents (+3.17%)
Neal & Massy Holdings up 49cents (+2.51%)
ANSA Finance up 20 cents (+2.50%)

Major Declines
Prestige Holdings down 20cents
(-4.55%)
Trinidad Cement down 26 cents (-4.15%)

The US led war on Iraq has local business people jittery.

Many continue to live in hope that the war will be short-lived, otherwise they could see their profits being whittled away. At a recent panel discussion organised by the RBTT Roytec Institute of Learning on the “Impact of the war against Iraq on the TT economy,” President of the TT Chamber of Industry and Commerce, David O’Brien, noted that the war would result in a lack of certainty among the business fraternity, which would seriously affect the local economy. “Business thrives in certain times,” he said, adding “right now, we don’t know what is going to happen tomorrow.”

This uncertainty, he said, will always affect the economy. War, he went on, will also have a negative effect on confidence, which is the key to business and economy. He said, “people have to feel confident to start new businesses, they have to feel good that they are going to risk their money to open or expand their business or hire new people. When we are in times of war, this negatively affects our confidence.” However, O’Brien maintained that all is not lost since war can also bring some positive opportunities to counter the bad. Every bomb, he said, which is dropped needs to be replaced, therefore there is a new demand for the replacement of armaments. This, in turns signifies a possible shift in terms of the world economy to reinforce or rearm the major world powers.

“Additionally, there will be an increase in oil prices,” he stated, “which will be a short term opportunity for us. We need to ask the question : ‘if it does increase dramatically, how is this going to affect our trading partners? “It might help us in the short-term, but it won’t help us for too long,” he said. O’Brien went on to note that while it was wise to keep a watchful eye on the situation in Iraq, there were situations closer to home which should have us a lot more worried. He said, “while I am in no way trivialising the war in Iraq, here in TT we are fighting a number of wars ourselves — the war between the two polarised elements of society, the gangwar in Laventille and the kidnapping war.”

“The effects of the local wars have me more worried,” he asserted, stating that the polarisation between the two factions of society could have serious long term repercussions. He revealed that business in the South and Central areas have already begun to show a decline, possibly because of the impression that things are not going to happen in these areas. However, business in the East/West corridor is picking up. “The Chamber is making a concerted effort not to pick a side,” O’Brien maintained. “We would like to see the war end quickly and a return to diplomacy. “Business is about negotiation and about dealing with win-win situations and we think that there is an opportunity for both sides to win,” he said.

Central Bank Economist Garnett Samuel, expressed his belief that the world was in no way ready for a war at this point in time, since the global economy is still on a “recovery watch” after the events of September 2001. He revealed that before the war IMF projections had predicted a 2.6 percent growth in the US economy in 2002 from 2.2 percent in 2002. Japan was expecting a growth of 1.1 percent, up from the 0.5 percent of 2002, while the European Union was hoping for a 2.3 percent growth after a mere 1.1 percent for the previous year. “Things were looking up,” Samuel said, noting that people were optimistic as to what 2003 would bring. Then came the war.

The Caribbean economies fared no better in 2002. In recent years, Samuel disclosed, they have been going through “rough times,” faced with declining growth, an increase in unemployment as well as fiscal deficits. “This came about mainly as a result of 9/11 which had a profound negative impact on the tourism industry which is extremely important to the economies of the Caribbean like Barbados, Jamaica and the Bahamas,” he said. In 2002, Barbados experienced a negative growth rate of 0.5 percent with Jamaica seeing a mere 0.6 percent. Trinidad, however was one of the lucky ones, showing a significant growth rate. However, this may be short-lived if the war continues longer than is expected, Samuel asserted.

The challenges for the world economy will continue, he said, noting that the pace of recovery in the US is cause for worry, in addition to the effects of falling incomes and weak consumer and investor confidence which has shown significant decline. “Once the world economy is affected, especially the US economy, then the TT and Caribbean economies will also be affected.” The Caribbean, he went on, also faces the continued challenge of trade liberalisation on the WTO agenda as well as the FTAA agenda. Caribbean economies, Samuel explained, are basically monocrop economies, which display a disproportionate dependence on certain markets, specifically that of the US and Europe, and these are the principal countries involved in the war.

