Entornointeligente.com / While the energy sector—which is critical to T&T’s economy —experienced a sharp fall in revenue in 2020, a promising pipeline of upcoming projects will see its contribution to economic activity recover in 2021 and 2022, says the Oxford Business Group in its report titled, What is the post-pandemic outlook for T&T?
The report, written by regional editor Harry van Schaick and compiled in collaboration with invesTT, was released on May 20.
It noted that global oil prices plummeted to around US$18 per barrel in April 2020, which significantly impacted commodity-producing economies such as T&T.
The report said while crude oil production continued its downwards trajectory, it fell at a slower rate in 2020, adding that during the first 10 months of the year output declined by two per cent to around 57,500 barrels per day (bpd), compared to a 13.9 per cent fall to 58,600 bpd in the corresponding period 2019.
“For T&T’s energy sector, the recovery in both international demand and prices has been promising, especially given the anticipated drilling of a new oil well, Saffron #2, which is scheduled for the first half of 2021.
Once on-line, the well is forecast to produce 200-300 bpd, and provide Caribbean and Atlantic focused oil and gas company BPC an additional US$1.8 million to US$2.61 million per annum in hydrocarbons-based revenue, the report said.
It said in the natural gas segment, however, the country’s output is expected to fall further in 2021, as a result of the indefinite turnaround of the four-train, 14.8m-tonne-per-annum Atlantic liquefied natural gas plant in south-western Trinidad.
Although this could lead to greater capacity and efficiency at the plant in the future.
It noted that a rebound in the downstream sector will also depend on broader recovery in the upstream sector, particularly in terms of gas feedstock availability, which has been falling gradually over the previous decade.
And on energy efficiency, the report said for T&T to foster growth in the renewable energy subsector, a comprehensive framework and legislation is needed.
There have been calls from economists for an outline of renewable energy goals as well as budgetary targets, it noted.
However, it said in the meantime, the Ministry of Energy is developing renewable utility-scale projects with help from private sector entities.
In late June 2020 the ministry announced a consortium formed by BP Alternative Energy T&T, Shell T&T and Lightsource BP won the tender to develop a 92.2-MW solar photovoltaic (PV) plant at Couva and a 20-MW solar PV facility at Trincity.
In looking at factors that underscored T&T’s vulnerabilities, the report said T&T’s economy had been gradually recovering from the drop in commodity prices in 2014 to 2016 thanks to a number of new energy projects that came online in the latter half of the previous decade.
However, worldwide lockdowns to contain the spread of the virus had a direct impact on the demand for and price of oil and gas.
Energy products account for around 80 per cent of the country’s exports and more than 40 per cent of domestic economic activity, the report noted.
As a consequence, it said, the drop in oil prices from a monthly average of US$64 per barrel in January 2020 to US$18 in April 2020 was a significant external shock to T&T’s economy.
Although the first few months of 2021 saw oil demand recover globally, the pandemic has led to significant losses in hydrocarbons revenue.
According to the CBTT, energy revenue declined by approximately 50 per cent in the 12 months to September 2020, to $7.9 billion.
As a result, the increased scarcity of foreign currencies has put a strain on small businesses and individuals trying to make a purchase outside T&T.
In April 2020 unemployment levels in T&T were projected to reach 5.04 per cent by the end of the year and 5.12 per cent in 2021, compared to 4.96 per cent in 2019.
However, job market analyses by the IDB released the previous month predicted that the country could experience more job losses depending on the pace of its economic recovery, the report cited.
It said as with many developing countries, the relatively high proportion of economic activities occurring outside conventional channels increases socio-economic vulnerabilities.
“With high levels of informal employment in T&T, many individuals ignored stay-at-home orders and continued to work in public, increasing the likelihood of community transmission,” the report added.
The informal economy accounts for an estimated 26 to 33 per cent of GDP, according to a research paper published by the IDB in August 2017.
Tourism and valued-added agriculture
The report also examined a number of other sectors.
Regarding tourism it advised that for T&T to prepare for visitors, the Government should extend the Tourism Accommodation Upgrade Project to 2023.
The programme is to incentivise tourism infrastructure development by reimbursing costs for upgrade work carried out on approved accommodation projects in T&T.
The report lauded the fact that the Government is focused on promoting T&T as a green tourism destination, in line with the first pillar of the Roadmap to Recovery, which seeks to leverage digitalisation and diversify the economy.
And investing in the country’s agriculture sector is key to diversifying the economy, the report said, adding that this has become even more important as the outbreak of COVID-19 highlighted the threat of food insecurity in T&T.
In this light, the report said the first phase of the Roadmap to Recovery suggested the implementation of policies aimed at modernising the agricultural system and increasing agricultural production to reduce the import bill.
The second phase of the roadmap, pillar two, titled “Making food security a reality in T&T”, focuses on the use of modern technology to improve the manufacturing and quality of agricultural products, with the broader objective of attracting young entrepreneurs to the sector.
“Looking forward, cocoa from T&T has the potential to become a regional brand, especially as the flavour profile of T&T cocoa is highly regarded in the culinary industry,” the report said, adding that as part of attempts to enhance the industry, efforts in partnership with the World Intellectual Property Organisation are under way to help establish and protect cocoa farmers.
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The organisation suggested solutions such as trademarking and patenting T&T cocoa products and designs, using social media to build brand awareness, and developing new techniques and processes that distinguish their business.
Increasing the availability of loan instruments is also vital to further growth in the industry, the report said.
“While taxes on agricultural products have been relaxed, access to financial capital from the Agricultural Development Bank remains constrained. However, the Ministry of Agriculture, Land and Fisheries’ move towards digitisation is expected to speed up bureaucratic processes related to land ownership, which will in turn enable landowners to access credit more quickly,” the report added.
Around the world, and in T&T in particular, the pandemic has not only sped up the adoption of digital tools, but also emphasised the importance of digitalisation to economic development and resilience.
The report said Government infrastructure and wide-scale adoption of digital capabilities are crucial for the growth of T&T.
It noted that T&T ranks relatively low on the ease of doing business index within the World Bank’s “Doing Business 2020” report, in 105th place out of 190 economies – though many areas could be improved with digital innovation.
The report said the Roadmap to Recovery highlights the importance of digitalisation to achieving its objectives and outlines eight jumpingoff points, which are primarily focused on financial services.
Central to this is Government’s plan to roll out e-identity cards, which would ease access to banking as well as facilitate access to public services.
Another important component of T&T’s digital transformation is establishing a financial technology (fintech) ecosystem across the two islands.
“However, given that take-up is currently low, a combination of clearly outlined regulatory requirements and a public education campaign should be rolled out to broaden awareness of fintech. This would help to engage the population and showcase the associated benefits of fintech.
“The incorporation of digitalisation is vital to boosting financial inclusion,” the report said.
It also referenced, RBC Royal Bank, for instance, which redesigned 80 per cent of its branches to include a digital centre at the front of the store.
“Since the pandemic started, RBC Royal Bank has doubled its online banking registrations. With plans to create digital identification for all citizens, banks could reduce stringent measures such as multiple forms of ID and proof of income, which would help increase access to underbanked and unbanked individuals,” the report added.
LINK ORIGINAL: The Trinidad Guardian