Adriana Arreaza, director, macroeconomics studies, Latin American and Caribbean Bank (CAF), has said that productivity is not only a problem in T&T but across the rest of Latin America and the Caribbean.
“I think in each country there is a different problem because productivity depends at the end of the day on companies and their decisions to allocate labour and capital. Where to invest and where not to invest. How to expand and where not to expand. That takes place in an environment that depends on policies. If companies are not able to compete , if they are not able to access quality inputs in a reliable way, they will not be able to invest,” she told the Business Guardian at the CAF Conference on Monday .
According to CAF, its recent seminar organised on its 50th anniversary addressed the long-term developmental challenges with the participation of speakers from academia, the Government, international organisations and the private sector.
Arreaza explained that In some sectors, T&T’s productivity is much lower than developed countries like the United States.
“Trinidad has half of the worker output of the United States and that is related to stark differences of productivity across sectors. T&T has some world-class sectors like mining, trade, energy but other low productivity sectors such as agriculture, manufacturing, utilities and some services. It is important that these lower productivity sectors improve. For example, tourism that T&T wants to expand depends on the inputs that they receive from manufacturing. As long as those sectors are not very efficient that is going to translate into lower input.”
ECONOMIC DIVERSIFICATION
Andres Lopez, director, Institute of Political Economy, University of Buenos Aires, Argentina, who also spoke at the CAF conference said T&T is not the only country in the region with an economy that needs to be diversified.
He said he was invited to discuss the long-term prospects of the T&T economy and the need for diversification.“Like most Latin American economies, your economy is based on one commodity and those sectors give the country the money that it needs but at the same time, few people are employed from this sector. Often they are subject to volatility so the challenge is to diversify the source of currency and the source of employment and that needs to be done through a diversification strategy.”
He described T&T as a middle economy similar to other Latin American countries with a relatively high income per capita but one which is very dependent on one commodity.
“That commodity is needed abroad and has a global demand, but we are backward in terms of our educational systems. Our macroeconomic systems are not sound. There are also institutional systems like other regional countries like government deficiencies and other issues that are common to the rest of this region.”
He added that the process to diversify the economy is a long one.
“T&T cannot expect results in a short while. But first T&T needs to create more linkages from the oil and gas sectors. Just look at Norway and Australia; they have created a lot of linkages in software companies, engineering companies, capital goods companies. That is one thing that T&T can do.”
He also said that T&T has a competitive advantage in several sectors that it must work on to its advantage.
“These areas include tourism, agricultural activities, and these sectors are going through technological innovations that are changing the way that those activities are performed. The world is changing quickly and there are new opportunities for export and for innovation.
The best way to deal with these challenges is to promote a discovery process in which companies, governments, and universities, science,
and technology institutes meet and discuss which are the opportunities for diversification and which are the obstacles and the strategies to deal with those obstacles.
That has been done in other countries in sectors where someone from the tourism sector meets and states what are the obstacles that they face and what needs to be done from the companies and the Government to solve the situation.”
On the topic of innovation, he said it is companies that introduce innovations to the market.
“Developed countries spend a lot of money on research and development activity and all Latin American and Caribbean countries are very far from reaching those standards. So T&T needs to put more money into innovation activities and then to create more linkages among companies, the universities and science, and technology sectors. The world is changing quickly and T&T needs to be flexible.”
He also recommended that T&T do its best to attract more Foreign Direct Investment (FDI) in activities in which innovation is important.
“It should not only be in the area of tourism and natural resource activities but also areas like green technologies. The green economy is cross-cutting as it is needed in every area of the economy.”
“I stressed the role that innovation now has in natural resource-based activities and nowadays has a lot of opportunities for innovating in agriculture, mining and other areas and those opportunities need to be addressed through Government policies that create the capabilities for people and businesses to get into this these activities to create new ideas that may improve productivity and at the same time create new opportunities for employment in new sectors related to services and inputs and capital goods that maybe used in natural resource sectors.”
Finance Minister Colm Imbert who also spoke at the CAF meeting said that T&T is making the effort to diversify the economy.