Samuel said 41 percent of our exports go to the US and when this is combine with the falling incomes in the US as well as the low consumer confidence, “we have a serious problem on our hands.” UWI Economist, Dennis Pantin agreed with O’Brien and Samuel, saying that the economic gains from an increase in the price of oil will be short lived. “Iraq,” he said, “cannot fight the US. Sooner or later the US will take control of Iraq and its oil supplies at which point in time oil supplies will become wildly abundant and the price of oil globally will fall.” However, Pantin presented the impact of the war in moral terms when he described it as the “might exercising its right.” He said, “we are sanitising what is a human tragedy, where millions of people are suffering, by discussing it in terms of seasons and thinking of it only in terms of its economic implications.”

He described it not as a war against terrorism but one effectively intended to serve the interests of the US. “Any small country in the world needs to be extremely concerned about unilateral arrangements outside of the UN,” he asserted, “since as small countries we have virtually no power and we need the protection of the UN.” Pantin explained that this particular war endangered the UN and now established the kind of unilateralism which has implications for all Caribbean economies.

Anthony Hosang is a busy man these days. Apart from overseeing the day-to-day operations of his own business, Fine Art Ltd, he now sits at the helm of the Trinidad and Tobago Manufacturers Association (TTMA).

Hosang, 42, was appointed the 38th president of the 50-year old association just over two weeks ago. With local manufacturers being threatened by the onslaught of globalisation and the Free Trade Area of the Americas (FTAA), Hosang knows that he has plenty work to do, and very little time to do it. As a result, Hosang will spend his time bringing to TTMA’s 400 plus members and other businessmen up to speed on what steps have to be taken for TT to secure a place in the FTAA.  In fact, TTMA’s former general manager, Anthony Guissepi, resigned his post to work as a consultant on trade negotiations. “We are going up against first world countries who have economies of scale on their side.” Hosang  said in an interview. The local manufacturing sector was born out of a very protective environment with lots of licences and other regulations, he said, adding that by removing these we now have to take on the world.

He said the TTMA has been focusing on having the voice of the private sector heard through its negotiating teams, noting that this has prompted the signing of several bilateral trade agreements with countries like Cuba, the Dominican Rep-ublic and Costa Rica. Hosang voiced concern over the manufacturing sector’s response to the upcoming FTAA agreement, stressing that many business people have not yet realised how it is going to affect them. Through seminars and meetings, Hos-ang hopes to get the message out about the FTAA, and what must be done to protect TT business. As the FTAA draws closer, many more people are going to become interested, because only then will they start to realise that it is a reality and that it is definitely coming.

He reminded that the largest trading bloc in the world is less than two years away. By 2005, the FTAA would affect the lives of 800 million people throughout the Americas. He is of the view that TT is lagging behind, noting that while the TTMA will do its part, it needs some government assistance. “We are our own biggest threat,” he said, adding that the government has to play its part in ensuring that the necessary measures are implemented to strengthen the regulatory bodies and ensure that they are properly manned and funded. “These regulatory bodies like the Trinidad and Tobago Bureau of Standards (TTBS) need proper legislation to be able to enforce the laws of TT, especially on the sub-standard products entering TT. “TT needs to realise that the only way to level the playing field is through the regulatory bodies. Our regulatory bodies are under-funded and not given the attention they require,” Hosang added.

Hosang noted, too, that govern-ment has a major role to play in ensuring that TT’s line of defence against un-fair trading practices are in place to protect its manufacturers. “Whether we like it or not, it will affect the food that we eat, the water that we drink, our children’s access to education, our health care and essential medicines, our electricity.” “Manufacturers are already seeing the impact on their production processes and the way they do business. “As governments put policies in place and industries streamline operations for global competitiveness, we are already seeing the effects. We can boast of the variety on our grocery shelves. “But we are also seeing the closure or downsizing of many local manufacturing operations.” He said the TTMA is concerned that apart from a few manufacturers, the country is still largely ignorant and therefore ill-prepared to make the most of the opportunities of liberalised trade. While some manufacturers have adopted an “uninterested” attitude towards the FTAA, there are others who are looking for opportunities, making the changes and adjusting their production processes to create a niche for themselves in a globalised environment.

