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Caribbean Cure —finalist at food innovation awards in Paris

Sat, 09/01/2018 - 22:22

Two Caribbean companies have been selected as finalist in the SIAL Innovation Awards 2018 for their product innovation.

They are Caribbean Cure Ltd of T&T and Naledo Belize Ltd. SIAL is regarded as the world’s largest food innovation exhibition and hosts the SIAL Innovation Awards each year to recognise those who help to shape what we eat both today and tomorrow.

Taking place in Paris from October 21-25, 2018, the Caribbean Export Development Agency (Caribbean Export) in collaboration with the European Union are supporting twelve food and beverage producers to participate at SIAL under the Caribbean Kitchen banner. Of the 12 companies, Caribbean Cure and Naledo’s participation has already started draw attention given their shortlisting for a SIAL Innovation Award for their dynamic and creative product offerings. Keeping with tradition Caribbean Cure Ltd produces a line of loose leaf natural healing teas that utilise indigenous plants found within the Caribbean. Their handcrafted teas which utilise premium organic ingredients are crafted through the preservation of nutrients found within the roots, herbs and flowers of plants that have been used for generations within the Caribbean to heal and treat ailments.

“When we began handcrafting our blends, we had one simple mission: to share our passion and love for the age-old traditions and healing qualities of Caribbean herbs. We visited farmers, herbalists and tea lovers from across the region to find out what makes the perfect cup of natural tea. We were determined to create much more than tea with health benefits.

We are excited to share the Caribbean tea experience at SIAL Paris and will continue to share our passion with the world on this global platform,” commented Sophia Stone, founder and managing director at Caribbean Cure Ltd.

Naledo Belize Ltd is one of the world’s first manufacturers of fresh turmeric paste. Developed by CEO Umeeda Switlo, Naledo use a recipe based on her own traditional Indian cooking to create Truly Tumeric.

Tumeric is a healthy root often found in supermarkets and health stores in a powered or capsule form to be taken as supplements however, Naledo Belize Ltd have transformed it to create a deliciously healthy wildcrafted whole root turmeric paste making it a niche product within the global market. “We are very excited to be a finalist in the SIAL 2018 product innovation award for Truly Turmeric. Naledo is the first company in the world to manufacture a fresh turmeric paste and our CEO Umeeda Switlo came up with this recipe based on her traditional Indian cooking.

This nomination means that our company has been recognized for the innovative product we produce and our social enterprise model. We hope that it opens trade doors to the EU and beyond” declared Nareena Switlo, COO at Naledo.

Naledo is a social enterprise based in Toledo, Belize and focuses on youth entrepreneurship, sustainable production, regenerative agriculture, and community empowerment. With every jar sold customers know that they are directly impacting our network of small-scale growers in Belize.

“We are thrilled that two of the companies that will be attending as part of the Caribbean Kitchen pavilion have been recognised for a SIAL Innovation Award. This doesn’t only bode well for Caribbean Cure and Naledo but also for the region as a whole. We have some fantastic food innovations across Cariforum and we need to gain greater visibility for them” expressed Chris McNair, manager,
competitiveness and export promotion, Caribbean Export.

The participation of Cariforum com panies at international trade shows is a key intervention of Caribbean Export to support the region’s exporters to increase their market penetration namely in Europe.

“It’s important for Caribbean companies to be present at international events. We have to leverage the support from the European Union via the 11th EDF to ensure the innovation, great products coming out of the region are seen internationally. At the end of the day there’s no point in having great products if no one knows about them,” McNair said.

Categories: News

Petrotrin—then and now

Sat, 09/01/2018 - 22:17

Tuesday’s announcement of the impending closure of Petrotrin’s Pointea- Pierre refinery and the laying off of 1,700 workers may have come as deja vu for those old enough to remember the last time the country was faced with a similar situation.

It was in 1985, at the start of a deep and protracted recession, that the then George Chambers administration decided to buy the Texaco refinery in an effort to save jobs. The decision was hailed by the Trade Union Movement as a commitment to the control of the commanding heights of the economy and at ensuring the country’s patrimony was nationalised.

Thirty three years on and it appears that while the country was in charge of its patrimony and the commanding heights of the economy, it failed to manage the company in such a way thatmade it sustainable.

Politics, mismanagement, corruption and a non-compromising trade union have combined to see what looks like the death knell of the refining business in T&T.

The failure of the refinery was indeed predicted by the late economist Dr Trevor Farrell and successive administration failed to tackle the issue head on.

Various governments never brought the country into its confidence on the challenges facing the company and on how, by taking hard but timely decisions, the refinery may have been saved.

In the following New York Times article, it shows that from its inception, the purchase of the refinery was a gamble and makes us ask if— as T&T—we should have risen to the challenge of transforming the local refining business and whether we all failed in our duty to keep those responsible for the refinery accountable for their lack of performance.

—Curtis Williams


Trinidad to keep refinery going

With world oil prices down and many refineries closing, the Government of T&T has reluctantly bought the sprawling Texaco Inc. refinery on the east coast of Trinidad.

The Government agreed to buy the money- losing refinery, officials say, mainly to save more than 3,000 jobs and avoid expensive imports of oil products.

‘’We didn’t want to take over Texaco,’’ said Ronald Jay Williams, Trinidad and Tobago’s Minister of State Enterprises in a recent interview in Trinidad.

‘’They told us they were leaving. We had no choice.’’

As Prime Minister George M Chambers and Texaco executives were signing the purchase agreement at the end of March, the Exxon Corporation was formally closing its refinery in nearby Aruba while the Royal Dutch/Shell Group and the Government of Curacao were continuing negotiations concerning the future of the Shell refinery in Curacao. Shell had said earlier that because of continuing losses it would have to close the refinery unless the Government bought two-thirds of the operation.

Better sites elsewhere

Refineries have been shutting down not only because of the oversupply of oil in international markets but also because many companies say they find it more cost-effective to refine crude either where it is produced or where it is sold rather than at intermediate points such as the Caribbean islands.

The Caribbean refineries were built mainly to produce fuel oil for utility companies and factories in the northeastern United States. These customers have reduced their needs through energy conservation and in some cases have shifted to cleaner-burning and less-expensive natural gas. The refineries, some of them built more than 50 years ago, also find it difficult to compete with more efficient modern plants. The refineries in Trinidad and Curacao have been operating far below capacity, as did the plant in Aruba. The Bahamas Oil Refining Company in Freeport reportedly is operating at about a third of its capacity, and the Amerada Hess Corporation says it is reducing its refinery operations at St. Croix in the United States Virgin Islands by two-thirds.

Lost jobs’ social impact

Government officials in Curacao say they are no more eager to buy a refinery than the Government in Trinidad was but are also worried about both the social and political impact of thousands of jobs being lost.

Officials in Aruba said they never seriously considered buying the Exxon refinery because of the huge cost that would be involved.

Unlike most other islands in the Caribbean, Trinidad and Tobago have their own oil wells, although they do not produce enough petroleum to efficiently run the Texaco refinery and the refinery that the Government has been operating. Still, even limited production capability makes the operation of a refinery more feasible for Trinidad than for Aruba and Curacao, oil experts say.

Trinidad agreed to pay Texaco $189.2 million—$98 million in cash and the rest in petroleum products over 10 months. Texaco kept its most productive offshore oil fields and two other undeveloped offshore tracts. Prime Minister Chambers said negotiations would continue for these properties, but there was no immediate comment from Texaco.

Improvements are urged

Many people in the Government believe that by stepping up the amount of crude oil the refinery processes and by making some technical improvements, Trinidad can stem the losses that the plant has been sustaining and break even. Some suggest that making a profit may even be possible, but others predict that the Government will suffer huge losses.

‘’It would have been cheaper to put all the workers on the dole,’’ said Trevor Farrell, a Cornell graduate who is a specialist in oil and energy economics and teaches at the University of the West Indies campus in Trinidad.

Oil experts disagree on how much crude is needed for the refinery to break even but agree that a substantial amount will have to be imported.
(Joseph B Treaster, New York Times)

Categories: News

Petrotrin’s transfer on-shore

Sat, 09/01/2018 - 22:10

Petrotrin’s refinery is to be closed putting some 1,700 workers on the breadline. Given the large debt load that the company is carrying, the hope is that it can use its depleting petroleum upstream asset to transform the company into one that can in the future service its refinanced debt.

The refinery, as Mariano Browne tells us, was operating at a conversion ratio of 65% as compared with that of the competition out there, at some 90%. This comparison is based on the Nelson Complexity Index, which when applied to Petrotrin shows that the products it was extracting from its oil throughput were of low value given its low complexity index; its plant was unsophisticated.

Eventually its board and management realised the incapacity of its aged plant and attempted upgrades, some of which were spectacular failures.

One may ask why did these projects fail since they were not inventions of Petrotrin or the first installations in the world of similar upgrades and they were being done by supposedly qualified foreign contractors.

Moreso, the gas to liquids plant utilised an untested process, adding to the risk of this upgrade.

Understanding what happened demands that we look at the bigger picture, at the economic model that Lloyd Best called the plantation economy.

This small open plantation economy used the rents- the foreign exchange left in the country by foreign investors invited to exploit our petroleum resource- to purchase the many imports that we could not produce for ourselves.

Hence the energy sector, the foreign investment activity, made efficient use of their factors of production (capital, technology, innovation and people) and was able to perform, drive the whole economy with only four per cent of our labour force.

On-shore the main activity of the private sector was import-markup-sell. This could not provide full employment for the remaining 96 per cent of the labour force. Hence we have a large public service, particularly in Tobago, make work programmes, endemic over staffing at state enterprises and public utilities.

This is made more difficult given the impact of the Dutch Disease on wages and salaries on-shore. In other words, employment on-shore was always a problem, a government problem that it attempted to solve via the rents from the energy sector.

Indeed some 50 per cent of government’s spending goes to transfers and subsidies!

The Petrotrin we know today is the result of acquisitions over the years. Trintoc was formed when we acquired the assets of Shell in 1974; in 1985 Trintoc subsumed the assets of Texaco when they left our shores; in 1969 Tesoro was formed from the assets of BP; Tesoro became Trintopec in 1985 and Petrotrin was formed in 1993 when Trintoc and Trintopec were merged; the Petrotrin of today was formed in 2,000 when the outstanding shares in Trinmar were acquired.

Petrotrin then is an amalgam of assets originally held by the oil majors of the world and these acquisitions like Caroni were about preserving jobs and also our ascent to the commanding heights of the economy when the majors left as the market conditions changed and the oil resource was depleting.

These acquisitions were not based on us having built world-class ability and capability locally in the technologies, the emerging innovations and the marketing required, as happened in Brazil’s deep water venture.

Though these companies in the energy sector were considered off-shore, the acquisition brought them under government control and into the philosophy of the on-shore, where the overriding concern was the provision of jobs and hence the over staffing at exorbitant, for the on-shore, salaries and wages, ensured by a very powerful union that would not hesitate to shut the company down to get its way.

The blame now is being put on the successive managers and boards of Petrotrin for the financial/commercial collapse. But one can question whether the major objectives of the unions, the management, the boards and the governments were economic efficiency, given the low refinery complexity, the poor state of the company’s infrastructure and the neglect of the exploitation of the remaining upstream petroleum assets; assets that today are touted as the salvation of the company.

