Published: Wednesday September 10, 2008
Investment confidence in Trinidad and Tobago has dropped over the last six months, while the country's energy sector showed no improvement in the second quarter, relative to small declines observed in 2007, according to two recent surveys.
The Corporate Confidence Indices (CCI) produced quarterly by the Arthur Lok Jack Graduate School of Business point to a pronounced decline in investment confidence in Trinidad and Tobago as well as a general weakening of confidence in the economy.
The CCI, which captures the views of top corporate bosses and business leaders, measures business confidence along six dimensions: organisation financial performance, financial outlook, investment outlook, employment outlook, domestic economic outlook and global economic outlook.
Substantial Decrease
Executive confidence in this index for both the six- and 12-month time horizons decreased substantially during the quarter, moving from 127 to 83 CCI points and from 119 to 86 CCI points.
"There was a significant increase in the number of executives who were either uncertain, or indicated definitively that they would not be undertaking investment in their organisations in the near future," said Sherry Ann Singh, communications manager at Arthur Lok Jack Graduate School of Business.
Downward trend
"The index has been trending downwards."
It's a similar picture for theConsumer Confidence Index produced by Republic Bank, which shows that Trinidadians' medium-term expectations are even more despondent.
A substantial majority, 80 per cent of respondents, predict bad times in the next five years.
"Such pessimistic expectations seem baffling when one considers that our economy is booming, construction continues unabated and we're revelling in full employment, " said Singh.
One possibility that has business uneasy is the sustainability of the economy, which has been experiencing positive and robust growth consecutively for the last 15 years, and has grown by an average of 8.3 per cent since 2001.
"One gets the sense that this cannot continue indefinitely," Singh added.
The other factor that seems to have businesses wary is escalating energy prices.
"Given the gas-guzzling Americans' high energy import bill, that alone has significant potential to further contract growth in that economy, which will be bad for T&T and the rest of the Caribbean which are so dependent on the US for trade," said Singh.
"Further, since the vast majority of our inputs into production are imported, as global energy costs rise, so would the costs of our exports, and that too, spells trouble for business."
The growing lawlessness and apparent helplessness of law enforcement to curtail crime is also now seen as a business risk.
"If you factor in the country's declining energy reserves and the lack of exploration activity, you'll start to see how business would be lacking optimism about long-term investment prospects."
Improvement
A separate survey conducted by the South Trinidad Chamber of Industry and Commerce (STCIC) shows that after a year of extremely high and generally increasing levels of business activity throughout 2007, the current year has generally seen a decline or stabilisation of activity in the T&T energy services sector despite record-high commodity prices.
According to data collected from companies by the STCIC Energy Services Sector Survey, business activity in the sector showed no improvement.
Corporate respondents, for the most part, reported that value and volume of production were normal, whereas for the same period in 2007 most reported above normal levels of business.
Businesses however remain optimistic for a turnaround in their circumstance with 60 per cent of respondents anticipating business to pick up in the third quarter.
The energy sector survey also found that increases in income over the period appear to have been outstripped by increasing costs, resulting in about 45 per cent of responding companies reporting a reduction in their overall profitability.
In summarising, the Trinidad Chamber of Commerce said the latest data from the survey indicates a continued dip in the business environment for energy service companies.
"This is consistent with the reported decline in drilling activity and the departure of a number of rigs from T&T, impacting negatively on most upstream service companies, while the anticipated new plant construction activity is yet to materialise downstream," said the business association.
"The data underlines the need for the Ministry of Energy and Energy Industries to ensure a continued flow of new exploration activity and for the streamlining and acceleration of the negotiation and project approvals process, in both the up and downstream sectors."
Source:
Linda Hutchinson-Jafar
Jamaica Gleaner
http://www.jamaica-gleaner.com/gleaner/20080910/business/business4.html
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