For now, Nariva Swamp may be off-limits, but oil giant Talisman is fine-tuning and pressing ahead with its oil exploration efforts on land. Even as Talisman prepares its Environmental Impact Assessment (EIA), which, it hopes, will allow it to conduct a seismic survey in the Nariva Swamp, the company is leaving nothing to chance in the Eastern Block in south Trinidad.

The company is planning to sink TT $150 million into its seismic programme alone. That includes the forests of Rio Claro, an area that borders the Nariva Swamp. Further east in the offshore, Talisman will spend a further US$ 180 million through its involvement with BHP and other partners. “We know that this is a high-risk operation,” says Paul van Rijswijck, managing director of Upstream Operations, a local company hired by Talisman to do the groundwork for the onshore oil exploration. “It’s a one in ten chance that oil is there.”

This exploration is being done in a joint venture partnership with Petrotrin but Talisman carries all the financial risks during the early exploration phase. “It’s a lot of money to put out not knowing if you’re going to find oil,” says van Rijswijck, adding, “Talisman has no idea what the outcome will be.” In its arsenal though is the latest in 3-D seismic, a technology that makes finding structures that might trap oil a lot easier and lowering the risk of expensive exploration wells. Talisman has been in TT since 1996, attracted by geology similar to that of Venezuela and if things go according to plan, the company stands to reap rich rewards along with the other stakeholders.

Seismic field operations are conducted from upstairs an ordinary-looking building, opposite a gas station in Rio Claro. The company occupies the entire floor. On one wall is a huge grid-like map of the Rio Claro environment that in essence, outlines Talisman’s operations, while on another wall is a similar map that pinpoints where the crews are deployed. At peak operations, more than one thousand men will be directed over a vast area from the main operations office. In another room is a geophysics team putting all the pieces together on a computer system to ensure that technical goals are met without damage to property.

It’s one hell of an operation. Every day and like clockwork, maxi-taxis and crew vehicles ferry about 750 workers to an area a few miles away. They then head out in crews to survey, drill and prepare the heavily forested area for data recording, which will begin in April. Mapping the area will be done using explosive charges, something that environmentalists are not too keen on. It is only by using these charges that seismic mapping of the area can be done, says van Rijswijck. The process is tedious. By the time we got to the area, a crew had drilled a 60-ft hole (known as a shot hole) in the ground. An explosive charge, a water-gel we’re told, was then anchored at the bottom of the hole and prepared for detonation. As a precaution, three plugs along with an anchor, are lowered into the hole, making it almost impossible to retrieve. By the time the crew was finished, all that was left was a small muddy area. Van Rijswijck notes that in a few months, the area would revert to its original condition.

If Talisman is allowed to do the seismic survey in Nariva Swamp, this exact procedure will be followed, he adds. Apart from the muddy area, the surrounding area was left untouched. The forest trails are only wide enough to carry equipment. When the charge is set off, van Rijswijck says a small quantity of mud may be ejected from the hole in a few instances. “The impact will be minimal,” he stresses, noting that Talisman is doing everything possible to address environmental concerns. The company has handed out brochures to residents and explained what will take place through the various phases of the project. Asked what the explosion will sound like, Rijswijck likened it to a dull thud from a large bass speaker accompanied by a vibration similar to a loaded dump truck passing on a bumpy road. When detonated, sound waves will be sent into the earth and recorded by surface instruments. Van Rijswijck laments the fact that few people have asked to see what the reality is like on the ground.

The Eastern Block is licenced to Talisman, with Rio Claro being the centre of the survey. The survey reaches west into Tableland, south past the cattle ranch on the Guaya Road to Catshill, north past Churuma and East to the Balata-east Field area. Talisman hopes to complete the survey before the onset of the rainy season in 2003.  Van Rijswijck says the company would like to acquire seismic data over 375 sq km of the block, which includes parts of the Nariva Swamp. But the swamp itself has been the subject of controversy and for a while became a flashpoint for environmentalists. He notes the first CEC that Talisman has obtained encompasses 320 sq km, the area over which current field operations are taking place.

When the EMA denied Talisman access to the Nariva Swamp on the grounds that it was protected, Talisman took the matter to the Environmental Commission (EC). The court upheld Talisman’s appeal and sent Talisman’s application back to the EMA with a view to having an EIA done in the area as prescribed in the environmental legislation. Van Rijswijck stressed that even if Talisman were to get permission to go into the swamp to shoot seismic, there will be no exploration drilling or oilfield development in the swamp whatsoever. “We can,” he says with conviction,” explore and produce oil from beneath the nature reserve.” This, he says, can be done  through long reach wells and without “spudding”  within the sensitive area. He maintains that this is being done in environmentally sensitive areas elsewhere where Talisman currently operates.  He adds that even though oilfield operations take place in several Ramsar sites around the world, Talisman respects the sensitivity of the Nariva Ramsar site.