Before TT opens its doors any further to trade, he hoped that consumers appreciate the products made right here. “We have to appreciate the special things we produce,” he says, noting that they will be under threat from low cost imports made en masse by producers who already have some of the largest markets in the world. He added that consumers will have to develop a discerning taste. The playing field will never be level for TT outside, noting that manufacturers will have to identify their unique qualities and  customise products and work towards niche markets. “We are ourselves a niche — and a very small one at that — in the world of global enterprise.” The TTMA, he said, has been working closely with the Ministry of Trade, noting it needed to get legislation in place before January 2005. It is possible for the FTAA, he observed, “to increase profits for large foreign corporations without providing any real benefits to the people of TT.” Hosang is also committed to working with other manufacturers in the region to build a stronger manufacturing force. The TTMA has been meeting with other manufacturers from throughout the Caribbean under the Caribbean Association of Industry and Commerce (CAIC).

But even with all his efforts, Hosang has his doubts. “There is still too much to be done and far too many manufacturers have the care-free attitude that their protected markets will forever be a safe haven from foreign competition.” FTAA is not going to wait on TT, he warned.

Q.   I’ve been looking at the price of oil and it seems to be going up and down in quite an unpredictable fashion. What are the reasons for this?

Mervyn, La Romain

A: The price of oil has been quite volatile over the past few weeks due to shifting expectations about the war in Iraq. In the weeks leading up to the war the price started to increase significantly, going over the US$30 level. This was due to fears of possible oil shortages given that Iraq is the seventh largest exporter of oil in the world. However, when the bombing campaign started, the price fell drastically down to US$24 contrary to what most had expected. This was due to a number of variables.

Firstly, the markets were expecting that the war would be short given the initial successes of the US led forces and rumours that Saddam Hussein may have been killed. Secondly, OPEC producers promised to increase quotas to allay some of the fears which had been developing. Thirdly, news that America had a substantial six billion barrels of oil in its Strategic Petroleum reserve calmed some of the fears of a supply shortage. However, as time passed and news came out about casualties, prisoners of war and a possibly protracted engagement in Iraq, the price once again rallied above the US$30 level factoring declining supply.  So we see that when there is uncertainty in the market, prices tend to be erratic. Investors tend to be undecided as once news is released which changes expectations, the price of oil would quickly react to it, causing the frequent oscillations which we have been witnessing in recent times.

Q.   I retired two years ago with what I thought was a nice little nest egg.  But I’m surprised at the speed at which it’s getting eaten up. Is there some sort of formula I can use to work out a spending plan that will not wipe out my savings?

Doreen, Sangre Grande

A: There is no magic formula to this, just plain old fashioned budgeting. Since you are no longer working your income would obviously be substantially reduced and so you need to reprioritize your expenditure. Start with a list of what is absolutely essential and calculate the total cost per month. Then determine what rate of return on your nest egg would give a monthly flow that covers your necessities 1.67 times.

In other words your necessities should not exceed 60 percent of the monthly return on your nest egg. Of the remaining 40 percent, half could be put into a rainy day fund in case of emergencies. The other half should be put towards insurances, which I assume you already have and which you have to continue to pay.  It is extremely important to not let insurances lapse since they would be a source of funds in case of illness. Such circumstances can put a strain on your nest egg if you do not have insurance cover.

The emergency fund should be built up and kept at three times your monthly necessity expenditure. If it goes over that level you could then use those funds for discretionary expenditure, such as a special vacation, luxury items, etc.  Remember, the allocations to emergency and insurances should be mandatory. Therefore what you classify as necessities must be able to fit within the 60 percent of your monthly investment income. Some adjustment to your lifestyle may be necessary, as you should only invest in fixed income instruments with built in principal protection. The rates on such investments are conservative and may not be able to cover what you classified as necessities before you retired. However, talk to a qualified financial planner, as you may be able to invest in instruments whose yields increase as interest rates rise.