If we were to apply Prof Michael Porter’s stages of economic growth to Petrotrin it is clear that it may have entered the exploitation of basic economic factors (petroleum), then investment through its acquisitions.

However, it remained stuck there with no highly skilled knowledge acquisition, no local R&D support institutions, hence no ability to improve economic efficiency via plant development, no innovation. When at last it was recognised that the refinery’s conversion ratio, its Nelson Complexity Index was low—its products were low value and below international standards, eventually losing money on the refinery production—the move was made to upgrade the refinery. But this lack of skills, of knowledge, contributed to the fiasco that has now hung a large debt onto the company for failed upgrades with little capacity to repay.

The closure of the refinery was inevitable. However, the problem still remains on-shore: How do we provide good jobs on-shore and also earn foreign exchange via exports to fund the imports we cannot produce ourselves?

Diversification via a national innovation system is the only option; one that all of our governments pay lip service to as we continue to live off the depleting rents from the energy sector.

Still, this is not a short-term process and the pain of adjustment, of sacrifice as we achieve this transformation will test our resolve.

St Augustine

Categories: News

Poland, T&T mark 20 years of relations

Sat, 09/01/2018 - 22:08

Chargé d’affaires of the Polish Embassy in Caracas, Venezuela, Milena Łukasiewicz, says her country sees T&T as a country to invest in.

When people think of T&T’s European ties, they think of western European countries like England, Spain and France; countries that colonised the Caribbean islands.

Few think about Poland, which is an Eastern European country, but its historical and contemporary ties with T&T are much stronger than people think.

In reply to Guardian Media questions, Łukasiewicz noted the historical and growing ties between the two countries.

On August 15, there was a book launch coinciding with 100 years of Polish independence and 20 years of diplomatic ties between the two countries at More Vino, Woodbrook. It was hosted by businessman David Lewis, who is Poland’s Consul in T&T.

Business with T&T

Łukasiewicz said T&T has a reputation internationally for being an important investment destination.

“With over 15 years of economic growth, T&T has earned the reputation of being an ideal country for foreign investment and one of the most prosperous in the Caribbean region,” Łukasiewicz explained.

“At the moment there is no bilateral economic agreement signed between Poland and T&T, but the inter-regional Cotonou Agreement between the African, Caribbean and Pacific Group of States and the European Union is in force.”

She also gave statistics on trade between the two countries.

“According to data from the Ministry of Economy of Poland, the value of trade with T&T amounted to US$3, 264,513 in 2016. Polish exports to T&T reached US$3,144 315 that year, and the value of Polish imports from T&T amounted to US$120,988,” she revealed.

“The main export assortments were mechanical and electrical machines and devices (about 45 per cent of total exports), and products of the chemical industry. T&T imported from Poland food products, alcoholic and non-alcoholic beverages, machines, mechanical and electrical equipment, medical devices and apparatus, tannins and pigments.”

She added that T&T has always been one of the main Caribbean markets for Polish exporters for years. Nevertheless, the share of the total value of exports and imports to and from T&T does not exceed 0.01 per cent of the total Polish export and import activity. Trade turnover in 2017 closed with the number US$5, 210 000. Export amounted to US$5,040,000 and import only US$170,000.

Speaking about how Poland can help a small developing economy like T&T, she pointed to a number of initiatives.

“Since 2007, Poland’s development aid towards the Americas has been allocated through the Small Grants Programme. T&T has benefited from the three branches of this programme: education, empowerment of civil society and climate change. Moreover, Poland supports T&T in international fora, including the push given by the EU to multilateral investments linked to the fight against climate change and the sustainable developments goals.”

She said a lot is also being done to strengthen diplomatic ties between the countries.

“Poland is represented in T&T by its Embassy in Caracas and by the presence in Port-of-Spain of the Honorary Consul of the Republic of Poland, David Lewis. In this two-fold way, we continuously enhance our political, economic, cultural and consular bilateral relations. Showing a wider perspective, a book has just been published about the history of Poles in the twin-island republic, Polish Legacies in Trinidad and Tobago, by Ian Senior. And to keep working in the mutual knowledge, the Embassy of Poland will select a Trinbagonian journalist to conduct a study trip in Poland in 2019.”

She also gave a historical overview of relations between the countries.

“As a curious fact, there was a time when Poland tried to establish a colony in Tobago. On the basis of the Union of Vilnius (November 28, 1561), Gotthard Kettler, the last Master of the Livonian Order, created the Duchy of Courland and Semigallia in the Baltics and became its first Duke. Some colonial territories for the Duchy of Courland and Semigallia were acquired by its third Duke and Gotthard’s grandson Jacob Kettler.

“The first colony founded by Jacob was the New Courland (Neu-Kurland) on the Caribbean island of Tobago. However, three initial attempts to establish a settlement (in 1637, 1639 and 1642) failed. The fourth was founded in 1654, but eventually in 1659 was taken over by a competing Dutch colony, also founded on the island in 1654,” she said.

Book launch

Polish Legacies in Trinidad and Tobago is the new book which captures the historical ties between Poland and T&T.

The book was authored by retired school teacher Ian Senior.

Senior told Guardian Media on Monday it was not easy getting information on the relationship between the two countries.

“It took a lot of digging to get to what was Polish. But there were a few things of note that are in the book that was at the launch. It is difficult to find things related to Poland in T&T,” he admitted.

He referred to some of Poland’s influences in T&T, like the visit of Polish Pope John Paul II in 1985 and the fact that Poland wanted to set up a colony in Tobago.

He pointed out that before World War II there were Jews of Polish origin who came to T&T fleeing the war and tumultuous times of that era.

“Some of them made substantial inputs to T&T,” he said.

Poland economy

Poland is the eighth largest economy in the European Union.

According to the World Bank Group, it has reached high-income status over a relatively short period of time. Few middle-income countries have experienced such consistent broad-based growth, both fast and stable (on average 3.6 per cent over the past decade). This transition benefited from increases in productivity, strengthened institutions, human capital investments, and sound macroeconomic management.

Categories: News

Digicel Group welcomes Charlier to the board

Sat, 09/01/2018 - 22:06

Telecoms industry veteran Jean- Yves Charlier has been appointed to the board of directors of Digicel Group, effective September 1, 2018. Charlier will replace Michael Willner who served on the board from September 2015 and will be stepping down.

In thanking Michael Willner, chairman Denis O’Brien, said; “I would like to thank Willner most sincerely for his contribution to Digicel. His deep knowledge and extensive track record in the cable industry was instrumental in steering the company’s successful entry into the cable TV and broadband markets powered by our fibre roll-out in key markets. I am very grateful to him for his partnership and would like to wish him well for the future.”

Recognised as a leading light in the telecoms industry, from 2015 to 2018, Charlier served as CEO of VEON (formerly Vimpelcom).

Prior to that, he served as chairman and chief executive of SFR and was also chief executive at Promethean World and COLT.

In welcoming Charlier to the board, Digicel Group chairman, Denis O’Brien, said: “With Jean-Yves’s extensive knowledge and experience in telecoms transformation and, as we continue on our journey to being fit for the future, I am confident that Digicel will benefit enormously from his support and insight.”

Commenting on his appointment, Charlier said: “With Digicel well advanced in its global transformation programme, it’s an exciting time to be joining the board. There are many opportunities for the organisation to take advantage of now and into the future and I am looking forward to taking the journey with the team."

Categories: News

Entrepreneurship, diversification debate

Wed, 08/29/2018 - 21:55

Entrepreneurship, often defined as “the capacity and willingness to develop, organise and manage a business venture along with any of its risks in order to make a profit,” is a key instrument in the economic toolbox of any nation.

Entrepreneurs are thought of as national assets, since their efforts contribute significantly to the country’s gross domestic product (GDP) and employment.

Entrepreneur vs employee

The realities of an entrepreneur versus an employee are starkly different in nature.

As such, any drive to develop entrepreneurship can only be successful with the input of those who know the realities best but in the absence of a structured system through which experienced entrepreneurs can mentor younger ones, the discussion continues: How can we find a balance between risk and opportunity? Between funding and education? Mentoring and competition? There are no quick fix solutions; yet, economic growth and balance are dependent on the solution.

The T&T case

The World Bank describes T&T as “a high-income country, rich in natural resources, with well-developed, globally competitive oil and gas industries.”

The local energy sector, which contributes approximately 44 per cent of GDP, has been the major economic contributor for several decades, and has allowed T&T to maintain its positive economic growth from 1960, up until the recent sharp decline in global oil and gas prices. But this high dependency on the energy sector has led to underdevelopment of non-energy sectors, which tend to attract little investment, and are often reliant on government subsidies and transfers.

Economic diversification is essential for economic stability and long-term growth. For several years, decision-makers have been engaged in the diversification debate; however, there has been very little growth in the non-energy sector.

The World Bank suggests that T&T needs to be more open to direct foreign investments and focus on improving the business environment. Much of the discussion around diversification suggests that any diversification strategy that supports new and emerging sectors should be government-driven.

At the 2016 T&T Energy Conference, Prime Minister Dr Keith Rowley stressed the importance of diversification as one way of weathering the impact of the current economic downturn, caused by the precipitous drop in international commodity prices. But when will there be measurable results emanating from these discussions?

There is a symbiotic relationship between economic diversification and entrepreneurship development.

Fostering a culture of entrepreneurship is an essential tool in creating a balanced economy. So what are the key elements required to drive entrepreneurship? How do we produce individuals willing and able to take calculated risks that will generate profits and benefit both stakeholders and the nation? This is by no means an easy task.

The challenges of entrepreneurship

The high failure rate of small and medium enterprises suggests that entrepreneurs experience several major challenges, including inadequate funding, poor planning and management, lack of product differentiation, and not paying enough attention to the needs of their customers.

Insufficient funding is one of the most significant contributors to failure.

The inability to access start-up funding because of a lack of personal resources is all too common; yet, many start-ups that are successful at getting funding—statistics suggest more than 80 per cent—still fail, which creates high risk for financiers. Funding providers have generally avoided start-up businesses for this very reason.

To protect themselves, they set mandatory requirements that businesses must be in operation for a minimum of three years before they will even consider an application for funding. While certain government agencies do offer financial support for entrepreneurs, even these agencies have stipulated limitations regarding the types of businesses they are able to support.

The challenge is further complicated by the fact that financial backing is not the only kind of support entrepreneurs need. Giving money to an entrepreneur who lacks financial management expertise is likely to lead to poor results and possible failure.

In 2002, the National Entrepreneurship Development Company (Nedco) was established and mandated to promote entrepreneurship in T&T.

This was a strategic move but the company lacks the critical resources to produce meaningful, measurable results, on a scale that will positively impact the national community.

It would be far more useful to evaluate entrepreneurs’ needs and the realities of their business environment, in order to identify the critical gaps hindering their growth and development.

Promoting entrepreneurship demands clear policies that are able to overcome such challenges, and achieve successful, sustainable enterprises.

It should be noted that in addition to Nedco, a number of support programmes have been created to promote entrepreneurship.

The value of the entrepreneur

Diversification is critical to a sustainable economy. To effectively diversify, we need to have a bank of successful entrepreneurs investing in a variety of goods and services.

