PE­TER CHRISTO­PHER
pe­ter.christo­pher@guardian.co.tt

As op­er­a­tions re­turn to nor­mal in Trinidad and To­ba­go, the man­u­fac­tur­ing in­dus­try has drawn its eyes to ac­tiv­i­ty be­yond its bor­ders.

Many with­in the in­dus­try are aware with the coun­try and much of the Caribbean  still un­der re­stric­tions im­posed as a re­sult of the pan­dem­ic, their mar­kets have been di­rect­ly im­pact­ed and in many cas­es shrunk.

This was high­light­ed as far back as June, when CEO of To­ba­go Tourism Agency Louis Lewis high­light­ed the hit the in­dus­try took as re­sult of ho­tels across the re­gion be­ing closed and flights from for­eign lands not ar­riv­ing with po­ten­tial cus­tomers to the var­i­ous is­lands across the Caribbean.

"We know that Trinidad and To­ba­go is the man­u­fac­tur­ing hub or pow­er­house with­in the re­gion. But I think it is cer­tain for the man­u­fac­tur­ing sec­tor to thrive it de­pends on the de­mand that is cre­at­ed by the is­lands chain which de­pend on tourism. And I think the con­ver­sa­tion has start­ed to change and we have to recog­nise we are in­ter­con­nect­ed even if we are not nec­es­sar­i­ly first round ben­e­fi­cia­ries of a tremen­dous flow of vis­i­tors,” said Lewis then.

In his as­sess­ment of the state of the man­u­fac­tur­ing sec­tor econ­o­mist Vaalmik­ki Ar­joon said the In­dus­try has made sig­nif­i­cant strides since be­ing giv­en the all clear to re­open es­pe­cial­ly with re­gard to vac­ci­nat­ing work­ers.

"So far, the man­u­fac­tur­ing sec­tor ap­pears to have achieved the most crit­i­cal com­po­nent in en­sur­ing their op­er­a­tions re­turn to a healthy ca­pac­i­ty – vac­ci­nat­ing the bulk of its work­ers. This is cru­cial, as it re­duces the health risk to the com­pa­nies’ labour force so there is im­proved work flow, room for in­creased pro­duc­tiv­i­ty and greater con­fi­dence in the sec­tor for meet­ing lo­cal and ex­port de­mand. This is one fac­tor that builds the ex­pec­ta­tion of high­er earn­ings and, con­se­quent­ly, cash flows in the sec­tor, there­fore strength­en­ing their po­si­tion to ac­cess fund­ing from fi­nan­cial in­sti­tu­tions go­ing for­ward," said Ar­joon.

He ex­plained that to get back to a lev­el of pro­duc­tiv­i­ty was cru­cial, giv­en the de­clines ex­pe­ri­enced with­in the sec­tor be­cause of the pan­dem­ic.

 "The CBTT (Cen­tral Bank of Trinidad and To­ba­go) da­ta shows af­ter ac­tiv­i­ty fell in the first two quar­ters of 2019 by -2.5% and -1.5% re­spec­tive­ly, the sec­tor’s per­for­mance im­proved and grew by a quar­ter­ly av­er­age of 2.4% from Ju­ly 2019 to March 2021, with the best per­for­mance over Jan­u­ary to March 2020 of 4.1%. Such en­cour­ag­ing per­for­mance may have con­tin­ued, had it not been for the ef­fects of the glob­al pan­dem­ic. By the sec­ond quar­ter of 2020, ac­tiv­i­ties in the sec­tor de­clined by -7.3%, fol­lowed by a mar­gin­al growth in the third quar­ter of 0.5% and a de­cline of -0.3% in the fourth quar­ter," Ar­joon re­mind­ed.

Like Lewis had point­ed out months ear­li­er, Ar­joon not­ed that the lack of tourism across the is­lands al­so neg­a­tive­ly af­fect­ed the sec­tor.

"The var­i­ous lock­downs in the pri­vate sec­tor since 2020, not just lo­cal­ly but in­ter­na­tion­al­ly, caused our man­u­fac­tur­ers to face de­clines in their lo­cal sales and ex­port earn­ings," he said, "For in­stance, the shut­down of the tourism sec­tors in the wider Caribbean re­gion meant sub­stan­tial­ly low­er pur­chas­es of food items pro­duced by our lo­cal food proces­sors, as ho­tels, restau­rants etc. were ei­ther closed or op­er­at­ing at min­i­mum ca­pac­i­ty. Pro­duc­tion lev­els lo­cal­ly were al­so dras­ti­cal­ly slashed – apart from hav­ing to op­er­ate at a low­er ca­pac­i­ty with few­er work­ers giv­en the lock­down re­stric­tions, man­u­fac­tur­ers were not able to im­port ad­e­quate raw ma­te­ri­als and oth­er items es­sen­tial for the pro­duc­tion process, in­clud­ing equip­ment, as their for­eign sup­pli­ers were ei­ther shut down or op­er­at­ing at a low ca­pac­i­ty."

Ar­joon al­so not­ed that key in­ter­na­tion­al ports and trade routes were closed which neg­a­tive­ly af­fect­ed the pro­duc­tion process, and man­u­fac­tur­ers abil­i­ty to ex­port.

"The fall in pro­duc­tion and low­er ex­port de­mand for man­u­fac­tur­ers would have been par­tial­ly re­flect­ed in the fall in non-en­er­gy ex­ports (year-on- year) of 34% and 32% in the sec­ond and third quar­ters of 2020 re­spec­tive­ly," said Ar­joon, who al­so not­ed that the in­dus­try al­so saw a boost as cer­tain for­eign mar­kets re­opened.