Q.   I’ve read your comments about the dangers of having debts you can’t meet. I have a small business and instead of taking out a loan to buy equipment, I am considering leasing the machinery I need. Are there any pitfalls to leasing?

Vashti, Siparia.

A: The business strategies you adopt must be relative to your particular situation. Leasing can be extremely helpful, especially when a business needs to expand output temporarily, for example for a special contract awarded. In such a situation you would not want to buy equipment as you may end up with idle capacity after the contract. The lease would allow you usage of equipment just until it is required. It is also good as equipment can become obsolete by changes in technology and you would want to be flexible to change the type of equipment you use.

However, it is important to understand the terms and conditions between the lessor and the lessee. Some leases require that the lessee maintain the equipment and pay for non-warranty repairs for the duration of the lease, in which case it increases the cost of using the equipment especially if it has been used a lot. The cost of financing a lease (the lease payments per month) can also be extremely expensive when compared to the monthly loan installment on equipment purchased. It may also be very difficult to get out of a lease before the scheduled date without incurring stiff penalties. This may reduce some of the flexibility we spoke about if you have to shift your business strategy quickly. Some businesses may reverse the situation in that they may buy a piece of equipment and if later on there is idle capacity the equipment can then be leased out to another business to cover the loan installments.

Questions can be sent to
PO Box 1830, Wrightson Road, Port-of-Spain.
Or email: cmmbsecurities@mycmmb.com

THE DEPTH and pervasiveness of corruption revealed in the $1.6 billion Airport Development Project is so outrageous that it cries out for justice. Satisfactory closure of this scandalous project will never be achieved unless and until the necessary measures are taken to bring to justice those who have calculatingly and systematically milked millions of public funds from it. But after that what? What assurance does the public have that such a scandal will not, indeed cannot, occur again.

Moreover, is there an accepted procedure or system which can be introduced here to ensure not only that the process of awarding major contracts is corruption-proof but also that taxpayers will get optimum value for their money in these transactions? In regard to this question, the Trinidad and Tobago Transparency Institute (TTTI) offers quite a worthwhile answer.

According to a paper issued by TTTI chairman, Boyd Reid, we can begin to implement in the award of public contracts the Integrity Pact (IP) which has been developed by Transparency International and used to good effect in such countries as Colombia, Ecuador, Italy, Korea, Pakistan and Nepal. The IP is a legal agreement between a public authority, such as a government agency or state-owned enterprise, and all the bidders for a public contract of any type, used to prevent corruption throughout the whole contracting process. Mr Reid gave an example of IP’s successful operation in Argentina. “In May, 2000, the municipality of Moron, a suburb of Buenos Aires, put out for tender a four-year garbage collection contract estimated to be worth US$48 million. After a public hearing on the bidding documents and the terms of the contract, attended by more than 500 people, the estimated cost was cut by 30 percent.
 
“Ten days after the hearing, the municipality published the final bidding documents on its internet website, explaining which of the participants’ observations and suggestions it had accepted or rejected and why. Then the municipality and the four prequalified bidders (one foreign, three local) together signed the Pact. “Each bidder affirmed that it had not paid, and would not pay, any bribes in order to obtain or retain the contract. “Each bidder further undertook to disclose all payments made in connection with the contract and to report any violations by other tenderers during the bidding, and by the winner during contract execution. “The municipality undertook that its officials would not demand or accept any bribes and agreed to enforce appropriate disciplinary or criminal sanctions in case of violation. “All agreed to public disclosure of the award, of the major elements of the evaluation and of the reasons for selecting the successful bidder. Bidders agreed to sanctions for violation of the Pact, including damages payable to the municipality of 10 percent of the contract value and blacklisting for five years.