Promoting and supporting entrepreneurship requires the focus to work through the maze of challenges and conflicts that exists.

Are adequate resources being dedicated to the national diversification objective? Are policies designed to promote entrepreneurship across all levels of the education system? Are we doing enough to move past discussion, to planning and implementation? What can the private sector do to promote entrepreneurship?

Changes in the energy sector have demonstrated both the risk and impact of a poorly diversified economy.

Both diversification and entrepreneurship are processes that require proper lead-time in order to yield results; we must aggressively refocus on them if we are to achieve economic growth and stability, and this must be done sooner rather than later.

Can we objectively say that we have given adequate resources towards either?

• Nichole Joseph-Cupid is an entrepreneurship and business solutions provider based in T&T.

Categories: News

The Venezuelan gas deal: Risk versus rewardwill

Wed, 08/29/2018 - 21:45

The “historic” gas deal signed between T&T and Venezuela on August 25, 2018 is a structural solution to T&T’s gas supply woes experienced by the petrochemical sector over the last few years. This deal, set to flow in 2020 and beyond, coupled with increased local production will provide greater certainty to NGC, Atlantic LNG and many companies operating in the Point Lisas Industrial Estate, and will promote increased business confidence, increasing the likelihood of further business investment.

While much of the details of the deal remain confidential, there are a few considerations that should be explored to assess the risks and rewards to T&T as a country.

Three considerations:

• Counterparty risk

• Forward or market contract pricing

• Geo-political factors

1. Counterparty risk: Who are we dealing with?

“Counterparty risk is the risk to each party of a contract that the counterparty will not live up to its contractual obligations. Counterparty risk is a risk to all parties and should be considered when evaluating a contract.”

In this case, the agreement has been signed by Petroleos de Venezuela SA (PDVSA), the Venezuelan state-owned oil company, T&T’s National Gas Company and Shell.

However, in December 2017, “Fitch reduced the Venezuela’s long-term foreign rating to C from CC and called a default “highly probable,” according to a statement. S&P also downgraded the sovereign and state run-oil company PDVSA to CC from CCC, two notches from default.”

More recently in March 2018, Moody’s also downgraded PDVSA’s ratings to C from Ca. Moody’s lowered the company’s baseline credit assessment (BCA) to “C” from “Ca” and the country’s rating to C from Caa3. “C” is the lowest rating possible and is typically attributed to counterparties that are in default.

“The downgrade of the Venezuelan government’s ratings were based on Moody’s expectation that the continuing erosion of Venezuela’s payment capacity will lead to heavy losses to bondholders, with ongoing defaults on interest payments on various bonds compounded by upcoming principal maturities, and the limits on Venezuela’s ability to restructure its debt posed by current US sanctions that prevent US investors from accepting new debt instruments under a potential debt exchange, which will further exacerbate losses.”
Should we be worried?

The good news is that we are not looking for financial payments from PDVSA or the Venezuelan government, we need only to receive a commodity, natural gas from the Dragon gas field. It has been made clear that Shell has the responsibility for transporting the gas to the Hibiscus Platform (jointly owned by NGC and Shell). But who is responsible for extracting the gas in the first place? If it is PDVSA then, we should be concerned about their ability to continue to operate and fulfill their contractual obligations to us, especially considering the country’s current precarious financial situation.

A good way to structure the deal and mitigate this risk, is to ensure T&T and Shell have operational responsibility and associated property rights to take the gas from the ground, in addition to transportation, processing at Atlantic LNG and eventual sale on the global markets.

However, if we are taking some risks, we should be compensated for it, this is where the price of the gas comes in.

2. Forward or market price?

The Government of T&T has stated that “commercial terms of gas sales agreements are subject to the strictest confidentiality clauses” and as such the public will not be privy to this information. However, as reported in the Trinidad Guardian on August 26, 2018, “the Prime Minister took the liberty to say the prices are very competitive and in some cases lower than what we are paying to domestic upstream producers in T&T.”

Given the amount of public disclosure, it is tough to assess the favourability of the deal and the associated risk-reward dynamics. However, the news that prices negotiated are lower than some of those agreed to with domestic upstream suppliers, is most welcome. It says that we are getting a discount (or some compensation) for dealing with a counterparty that has some financial credibility issues (not to mention political and social issues as well).

However, the gas is set to flow from 2020, so have we locked in prices today for gas to be purchased and delivered in the future? If so, then we have entered into a “Forward market contract.” The “Forward price is the predetermined delivery price for an underlying commodity, currency, or financial asset as decided by the buyer and the seller of the forward contract, to be paid at a predetermined date in the future.”

However, if market prices go down by the delivery date, then the seller (in this case Venezuela) usually wins, as they get a higher price for the commodity, when the current market price is lower. The converse is also true, if natural gas prices go up, T&T would have benefited from locking in the lower price.

To neutralise the effect of future commodity price movements, and to eliminate any associated market risk: if the authorities have entered into fixed price contract arrangements on the purchase side (ie T&T buying the gas from Venezuela), then we should immediately start negotiating the fixed price future contracts on the other side with our customers, for when we finish processing the gas and have to sell it on the global market. The key is to lock in the profit margin immediately. This is called hedging.

Another strategy in commodity-based transactions is just to agree to a premium/discount over market rates at the time of delivery. The current gas border deal could also have been set at some generous discounts to final market prices, to compensate both Shell and T&T for the services that are provided to prepare the gas for sale on the global markets. In this case, the profit would be realised once the costs to transport and process are less than the differential between how much we buy and sell the gas for.

3. The geo-political consideration

The tense relations between the US and Venezuela are well known, in May of this year, one day after a Venezuelan election the US government called a “sham,” the Trump administration placed a fresh third round of sanctions on the beleaguered country. Some in T&T have wondered, if we as a country deal with the Maduro regime (who is the real antagonist of the US government, not the people of Venezuela), if we could get backlisted too? However, this is a relatively low probability as the recent “sanctions fall short of direct penalties on the oil sector, which the Trump administration has said would harm the Venezuelan people and American companies. They do not bar United States companies or citizens from selling oil products to or importing them from Venezuela.” As reported by the New York Times on May 21, 2018.

Accordingly, it would be a reach for the US to penalise us, a neighbour, for making this deal. Having said this, any transactions or agreements with the Maduro government, rank as “very high” on the political risk spectrum.

Financial, operational, market and political risks have been identified above, but much can be mitigated by appropriate deal structuring. For the public this will remain a black box for this time. However, it is hopeful that the benefits to T&T which include the bolstering of our natural gas supply and the setting of the frame for sustained increased LNG production, will provide net benefits and the requisite returns to the people of T&T

• Navin Dookeran ([email protected]) is a lecturer and programme director of the Executive MBA at the Lok Jack GSB and was previously the head of credit risk for Manulife Bank and Trust, and worked at the RBC Financial Group, Toronto, Canada.

Navin Dookeran

Categories: News

Should we move away from the NGC model?

Wed, 08/29/2018 - 21:41

Reporting on the signing of the Dragon Gas deal between Venezuela and T&T, American outfit, Bloomberg News described it as a lifeline being thrown to T&T as it struggles with natural gas curtailment.

While this may be a bit of an exaggeration, it reflects what the international community sees as this country’s challenge to meet its gas commitments.

As we discussed last week, the reasons for the gas shortages are myriad and both the PNM and UNC governments have to take the blame. So do the upstream producers who, despite having contracts were unable to fulfil them—and in the case of bpTT— while it has returned to contracted levels it is no longer prepared to have excess gas behind pipe to supply the National Gas Company on a needs basis.

This shortage has cost the government hundreds of millions of dollars and it has led to the NGC being taken to court by several downstream companies for a breach of contract due to its failure to deliver sufficient gas to their plants.

The question to ask is: why was the NGC being sued when it is not a gas producer? The answer: this is due to what we call the NGC model.

In this model, with few exceptions, the NGC buys all the gas from the upstream producers—it owns the pipeline infrastructure— the gas is then piped to customers and sold to the petrochemical plants at a profit.

There are three exceptions to this rule. In the case of Atlantic LNG, the upstream producers like bpTT and Shell sell directly to the Point Fortin plant and bpTT due to its interest in Atlas methanol sells directly to the plant as did EOG resource to CNC ammonia plant.

For a long time there has been the argument that the NGC model was not working because, according to companies like bpTT, the risk reward was out of sync, with the state-owned enterprise almost guaranteed profits without taking the risk of looking for and producing natural gas.

The NGC has argued differently, saying it takes risks by partnering with the petrochemical producers and profiting when prices are high and making little when commodity prices are low.

Gregory McGuire, who worked at the NGC and is a supporter of the company remaining sole aggregator, argues this offers the downstream tremendous flexibility in terms of its product-related pricing mechanism.

He said, “By this mechanism, which is not common place in the natural gas business, NGC shares some of the market risks with the petrochemical producers and reduces their most significant operating costs at a time when revenues are relatively lower. Contrary to the view that NGC uses its monopoly position for price gouging and profiteering, it is the big risk taken on product-related pricing that has in the past generated significant surpluses in period of high prices. This has allowed the entire industry to grow and prosper.”

Helena Innis, an energy consultant, said the NGC model is best for T&T because of the vertical integration of the dominant upstream suppliers.

Innis said the government allows the upstream producers to sell directly to the downstream petrochemical companies that could likely result in there being no downstream domestic market.

“The profit motive will win,” she added.

In an article in the T&T Guardian, former Finance Minister Mariano Browne argued that the NGC was doing a disservice to the country.

He said, “The market has now become more competitive contemporaneously with higher prices demanded by the upstreamers. And supply is still smaller than the demand. The balance of power has shifted to the upstreamers who control over 90 per cent of the production and therefore a strangle hold on capacity and utilisation. And the upstreamers priority is liquefied natural gas, not petrochemicals.”

Browne added, “The primary purpose of a firm in a competitive industry is to meet the needs of its customers. There is no business if there are no customers. To do so, a business must have a unique value proposition and compete either on cost or product differentiation. When looked at in this light, NGC is in a weak position and its crude tactics jeopardise the industry and the country’s economic future.

It is clear that the NGC has served the country’s interest well, but as McGuire notes it cannot remain static. There are also questions about transparency.

Why should the NGC negotiate in secret with petrochemical companies when renewing a contract?

Would it not make sense to ensure that everyone knows there is a Point Lisas price for gas and that is the price all businesses coming to the NGC for gas must be prepared to pay and run their models on?

To do otherwise is to open the company to allegations of favouritism.

The other reality is while it makes sense for vertical integration, the challenge of being a middleman in a period of gas shortage and then offering gas to a new plant in which you have a stake reeks of conflict of interest.

When this was put to the NGC, this was the company’s response, “NGC continues to work assiduously with all stakeholders to bring relief to the current gas situation in the best interest of the industry.”

Asked if the issue was raised in legal proceedings against it, the NGC answered, “All legal proceedings are bound by strict confidentiality agreements.”

n Next week we end by looking at the issue of contract transparency and the way forward.

Categories: News

Venezuelan gas—good move for T&T

Wed, 08/29/2018 - 21:38

Last Saturday’s signing of an agreement between T&T and Venezuela for the export of natural gas from Venezuela to this country has the potential to lead to further downstream investment in T&T.