He acknowledges that finding oil on land carries a high risk, but Talisman says it’s worth a shot. Exxon, they know, spent time  and money in the early nineties in this area and found nothing. “Their seismic work was a 2-D programme carried out throughout southern Trinidad, but ours is a low impact 3-D focused on the Eastern Block,” he explains. Trinidad, he says, is called the “graveyard of geologists” because of such failures and the general complexity found in Trinidadian onshore geology. He is quick to point out, that while they are in the process of collecting data, it was too early to draw any conclusions on oil prospects.

I don’t feel like a professional. I just feel that I am a simple person doing what I like to do and making a difference,” says Linda Kendal, CEO of JSL Speedpak, one of the major players in the local courier business.

JSL Speedpak presently provides a two-day courier service, the Express Cargo service, the Classic Mailbox service (CMB) and the Shop America Service. This allows Kendal and her team to purchase items in the US for customers and ship them to Trinidad. Clients are then required to pay for the merchandise in US dollars. They also provide customs clearance with delivery in Trinidad as well as a pick-up service in Miami. Eight years ago, Kendal, who has training in customer Service, cargo operations and what she calls “extensive training in people skills at the University of life,” left Trinidad for Miami, Florida. She was joined by two of her three children and her husband of thirty years, William. It’s a well-run family business. Her eldest son, Nigel remained behind to take on the responsibility of the custom clearance duties at Piarco; her second son, Curtis, who holds a Bachelor of Sciences degree in Biology, manages the Miami office, while her only daughter, Ayana, a student at Florida International University, is the warehouse supervisor in Miami. JSL Speedpak began as a small package service in the early 1990’s, under the name BWIA Jetpak, offering a same-day service to the Caribbean, mainly Trinidad, on BWIA passenger aircrafts.

Kendal established the Jetpak Service while she was employed with BWIA as a cargo sales representative. Before that she had held the position of a BIWA reservations assistant for 18 years. The Jetpak service was developed by Kendal from an airport to airport service into an all inclusive courier business — all this before she left her job at BWIA in 1992. She recalls that after her departure, the courier service began to suffer.  “I was called in and offered the contract to handle the service on a private basis,” she remembers. “I could not have been happier because I always had a desire to go into business.” In February 1993, she registered and launched the company now known as Jetpak Services Limited (JSL) in a small office at the old Piarco Terminal. “We never turned back,” Kendal said. In 1993 they also established agencies in Guyana and Barbados, with the office in Miami being opened the following year, along with the third branch in New York. Over the next few years, other agencies were opened in Grenada, Antigua, St Lucia and Toronto, Canada. However, these agencies were discontinued after  BWIA opted out.

“This is in no way a permanent thing,” Kendal asserted. “My decision to establish the company was fulfilled in the service we offered and the satisfaction of fulfilling a need.” In 1998, Kendal left BWIA for a second time, this time for good to establish herself as a freight forwarder from the company’s Miami office. “The move was very timely,” she said, “because of the demand by our customers for an express cargo service to Trinidad.” While the company’s main office is situated in Florida – the gateway for operations to South America and the Caribbean – Kendal maintained that the original base for JSL is Trinidad, which continues to remain the head office. “We service the Trinidad public,” she said, adding that the majority of their  customers are based here. Trinidad, she says, continues to dictate the pace at which we operate our business.”

She covers a diverse range of clients. From electronics, cosmetics, medical supplies, technology to  machinery and the auto industry. “In short we service both the large and small businesses, as well as individuals,” she maintained. The company also has its own web site (www.jslspeedpak.com) which provides a tracking system for all packages shipped by JSL. According to Kendal, this website is presently being updated to include all the services offered by the company, along with information and forms which are required for these services. It may seem like it was all easy sailing for Kendal in establishing her company. However, she maintains that this is not so. She recalls that her greatest challenge came when they embarked upon the construction of their two-storey complex at Piarco. Soon after breaking ground, her contract was terminated by BWIA. “We were determined to press, on,” she stated, adding that, “I never knew that being a woman was a disadvantage until I tried to get a bank loan to complete the building.” “Many doors were closed on us, but God is good,” she went on. “He made a way for us and after much stress and trial and error, we managed to get a loan to complete the building in late 1999.”

Today, this very building houses tenants such as Air Canada, DHL, Servisair, R&O Real Estate in addition to the Customs Facilitation Centre for the courier companies. In keeping with its motto of service and customer satisfaction, JSL Speedpak will soon be launching its newest business venture – a shopping website (www.shopmetoo.com), which will provide Trinidadians with a shopping outlet whereby they can take advantage of all the major sales in the USA. “They will be able to go online and purchase items at the sale prices and have them shipped to Trinidad and delivered to their door via our Classic Mailbox, Express Cargo or any other services,” Kendal revealed.