“Any conflict was to be resolved by national arbitration. The Argentinian chapter of Transparency International was appointed to monitor the bid evaluation, the award decision process and the implementation of the contract. “About one year later, an independent opinion poll revealed that 80 percent of the citizens of Moron were satisfied with the refuse collection service.” Our view is that the Integrity Pact as designed by Transparency International is a sure-fire way of ensuring integrity in the award of contracts. If it has achieved this success in so many developing countries why can’t it do the same in TT? In light of the venality that marked the Piarco Development, we would urge our Government to consider seriously the introduction of the Pact here, either wholly or in most of its relevant parts.

Getting rid of
corruption

Assuming that there really is this strong pressure to bribe, can anything be done about it? The usual answer is, “You’ll never get rid of corruption.”

 “To succeed in business you have to be prepared to bribe.” Is this true? Many people think so. Some even go further and say that, once people don’t ‘overdo it’, it’s not really a problem.

It gets things done. It’s an inevitable and tolerable cost of doing business.And when it comes to getting new business, many will say that you cannot avoid ‘offering inducements’ in one form or another because that’s what your competitors are doing.

And that’s probably true. But it is also true that you can at least reduce it and, in some cases, prevent it. The Hong Kong Independent Commis-sion Against Corruption (ICAC), when it was proposed in the late seventies, was greeted with some scepticism in what was then considered one of the most corrupt societies of East Asia. People said that ‘ICAC’ really stood for ‘Interfering with Chinese Ancient Customs’. But it really worked. Some years later, Hong Kong managed to build a state-of-the-art airport involving thousands of contracts with no evidence of corruption  in the award process and very few problems in the execution. Maybe if we had such a commission in Trinidad and Tobago there would have been no need for a commission of inquiry into our own airport project.

Most firms, whether foreign or local, would prefer to do business in an environment that is free of the pressure to bribe. Most would prefer not to have the high cost of bribery affecting their bottom lines. And surely they would prefer not to run the risk of prosecution. For some foreign firms, this risk is double as the laws of their home countries make it a crime to bribe local officials. So they are not comfortable doing business in places where corruption appears to be a way of life.

There are plans to set up an ICAC here. If it is half as successful as the Hong Kong Commission, it will go a long way to cleaning up the business environment. This will not be an easy or inexpensive task. But, as the Attorney General is reported as saying, “The price we have to pay to clean up the Augean stables is great but necessary.” She is also reported as noting the very important point that we cannot rely solely on legislative measures.

A Preventative Pact

And there are other measures available almost immediately. We do not have to wait on an ICAC. Without making any new laws we can begin to implement in public contracts the Integrity Pact (IP). This is a legal agreement between a public authority, such as a Government agency or State owned enterprise, and all the bidders for a public contract of any type, used to prevent corruption throughout the whole contracting process.

Developed by Transparency International (TI), it has been used to good effect in Colombia, Ecuador, Italy, Korea, Pakistan and Nepal. Here is an example of how it worked in Argentina.
In May, 2000 the municipality of Moron, a suburb of Buenos Aires, put out for tender a four-year garbage collection contract estimated to be worth US$ 48 million.

After a public hearing on the bidding documents and the terms of the contract attended by more than 500 people, the estimated cost was cut by 30%. Ten days after the hearing the municipality published the final bidding documents on its Internet website, explaining which of the participants’ observations and suggestions it had accepted or rejected and why. Then the municipality and the four pre-qualified bidders (one foreign, three local) together signed the Pact.

Each bidder affirmed that it had not paid, and would  not pay, any bribes in order to obtain or retain the contract. Each bidder further undertook to disclose all payments made in connection with the contract and to report any violations by other tenderers during the bidding, and by the winner during contract execution.

The municipality undertook that its officials would not demand or accept any bribes and agreed to enforce appropriate disciplinary or criminal sanctions in case of violation. All agreed to public disclosure of the award, of the major elements of the evaluation and of the reasons for selecting the successful bidder. Bidders agreed to heavy sanctions for violation of the Pact, including damages payable to the municipality of 10% of the contract value and blacklisting for five years. Any conflict was to be resolved by national arbitration. The Argentinian chapter of TI was appointed to monitor the bid evaluation, the award decision process and the implementation of the contract. About one year later an independent opinion poll revealed that 80% of the citizens of Moron were satisfied with the refuse collection service.