It is also a major success for both the government and for Shell Trinidad which is partnering with the National Gas Company on the construction of the pipeline from North Eastern Venezuela to its Hibiscus platform off the North Coast.

Over the last decade there has only been one additional downstream project started in the country, that being the Mitsubishi methanol plant that is being constructed at La Brea.

A major reason for the lack of new investment has been the shortage of natural gas that had plagued the country since 2011 but which has intensified since 2014. Uncertainty of a gas supply and the increased prices that are being demanded by the NGC are major reasons why investors have dried up in the Petrochemical sector.

Take, for example, the recent decision by the Proman group to build its methanol plant in the United States. Sources tell Business and Money that the company, which has significant investments in T&T, would have preferred to build it here but the conditions did not allow for it. The loss of such a plant is a loss of jobs for locals in the construction phase and a loss of a stream of revenue and foreign exchange to the ex chequer.

It is why this deal with Venezuela is so important.

In a real sense 300 million standard cubic feet of gas is a relatively small tranche, especially when you consider that this country’s demand is closer to 4.5 bcf/d. This also opens the door for the development of a relationship between the two countries that can see further corporation and the big fish of Loran Manatee being processed in T&T.

This was not lost on Prime Minister Dr Keith Rowley who said, “We may have been able to save our industry by getting a secure source of gas for the downstream sector. It may, over time, also allow us to look at the expansion of the downstream sector and investments there, as long as we can show investors we have a secured stream of gas,” Rowley told journalists on the flight back from Venezuela.

The Prime Minister noted that the situation allows, for the first time, Venezuela gas to be processed in T&T.

“T&T is a processor and exporter of natural gas. Venezuela’s resources of natural gas have never been an input but after today...Venezuelan gas will come to the international marketplace to be monetized for the benefit of the people of Venezuela and the people of T&T and that being so, the sky is the limit,” he told reporters in Caracas.

Dr Rowley added, ”What we have just witnessed is the coming together, in a situation which existed for two years but which has now come to the fore, to be operationalised for the people of T&T and the people of Venezuela. Geologically we are connected and historically we have used our hydrocarbon resources as the engines of both our economies. There have been many changes some for better, some for worse, but in recent times under recent and current leadership, a new impetus has attended our requirement to co-operate in our hydrocarbon legacy.”

The Prime Minister admitted that the cost of building the pipeline was a concern but said Shell was helping with the estimated $1 billion needed to build out the infrastructure.

But what’s in this for Shell?

One imagines that Shell is in this for the long haul and the big fish.

For one, the company will make a profit on its investment in the pipeline. It allows the major to position itself as the leading multinational in Venezuela, a country that has become an almost pariah internationally due to its nationalisation of oilfields.

For Shell, there is also another major prize and that is the Loran Manatee field in which there is 10 trillion cubic feet of gas. That is enough gas to support an LNG train for 40 years. If the Venezuelans agree to it coming to T&T, this could be a major prize for Shell.

There are real possibilities but, as many have said, more information is needed and the issue of contract transparency needs to be addressed.

“Our Starfish development, which achieved first gas earlier this year, and Dolphin development projects were both accelerated following the acquisition of Chevron’s assets in the ECMA which gave us full operation of the upstream value chain.”

Economist Dr Roger Hosein said told Business and Money that while the government should be happy about the extra gas that is going to be available for both downstream and LNG, he warns on the LNG side that the prices are likely to remain depress as the US ramps up production of the commodity.

He said the T&T government had to be aware of the supply side imbalance in LNG.

While there are those who believe it is the upstream producers and LNG that drive the energy sector, in many ways it is really the downstream sector that is the mainstay of the economy.

Consider this: it is the downstream petrochemical companies that are responsible for the purchase of close to 40 percent of the country’s natural gas. This means that the gas produced by the upstream companies like bpTT and Shell require a market. Without the downstream companies like MHTL or Methanex or even CNC a large part of that market is gone.

The Government has depended heavily on billions of dollars in dividend payments from the National Gas Company. The NGC makes most of its money from the sale of natural gas to the downstream companies. Therefore it is the downstream sector that is a major part of government’s ability to earn taxes and dividends from the NGC.

Categories: News

The importance of this gas deal

Wed, 08/29/2018 - 21:35

Venezuela’s ambition to become the largest exporter of gas in Latin America dates back many decades, well before the start of the on and off talks with T&T on utilisation of cross border gas assets.

That country, now beset by economic and social turmoil, has the potential to produce 1,200 million cubic feet and 28,000 barrels per day of condensate gas and has been pursing partnerships with neighbouring energy producing nations, as well as private entities, in it quest to become a major gas production hub.

Its best prospects for realising that dream now reside in the Mariscal Sucre project—a development of great interest to T&T—since it encompasses four giant deposits located in northern Paria Peninsula (east Venezuela): Dragón, Patao, Mejillones and Río Caribe.

Dragón field alone is expected to produce some 300 million cubic feet of gas. That, combined with the other deposits that make up the Mariscal Sucre Project is expected to reach more than 1,000 million cubic feet in the coming years.

With 198 trillion cubic feet of natural gas reserves, Venezuela holds the largest such reserve base in Latin America and the eighth-largest in the world. However, our closest Latin America neighbour has been hampered by a natural gas deficit in its industrial western region which it is seeking to alleviate by developing it offshore natural gas reserves located in the projects.

Apart from Mariscal Sucre, where the Dragón field is located, development is also being pursued in Rafael Urdaneta and Deltana Platform.

It must be remembered, that for both countries, the political and economic scenarios were quite different when the talks started on cross border gas arrangements. Venezuela, then in the “glory days” of the Hugo Chávez Bolivarian Revolution, was still enjoying bumper years of oil production. Then the Chavez regime embarked on forcible seizure of foreign-owned upstream energy assets and drilling activity began to decline.

Meanwhile, in T&T, just around the turn of the 21st century, a Patrick Manning administration was in place when the first Atlantic LNG train was established. The facility eventually expanded into a four-train, 14.8mn t/yr liquefaction complex and this tiny twin-island state evolved into a prosperous gas-based economy.

Bilateral agreements on hydrocarbons started in 2007 when Chávez and Manning signed the Framework Treaty for unification of hydrocarbon reservoirs, along with a series of trade and public safety agreements.

This had been preceded, in December 2004, by Chevron Texaco’s discovery if 5 trillion cubic feet of natural gas in the Loran field which straddles the territorial waters of our two countries.

Venezuela subsequently signed deals with Chevron Texaco and Repsol to increase natural gas production. Chávez expected the Loran to advance Venezuela’s plans build its own LNG plant.

It is no surprise that negotiations between the two countries on developing cross-border gas fields have stalled several times over the years. However, these do not detract from the significant milestones that were achieved leading up to last Saturday’s historic agreement, signed in Caracas, Venezuela.

Also not to be overlooked is the fact that progress in negotiations have been relatively few and far between and that, in the case if T&T, has extended over the life of more than one political administration.

So while the talks began during the tenure of the late Patrick Manning, neither he nor his People’s National Movement (PNM) where at the helm in August 2010. That was when, just months into the People’s Partnership administration of Kamla Persad-Bissessar, this country and Venezuela signed a long-awaited agreement to develop natural gas reserves on their maritime border.

Then, in September 2013, a preliminary agreement, also during Persad-Bissessar’s tenure. Another deal was signed to exploit the Loran-Manatee field.

In the intervening years came the drop in oil prices which sent both countries into economic tailspins.

It was therefore a significant step forward in the protracted negotiations when, in December 2016, with Dr Keith Rowley just over a year in the Office of the Prime Minister, the two governments signed an agreement to facilitate transport and sale of Venezuelan gas to this country. Since then, closed door talks have focused on hammering out a deal that is financially and commercially viable, with legal protection from any risks.

What both sides have now agreed to is for150 million cubic feet of gas per day—eventually increasing to 300 million cubic per day—to flow from Venezuela’s Dragon field through a 17-kilometre pipeline to Shell’s Hibiscus platform offshore T&T. From there, the gas will be distributed by the National Gas Company. Operations are slated to begin in 2020.

While full details have not yet been made public, the deal is also supposed to cover, among other things, joint development of Venezuelan gas reserves with the participation of companies from T&T, as well as construction of a 300-kilometre gas pipeline that would ship gas from Mariscal Sucre to Güiria.

Also in the pipelines are further talks on development of the Loran-Manatee field that straddles the borders of Venezuela and T&T and contain more than 10 trillion cubic feet of natural gas. Already agreed is the allocation of 73.75 per cent of those reserves to Venezuela and the remaining 26.25 per cent to T&T.

This field has the potential to significantly increase overall gas production. There have been discussion of Loran-Manatee by the respective but on the T&T end very little has been revealed about a potential investment decision from the multinational companies holding the rights to develop the acreage.

Also still to be considered is the much smaller Manakin Cocuina field, discovered in 2000, which is estimated to contain around 0.4 trillion cubic feet of reserves with the majority (66 per cent) on the T&T side of the boundary.

There are many other deals still in talks so negotiations over cross-border gas resources will continue well into the foreseeable future. Now that the deal for interconnection to export from the Dragon field to the Hibiscus platform has been finalised, attention can now shift to the other potential pipeline route from Güiria, Sucre state, to Point Lisas.

Success in all these discussions is critical since the Government has promised that the natural gas shortages experienced by local downstream companies will come to an end by 2021. While this is based primarily on the just concluded Dragon gas agreement, other developments are also contributing to the resolution of the gas curtailments, such as bpTT’s Angelin field, with reserves estimated to be in the region of 1.5 trillion cubic feet, where there have been significant developments in just the past few weeks.

These must be viewed in tandem with developments over the past several months, including the Trinidad Onshore Compression project (TROC) which has resulted in additional compression capabilities for the Point Fortin Atlantic LNG plant.

Other significant projects include Juniper, which at peak will produce 590 million cubic feet per day of natural gas from the Corallita and Lantana fields located 80 kilometres off Trinidad’s south east coast and Sercan gas field, a joint venture between EOG Resources and bpTT, which has the capacity to produce 250 million cubic feet of gas per day.

While a deal has been signed off—particularly the prevailing economic and social conditions in Venezuela—great care must be taken to ensure agreements already in place are kept and future deals are approached with a level of diplomacy. The value and proximity of the assets involved must never be under estimated.

It helps that in this case Venezuela needs these arrangements to succeed as much as, or perhaps more than, T&T. Very likely, that country is staking its economic recovery on successful implementation of Dragón and the other energy deals it is currently pursuing with other countries in the region.

For T&T, currently sitting on an estimated 11.5 trillion cubic feet of proved natural gas reserves, the challenge is not only to bring new gas reserves into production as a means of stemming the current shortage but to also maximise production from existing reserves.

Our economic survival still depends heavily on natural gas, so even while efforts must be made to develop other sectors, keeping this industry alive and ensuring it returns to optimal capacity is crucial.

That is why the Dragón deal was such a significant development.

It is one of many important steps for economic recovery and future prosperity.

Categories: News

Herbalife distributors claim in US$1B suit—events were a sham

Sat, 08/25/2018 - 21:45

MIAMI (AP)—Patricia and Jeff Rodgers figured they did everything right to get rich beyond their wildest dreams selling Herbalife health and personal care products. They attended all of the “Circle of Success” events, brought in new recruits, met their quotas on buying Herbalife goods to sell and even set up a storefront shop.