The website, she noted, is equipped to accept credit cards. “This is is a big plus for Trinis, because most foreign credit cards are now being declined by US companies for purchases on the internet,” she said, explaining that US companies are only shipping to the same address as the credit card billing address. For Kendal her greatest motivation has been to provide a service with which  her customers are satisfied and proud to use. “My dream is to build a business of which my family can be proud and to leave a legacy for my children.”

Systems are all go for government’s plan to open up the local economy to skilled labourers from other Caricom countries.

Prime Minister Patrick Manning announced his administration’s intention  to diversify the labour market at the recently held 14th Inter-Sessional Caricom Heads of Government meeting. This move, he said, was part of the effort to have TT ready to enter into the Caricom Single Market and Economy (CSME) by year’s end. Support for government’s plan has been forthcoming from members of the business community and even major players in the trade union movement. However, many maintain, government has to be careful in the way it proceeds.

According to Carlton Gibson, Second Vice President of the Oilfield Workers Trade Union (OWTU), labourers have been moving throughout the islands for a number of years without the aid of any administrative policy. “There are Trinidadian labourers working in islands such as St Lucia and Grenada among others, just as there are labourers from these countries employed here,” he said, in a telephone interview. “We are a Caribbean people and with or without an official policy, the movement of labour will continue,” he asserted.

President General of the Seamen and Waterfront Workers Trade Union (SWWTU), Michael Annisette, shared Gibson’s sentiment. Describing himself as “a Caricom nationalist,” Annisette noted that he had no objection to the opening up of the local economy to skilled Caricom labour. But this, he said, must be reciprocated by the other islands and regulated in such a way that it will not be used and misused for cheap labour. “Foreigners,” he went on, “will be coming into TT without the benefit of a collective agreement and a proper regulated committee needs to be set up to oversee the involvement of the trade union movement.”

UWI Economist, Dr Dhanyshar Mahabir, believes that free movement ensures greater employment of our human capital. “If we are moving towards greater integration in the Caribbean region, it involves not only the free movement of goods but the free movement of capital as well,” he said, adding that one would expect that human capital or rather skilled labour should be able to move with relative freedom within the region.” “This is a valuable first step in facilitating the free movement of labour in the region,” he added. However, he asserted, one country cannot bear the burden, hence the need for reciprocity. He said, “if for example, there is a shortage of accountants in TT, then those from Jamaica and Barbados or any other Caricom island can come here to work. Just the same, if there is a shortage of engineers in St Kitts, then our engineers should be able to go there to work.

“If however, only one country does it and others do not follow, then we are simply opening up our market to competition,” he said. He warned that, “we can find ourselves with low wages for professionals without them having the opportunity to migrate within the region.” This, he said, may have the perverse effect of forcing our skilled labourers to migrate out of the region entirely. Mahabir maintained that if reciprocity was achieved on this particular sphere of the market, the next move would be to the level of the free movement of unskilled labour throughout the islands. “Of course,” he said, “if we go in this direction, we might just find there is an influx of unskilled labourers moving from the more depressed territories to the more buoyant territories. “This influx would have to be catered for, given the burdens which may be imposed on social services,” he added.

President of the TT Chamber of Industry and Commerce, David O’Brien, expressed his belief that bringing in labourers from other Caricom countries would be an asset to TT since it would help to fill the gaps in the sectors where there is a shortage of labour. The energy sector is one such example. Professor Ken Julien, former Dean of the Faculty of Engineering at UWI, and Chairman of the National Energy Skills Centre (NESC) has said that over the next five years TT will need an additional 3,000 individuals per year with tertiary level technical skills training in order to satisfy the needs of the expanding energy industry. Experts have determined that the growth in the natural gas sector and related industries is directly responsible for the rising demand for skilled workers.

Julien maintained existing training institutions put out less than 1,000 adequately skilled persons annually. Over the next seven years, there will be a need for at least 2,500 professional engineers, 4,500 engineering technicians and 1,600 skilled craftsmen. Professor Julien further noted that the production sectors needed more engineering technicians, craftsmen and more tertiary level graduates with either a Bachelor of Science and Bachelor of Technology Degree. Preliminary results from a study, which is still being conducted, revealed that for the period 2000 to 2009, more than 400 professional engineers would be needed per year, over and above the number of graduates coming into the market. Julien further noted that these gaps will only become larger as the country heads into an expected 10 to 15 year period of sustained activity in the energy sector. While O’Brien stressed the importance of having free movement of labour among the Caricom countries, he could not say if the  impending implementation of the Free Trade Area of the Americas (FTAA) was driving it. “If it is inevitable,” he stated, “then the FTAA will deal with the issue of labour and may just cater for the movement of labour among countries named in the agreement.”