Good for business

It’s not hard to see how an agreement like this one can help reduce the pressure on firms to bribe. It establishes what most firms want — a level playing field. The rules of the game are the same for all and known to all. The bidders can abstain from bribery and other corrupt practices because they are assured that their competitors will also abstain. They are assured, too, that Government officials will not demand or expect bribes. They can be confident that public authorities will follow transparent procedures.

Best of all, it reduces costs. Bribery can now be seen for what it really is — an avoidable, intolerable and excessive cost of doing business. For the public authority and thereby for the public whose money is being spent, the IP helps ensure that the desired product or service is obtained at a competitive price and in accordance with specifications.  The high cost and the distorting impact of corruption are avoided.  Also the IP helps increase public trust in Government contracting and encourages a more hospitable investment climate.

We can do it 

All of this is good for business. And, in an economy in which public funds are not siphoned off into the pockets of the corrupt, there should be more available for investment in projects and hence more opportunities for suppliers of goods and services.

But can it work here in Trinidad and Tobago? Experience in other countries has shown that, for successful implementation of the IP, there must be, first of all, sufficient political will on the part of Government, its agencies and its enterprises. There must also be commitment on the part of the suppliers. Then the drafting of the pact must be done properly-adapting it to local conditions while maintaining its essential elements. Lastly and possibly most importantly, there must be careful monitoring both by an independent body and by the general public provided with easy access to all necessary information. Can we meet these conditions? I think so.

What would you like to be when you grow up?  I recently asked a group of third to fifth formers this question at their school’s career day.  Every student responding did so in terms of jobs that presently exist. 

The significance of this is that I had been asked to talk to them about “dejobbing”, and my objective was to prepare them for a possible world, ten to twenty years from now, without jobs – at least, as we know them today. The nature of work is changing and the concept of the “job” itself may someday become obsolete.  As the word implies, “dejobbing” means the removal of jobs from the workplace.  The main driver of these changes is technology.

Technology is rapidly turning all work into knowledge work and transforming the way we do work.  Organizations in the future — as some are already doing — will operate around projects and assignments rather than well-defined tasks and jobs.  Individ-ual workers and teams will work on the projects and then disband or move on to other projects. Many of today’s jobs will become obsolete in the future, in the same way as many of yesterday’s jobs no longer exist.  And many of the jobs that will exist in the future have not been created as yet.  Perhaps, have not even been thought of as yet.  But what will be most striking about the future world of work may be the absence of “the job” as we know it. 

In the rapidly approaching future, organizations will not necessarily offer you a “job” but may provide work to be done.  In fact, you may not be employed with any one organization, but with several organizations over time or at the same time.  You may not work for an organization at all but for yourself.  You may be “the organization” – a business of one, “You & Company”, as one author puts it.

In the future, you will not necessarily have to go to work.  The work will come to you.  You may not work from Monday to Friday, 8.00:4.00.  You will work anytime and anywhere.  Work will be whenever and wherever you choose to do it. True employment security will come not from getting a job but from being able to work.  Not from “employment” but from “employability” — being continuously able to be employed.  This, in turn will come from continuous learning.   This learning will not necessarily take place in a classroom.

This learning will come from a willingness to experience new things, an openness to new experiences and ideas.  It’s an attitude to knowledge rather than the knowledge itself.  Rapid and continuous change means rapid and continuous skills obsolescence. That means that, in ten years time, most of what we are learning today will no longer be relevant!  We have to be constantly relearning, retooling, reskilling, reinventing ourselves.

So how do you prepare for a world without jobs?  The first step is to understand yourself: what one author calls your “data”: your desires, abilities, temperament and assets.  Your data will tell prospective employers more about who you really are and what value you can really add to the organization.  What is your data?

Desires:  Desires are what you are willing to work toward achieving, rather than just your wishes.  As the saying goes, find something you enjoy doing and you will never have to work a day in your life!  That is, if you can work at something you like doing, it won’t seem like work.