But they didn’t get rich. Instead, Patricia Rodgers estimates the couple lost over US$100,000, including about US$20,000 spent on attending Herbalife events. Now, the couple and others are suing the multi-level marketing company that sells its products through a network of distributors who recruit more distributors. The potential class-action case could involve more than 100,000 plaintiffs and might mean as much as $1 billion in damages.

“We did everything they told us to do. We attended every event. We traveled and we spent money. And we didn’t get successful like they said we would,” Rodgers said in an interview at the couple’s home in Hallandale Beach, Florida. “You get involved in it, it’s almost like a cult mentality.”

Los Angeles-based Herbalife, a publicly traded company with 2017 net sales of US$4.4 billion, has long been embroiled in litigation and regulatory actions over its business practices, which have been compared by some to a pyramid scheme. A spokeswoman declined to comment for this story, although Herbalife attorneys are seeking to get the lawsuit dismissed or moved from Florida to a California court.

Herbalife lawyers say in court papers the distributors now suing the company in Miami were not specific in how company statements influenced them into making bad decisions.

“Plaintiffs’ failure to specify how they were misled by these alleged misrepresentations is fatal” to many key claims, the lawyers wrote.

To become a distributor, a person must be recruited by an existing distributor, according to the company’s website. The new recruit also must purchase a “Herbalife Nutrition International Business Pack” explaining how the business works and how to become a sponsor. The new distributor buys Herbalife products at a discount and sells them, often part-time, in hopes making a profit.

In 2016, the company settled a Federal Trade Commission case for US$200 million. It centered on Herbalife’s business model being based on recruitment of distributors rather than actual sales of its products, such as protein shakes, vitamins and skin care items. One year earlier, another lawsuit by Herbalife distributors ended in a US$17.5 million settlement.

In the FTC case, the agency said in a statement that “only a small minority of distributors have made anything near what the company promises” through promotional materials showing how they lived in expensive homes, drove luxury cars and took exotic vacations.

“A large majority of distributors made little or no money and a substantial percentage lost money,” the FTC said.

The case in Miami federal court is different, said plaintiffs’ attorney Etan Mark. It targets the system of high-energy events known as “Circle of Success” that distributors are cajoled into attending all over the country at their own expense. They are touted as the supposed key to learning how to become wealthy—all the while signing up more people to become distributors in what’s called the “downline.”

A common company refrain was: “If you go to all of the events, you qualify for everything—you will get rich,” according to the lawsuit. Another was: “These crucial events provide you with the skills you need to take it to the next level,” court documents show.

“They felt like they were chasing a ghost. It’s the event you missed that would have changed your life,” Mark said. “These tens of thousands of people in this case lost money. I believe the vast majority of people lose money through the Herbalife opportunity.”

Not every distributor feels that way. Valarea Pagan, an Orlando-area single mother, said selling Herbalife helps pay her bills as a second income source. She said Herbalife products helped her lose weight and feel good about herself.

“I love the products and I’m helping people and I’m getting extra money,” Pagan said in an interview. “It’s helping me a lot.”

Pagan said the biggest “Circle of Success” events are multi-media extravaganzas that get everyone hyped about selling Herbalife products. And they push distributors to aim for the company’s VIP-level circles or even the company’s top “President’s Team.”

“It’s crazy. You get so pepped up. It’s like the Super Bowl for us,” she said. “It’s like the biggest event of the year.”

Herbalife’s website says it has about 8,300 employees worldwide and about 2.3 million distributors. China, North America and the Asia-Pacific region account for nearly two-thirds of Herbalife sales.

Herbalife attorneys contend that many of the claims in the Miami court case are covered by the 2015 settlement with distributors that also focused on purported misrepresentations by the company about the pathway to wealth. That settlement, however, involved distributors who either couldn’t sell the products for at least the cost of their purchase or wanted to return products after the company’s one-year return policy.

If the case isn’t dismissed or settled, Herbalife wants it transferred to a California federal court, which it claims is a requirement when a person signs up to become a distributor. In the Miami case, the plaintiffs claim their lawsuit isn’t about the distributor agreements but about the “Circle of Success” events, so that requirement does not apply.

US District Judge Marcia Cooke in Miami is weighing all these motions, with trial set for September 2019 if the case isn’t resolved before then. A key hearing is set for Wednesday on pretrial motions.

Rodgers, the former Florida Herbalife distributor who’s suing, said she’d like to recover some of her money but also hopes others don’t get fooled as she thinks she was.

“I took what money I had. I followed a dream I was sold. It was addictive. It was almost like you got hypnotised and you were in some kind of trance,” she said. “Then you realise, man, I really got duped.”

Categories: News

Striving for better

Sat, 08/25/2018 - 21:42

I’m always in awe about the difference social entrepreneurs are making globally.

The new breed of entrepreneurs is so passionate about creating a whole new system, product, service that becomes the “new NEW” for many feeling the despair in society stemming from poor education, health, housing, clothing or in need of economic amelioration or independence.

As strategy guru Roger Martin explains, simply striving for social good or advocating for social justice does not a social entrepreneur make. These leaders—call them disruptors, rebels or changemakers—develop solutions in ways that bring about the truly revolutionary change that makes the world a fairer and better place (MaRS News Desk, 2016).

One of the questions I am asked frequently is: how do I become a better social entrepreneur?

Before diving into any response, it’s good to understand the context which allows a person to pitch this question.

T&T Social Entrepreneurs

In T&T, striving for better is critical as we need social entrepreneurs to not just survive, but thrive. In our landscape, there are annual cuts in the national budget for social programmes, non-profit funding is shrinking, and most funders are increasingly demanding to see the ROI on the programmes and projects they fund. Social entrepreneurs are striving but wish to strive for better to really bring about that revolutionary change.

While there are many factors to consider, here are three areas for social entrepreneurs to consider in their quest for striving for better.

1. Find your niche.

In a society where there are many problems and new ones spawning every day, it’s important as a social entrepreneur to understand what you want to solve—find your niche. Remember you cannot solve all the problems as each problem requires human resources, financial resources and time. Dedicate your actions and resources to your niche problem.

2. Use your skills.

Never underestimate yourself. Never doubt that you cannot be successful. Have the self confidence that you have skills that can make your social entrepreneurial venture successful (if at start up) or even more successful (if already established let’s say more than 3-years). You know yourself best; what you are good at. Use that self-knowledge of your skills to understand where you need to seek external support.

3. Never give up.

If you are thinking about giving up because you are experiencing bad days then you need to consider whether you are a social entrepreneur. All successful social entrepreneurs strive and strive embracing the good days and looking forward to the bad days on their journey to make a difference and, most of all, establish the “new NEW.”

They will not stop until their way of doing things becomes the new status quo. Remember, if you fall down, don’t stay down. Get up, learn from your lessons, move on to create positive difference in the lives of others.

While no social entrepreneur is the same, these common areas make you stand out in the top as influential leaders in social change.

Jim Rohn said, “Successful people do what unsuccessful people are not willing to do. Don’t wish it were easier; wish you were better.”

Great social entrepreneurs keep striving for better—in their work and in the world.

Nirmala Maharaj is a doctoral candidate at the UWI-Arthur Lok Jack Global School of Business. Her research is in social entrepreneurship. Mobile: 689-6539 / E-mail: [email protected]

Categories: News

A closer look at under-invoicing

Sat, 08/25/2018 - 21:40

The United States (US) Department of State reported in its 2016 International Narcotics Control Strategy Report that under-invoicing occurs when “money launderers and those involved with value transfer, trade fraud, and illicit finance misrepresent goods or services on an invoice by indicating they cost less than they are actually worth.

This allows the traders to settle debts between each other in the form of goods or services” or simply put it is a form of trade mis-invoicing where the price of a good on an invoice is less than the price in fact paid.

Under-invoicing takes place if the importer and/or exporter desire to reduce a tariff or if a buyer and/or seller wish to reduce their apparent profits so as to pay less in taxes. So what is the reason behind this? The main reason behind under-invoicing is that the importer will under-invoice if import duties and premium on restricted imports are higher than the black market premium on the foreign exchange which an importer pays. This result in the price released by the importers of the good at the customs point is far lower than the market price.

The effects are wide.

Under-invoicing can hurt government’s revenue and while creating several risks in the domestic economy. Under invoicing not only hurts customs tariff, it also affects the collection of inland tax like value added tax (VAT) and income tax.

The playing field becomes distorted as under- invoiced goods can be sold at more competitive rates compared to goods imported by legit importers. Under-invoicing of goods also hurts the domestic production base as their products cannot compete with under-invoiced goods. Further, under invoicing also cause an increase in inflation and capital flight and unemployment as it transfers jobs outside the country.

The problem is global. For example, the UNCTAD reported in a 2016 study that trade mis-invoicing is making some countries lose up to 67 per cent of commodity exports earnings. For instance, under- invoicing of gold exports from South Africa amounted to US$78.2 billion between 2000 and 2014.

The study again reported that between 1995 and 2014, Zambia recorded $28.9 billion in copper exports to Switzerland which is more than half of all its copper exports, yet these did not appear in Switzerland’s trade statistics. Another example- between 1990 and 2014, Chile recorded $16 billion in copper exports to the Netherlands, but these exports also did not appear in Netherlands’ trade entries.

The problem is global. The Pakistan Today newsletter reported in a 2018 article that trade between Pakistan and China revealed major under-invoicing and mis-declaration of imports most notably in Pakistan.

The article articulates that textile imports from China are coming into Pakistan without paying the actual amount of duty, causing massive losses to national exchequer and destroying the domestic industry.

The problem is global.

In Ethiopia, the country loses $1.97 billion every year through trade under-invoicing, and a further $630 million every year through illicit financial flows. The losses constitute five to ten per cent of the country’s GDP. This information was provided by Africa News Portal in its article: Under-invoicing a major problem for African countries. The article further reports that Uganda, Tanzania and DR Congo lose about $720 million, $480 million and $225 million annually respectively to illicit flows.

So, what is taking place in T&T?

In T&T, local manufacturers have reported of cases of under-invoicing. The domestic industry is feeling increasingly threatened by heavy imports of under-invoiced goods, which are hindering the growth of their businesses. It is believed that more quality checks are required to the imported goods since the some goods are have been claimed to be substandard and can pose a threat to local consumers.

Local manufacturers report that the capital drained from trade mis-invoicing means that local businesses have less money to grow their companies. The potential revenue loss from trade mis-invoicing means that the country has less money to spend on healthcare, less money to education, and less money to invest in infrastructure.

Trade mis-invoicing can be seen as one of the serious economic issues plaguing T&T, but there is lack of emphasis on this area. It should be noted that the act of under –invoicing is unlawful in Trinidad and Tobago. An individual will be fined for the production of false declaration of documents. This is stipulated in the Customs Act Chap. 78:01.

What can be done?

Solutions should be centred on the principles of transparency, consistency, uniformity and proper governance. Thus, the government should enforce the laws that combat trade mis-invoicing and consider reviewing the legal framework. Further, government should significantly boost its customs enforcement, by equipping and training officers to better detect intentional trade mis-invoicing of trade transactions.