He said, "De­spite man­u­fac­tur­ing ac­tiv­i­ty falling in the last quar­ter of 2020, non-en­er­gy ex­ports in­creased by 22% in this pe­ri­od. Some of this may have been at­trib­uted to the man­u­fac­tur­ing sec­tor, giv­en the in­crease in de­mand for items such as processed foods and non-al­co­holic bev­er­ages due to the grad­ual re-open­ing of cer­tain US states."

He ex­pect­ed the trend of in­creased de­mand to con­tin­ue as more mar­kets opened.
 "For the first half of this year, the pent-up pan­dem­ic de­mand un­leashed a surge in in­vest­ment and con­sump­tion ac­tiv­i­ties in large economies when they re-opened, in­clud­ing the US, EU and Chi­na. This, to­geth­er with the grad­ual re-open­ing of oth­er Caribbean economies, pro­vid­ed op­por­tu­ni­ties for lo­cal man­u­fac­tur­ers to in­crease their ex­ports. In­deed, as tourist ac­tiv­i­ties pick up in next two years in oth­er Caribbean coun­tries, the de­mand for lo­cal food items man­u­fac­tured by our food proces­sors will im­prove," said Ar­joon.

How­ev­er he be­lieved they would re­quire more ac­cess to forex to achieve the nec­es­sary pro­duc­tion to meet that de­mand.
"It is, how­ev­er, es­sen­tial for man­u­fac­tur­ers to be al­lot­ted more forex to be able to in­crease their im­port needs of raw ma­te­ri­als to fa­cil­i­tate pro­duc­tion and meet some of this ex­port de­mand. In the first six months of this year, au­tho­rized for­eign ex­change deal­ers have pur­chased an ad­di­tion­al US$2.5 bil­lion, par­tial­ly due to the small in­crease in ex­port earn­ings from high­er oil prices – this should hope­ful­ly help banks to bet­ter sup­port the forex needs of man­u­fac­tur­ers, there­by bet­ter al­low­ing them to in­crease pro­duc­tion and for­eign sales," he said.

Ar­joon warned how­ev­er that this surge in de­mand could be "a dou­ble edged sword for the sec­tor" as they run the risk of falling out of favour with their clients if they are un­able to pro­vide what is re­quired.

"The ex­cess glob­al de­mand has made it dif­fi­cult for sup­pli­ers to fill pur­chase or­ders for raw ma­te­ri­als and oth­er in­puts for pro­duc­tion, there­fore some man­u­fac­tur­ers have to wait lengthy times to re­ceive these in­puts from abroad, which stalls the pro­duc­tion process. For in­stance, the pent up de­mand has caused man­u­fac­tur­ing in Chi­na to in­crease by 38.6% in the first half of this year, but this means that es­sen­tial in­puts for pro­duc­tion would have been sent to Chi­na as op­posed to oth­er economies, in­clud­ing ours," he said,  "Low­er glob­al sup­ply of these raw ma­te­ri­als al­so caused their prices to in­crease, sug­gest­ing a high­er cost of pro­duc­tion, which is com­pound­ed by the in­crease in in­ter­na­tion­al ship­ping costs. This can im­pede the abil­i­ty of the man­u­fac­tur­ing sec­tor to mean­ing­ful­ly in­crease their pro­duc­tion lev­els and ex­ports. If we are un­able to there­fore sat­is­fy for food items for ho­tels and oth­er busi­ness­es. as the tourism seg­ments re-open, our lo­cal man­u­fac­tur­ers could lose mar­ket share to oth­er re­gion­al/in­ter­na­tion­al food proces­sors."

 There were a few ways he felt that the sec­tor could be helped along by the state and oth­er lo­cal stake­hold­ers

"Cer­tain in­ter­ven­tions by the state can help to en­sure that ac­tiv­i­ties in the sec­tor grow and they are bet­ter poised to ad­e­quate­ly cap­ture some of the in­creased glob­al de­mand. The EX­IM bank has helped to al­le­vi­ate some of the forex woes for many com­pa­nies, but they are not meant to re­place the banks, on­ly com­ple­ment. Ad­di­tion­al stim­u­lus where small man­u­fac­tur­ers can ac­cess some of the ex­cess liq­uid­i­ty in the bank­ing sec­tor is a nec­es­sary step, cou­pled with im­prove­ments in the ease of do­ing busi­ness, in­clud­ing dig­i­tal ac­cess to im­port li­cens­es, faster grant­i­ng of build­ing per­mits and ac­cel­er­at­ed ac­cess to im­port­ed raw ma­te­ri­als etc. to name a few. Larg­er su­per­mar­ket chains can al­so pro­vide more sup­port to small lo­cal food proces­sors by pro­vid­ing them with more shelf space for their items," he said.

 The Trinidad and To­ba­go Man­u­fac­tur­ers As­so­ci­a­tion has al­ready be­gan talks con­cern­ing in­creas­ing ex­ports.

This week, the as­so­ci­a­tion, lead by TTMA Pres­i­dent  Tri­cia  Coos­al met with out­go­ing Mar­ket Head of the An­glo Dutch Caribbean, Patri­cio Tor­res and Jo­sue de la Maza who is set to take on the role from Sep­tem­ber 2021 to dis­cuss TTMA’s Ex­port Man­u­fac­tur­ing Strat­e­gy.
The Ex­port Man­u­fac­tur­ing Strat­e­gy's goal is  dou­ble non-en­er­gy ex­ports by 2025.