Abilities:  What do you do well?  What talents do you have?  We all have abilities.  We all have talents.  You can use those talents in a jobless workplace were organizations will not necessarily have a job to fit you into, but may be able to use your talents and abilities to help them achieve their goals.

Temperament:  Another word for temperament is “personality” — what makes you the kind of person you are.  Not all temperaments suit all kinds of work.  You should try to find work that suits your temperament or personality.

Assets: what do you have that can add value to an organization or employer?  Education, qualifications, experience, achievements, hobbies, etc. — the kinds of things you put in a resume.

Once you have studied yourself and your data, you can start putting You & Company to work.  The important point is to be proactive, to take charge of your life and career and to start preparing now for a world without jobs.

Dr. Charles is a Director of Quality Consultants Ltd.

The views expressed in this column are not necessarily those of Guardian Life. You are invited to send your comments to guardianlife@ghl.co.tt

TT Insurance Act needs fast tracking now.

The Insurance Sector is one of the country’s primary sector. If this sector goes, or is adversely affected it can have a tremendous negative social and economic impact on the entire country. TT is currently operating under an Insurance Act, which is over 22 years old.

As a Trinidadian, who has had the experience of working in the Insurance and Finance Sector in Jamaica over the last nine years, one has seen and had to work through the end result of the virtual collapse of the sector there.

The main point is that some of the factors which caused the collapse of the Jamaica insurance sector is already very much a part of the TT landscape. Prime Minister Manning, unlike the Jamaican Government, is not in the “bailout business” and therefore, if the sector should find themselves in problems a rescue plan may not be that simple for Trinidadians.

The government must implement the proper framework and ensure that the necessary adequate regulations are in place  to protect policyholders and the public at large. At the moment there is said to be a draft of a New Insurance Act in circulation, however, as one sector leader indicated, this draft has been going around for almost five years now and no one knows where it is.

Margaret Yearwood, Supervisor of Insurance, is of the  view, that the longer the process takes the greater the risk not only to the insurance sector but most of all the public at large. The reality is that the Jamaican government had to intervene to the tune of JA$120B  (US$3B), to avert a total collapse of the insurance and banking sector. I am very concerned about some basic signs, which have been in existence in the local insurance sector for some time, the red flags have been waving for some time now.

Some of the issues and warning signs are as follows: –
• The sector as a whole is poorly capitalised, with over 80 cents (80 percent) of every premium dollar (general insurance) being remitted overseas for reinsurance cover). Many players display very weak Balance Sheets.
• Many local insurance companies depend heavily on investment income in order to realise a profit, which speaks to concerns regarding to the viability of their operations.
• A culture of tardiness, by players (companies operating in the insurance sector), in reporting their financials etc, to the Office of the Supervisor of Insurance. The most current report on the market for public scrutiny is dated 1998.
• A culture of having a weak regulatory framework, which although is normal in most developing countries, is not a luxury TT can afford.
• Functioning with an obsolete Act means that most, if not all the major guidelines for efficient and effective operating companies in today’s global environment are currently out of sync.
It means that there will continue to be flaws in the system: inefficient investment guidelines, solvency margins, corporate governance, claims settlement and management guidelines, incestuous relationships, conflict of interest issues etc.
• The number of existing players in the market, as compared to the actual market size (too many players chasing too few policies). At the moment there are over 30 registered insurers operating in the market.
• It is clear that a number of players in the sector are undercapitalised, and may not be able to pass a required solvency test based on international standards and this in a nutshell means that they continue to put themselves, policyholders, the sector and the public at risk.

As a result,  players in the insurance sector may not be prepared for the global competition that is now on our doorsteps. We are already seeing the presence of the Internet players and the briefcase players biting away at the local marketshare. I would hope that we never reach that stage, like in Jamaica, where when “the horse has already bolted” they began a “fast track” programme for their new Insurance Regulations.

Let hope that we would have learnt something from our neighbours. St Bernard is a Regional Insurance and Business Consultant. He is also the Co-host of Risky Business, a TT radio programme which deals with risks and insurance matters. 
Email: pri@kasnet.com 

Bernard Aquing’s column will return next week.

