The cost of doing business in T&T is still too high. This was the main sentiment expressed by a wide cross-section of the business community during a series of interviews with the Business Guardian. They lamented that this major issue has been plaguing the business community, which was inevitably retarding its productivity levels. In addition to the global economic downturn, which had a significant negative impact on developed and developing countries, T&T's business community had to contend with other local challenges that created major setbacks.
These setbacks caused a chain reaction, which resulted in a declinein consumer spending and a lack of confidence in the economy. This year, the International Finance Corporation revealed in its Doing Business survey that T&T fell 16 places within a year, moving from 81 in 2009 to 97 in 2010. Thus, the business community has been calling on the Government to improve the efficiency levels at the port of Port-of Spain, one of the main hindrances to doing business in T&T. Other factors affecting businesses include high labour costs, reduced domestic demand, high security costs and traffic woes. Some businesses even predicted that the cost of doing business would increase in 2011 if the correct measures to reduce expenses were not implemented.
Underscoring some of the aforementioned views was Roxanne de Freitas, Unilever's managing director, who said it was tough doing business in T&T. She lamented that being a competitive manufacturer is a struggle. She attributed this to the traffic congestion, high wages, low productivity and reduced domestic demand due to the economic downturn. She explained that productivity is hindered by the delays experienced at the port and high labour costs. "It is very important for our sector to have the ASCUYDA system running. We want to have a world-class, efficient manufacturing site," de Freitas said.
Even though she believes the economy would not experience much growth in 2011, de Freitas said she remains optimistic.
But despite Witco's three per cent increase in profits this year compared to 2009, Jean Pierre de Coudray, managing director of Witco said doing business in T&T is tough. He outlined the same factors including the high security cost which hindered his company from effectively doing business in T&T.
He stated that T&T had the potential as it remains the manufacturing hub of the Caribbean. "We are leaders...we have the economies of scale," he said. Admitting that things would be tough for 2011, de Coudray said he was mindful about his method of conducting business in 2011. His recipe for survival is to maintain a strong brand portfolio comprehensive distribution and implement methods of cutting cost.
Carib Brewery Ltd
Derek Waddell, managing director at Carib Brewery, said the cost of doing business would increase.
He outlined that some of the contributing factors were the increasing cost of imported raw materials, labour and low levels of productivity. Waddell said he was convinced that the cost of manufacturing would go up. In order to make things work, Waddell said there must be a combined effort with the manufacturer, labour and the Government. Despite these challenges, Waddell said the company had weathered the storm and was stronger for it. Waddell said he was confident about the future, but remains cautiously optimistic.
Could the business community have done more?
One 2010 Central Bank report said the manufacturing sector was operating with a great deal of spare capacity. It stated that the capacity utilisation in the manufacturing sector averaged 65.0 per cent in 2009, but fell to 62.6 per cent during the first quarter of 2010. This was due to the rise in excess capacity in food manufacturing activities. The T&T Manufacturers Association (TTMA) contends that the sector was hard-hit by a decline in consumer spending, so there was a drop in sales in both the domestic and export markets. Central Bank Governor, Ewart Williams, in an interview last week, was also curious as to why the business community was not investing and taking full advantage of the initiatives outlined by the Government. In defence of the business community, Peter Kanhai, president of the Greater Tunapuna Chamber of Industry and Commerce, said the business community became cautious because it was observing certain trends.
He explained that 2010 has been a tough year. Kanhai said some of the reasons for this were the high cost of doing business, the public being reluctant in their spending and the cost of borrowing, which was very prohibitive, especially for smaller businesses. "So the business community took these factors into consideration before investing. But I hope that some of these issues would be addressed in 2011, allowing some movement in the economy," Kanhai said.
Former president of the South Chamber, Kiran Singh said the business community has not regained its confidence in the economy and was therefore hesitant to reinvest.
Also a manager of RRM Plaza, San Fernando, Singh said the word on the ground was that some members of the business community were looking towards investing in 2011. Singh said the disparity between the savings rate and the lending rate must be reduced. He said while businesses welcomed the current initiatives, they were looking forward to more in 2011. He said sales during the Christmas season were down by 30 and 35 per cent compared to 2009 which has left some businesses were struggling to meet their expenses. He said he was hopeful hat the New Year would bring some improvement, at least by the second quarter.
1. Average weekly earnings in the manufacturing sector increased by 3.5 per cent on year-on-year basis in the second quarter of 2010
2. In a 2009-2010 Global Competitiveness Index, T&T ranked 16 out of 34 countries in the Western Hemisphere.
3. After seven years of declining competitiveness between 2002-2003 and 2008-2009, T&T's ranking improved from position 92 in 2008-2009, to position 86 in 2009-2010, out of 133 countries.
4. Real gross domestic product growth in construction for 2010 was 8.9 per cent, an increase from 7.6 in 2009.
5. Distribution 2010, 5.1 per cent from 21.2 in 2009
6. Finance, insurance and real estate, 1.0 per cent, a decline from 4.7 in 2009.