This means the customs are to be equipped with modem technology and reforms to deal with this problem. Another measure is that trade transactions involving tax haven jurisdictions should be treated with the highest level of scrutiny by customs, tax, and law enforcement officials.

At TTMA, the illicit tradedesk office is seeking to highlight this issue due to the implications it has on the local economy.

TTMA is of the belief that there is a need to give this area more emphasis. For example, more research studies should be conducted to know the economic losses and fallouts. The wide reaching effects are not only economic but also social. Local manufacturers are subjected to an unequal playing field in the local market and therefore, it has become an important issue.

If you are interested in becoming part of the solution to address this, you can contact the TTMA’s office at 675-8862 for more information.

Submitted by Joy Francis, TTMA

Categories: News

Business, branding and cocktails

Sat, 08/25/2018 - 21:38

“Business, branding and cocktails. Designed for entrepreneurs by entrepreneurs”. Those were the words that stood out like a beacon when I first heard about this event. Bring Your Own Brand (BYOB) was slated to be a cocktail networking event specially designed for local entrepreneurs to gain exposure for their brands and connect with like-minded individuals. As a budding businesswoman, I most certainly was intrigued.

Organised by Shaquilla Daniel, the event took place on August 9 at the VIP Lounge of the Rush Nightclub, Tacarigua. Heavy rainfall and ensuing traffic led to a late start but Daniel and her organisers ensured that the event was not to be derailed.

After a welcome address, Daniel—a human ecologist, paralegal and entrepreneur in her own right—introduced us to the evening’s panelists. Quentin La Barrie, accountant, spoke about the benefits of keeping proper accounting records for the small businessman. Carla Williams-Johnson, marketing consultant, provided valuable insights on the marketing perspective.

Kyle Fortunè, attorney, presented a legal discussion on the basic requirements for incorporating a business, and Keeshorn Vane, sales executive, gave an energetic presentation on the nature of sales in the 21st century.

Then we participated in a fun group exercise that encouraged the attendees to mingle and make new acquaintances.

As an author and blogger, at first, I was not certain whether this event would be beneficial for me. However, as the evening progressed, my doubts were allayed.

BYOB is an event for all business types: makeup artists, swimsuit fashion designers, photographers, travel consultants, and even authors.

I shared the current issues I faced as an upcoming brand. It was comforting to note that I was not the only person confronted by such stumbling blocks. One of the panelists even provided me with marketing advice.

Cocktails and refreshments were served.

With music in the air, drinks in our hands, and a spirit of camaraderie in the atmosphere, the evening was a success.

Sponsors for the event included: Classy Bodies Wellness, Michael Mottley Photography, Sound Resource Ltd, Rush Night Lounge, Carli Communications, NRC Consultancy Ltd, Sisel International, Weddings by Bella, TicTok Ltd and Studio 19. See images from Bring Your Own Brand

Giselle Mills,

Categories: News

Royal Castle fuels local expansion

Sat, 08/25/2018 - 21:36

Fifty years ago in the bustling city of Port-of-Spain, Marie Permenter took a brave step in opening up the first Royal Castle fast-food restaurant on Frederick Street.

It was at the height of the nationalist movement and although it was only six years after T&T achieved independence, the desire to rise above the debilitating effects of colonialism by building local content was high.

Permenter’s restaurant offered succulent fried chicken sourced locally using local marinades, sauces and seasonings.

With a mere staff of 12, the restaurant thrived and became so popular that within a few years Royal Castle became the first locally owned restaurant chain in T&T.

Today, half a century later, and despite the economic instability, Royal Castle is continuing to fly the flag of national pride by supporting local farmers.

Speaking to the Guardian Media on Tuesday, managing director Sandy Roopchand said, “All our suppliers are local. We buy chicken produced on local farms as well as fresh garden peppers and seasonings.

Our local suppliers contribute to our success, as they understand our commitment towards quality products and our desire to use local ingredients for our customers.”

As the first locally owned fast-food chain, Roopchand said citizens have developed a special love for Royal Castle and this loyalty has kept the company afloat.

In return, the company maintains its philosophy of using home-grown products.

“We pride ourselves in being able to support our local economy by sourcing approximately 95 per cent of our products locally. We have built relationships with numerous farmers, chicken producers and other local bodies for a supply of quality products for our operation,” she explained.

With pride etched on her face Roopchand said since 2008, despite falling energy prices, inadequate foreign exchange and rising cost of living, Royal Castle has been able to successfully ride the waves of economic turmoil and expand from 12 to 37 restaurants across Trinidad and Tobago.

Much of the company’s success took place under Roopchand’s stewardship.

Apart from supporting local suppliers, especially in terms of farm produce, Roopchand said they have partnered with popular international sellers such as Nutrina, Fine Choice, Kiss, Cavendish Farms and Coca Cola.

So what else is the key to the company’s success?

Roopchand says keeping a happy and productive workforce is extremely important.

“I strongly believe that an organisation’s relationship with its staff must be mutually beneficial. I also hold myself accountable to my staff as I build trust, earning their respect whilst being authentic and aware of what’s happening at the various levels,” she explained.

Having moved up from a managerial position in the finance department to managing director of the chain, Roopchand said she also understood the needs of their customers. As such, keeping prices down is an important goal and Roopchand revealed Royal Castle’s meals are priced significantly lower than their competitors.

At the food chain’s latest restaurant opening along the Penal Main Road on Tuesday, customers were given free meals, vouchers and gifts to celebrate its arrival in the community.

Roopchand said in keeping with her desire to have exceptional product standards, her workforce needed to be steady so within a few years staff numbers increased from 300-plus to 520.

She said they were now looking to open another restaurant in El Socorro, San Juan, so this meant an additional 40 new recruits.

“We aim to have at least 20 workers at each new restaurant,” she said. 

Joining the Royal Castle family is easy, she added, as the company only requires prospective employees to have a love for people and a committed work ethic.

“We have invested heavily in the training and well-being of our workers, from floor workers to those in managerial positions,” she explained.

“We continue to recognise and reward our employees - they are our greatest asset. I understand my responsibility for building and maintaining conditions that make service excellence possible and worthwhile.

Knowing that is a culture change and one that will create long-term success. ”

Apart from placing heavy emphasis on internal promotion and recognising the potential of employees, Roopchand said she is also careful to encourage workers to fulfil their true potential.

“We try not to put a cap on how far their ambition and dedication can take them. Without such an investment in our employees, we understand that we would not be able to uphold our value proposition, nor ensure that our customers receive a good service experience,” she said.

Roopchand also revealed that Royal Castle’s aim is to expand further outside T&T.

She said there are already six Royal Castle restaurants in Guyana but she was hoping that within the next few years there will be outlets further up the Caribbean island chain. She also revealed that as consumers’ tastes changed with time, the company’s menu selection has also changed to reflect healthier choices.

From the simple meal of chicken and fries, Royal Castle today offers a wide variety of items, including chicken, fish, sandwiches, vegetable burgers, salads, rotisserie chicken and a wide selection of beverages.

All of the restaurants also now sport modern in-store decors while some restaurants are equipped with “drive-thru” services as well as home and office deliveries, Roopchand explained.

Going forward, she said upholding Caribbean culture and encouraging support for local goods will remain the hallmark of T&T’s first locally owned and run fast-food brand.

“Our culture and our taste are represented in our brand. Our selection of quality ingredients, combined with our well-trained, multi-racial, cultured staff make our customers’ experience a unique, tasty and unforgettable one and this will remain as we expand,” Roopchand said.

Saying she was privileged to lead such a dynamic business with a supportive, diverse staff, Roopchand vowed that the company will continue to hold fast to tradition.

“We will continue to uphold our slogan “Our Culture, Our Taste” because we hold our culture and diversity in high regard. We will continue to be local-minded and even as we expand to distant shores we will not forget where we started,” she added.

She urged citizens to support local by buying Royal Castle, adding that an entire network of local producers, workers and suppliers benefit from the company’s success.

Categories: News

A crime story from Emancipation to Independence

Thu, 08/23/2018 - 05:44

August is a unique month in our calendar. It is the month that is at the height of the vacation period and so is probably the most relaxed time of the year. Relaxation also allows for reflection and with it comes the realisation that August is even more unique in that consistent with the vacation period it begins and ends with two holidays.

In contrast to the overall theme of this month, both of these holidays are serious events on the national calendar. August 1 marks our recognition of Emancipation and August 31 marks our celebration of our Independence.

Take a bit more time to reflect and you may come to realise that as a person and as a country you can be emancipated but not independent and you can also be independent but not emancipated. We can all do well if we strive for both.

Adding another unique twist to this August is the appointment of a new Minister of National Security and a finally a new Commissioner of Police and it is here that I hope that the concept of emancipation and independence will resonate.

As a country, we have spent untold billions of our precious and declining oil and gas wealth via the Ministry of National Security. As citizens we have collectively spent billions more on our individual security paying for everything from burglar proofing, electric gates, security cameras, alarms, security guards and on top of that we pay the ultimate price of restrictions on our time and quality of life due to crime.

It is not only that the combined cost of all of these initiatives are in the billions it is also true that most of the hardware associated with our security apparatus is imported so there is a huge foreign exchange component to our crime fighting situation.

It should be clear to every citizen as well as those in authority that T&T is anything but emancipated. We are for all intents and purposes prisoners in our homes and there is a significant social and economic cost to this dynamic, regardless of what various politicians have tried to spin over the last two decades.

Making comparisons

It is clear we are not emancipated because of crime but are we truly independent? By independent I am referring to the ability to think independently and come up with solutions that are unique and relevant to T&T.

The ever-increasing size of our National Security budget, comes about from all accounts because the funds are needed, to fight a well-funded organised crime enterprise. The cost to ordinary citizens who are ostensibly caught in the middle is for all intents and purposes an additional tax on income and I may add a curtailment of income opportunities.

It is said that the main component of organised crime in T&T is the drug trade and the ensuing gang related activity that emanates from this trade. I sincerely hope that the new Minister of National Security and the new Commissioner of Police (CoP) when they settle into their roles will have the independence of thought to ask the following question.

Why is alcohol legal to sell and to consume in T&T?

Alcohol is a drug. It is an addictive drug. It has many negative social side effects. It is linked to domestic violence, it is linked to unwanted pregnancies, it is linked to sexually transmitted diseases, it is linked to diseases of the liver and it is linked to vehicular accidents. There is an extremely high social and economic cost all of which is borne by the State through the taxpayer from the use of alcohol, yet alcohol is legally sold and consumed in T&T so much so that we even invest in the companies that produce and sell the associated products.

An independent mind will ask why is this so and will seek to find a cogent and consistent answer when comparing the stance against other drugs versus alcohol.

If this issue proves to be too difficult to reconcile then quickly move to a review of the infrastructure that exists around the sale and usage of alcohol. The age restrictions on consumption, the license required to import and to sell and the ongoing conditions that need to be met each year and the conditions that exist over its advertising and promotion. Consider the fact that it is regulated and taxed. An independent mind will ask why is it not possible to do the same with other drugs.