According to Economist, Gregory McGuire, with or without an oil boom or the FTAA, the freeing up of the regional market for skilled and professional labour  is an important part of deepening the regional integration process. Under a regime of free movement of labour, he said,  new and expanding opportunities will be created for skilled personnel throughout the region. When asked whether he was of the belief that opening up the economy to outside labour would increase the cost of labour, McGuire maintained that the state of the market in terms of the balance between supply and demand would determine where wages go. “During periods of buoyant economic activity, as anticipated over the next few years, there is a tendency for labour costs to rise sometimes out of proportion with anything else,” he said, adding that increasing the supply options may have a dampening effect on wages. This point was reiterated by Annisette, who stated that if foreign labourers were brought into TT, there were employers who would not hesitate to pay them less than the local labourers.

Therefore, he maintained, some sort of regulated commission needed to prevent this from occurring. “In truth and in fact,” he stated, “all of the provisions of the ILO in terms of protective bargaining must be enshrined if this is to make sense, as well as to avoid a fall out or fighting among Caricom countries which has occurred in the past.” First Vice President of the Trinidad and Tobago Manufacturers Association (TTMA), Anthony Hosang, expressed the view that the free movement of labour can work in favour of TT, since local companies in all areas of business have invested and plied their trade throughout the region. Construction companies and construction material manufacturers, he said,  continue to tender and win lucrative contracts throughout the region and the free movement of labour will definitely aid their efforts, he said.

He went on to note that the cost of living in TT was by far one of the lowest in the region. “Labourers,” he said, “from other islands have to sustain a family overseas, at a much higher cost than a TT labourer would. “There will always be a demand for good, productive, skilled labour and we must therefore ensure that we provide our citizens with the opportunity to acquire the skills to capitalise on a larger job market,” he maintained. In the words of Dr Mahabir, PM Manning needs to ensure that there is reciprocity in the area of skilled labour as well as an acceptance of the definition of what skilled labour is. “If these two can be agreed upon,” he stressed, “then we will be making progress towards regional integration.”

In our part of the world, we celebrate what is described as the dominant way of organising business, the American Model. Its evolution  over the last one hundred years derived major success from the assembly type operation introduced in motor car manufacture and other industrial enterprises.

The model’s systematisation and application to a range of business types includes services particularly the fast food business. George Ritzer, who studied the rise and global spread of fast food chains and franchises, described the process as McDonaldisation, the new, successful business model of the west. Four alluring dimensions lie at the heart of this model’s success offering consumers, workers and managers — efficiency, calculability, predictability, and control. Efficient service delivery is gained from predesigned  organisational rules and regulations which workers and customers are trained to follow supervised by managers. 

Calculability emphasises the quantitative aspects of the production process which in the fast food example relates to portion size, cost and time to provide the service. In the American environment, quantity has become equivalent to quality because of the bigger is better syndrome. The time factor has incorporated home or office delivery, even guaranteeing a delivery  time backed by no charge for late deliveries. Predictability is the assurance that products and services remain the same over time and space including international space.

This means if a consumer travels  to a foreign location such as the Caribbean islands, the product or service will be the same. It is argued that despite rapid changes given the pace of modern living, people now prefer a world with few surprises. The workers in McDonaldised systems also behave in predictable ways by following corporate rules and the dictates of the ever present  supervisor. Control is the model’s final element in the business world. Ritzer says that in the McDonald example, the lines, limited menus, few options, and uncomfortable seats lead diners to eat and leave quickly. In the drive through version they never enter at all. It was noted however that in the global application of the model this aspect has been tempered to suit  cultural differences.

Along with the four dimensions of the business model described above, there are three other factors integral to an understanding of the drive towards the growth in use of the McDonaldisation  model, namely economic interests, the spread of American culture, and  the model’s capacity to attune to important changes. The model properly implemented leads to lower costs and higher profits through greater efficiency which benefits people and organisations. American culture values efficiency, calculability, predictability, and control and seeks them out. The spread of American culture has transferred these values to other places as is so evident in Trinidad which boasts of being the fast food capital of the world on a population measure.

Important societal changes such as single parent families, high mobility, more discretionary income, the opportunity for lower income people to dine out and computer technology have contributed to the growth of businesses on the  McDonaldised  principle. Alternatively, the post-industrial  business model is based on the rise of new technologies and the growth in knowledge and information processing  which employs professionals, scientists, and technicians. The growth in the number and importance of such persons created the belief that society will be dominated by creative knowledge workers. However the low status service occupations which are central to the fast food business and other businesses that follow that model show no sign of disappearing, even though some of the actual brands may disappear.

It is clear that the two models will coexist in most economies for many years to come. The fast food model adopted wholesale in Trinidad and Tobago is not without difficulties in the USA due to market saturation. McDonald’s itself is declining in its home market but growth in foreign markets is currently ensuring survival. The model is also associated with environmental degradation, dietary problems, and poor working conditions. Locally,  some fast food outlets and similar enterprises contaminated the local drainage system with their effluent for years and internationally the charge of being the major contributor to the disease of obesity is being vigourously pursued by various health lobbies. It will not be long before such a lobby begins in Trinidad and Tobago with obesity already an increasingly serious problem  among the young population as reported by the wellness guru Geoffrey Frankson. Ritzer argues that McDonaldisation or the fast food model includes both benefits and costs and is an important social process but not the only process transforming contemporary society.

