The Trinidad and Tobago manufacturing sector accounts for 8 percent of the national GDP, and employs around an 8 percent of the total workforce. Most industries in the sector are currently facing decreased output due to labor shortages, an ongoing lack of foreign currency and the effects of the removal of a number of utility subsidies, including subsidies to transport fuel which will be phased out between 2016 and 2019.
While providing a negative short-term shock to national consumer spending, the subsidy reductions of the past year should benefit the country in the medium- and long-term as subsidies and transfer make up 50 percent of government spending as of November 2016. This would have the advantage of not only encouraging better consumer habits, but also reducing the need for other taxes that discourage consumer spending, such as the 12.5 percent sales tax and the new 7 percent online sales tax.
The food and beverage industry currently contributes over 4 percent of GDP, making it the largest non-energy manufacturing sector. Trinidad and Tobago has become an industry leader in the region in part thanks to CARICOM membership which has boosted the country’s market access via reduced tariffs. In addition, the sector contributes to reducing Trinidad and Tobago’s food import bill. The market leader, Angostura Holdings, is one of the country’s most innovative companies and has recently announced new plans for international expansion.
Another important subsector is mining. There are over 80 private and public mining companies in the country, more than half of which operate sand and gravel quarries. Historically, steel and iron have been major contributors to the economy but their importance to the local economy has fallen drastically. This is due to challenging market conditions created by low commodity prices and existing pressure from Chinese companies flooding the local market with cheap iron and steel parts. One of the leading companies in the industry, ArcelorMittal, has had to halt operations and close its 550,000-metric-tonnes-per-annum capacity facility for hot briquetted iron in Point Lisas in Q1 2016.
Paradoxically, while part of the oil and gas value chain, ammonia and methanol have not suffered the same fate as their upstream siblings or even industrial cousins. Trinidad and Tobago continues to retain top world market share in ammonia production at 20 percent - a $1.73 billion export value - and be among the top 5 national exporters of methanol and other acyclic alcohols, at a $1.45 billion export value. While production has decreased in recent years, the fluctuations are within the norm of the international market due to the countervailing forces of a global recession in developed markets and increased use of these chemical products in developing economies.
Lately, the cement sector has been performing well, thanks to companies like Trinidad Cement Limited (TCL), due its advantageous position within the region which enables TCL to make smaller shipments of cement to smaller Caribbean islands more cost-effective than competitors. This has given the local firm a dominant market position in many CARICOM nations’ cement supply, from Anguilla and Barbados to Guyana and Jamaica. Increased inter-regional competition from Rock Hard Cement also brought a takeover bid from Mexican cement giant Cemex of TCL in Q1 2017, increasing TCL’s local and foreign currency Issuer Default Ratings to rise from B- to B+, according to Fitch Ratings. Concurrent with this increased competition for regional market share, local cement prices have fallen by 13 percent, creating strong opportunities for construction companies to reduce their overhead costs for both public and private infrastructure projects in the future.
The retail sector is mostly driven by shopping malls and arcades throughout the country. The largest players in the sector are Excellent Stores and the Massy Group. The latter has over 20 stores in Trinidad and Tobago (45 in total when including Barbados, St. Lucia and St. Vincent), and despite the recession, and its integrated retail segment has been able to post stable revenue growth at an average of 2 percent over the past two years. However, Excellent and Massy both face a crowded field in retail grocery with over 70 other modern grocery outlets and over 2,400 independent, so-called “Mom and Pop” stores.
An interesting trend is the growing competition from online shopping. Excellent Stores launched its own online e-commerce platform in 2014 to counter international competition. Growth prospects remain limited however, as CARICOM countries are becoming increasingly protective – Trinidad and Tobago itself introduced a 7 percent tax on goods bought online in 2016.
Agriculture, once one of the main contributors to the local economy through staples such as sugar and cocoa, currently accounts for less than 0.5% of the GDP and employs 4 percent of the population. Despite a number of public initiatives to boost the sector, it is unlikely to see any significant growth any time soon due to high local labour costs and previous preferential treatment from the European Union in sugar exports no longer being a factor.
Other sectors with potential include medical tourism and the printing and packaging industry. With more than 220 companies operating in the sector contributing 3 percent to GDP annually, and business mostly geared toward exporting to the CARICOM region, printing and packaging is well positioned to become one of Trinidad and Tobago’s fastest growing non-energy service industries.
In the trade, industry and retails sectors, there is a larger SME presence than in other sectors of the Trinbagonian economy. However, government support of entrepreneurship is insufficient to encourage significant financial activity as of yet, despite 17 institutions and groups set up to provide micro-small enterprise funding in the country being spearheaded by the Ministry of Labour and Small Enterprise Development. With so much SME and even micro enterprise growth coming from online sources, the government could conceivably kill two birds with one stone by eliminating both the 7 percent online sales tax and subsidised loans to encourage more organic sector growth.