National Flour Mills (NFM) continues to disprove the theory that government is not in the business of making money. By making considerable profits each year and having healthy returns on stockholder equity positions, some may argue that the company is no longer state-controlled since it became a public liability company in 1995 when 20 percent of Governm-ent’s shareholding was divested to the public. In 1996 a further 15 percent was divested followed by another 14 percent in 1997 to achieve the present day position of 49 percent divestment.

In 1999 the Government transferred its 51 percent shareholding to The National Enterprises Limited. Its 2002 Annual Report reflects a healthy and stable company that will plateau unless specific strategies are taken to ensure new markets and products are introduced to sustain a growth pattern.  The plateau is not reflective of the new products introduced and the new markets sought during the last eight years, it is the result of NFM’s dominance and saturation of the local market which negates the efforts on the other fronts.

Since 1995 NFM’s management concluded that growth potential lies in markets outside of TT since “domestic consumption accounts for about 85 percent of all flour production”.  The subsequent marketing drive resulted in penetration of markets in over 75 percent of the English-speaking Caribbean. NFM’s flour, rice, soya bean oil, dry mixes and animal feed products can now be found in Jamaica, Barbados, Dominica as well as in St. Lucia, Antigua, Montserrat, Grenada, St. Vincent and St. Kitts. Over the years, NFM has expanded its product offerings with the accompanying capital investments.

NFM is a cash cow, the company’s cash balances as at December 31 2002 read at TT$36M. This figure combines with short-term deposits of TT$14M to represent 20 percent of the company’s current assets of TT$250M. Current assets need to be matched to current liabilities to ascertain the liquidity of the company.  The logic is simple, if total current liabilities and creditors of TT$134M recall monies outstanding in an immediate scenario, what would be the company’s position to repay on an immediate basis? NFM is well poised for such a scenario as the ratio stands at 1.87: one for assets to liabilities. We can pare the  ratio even further by looking at NFM’s ability to repay when we remove the items as inventory that may take a while to be converted to cash on the market.

Removal of the inventory figure of TT$96M and the Corporation tax recoverable of TT$5M leaves a total of TT$149M to cover liabilities of TT$134M. Do the math; the company can still pay its creditors even without the buffer of inventories. A quick examination of Inventory will show : raw materials of TT$66m; packaging materials of TT$2m, maintenance spares of TT$18m and finished goods of T$8M with TT$193K in goods in transit. During the year the company acquired TT$20.8M in Fixed Assets, most of this was for the upgrade of the extruder equipment.

Return on Shareholders Equity is calculated as 13.1 percent in the Annual Report.  This figure can best be analysed by a comparison with the Return on Total Assets.  A rough calculation (because of limited data) that uses the formula: (Net Income + Interest Expense (net of tax) )/ average total assets gives us 19 percent as Return on Total Assets.  This suggests that the company may be earning less on borrowed funds than the fixed interest to be paid to creditors. This should be paid attention to by investors and is a point that only management can address since we do not have the information that would answer the question why.

The financial data paints only one picture of the organization.  Other relevant data will be the efficiency ratios for the plant, which will reflect the wastage and rework levels on the manufacturing sides. This gives an idea of future costs savings for the company. Investors should also be very interested in the amount of discretionary expenses that are included in the administration expenses of TT$32M and the selling and distribution expenses of TT$14M.  Apart from maintaining independence from political manoeuvring that saw the company through past scandals and a dissenting Chair, NFM’s challenge will be to keep setting itself new goals and creating new opportunities.

Many examples exist of mature companies, offering high demand products who found themselves trapped in a “ comfort zone” and unable to maintain a competitive front. In 2002 NFM’s management has identified a new strategy to maintain competitiveness and open new overseas markets, the only true growth area left. This expansion should be matched by an efficiency drive, which will ensure that at both manufacturing and non-manufacturing areas, operations are at the highest possible efficiencies with the desired levels of economy and effectiveness.This will prove to be a critical success factor of the company’s survival if and when competition comes.