Further,  there are degrees of McDonaldisation  with fast foods an extreme example but even universities being a moderate example. The fast food example of the model is in its growth phase in Trinidad and Tobago with expansion of some of the existing fried chicken and pizza franchises and the entry of new chains. We can expect other brands in the future even some of the Mexican food types popular in the USA but the health implications will force a change in the model or its demise.

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

The local dairy industry knows what it’s like to face US food safety regulations, so does the sea food sector. And unless these businesses start to adhere to international food processing standards, they will be prohibited from exporting their goods to international markets, says Richard Parish, a safety and food processing consultant.

Speaking at a seminar organised by the Caribbean Business Services Limited (CBSL), Parish said the government also needs to get its act together. The main objective of the seminars was to assist manufacturers in the food processing industry in understanding why it is essential that they adhere to food safety regulations and implement food safety standards. Parish noted that food-borne illness has economic losses as well as a negative effect on business. He cited Perrier as an example and said the company lost its market dominance after its poisoning outbreak and has never been able to regain earlier sales volume. The cost of recall alone was in excess of US $5 million. He noted that one outbreak of food poisoning is sufficient to wipe out 20 years of good reputation and performance. “The trend in the food industry has been towards more regulation, more commitment to food safety concerns, increased onus on manufacturers on providing food safety and improved adherence to labelling regulations.” National Agricultural Development and Marketing Company CEO (Namdevco) Samaroo Dowlatt said because of these regulations, local exporters face many problems when exporting food. These include meeting regulations in importing countries and safety, particularly in respect of pesticide control programmes and proper recording of usage.

He explained that most food processing manufacturers are unable to comply with certain standards because they depend heavily on inspections from the Chemistry, Food and Drug Division of the Ministry of Health. There are only eight food inspectors within that Division who are responsible for  inspecting food and servicing the entire country. He said given their myriad responsibilities, it is extremely difficult for them to meet and service all the food processors and manufacturers in TT. Parish stressed that the lack of understanding of the obligations is keeping the food processing industry back. He wants to see Good Manufacturing Practices (GMP) and Hazard Analysis and Critical Control Point (HACCP) implemented locally.

Parish noted though, that some local exporters, in limited numbers, do adhere to safety standards. “Food safety standards in TT are below the required norms, below the international regulatory requirements, below standards in most other countries in the world. Awareness is lower in TT when compared with other states in the Caribbean region,” he said. He believes that government needs to take food preparation seriously and create the necessary competent bodies to oversee the implementation of the essential food safety programmes. This, he stressed, is needed to prevent their trade from being irrevocably damaged due to intentional regulatory exclusion.

He said more markets are demanding an assurance that products are manufactured within food safety programmes. In the US, federal authorities are now rejecting products that once had no problem coming into that country. In Europe, importers are already required to ensure that they have evidence of a certified HACCP system in place for all imports. Caribbean manufacturers are currently receiving notification from their long- term European importers that trade must cease unless they receive proof that the food products have been produced under a certified HACCP scheme. Some companies have seen orders being cancelled. Parish said the time period given by the importers for the HACCP certificate to be presented is usually only a matter of weeks. These regulations are also backed by heavy penalties and the risk of imprisonment.

One other important issue highlighted was the need for absolute accuracy in labelling and the strict adherence to the labelling regulations of each market. Food safety regulations act as non-tariff barriers to trade and provide no opportunity for non-compliance if export manufacturers need to comply with these regulations as soon as possible in order to remain internationally competitive. Dowlatt said the food manufacturing sector has expanded quite rapidly over time and there are many people in the sector that require the services of the inspectors. He noted that in the 1960s when the sector was not as large, eight inspectors were adequate, but with the growth in the industry 40 years later, more inspectors are definitely needed.

 

Kwodwo Filson of the Ghana Investment Promotion Centre (GIPC) believes that Trinidad and Tobago has what Ghana needs.

TT, he says, has an abundance of energy resources and well advanced information technology (IT) that Ghana would love to get its hands on. Speaking at a one-day workshop hosted by TIDCO last week, Filson who was part of a Ghana trade mission visiting TT, said his country has not developed those sectors as yet, and can use some of the expertise that TT has in those areas. “We have not developed those sectors in Ghana as yet and so it is different for us and that is why we are interested in TT,” he told reporters.

The Ghana trade mission made up of a delegation of 10 members, were in TT for 14 days looking for trading opportunities. Initially, the delegation was supposed to comprise 20 people, but some members had visa problems with the United Kingdom government. The ten members represented various sector of the Ghana economy seeking trading opportunities in construction, cocoa processing, food manufacturing, agriculture and, more importantly, energy and IT. The Ghana Invest-ment Promotion Centre is a government facilitating agency. Filson has been with the Centre for the last eight years and his role is to facilitate business from trade missions.  

