Trinidad and Tobago: Selected Issues

This Selected Issues paper on Trinidad and Tobago highlights that real GDP growth accelerated slightly from 2.4 percent in 1995 to 3.2 percent in 1996. In both years, growth was mainly driven by a good performance of the non-oil sector, which expanded by 3 percent and 3.6 percent, respectively. Construction, distribution, and tourism grew at an especially rapid pace. Manufacturing showed an uneven performance, growing in 1995, but stagnating in 1996, which was owing to the differential effects of trade liberalization on its various subsectors.

Abstract

This Selected Issues paper on Trinidad and Tobago highlights that real GDP growth accelerated slightly from 2.4 percent in 1995 to 3.2 percent in 1996. In both years, growth was mainly driven by a good performance of the non-oil sector, which expanded by 3 percent and 3.6 percent, respectively. Construction, distribution, and tourism grew at an especially rapid pace. Manufacturing showed an uneven performance, growing in 1995, but stagnating in 1996, which was owing to the differential effects of trade liberalization on its various subsectors.

V. Other topics

A. Poverty

138. Since the mid-1980s, Trinidad and Tobago experienced a marked increase in poverty. Due to its dependence on oil exports, the country underwent a deep and prolonged recession as international oil prices declined after 1983. Per capita GDP, which was US$6,200 in 1982, dropped to US$4,000 in 1993 and has recovered only to US$4,200 by 1996. Real wages have lost approximately 60 percent of their purchasing power since the period of oil windfalls. The unemployment rate has more than doubled during the late 1980s, from 10 percent in 1982 to 22 percent in 1989. It has come down only slowly in recent years to a value of 16 percent in 1996.

139. In the past, Trinidad and Tobago lacked consistent and regular surveys to monitor poverty. The first comprehensive Survey of Living Conditions was conducted in 1992, and a follow-up study is planned for 1997. Before this time, data are scattered among academic articles and are inconsistent. However, the trend emanating from these different sources is clear. Both living standards and income distribution have deteriorated substantially after the end of the oil boom. One study by Teekens (1990) estimated that the share of households living in absolute poverty increased from 3.5 percent in 1982 to 14.8 percent in 1988. A further increase of poverty is indicated by a study of Henry (1995) who estimates the share of poor households at 18.5 percent in 1988 and at 22.5 percent in 1992.36

140. Two poverty line measures are given in the government’s Survey of Living Conditions of 1992: Extreme poverty is defined as a minimum cost food basket of 2,400 calories a day (equivalent to US$1.15), poverty is defined as this food basket plus a daily allowance of US$0.50 for basic nonfood items. According to the survey, 21 percent of the population are classified as poor and 11 percent as extremely poor. Malnutrition, however, seems not to be widespread in Trinidad and Tobago. The level of meat and dairy consumption is high, even among the poorest 20 percent of the population. An interesting fact is that 73 percent of the poor own a television set and many have sewing machines and radio equipments. Some of these durable items might be remnants of the more affluent days of the first oil boom.

141. Gini coefficients indicate a general increase in income disparity over the last decade. An income-based Gini coefficient estimated by Teekens (1990) increases from 0.45 in 1982 to 0.47 in 1988. A consumption based measure in the Survey of Living Standards rises from 0.41 in 1988 to 0.42 in 1992, suggesting a further widening of the gap in recent years. However, these numbers correspond closely to (consumption-based) Gini coefficients for Jamaica (0.43), Guyana (0.42), and the United States (0.39) and are substantially lower than the regional average for Latin America and the Caribbean (0.50).

142. Poverty is concentrated among the unemployed and the less educated people in Trinidad and Tobago. There is, in fact, an almost linear relationship between income and unemployment, with the highest income quintile showing an unemployment rate of 9 percent and the lowest of 36 percent in 1992. The incidence of poverty is almost equal in rural and in urban areas.

