Published: Friday September 12, 2008
My recent trip to a bustling Port of Spain suggested that Trinidad seemed to be well on the way to becoming the financial capital of the Caribbean. And despite holding the Trinidad and Tobago International Financial Centre (TTIFC) symposium on April Fool's Day this year, Trinidad is clearly far from joking in its bid to create the Caribbean's newest international financial centre. In her opening address at that April symposium, Trinidad's Minister of Finance, Karen Nunez-Tesheira, defined explicitly what Trinidad was trying to achieve.
"We envisage that the TTIFC will be a designated hub that will provide a range of front-office financial services including but not limited to banking, asset management, capital market activities, specialised insurance operations and futures transactions on international commodities markets. It will not be involved in traditional off-shore banking activities. The Government sees the concept of the TTIFC as being similar to the International Financial Centres located in countries such as Singapore, Dubai and Ireland.. Our country's fortuitous location between North and South America will assist in promoting a core business that consists of a regional "captive market".
The Trinidad Government is in the process of building two 26-storey office towers specifically for the proposed TTIFC in downtown Port-of-Spain. One tower is 90 per cent complete, and the other 60 per cent, with a total combined space of 1.45 million square feet.
On a recent trip to New York, the minister got an expression of interest from Lehman Brothers (as an anchor tenant), Merrill Lynch and others for office space in the towers. One should note, however, that many of the major US financial firms, particularly Lehman, are under serious financial pressure.
Leading financial consulting firm hired
One thing Trinidad's initiative will not be short of is government money to make it happen. In addition to building the office towers, the Trinidad Government has contracted leading financial strategy consulting firm Oliver Wyman to guide it on the type of IFC it should create and how to do so. The firm submitted a 113-page confidential report on the way forward for Trinidad a year ago on August 2007.
Summarising this report at the same April 1st symposium where the minister spoke, Oliver Wyman consultant Samir Misra outlined the "immediately possible" short to medium-term initiatives to take "advantage of Trinidad and Tobago's existing capabilities and building the core skill set and reputation for long-term development of the IFC" as the areas of capital markets expansion, credit card collections and insurance middle and back office.
In their presentation on their report, Oliver Wyman outlined three potential models that Trinidad could follow, namely Ireland (Dublin), Singapore and Dubai, although according to Senator the Honourable Mariano Browne, minister of state in the Ministry of Finance, Trinidad is not following any single country model.
Caribbean Investment Forum launched
In her keynote address at the recent Caribbean Investment Forum conference held in early June, Trinidad's minister of finance, Karen Nunez-Tesheira, noted that Trinidad's proposed international financial centre will offer an attractive array of opportunities in investment management, international loan syndication and bank office activities. She argued that "Trinidad and Tobago has in fact already ensconced itself as a regional capital-raising centre through fixed-income securities, amassing some $US 2.4 billion and $TT 40 billion on its debt market from 2003 to the present."
Energy key potential niche for Trinidad IFC
Trinidad's oil and gas make its recent focus on the international commodities markets one of the more promising areas for Trinidad's international financial centre initiative.
In mid-June, the minister visited Dubai to sell the story of Trinidad's success to Dubai's Government and leaders. In a press release at the time, the minister noted:
"We envision the TTIFC as the gateway to Latin America and the Caribbean. But it is of special importance that we want to be a bridge to the Middle East."
She noted further that "Trinidad and Tobago is the largest exporter of liquid natural gas to the US". The release revealed that Trinidad and Tobago's abundant natural resources "are an important connection to Dubai, as both regions are leveraging their energy strengths into more diverse economies".
One trillion US dollars available in the Middle East for investment in the region
In a speech on July 22nd, Minister of Finance Karen Nunez -
- Tesheira informed her audience of Trinidad business leaders that a number of factors "are telling us to go ahead" with their planned IFC.
"The bearish global stock markets have generated a latent demand for good investment projects. As the world adjusts to record-setting prices for oil, our positioning as the fifth largest exporter of LNG takes on a new significance," she said.
"Our existing prominence as a global energy player is of special interest to our potential partners in the Middle East. The country's overall economic growth continues to defy international trends."
She revealed that the Dubai International Financial Center (DIFC) had "formalised its interest in partnering with us to develop our own IFC. They have reviewed other potential IFCs in the Caribbean and Latin America and decided that we have the best value proposition in the region. They have agreed to provide us with the road map and necessary technical assistance to ensure success. They also believe the TTIFC is the gateway by which they can transact business with Latin and South America... They have indicated that there is potentially 1 trillion dollars available in the Middle East for investment into the region. We believe that this relationship will attract many of the world's largest and best-known financial institutions."
She described the TTIFC concept as having some unique features not common to most other IFCs.
Firstly, the finance minister said Trinidad intends to combine a commodity trade facility with financial services. This approach in fact appears similar to that of the DIFC, within which the Dubai Mercantile Exchange is located. She has suggested that the commodities exchange could trade liquid natural gas, methanol, ammonia and other products Trinidad exports.
Secondly, Nunez-Tesheira was careful to make a distinction between Trinidad's planned Special Purpose Economic Zone (SPEZ) and the normal Special Economic Zone (SEZ), the latter being "an enclave defined with physical borders".
According to the minister, the SPEZ will not be tied to a location, but "will be based on the nature of the business or the project that an International Financial Institution (IFI) undertakes".
Next Steps
Outlining the government's next steps in creating the TTIFC, Finance Minister Nunez - Tesheira said the policy framework on legislation/regulatory/tax and draft organisational structure of the TTIFC will be completed by the end of August, with the draft lease terms for TTIFC businesses to be completed by the end of September, and implementation of the TTIFC now set for the first quarter of 2009. However, at the time of writing, the absolutely critical areas of Trinidad's planned tax strategy and legal and regulatory framework for the IFC still remains to be revealed.
Source: Jamaica Observer
http://www.jamaicaobserver.com/magazines/Business/html/20080911T220000-0500_140060_OBS_TRINIDAD_GOVERNMENT_ADOPTS.asp
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