Filson said TT should be interested in establishing trading links with Ghana, noting that it is the gateway to West Africa, which, he adds, has in excess of 300 million people. “We have the most stable political environment in Africa and we offer the best opportunities by way of linking other West African countries. We are not land locked,” he pointed out. Countries, he said, in West Africa clear their goods from the Tema port in Ghana because of its regulatory environment, adding that it also had a communications systems and good roads. Additionally, he said the crime rate is very low and English is the preferred language. The time difference between TT and Ghana is four hours.

While the mission’s main aim was to seek trading opportunities in TT, it also sought to establish transportation links, especially air links between TT and West Africa or Ghana. We want to establish trading ties, but first we must establish air and other transportation links to conduct business.” He said there were no direct air links between TT, Ghana or West Africa, stressing that these must be established to build the capacity and linkages necessary to conduct trade between both countries. Currently, persons from TT wishing to travel to Ghana have to do so via the UK.  “If we can set up direct air links between Accra (capital of Ghana) and TT and the Caribbean that will be great.” 

Filson said this is not the first time that Ghana was trying to establish trading and air links with TT. He noted that in 1998, Ghana’s former government sent officials to TT to sign a Memorandum of Understanding (MOU) which included agreements to discuss transportation linkages between the two countries.  “I am not sure what has been done with regard to that MOU, but still it is an initiative. It will not only take governments to do it, but private sector participation as well, to get that project going.” He said Ghana is very interested in private sector participation because the opportunities for the local private sector are very large in his country. “When we talk about Ghana, we are talking about the whole of West Africa.”

Filson said once the air links were established Ghana will be very interested in purchasing fertilisers from TT. He also expressed an interest in the food processing and manufacturing sectors of TT. When asked what Ghana can offer TT, Filson said Ghana has skilled labour at a relative competitive cost and noted that it also has very large distribution networks throughout West Africa. “So TT will have access to a very large market and we are removing all the impediments to trade to encourage more investments.”  Filson added that Ghana is concentrating on TT because they view this country as the gateway to the Caribbean. “Once we establish links with TT we believe that we will establish links with the rest of the Caribbean.”

The Ghana delegation met with Foreign Affairs Minister, Knowlson Gift;  Agriculture Minister, John Rahael; Port-of-Spain Mayor, Murchinson Brown as well as other private businessmen. The delegation also visited the energy plants in Pt Fortin and Pt Lisas and the port facilities. Vishnu Dhanpaul, vice-president, Trade and Investment, TIDCO, said there are many opportunities for trading with Ghana. “There is a huge market out there with over 300 million people which we have not tapped.”

Small Caribbean countries, many which are battling serious economic problems are now bracing themselves for a further fall out if the US goes to war against Iraq.

Minister of Foreign Affairs, International Trade and Civil Aviation of St Lucia, Julian R. Hunte in Trinidad earlier this week, said the general consensus of trade ministers at their caucus meeting last month and Heads of Government was that the region would be “devastated” by war with the increase in the price of fuel.

Like other Caribbean countries, St Lucia which is dependent on tourism was hard hit by the fall out of the 9/11 terrorist events in the United States in 2001 when visitor arrivals to the island plunged. “ If you compared those who did not travel after 9/11 and compare it to people from Europe who probably will determine that they will not fly because of the fear of terrorism and …also US (visitors) it’s going to be a double whammy and the effects will be horrendous as it relates to the  economy. “So that every effort must be made to exhaust all the options before a  decision of going to war is concerned,” said Hunte who is due to take up a one year term post as President of the United Nations General Assembly in September.

A war will mean non-oil producing countries big and small, rich and poor will have to spend much more money for oil. With the world oil market stretched nearly to capacity, the Organisation of  Petroleum Exporting Countries (OPEC) have had little success in keeping a lid on oil prices.Crude oil prices have hit their highest levels since the Persian Gulf War of 1991. With a glut of oil worldwide on the eve of the Gulf War, prices spiked at more than US$41 a barrel by October 1990. But a few weeks after the US-led attack on Iraq in January 1991, oil was selling for less than US$18 a barrel.

Analysts estimate war in Iraq would remove about 2 million barrels of oil a day from the market. Some believe OPEC, which does not disclose its production, has the spare capacity to replace that oil. Others believe the cartel’s members are already pumping at full capacity. Ultimately, the price of oil will likely swing with the progress of a war. If fighting were to end quickly, prices would probably fall – though not as sharply as in 1991, given generally tight supplies. But if the conflict were to drag on or if oil facilities in Iraq or neighbouring countries were damaged, prices could remain high.