At this stage I am not advocating a position, I am simply asking that we think independently as opposed to simply following what seems to be a norm. In 2013, I wrote an article on the 100th anniversary of the US Federal Reserve. Central banking, which we consider to be the norm for a banking environment, is just over 100 years old. The abolition of the gold standard, which has given rise to a fiat currency as the reserve currency of the world, is just an 85-year-old experiment.

Up until that same year (1933) it was also illegal to sell alcohol in the US. We take these things for granted in the same way that a young person today takes a smart phone for granted, because that is the only way they ever knew.

Solving the problem

Speaking of smart phones, despite the untold billions that have been spent through the Ministry of National Security, have we ever had a national discussion about the problem that we are trying to solve? Are we trying to solve a drug addiction problem, a drug use problem or a drug trafficking problem? Is it all three at the same time, which one is the priority, can we even prioritise?

We probably don’t have an issue with addiction per se because cigarettes contain one of the most addictive drugs and it is sold legally within the required regulatory framework. This is, of course, not to mention the addictive properties of alcohol already mentioned. Further gambling can also result in addiction and that is now legal and soon to be taxed. The negative personal and social consequences of all of these vices are quite significant. We have recently been told that even our phones, social media and video games can be addictive so maybe addiction is not the problem we are trying to solve.

If the problem is drug usage then apart from answering why we are comfortable with alcohol usage but basically nothing else we also have to address the collateral effects of drug usage being a criminal offense.

A person caught in possession of a few grams of marijuana is arrested and ends up in jail. There they are faced with the additional criminality that comes from being in such an environment. When they get out of jail their criminal record makes them unemployable by current standards. Now outcast they end up in gangs which have recently been outlawed as well. The main avenue available to them is drug dealing and other forms of organised crime so the system provides the recruits for the existing cycle to continue.

Arguing whether the person caught with marijuana was part of a gang before they were caught is a pointless argument because the economics does not add up. For the sale of drugs to be economically viable the usage of drugs has to be on a scale that cannot be found amongst the lower economic rungs of society.

Through the process of elimination it seems that the problem we need to solve is a drug trafficking problem. That of course requires a specific set of actions and success here probably does not exclusively involve the “cockroaches” referred by the CoP.

Our new agents of law enforcement come with much promise. However for their work to be considered a success they should first properly define for us the problem they are trying to solve and then deliver the results accordingly. They can only achieve this if they are emancipated in their thinking and independent in their actions. If nothing else, our increasingly scarce financial resources require them to do so.

• Ian Narine can be contacted via email at [email protected].

Categories: News

ANSA Merchant signs new MoU with Oxford Business Group

Thu, 08/23/2018 - 05:42

High-level coverage will be provided for the capital markets sector of T&T by one of the country’s leading expert financial institutions, ANSA Merchant Bank Ltd, in a report by the global research and consultancy firm Oxford Business Group (OBG).

The report: T&T 2018 will shine a spotlight on the possibilities of an economic paradigm shift in the country, including the country’s efforts to achieve a higher degree of diversification and end over reliance on the hydrocarbons industry, as well as a further development of financial and capital markets.

To this end, ANSA Merchant Bank will provide extensive research on new developments in T&T’s economy, including its well-developed capital markets. The report will cover aspects contributing to the development of the sector, such as high levels of liquidity and willingness from savers and customers to invest in different products, as well as offer readers insight into the challenges investors in T&T might face, such as a lack of acceptance for sophisticated products and limitations on foreign exchange.

Insider ideas about the current and future prospects of the sector will also be given in an exclusive viewpoint with Gregory N Hill, managing director of ANSA Merchant Bank Ltd. Hill said he was very pleased to be working closely with OBG’s team on its forthcoming report and documenting the benefits and challenges to investing in T&T’s capital markets.

“One would expect that given the size of the capital market in T&T relative to the rest of the Caribbean that there would be far more product and market sophistication. The preference for plain vanilla debt instruments in the domestic capital market continues to be the Achilles heel for acceptance of different financial products such as structured mezzanine and private equity funding, both of which are critical for new business incubation in a developing economy,” he told OBG.

Hill also went on to discuss the concept of promoting the IFC with us “If we are to promote T&T as an international financial centre, we must first foster an enabling environment, which not only encourages accommodative tax legislation for global firms and work permits for skilled professionals, for example, but also the creation and maintenance of a safe society for expatriate financial professionals to relocate with their families. So we need to make our country safe for its Citizens first, before we can attract expats”.

Simona Simeonova, OBG’s country director for T&T, said the new partnership with ANSA Merchant will undoubtedly give the report’s coverage of the evolving investment landscape an added dimension.

“Trinidad still holds a privileged position in the capital and financial markets of the Caribbean. Jamaica’s impressive growth in this regard over the past years should be considered, however,” she said. “Further sophistication and specialisation, coupled with the country’s already present assets—such as very high levels of liquidity and a customer-base very willing to invest—should be used in order to confirm the country’s position as the region’s lighthouse.”

The Report: T&T 2018 will mark the culmination of more than six months of field research by a team of analysts from Oxford Business Group. It will be a vital guide to the many facets of the country, including its macroeconomics, infrastructure, banking and other sectoral developments.

The publication will also contain contributions from leading representatives, including: Paula-Mae Weekes, the President of the Republic of T&T; Luis Alberto Moreno, president of the Inter-American Development Bank; and Hadyn Gittens, CEO of the T&T Securities Exchange Commission. It will be available in print and online.

Categories: News

The issue of natural gas

Thu, 08/23/2018 - 05:40

Monday’s announcement by Shell Trinidad of first gas from its Dolphin Extension off the East Coast is good news for the struggling downstream sector as this project, along with the Starfish development, will add 300 million standard cubic feet of natural gas a day to the company’s production.

To put this in context, that is enough gas to meet the demands of at least two methanol plants.

While Shell notes the gas will be shared between the downstream companies and Atlantic LNG, it also demonstrates the urgency with which the natural gas shortage has to be addressed.

In a statement Derek Hudson, vice president and country chair, Shell T&T said, “Shell aims to build a stronger competitive position in T&T through our existing assets and by delivering on our commitment to provide new energy options for the country.

“We have the acreage and the technical capability to achieve this growth aspiration, as we have proven with the recent Dolphin and Starfish successes.”

Hudson added, “Our Starfish development, which achieved first gas earlier this year, and Dolphin development projects were both accelerated following the acquisition of Chevron’s assets in the ECMA which gave us full operation of the upstream value chain.”

Yesterday the deal between Venezuela’s state-owned company Petroles de Venezulea SA (PDVSA), the National Gas Company and Shell T&T for the export of gas from the Dragon field was due to be finally signed. This is expected to assist in the provision of natural gas to T&T.

Both of these developments point to the challenge that the downstream sector and Atlantic LNG have faced with a nearly 30 per cent fall in production between 2013 and 2016. It has led to hundreds of millions of dollars in losses to companies and the citizens of T&T.

The gas curtailment has challenged the sector to remain profitable, to face off the challenges from US competitors and raised issues of the viability of the sector and what is called the T&T model.

But how did we get here?

What are the lessons?
Have we learnt from those lessons?

Are our leaders doomed to make the same mistakes in the future?

Looking back, the 1990s was a time of growth: Atlantic LNG was in expansion mode with continued discoveries in natural gas both in the Columbus basin and the North Coast and downstream plants were being built.

The T&T model of using limited gas resources, developing projects downstream while exporting those products to close and accessible major markets was alive and well.

By 2010, however, the downstream investments had dried up.

The partners at Atlantic LNG did not believe gas was available for the elusive Train X, several projects promoted by the late Patrick Manning government had been scuttled after his government was politically outmanoeuvred and, most importantly, the upstream sector was not investing in exploration.

The effect of this lack of investment began to rear its head in 2011, but the real effect began to be felt by 2014 when the production of natural gas fell by 200 million standard cubic feet per day (mmscf/d).

By 2016, it fell further by a whopping 700 mmscf/d.

In other words, the country lost a quarter of its production.

The PNM blamed it on the UNC, saying the party failed to act quickly and recognised the problem was structural and not just based on higher level of maintenance on the part of bpTT. There is truth in that. It is well documented that for more than 18 months the then Minister of Energy blamed it on maintenance issues.

He was eventually called out by bpTT which denied that maintenance issues were the major reason.

In a press release in September 2014, bpTT said.

“The lower production that has resulted in the gas curtailments recently experienced by both Pt Lisas and Atlantic (LNG) is primarily a result of a pause in new investment in recent years by upstream producers, including bpTT due to the culmination of many factors which created an unfavourable investment climate 

Monday’s announcement by Shell Trinidad of first gas from its Dolphin Extension off the East Coast is good news for the struggling downstream sector as this project, along with the Starfish development, will add 300 million standard cubic feet of natural gas a day to the company’s production.

Categories: News

Budget wish list

Thu, 08/23/2018 - 05:31

The Government will soon present its fourth annual budget since taking office in 2015. But these budgets have been drafted in an environment of depressed energy prices and so the Government has not had the luxury of overflowing coffers to finance the kinds of projects and social programmes of previous administrations.

As always, the country’s stakeholders are jostling to ensure that their proposals are acknowledged and implemented.

Some of our sector heads spoke to the Business and Money on what areas the Finance Minister should focus on in the upcoming budget.

Economist’s advice

Economist Dr Ronald Ramkissoon on Monday said that emphasis should be placed on improving the business environment.

He said one of the most pressing demands in the budget that needs to be addressed is making the private sector more efficient and responsive to the needs of the country.

“We have historically been unable to awake that sleeping giant and I am talking about the domestic private sector. We have found it much easier to invite foreign direct investment (FDI), particularly in the energy sector. But we have not been able to attract either sustained investment in the non-energy sector through FDI or through domestic investment and the environment still needs a lot of improvement,” he said.

“We need to see where in the budget we can address the issues.

That is a plan for private sector investment or public-private sector investment. Where is the body that is going to implement that?

The public sector has always done a poor job at that.”

He also said the Government needs to address the inefficiencies in the public sector, from the health to the protective services to local government.

“We need to work on our systems, policies, management and leadership. We need to have the instruments that will assist.

Whether those are in the budget or not is another question. Whatever can be included in the budget that will move us to a far more effective public sector, that needs to be addressed.”

San Fernando Business Association speaks

San Fernando Business Association president Daphne Bartlett told the Business and Money that they were not asked to make submissions for the budget this year.

But she said she will recommend what the association has been saying for the past few years; that the Government diversifies the economy into manufacturing, tourism, agriculture and other areas.

“We need to focus on Tobago. Look at small countries like St Lucia and Antigua that attract one million visitors annually. Why Tobago can’t do the same?” she asked.

She also said that “diversification” was an “overused” word in T&T, noting most people no longer take the word seriously because past administrations have not done enough to move the economy away from oil and gas.

AmCham submissions

Last Friday, the American Chamber of Commerce of T&T (AmCham) forwarded its submissions for the upcoming Budget presentation to the this publication.

In its introduction, AmCham noted that the suggestions were gathered from the feedback of almost 300 members and other stakeholders in order to distil recommendations to the Government for the effective management of the economy and country.

“Particularly in these challenging times, the recommendations aim to boost competitiveness, export potential, stabilise the economy and stimulate growth.

Undoubtedly, the foregoing is a tall order but one that can be accomplished if we work together,” AmCham said.

The first recommendation referred to debt reduction.