B. The State Enterprise Sector and the Divestment Process

143. The public enterprise sector has undergone extensive transformation in recent years. The sector had grown rapidly in the 1970s and the beginning of the 1980s as huge oil revenues were invested by the government in enterprises that would use the abundant energy sources in Trinidad and Tobago to create more value added through processing and create more employment by stimulating activity in the non-oil sector. The terms of trade erosion during the 1980s left many of these corporations dependent on protection and government subsidies that could no longer be supported by the budget. The stabilization efforts that began in the 1990s involved restructuring, closing, and divesting many of these entities.

144. In all, 17 state companies were totally divested, 9 were partially divested, 6 were merged, 2 were restructured, another 14 were liquidated, and 9 are still in the process of liquidation. Altogether, public sector employment was reduced by about one third. The process was not limited to public enterprises but extended to public utilities as well. Partial divestments were carried out in electricity generation and telecommunications. In addition, the management of the water and sewerage authority (WASA) has been contracted out to a private firm. The government still owns (wholly or partially) 26 commercial enterprises and another 13 indirectly through shares owned by some of the 26. Certain of these companies will be retained by the government for strategic reasons, such as the National Gas Company. Others, for which the previous government had developed divestment plans, are being reviewed, now that the new government has had a chance to install its own boards of directors. The privatization of some loss-making operations such as that of Caroni, the agricultural producer and sugar refiner, is considered politically sensitive. Petrotrin is a refinery operation that for lack of a dedicated supply of crude oil is running below capacity and losing money. Sale of the partially owned methanol corporation has been anticipated in the 1997 budget.

145. Through 1996, the National Petroleum Marketing Corporation had a monopoly in the domestic distribution of petroleum products. In the 1997 budget its monopoly status was eliminated and the sector will be open for entry, initially by domestic companies only.

146. In Table 6 the companies currently owned directly, either wholly or in part, are listed.

Table 6.

Trinidad and Tobago: State Owned Enterprises

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Appendix I Trinidad and Tobago: Summary Description of Principal Taxes, as at January 1, 1997

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Table 1.

Trinidad and Tobago: Gross Domestic Product by Sectors of Origin at Constant 1985 Prices

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Sources: Central Statistical Office; and Fund staff estimates.
Table 2.

Trinidad and Tobago: Gross Domestic Product by Sectors of Origin at Current Market Prices

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Sources: Central Statistical Office; and Fund staff estimates.
Table 3.

Trinidad and Tobago: GDP by Expenditures at Constant 1985 Prices

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Sources: Central Statistical Office; and Fund staff estimates.
Table 4.

Trinidad and Tobago: National Accounts by Final Expenditure at Current Market Prices

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Sources: Central Statistical Office; and Fund staff estimates.
Table 5.

Trinidad and Tobago: Savings and Investment at Current Market Prices

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Sources: Central Statistical Office; and Fund staff estimates.
Table 6.

Trinidad and Tobago: Retail Price Index

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Sources: Central Statistical Office; and Fund staff estimates.
Table 7.

Trinidad and Tobago: Index of Producer Prices by Industry

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Sources: Central Statistical Office; and Fund staff estimates.
Table 8.

Trinidad and Tobago: Domestic Prices of Selected Refined Petroleum Products

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Sources: National Petroleum Marketing Company; Central Statistical Office; and Fund staff estimates.
Table 9.

Trinidad and Tobago: Production and Utilization of Crude Oil and Refined Products

(In thousands of barrels)

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Sources: Ministry of Energy; Central Statistical Office; and Fund staff estimates.
Table 10.

Trinidad and Tobago: Labor Force and Employment

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Sources: Central Statistical Office; and Fund staff estimates.
Table 11.

Trinidad and Tobago: Employment in Public Enterprises

(Number of employees)

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Sources: Ministry of Finance; Central Personnel Office; and Fund staff estimates.

Merged to PETROTRIN in 1993.

Incorporated in National Gas Co. Ltd., in 1992.

Divested.

Currently not in operation.

Incorporated in Telecommunications Services of Trinidad and Tobago in 1991.

Incorporated in First Citizens Bank in 1992.

Stopped operations in 1994.