Last month Caribbean Community (CARICOM) leaders at the end of their Inter-sessional meeting in Port-of-Spain issued a joint statement calling on the US to exercise restraint on taking military action against Iraq and to give weapon inspectors more time to complete their work. The leaders were concerned about the consequences such a war would have on the world particularly on small developing states including those in the Caribbean. They expressed particular anxiety at the consequences a war would have not only for the region of the Middle East, but for the entire world, and the disproportionate burden that would be borne by small developing states,  including those in the Caribbean, which are ill-prepared to cope with the impact of a global recession provoked by volatile oil prices,  severe dislocation to their vital tourism and financial services sectors, and falling levels of investment, according to the statement.

Jamaica’s Trade Minister K.D Knights said higher oil prices will have a catastrophic impact on almost every aspect of his country which is beginning to see some recovery in the vital tourism sector. “We all know the consequences of war. That’s why the emphasis has been on disarming Iraq,” said Knights who was also in Port-of-Spain.” It will affect production, transportation, almost every aspect (of a country).” The Caribbean Hotel Association (CHA) is already setting in motion a number of preparedness and response measures on behalf of Caribbean hotels in light of the tensions in the Middle East and the resulting impact on the tourism industry. “From the experience of the Gulf War and the aftermath of September 11, 2001, a drop in demand is to be expected,” said CHA President Simon B. Surez. “On the one hand, the industry as a whole must be well prepared to weather a difficult period – whose severity will be determined by how protracted or swift is the conflict. On the other hand, it is those that respond proactively with targeted strategies that will have the edge,” said Surez, a hotelier from the Dominican Republic.

The Caribbean Hotel Association is moving forward on two fronts. First, CHA is encouraging its members to put in place policies that protect visitors whose trip is cancelled or who find themselves stranded in the Caribbean. Secondly, CHA is developing a public relations contingency plan to minimise  the negative impact on the Caribbean hospitality industry, by underscoring the region’s key attributes in the current climate, such as its geographical proximity to the United States, safety, and the diverse  offerings for families to travel and spend time together. “In today’s turbulent times, we feel more committed than ever to work in conjunction with the public sector for a common approach,” said St Lucia’s Berthia Parle, 1st Vice President of CHA and Chairperson of CHA’s Advocacy Committee. “We are encouraging Caribbean governments to identify and implement support plans.”Parle said.

Q.   A few times in this column you have mentioned “psychological accounting”. Can you explain that term?

Gail, Diego Martin

A: Psychological or mental accounting is the process by which individuals develop a system of mentally separating their money into different categories. The most common example of this is the case with savings and bank loans. Individuals view their savings separately from their bank loans, when they should really be viewed together in determining the individual’s net worth. For example, an individual with $20,000 on a deposit and an outstanding bank loan of $15,000 when asked the question about the value of his savings in some cases may say it is $15,000, when it is really $5,000.

The reason for this misconception is that in the mind of the individual there are two mental accounts, a savings account and a bank loan account. He does not see the two as integrated and intermingled. This may be harmful if the individual keeps funds in savings at the expense of not paying off debt, which usually commands a much higher interest rate than bank savings accounts. Nevertheless, there could be cases for keeping savings even though there may be outstanding loan balances. An example of this may be the need to keep an emergency fund in case of contingencies.

Q.  I understand the difference between an asset and a liability, but what is an illiquid asset and should I have them in my portfolio?

Radhica, Chaguanas

A: An asset’s liquidity is defined as the ease with which that asset can be liquidated at a price, which reflects the fair value of that asset. The most liquid asset in the local market is a Government of Trinidad & Tobago Treasury Bill due to the fact that there are primary dealers (commercial banks), which are always willing to buy and sell these securities. The Bills can also be bought and sold at the Central Bank of Trinidad and Tobago. A Money Market Account is also a liquid asset in that the funds can be withdrawn at anytime. However, there are some assets, which cannot be easily withdrawn. An example is a fixed deposit which is locked in for a period of time and which cannot be withdrawn before maturity without incurring significant penalties.

Another example is real estate. The size of the transaction is usually relatively significant and the transactional necessities of transferring, searching etc, could sometimes prove lengthy and bureaucratic. Nevertheless, the returns on real estate could be quite significant over time despite its illiquidity. However, if there is a forced sale the price fetched could be below fair value. Therefore, one should only invest funds in relatively illiquid assets, which one would not need in the near future, as premature sale may be at prices lower than which would normally occur. So, investing in illiquid assets, which generate higher returns, may sometimes be a necessity, but it should only be with the long-term part of a portfolio.

Q.   I have some US currency in a money market account. But I’m worried.  The US conflict with Iraq is causing the US stock market to slip and interest rates are low. Should I get rid of my US and convert it to TT dollar investments?