“In this year’s submission, we turn our focus away from the traditional discussion of debt to GDP ratios, trajectory and wider impact on the economy and instead place our attention on the question of the size, sustainability and accuracy of the country’s debt stock. AmCham T&T’s motivation to pursue this approach is based on the current situation that is unfolding on our Caricom neighbour, Barbados.

“Prior to the recently concluded general election, traditional estimates of debt to gross domestic product (GDP) hovered around the 145 per cent mark, troubling to say the least. As is well known, this number has ballooned since then, primarily driven by the discovery of the incoming administration of debts that were not appropriately captured.”

In part B of its recommendations, AmCham addressed the theme of doing business.

The chamber said the recommendations proposed in this section address the performance of government services in particular, how it affects business competitiveness and set targets for improving government services.

AmCham suggested flexible working hours and regulated lunch breaks within the public sector.

“In the first instance, the recommendation is to either have key government departments remain open later in the evening, or consider running a shift on Saturdays.

In the second instance, it should not be lost on human resource managers that if, for example, all cashiers are key personnel in a particular department take their lunch at the same time, business at that department grinds to a halt. If it is necessary that those persons take their lunch at the same time, then the public should be appropriately notified in advance and opening and closing hours should reflect this.”

AmCham also recommended supporting research and development in the private sector through the allowance of a write off of 75 per cent of the working capital used to support innovation against chargeable income tax, up to limit of two per cent of a company’s annual revenue in the prior year.

It also called for the prioritisation of the Central Statistical Office (CSO) and its resource requirements. 

“To attain better quality data sets on the national economy and to improve the frequency of such data update/delivery, the CSO—and more pointedly the transition to the National Statistical Institute (NSI)—should be prioritised,” AmCham said.

“In reviewing the competitiveness of the economy of T&T, a fundamental aspect of management becomes glaringly obvious: the quality of the statistics on trade and the economy. Without relevant, real-time data it is difficult for not only government planning but also business planning.” With regard to the energy sector, AmCham recommended completing and implementing the National Energy Policy (NEP).

“The Government should attempt to stabilise production shortfalls in the short term and incentivise upstream companies to continue to find and develop energy resources to optimise supply. As opportunities arise, contractual arrangements for both LNG and petrochemicals should be improved to ensure that the country has more exposure to the final market prices derived from the sale of energy commodities.

“Given the significance of the energy sector as a contributor to revenue, the Government should consider opportunities to stabilise annual revenue by implementing and managing a hedging programme for oil and gas, similar to what Mexico and others have done. This should be operationalised by 2019.”

The business chamber also made recommendations with reference to solving the crime problem. It suggested that the Government improve the human resource management system within the T&T Police Service, training staff and utilising technology.

What labour had to say

Federation of Independent Trade Unions (FITUN) president Joseph Remy says the labour movement did not submit new recommendations this year but referred to a document they submitted last year which he said is still relevant.

He said the major trade union federations had been asked to submit their recommendations to the National Tripartite Advisory Council (NTAC) in 2017 and what they have now done was to simply advise the Government of what they had already submitted since 2017.

They made the proposals in a document titled “Labour Economic Alternative Plan.”

He highlighted some of the proposals which, if implemented, could stimulate economic growth.

“We looked at agriculture as one of the pillars for resuscitating the local economy.

“We also examined the Government not looking at austerity measures but creating a fund that could be utilised to stimulate economic growth sectors, where we believe that employment could be created and there could be spin -ff benefits from spending in the economy. This will aid the small and medium enterprises in particular.”

Despite, labour’s proposals, Remy said the Government continues to ignore them when preparing the budget.

“We have made recommendations and they have all fallen on deaf ears. It is an exercise in futility by calling us to discuss around budget presentations. This is August and there is no way our input could have any influence on the budget. The Government would have already decided what they want in the budget,” he concluded.

But while FITUN held fast on any new suggestions, the National Trade Union Centre (NATUC) submitted their proposals to the Ministry of Finance on Monday.

In its document, NATUC said there is an immediate need to stabilise the national economy and protect working people and vulnerable groups in the country while contributing to the long-term transformation and stability of the economy.

One of the main areas NATUC is asking the Government to focus on is the area of housing.

It suggested:

i. Entering into public/private partnerships with trade unions or consortia of trade unions to develop housing estates
ii. Making grants of land to trade unions for the purpose of residential accommodation;
iii. Providing incentives by raising the income cap for low-cost mortgages to a combined income for the household of $20,000 per month in order to encourage home ownership in these developments

NATUC also called for wage-led growth.

“The evidence shows that among developing and emerging countries, those that invested the most in quality jobs from the early 2000s grew nearly one percentage point faster every year since 2007 and experienced lower income inequalities. Job-centred economic growth creates a virtuous circle that is as good for the economy as it is for people and one that drives sustainable development,” NATUC said.

It also called on the Government to the allow active involvement of the labour movement in a national job creation strategy.

“The labour movement has extensive and intimate knowledge of the T&T labour market,” it added.

Categories: News

The next chapter of the Petrotrin story

Thu, 08/23/2018 - 05:24

T he extent to which the economic survival of state-owned Petrotrin and T&T are inextricably linked is the kind of information that can cause sleepless nights. That is why, instead of wasting time casting blame and trading threats, the more sensible route for all concerned is to make a reality check and accept the difficult truth about Petrotrin and the tough decisions that have to be taken now, before it is too late.

Petrotrin is in a very bad place, not due to any recent developments but as a result of a combination of many factors, including bad management, poor decisions and unhealthy work practices which have combined over many decades into a “perfect storm”. The way out of this turmoil must be carefully navigated to avoid a heavy casualty toll which could be just a bad decision or two away.

Forget the noise and clamour of competing interests all trying to extract the largest chunk of that rapidly shrinking Petrotrin pie. It is time to face up to the uncomfortable truths about this country’s failing energy company.

In its current state, had it not been for cash injections and various other interventions by the Government, Petrotrin would have gone out of business a long time ago.

This is a company saddled with a huge debt due, in part, to massive project failures, an outdated refinery in urgent need of upgrading, massive project failures and overstaffing.

The majority union at Petrotrin, the Oilfield Workers’ Trade Union (OWTU), claims that at the core of the company’s problems is its highly paid, inefficient management. However, on the other hand, there is also the claim that the debt, currently estimated at $12 billion, is due to high employee costs amounting to 50 per cent of operating costs and an overtime bill of $22 million a month.

While the company has announced a $85.6 million profit for the first quarter of the current financial year 2018, that has to be viewed in the context of an overall loss of $500.7 million for the first nine months of the financial year.

As of June 30, salaries and wages accounted for 52.8 per cent of Petrotrin’s operating cost: $2.19 billion out of $4.15 billion.

According to information recently made public, the company currently has 3,437 permanent employees whose wages and salaries total $1.87 billion annually, or approximately $544,370 per employee, or $45,000 a month.

The company’s debt includes bonds raised to finance failed projects like the ultra-low sulphur diesel plant and World GTL projects. The first of those, valued at US$850 million, is due to year from now. The other, worth US$750 million, is due in 2022. Petrotrin pays $687 million annually in interest payments to service the former, and$542 million a year to the latter.

The energy company’s short-term debt of $4.2 billion includes trade financing and government-guaranteed working capital.

In addition to unsustainable debts, the poor state of the company’s assets is another concern. Deteriorating infrastructure, including berths, sea lines, port facilities, tanks, pipelines tanks, platforms and wells must be significantly upgraded to bring Petrotrin up to the standards required for 21st century efficiency and eventual profitability.

However, these upgrades come with a huge price tag, estimated at $3.4 billion.

Consider, also, that Petrotrin’s oil production has been declining since 2007 and at the current rate could be down to just 32,000 barrels of oil per day by 2021.

So there is no avoiding the fact that Petrotrin needs to be radically transformed.

Those changes will require a sizeable injection of capital and—as has been a common theme through the life of this company in its many stages of evolution—will require private sector input.

So while privatisation—even partial privisation—is an idea that is been strongly resisted in some quarters, there are not many options available to Petrotrin.

The fact it that the state-owned energy company is the result of a series of acquisitions and mergers with major oil companies.

Also, this wholly-owned national company, which some now proudly claim as part of our patrimony, came about because of developments between 1968 and 1975 when the government took control of the assets of foreign companies shutting down their local operations when global political and economic developments made it unprofitable for them to maintain a presence in this country.

Petrotrin was established in 1993 from a merger of two state-owned oil companies, Trintopec and Trintoc, with a third, Trinmar Ltd, being added in 2000.

Trintoc comprised the assets of Shell Trinidad Ltd and Texaco. Trintopec was formed when the government purchased Trinidad Tesoro—a joint venture with the Tesoro Oil Company which was created to purchase the assets of British Petroleum.

If we look back even further, we find that companies were formed United British Oilfields of Trinidad (UBOT), Trinidad Leaseholds Ltd) and other entities formed from the companies which first commercialised oil finds in Trinidad in the early 20th century.

Today, Petrotrin’s operations include land and marine acreages, joint ventures, lease operatorships, farmouts and production services contracts to support its exploration and production activities. The company has an automatic stake in all exploration and production arrangements with foreign companies in T&T.

In addition, it operates the country’s only petroleum refinery, located at Pointe-à-Pierre, south Trinidad. A smaller Point Fortin refinery was shut down some years ago, partly to make way for Atlantic LNG.

Some crude is imported to meet the needs of the refinery which produces liquid petroleum gases, unleaded motor gasoline, avjet/kerosene, diesel/ heating oil, fuel oil and aviation gasoline among other products.

However, the refinery has not been profitable for many years.

Early in the life of his administration, in an address to the nation in January 2017, Prime Minister Dr Keith Rowley reported on Petrotrin’s rapidly declining fortunes, made worse at that time by the slump in crude oil prices, which had led to a more than 50 per cent decrease in its revenues, from $37 billion in 2012 to $16 billion in 2016.

In its current state, Petrotrin is negatively affecting overall confidence of international investors in this country, so it is vitally important that the company’s adopts a new business model and changes are made in its governance arrangements.

The main proposal for restructuring of Petrotrin is for establishment of three operationally independent business units: Trinmar, Land Exploration and Production and Refining and Marketing.

Other key recommendations were that the new entities adopt and adhere to the laws and regulations for publicly-listed companies, particularly for transparency and accountability; and that the board of directors’ terms of office are cycled in a manner that ensures continuity of membership of 50 per cent of the board at all times.

In some quarters, strong arguments are being made for partial privatisation of the company, with the government retaining majority control. This is seen as one way of getting the injection of capital needed for upgrades and much needed expansion in some parts of its operations.

It is also felt that rescheduling of Petrotrin’s debt requires identifying a strategic partner with financing to undertake a series of major projects, including construction of a modern refinery, investing in enhanced oil recovery techniques and increasing exploration efforts.

While there is already some resistance to the proposed changes to Petrotrin and even dire warnings about staff cuts and other painful measures to be taken, the truth is that the most painful option of all is to leave things as they are.

The remedy for all that ails Petrotrin is bitter but there are no fast and easy alternatives.

Energy must therefore be focused on containing the inevitable fallout so that the company—and this nation—can move forward to a more stable and profitable future.

It is time to start the next chapter for Petrotrin.

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