Russell, San Fernando

A: You should not convert your US into TT. Firstly, your funds are in a money market fund so that the fact that the US stock market is slipping does not impact you. On money market funds your principal is protected and secured against the bonds in the fund. Secondly, as regards interest rates in the United States being low or going down further this has more of an impact on you as the interest rate on the money market fund does tend to float with interest rates in the United States.

However, due to peculiarities in our local economy, the degree of movement is not very significant. This is because financial institutions in TT are always willing to pay up for US dollars given the temporary shortages, which occur from time to time. Thirdly, interest rates on TT and US dollars are almost at the same level in TT even though interest rates on US dollars should be much lower given the relative strength of that currency. Therefore an investor holding US dollars is in a win-win situation. As the purchasing power of his funds is protected in a strong currency and at the same time is earning an interest rate close to that of the equivalent TT investment, whereas normally the rates on US would be much lower than those on TT.

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

This past week in Port of Spain, workshops have been arranged by the Caribbean Association of Industry and Commerce (CAIC) to deal with the challenges of the Caribbean Single Market and Economy (CSME), Free Trade Area of the Americas (FTAA) and General Agreement on Trade in Services (GATS) so that business leaders in the region could come to terms with the new trading environment and to put them in a position to engage in discussions that would likely shape the negotiating strategies of the regional governments.

While this approach might have come somewhat late in the day in the light of the progress of the FTAA and GATS, there is an old saying that “it’s better late than never” and in that sense it is never too late for the private sector to interest itself in what is taking place and to seek to influence the final outcome. In the final analysis, it is governments that negotiate agreements but it is the private sector that is involved in the business of trade. Trinidad and Tobago has committed itself to the full operation of the CSME by 2004. There are currently many impediments to the implementation and major legislative changes will be required. While there is good reason to have the entire Caricom market be seen and treated as a single market since in today’s world individual Caribbean countries are clearly too small to be taken seriously on the world stage, there are indeed difficulties to overcome, as each country is run by sovereign governments some of which are primarily interested in seeking the interest of their own people and not necessarily the wider Caribbean.

Let us now discuss what the single market might mean for the insurance business. If we analyse the European model, their single EC market now allows an insurance company established in a member country to operate in another member’s country provided that it meets the requirements of the insurance regulators in the country of establishment. For example, a German company operating in the Italian market will continue to be regulated by the German authorities. All of this was possible because the level of insurance supervision in all the member states was comparable and the expertise available to the regulators was acceptable regardless of the jurisdiction.

Consider the situation that currently exists in the Caribbean. Trinidad and Tobago’s insurance legislation was once recognized as the model but unfortunately it has not been amended to take into account the realities of today’s world and 20 years is a very long time in a business that has undergone significant transformation. Therefore, the first step is to update the legislation addressing issues of capital, solvency and investments and ensure that the regulators have the necessary tools to monitor the governance of the insurance industry. The next step is for insurance legislation in the other member states to be upgraded and thereafter to ensure that the regulators have the capability to monitor the companies so that troubled companies are not permitted to operate in other member states because they obtained a clean bill of health from a poorly regulated jurisdiction.

The present situation of licensing in each jurisdiction and bringing capital to support risks underwritten must no longer be a requirement but that change in policy would inherently bring competition to indigenous companies in the smaller territories and they might then find it difficult to survive. A CSME along the EU model for insurance would provide greater choice of products and services for citizens in the smaller islands but at the same time give the insurance providers from the MDC’s a likely advantage over the home grown companies. Turning to the FTAA and GATS, we have reached the request and offer stage of the negotiations and already we are witnessing the push for market access by the world’s dominant players for cross border trade. Any observer who was following the negotiations closely would have predicted that the big developed countries were interested in cross border trade in preference to the establishment of operations in developing countries.

Firstly, it is costly to set up office locally and be subject to local laws, hiring practices and competing for local labour and expertise. It is obviously far cheaper to stay in one’s home market and engage in cross border trade picking and choosing only those risks that give the highest revenue with minimum transaction costs utilizing existing human and physical infrastructure. While this model is the ultimate goal of the developed countries, developing countries must be informed and be alert to the dangers that cross border trade will pose to local companies. Trinidad and Tobago’s market is open and liberalized when compared to many countries around the world. It does not restrict new entrants and the entry barriers are quite low so it is not difficult for any serious player to enter the market. In fact, new entrants are welcome, but the up front costs of establishment act as a deterrent when in their view the market is small and therefore unattractive.

It is important that private sector leaders busy themselves in obtaining information and knowledge of the state of negotiations. The government negotiators must take on board the views of the private sector that are involved in trade in services and ensure that while it is difficult or impossible to protect home markets, the competitive advantages of local companies must not be negotiated away. We must learn from the experiences of the many countries that are opening their markets but only slowly. Trinidad and Tobago cannot be accused of protection or a closed market but we should not be at the forefront of promoting or agreeing to cross border trade in insurance services when the world is a long way from unbridled market access.
E-mail: daquing@cablenett.net