Success based on fortune and sound management
MONEY HAS FLOODED INTO THE ECONOMY FROM THE BURGEONING ENERGY SECTOR - THE CHALLENGE NOW IS TO DEVELOP THE DOMESTIC CAPITAL MARKET TO MITIGATE ITS EFFECTS ON THE ECONOMY

In a part of the world notorious for dramatic economic collapses, Trinidad and Tobago is a rare exception. Its sound and well-managed economy has a stable financial sector that is extending its reach throughout the whole region.

A STABLE CURRENCY has been the bedrock during the years of the energy boom, ensuring growth is not undermined by inflation

The country’s success is based on a combination of good fortune and first-rate management. Although money has flooded into the economy from the dominant energy industry, governments throughout the 90s have used strict monetary policy to ensure that growth is not undermined by inflation.

EWART WILLIAMS Governor of the Central Bank of Trinidad and Tobago

This is still a top priority says Ewart Williams, Governor of the Central Bank of Trinidad and Tobago. “In the face of fluctuating energy prices, the financial sector has continued to be strong. The challenge is going to be to diversify and to get the rest of the economy to participate and to gain from the energy sector,” he adds.

It is an important challenge. Foreign direct investment in Trinidad and Tobago still goes mostly into the energy sector. This sort of finance tends to be concentrated in large projects and therefore causes large economic fluctuations. So how can Trinidad and Tobago increase the linkages between the energy sector and the rest of the economy?
One answer is to develop the domestic capital market. “We are starting by restructuring the government securities market. Then we will look at providing incentives for more companies to go public. There are proposals, for instance, to encourage some companies in the energy sector to float more of their shares in the domestic market,” says Mr. Williams.

The financial sector is also going to have to support a growing, export-orientated industrial sector. He adds: “Our manufacturing sector has nearly mastered Caricom (the Caribbean free trade area), but that’s not enough. The next step is to be able to compete in the Free Trade Area of the Americas and then move beyond to the global economy.”

This role will fall mostly to the international and domestic commercial banks based in the capital, Port of Spain. These include Citibank, Republic Bank, RBTT, and Scotia Bank. It is a soundly regulated sector. Last year the government revised the insurance act and legislation for mutual funds.
“We are making sure our techniques of supervision remain in line with international standards to avoid the kind of financial crises that have affected others,” says the Central Bank Governor.

RONALD F. deC. HARFORD Managing Director of Republic Bank

Republic Bank has the reputation of being the premier bank in the country and the oldest with 167 years of experience. It began as part of the U.K.’s Barclays Bank and became independent in 1977. Managing Director Ronald F. deC. Harford has an almost equally distinguished pedigree. He joined the bank as a mail clerk at the age of 17. Now he is the chief of the leading financial services institution in the Eastern Caribbean, and the top bank for project financing for the entire region.

The bank’s results confirm its reputation. Profits have increased by 100% in the past three years to approximately $72 million in 2002. Mr. Harford describes a return on assets of 2.43% as, “a stellar performance.”
“Clearly the bank is well positioned to take on the opportunities that we see on the horizon. Foremost among these are the expected windfalls from the energy sector,” he adds.
Mr. Harford expects the bank’s profits to grow by 8% in 2003, slightly less than in recent years. “We are expending considerable time, energy, and investment in a new computer system, changes to our delivery systems, and a number of other major reorganizations. These initiatives will impact our performances. The real benefits should flow from 2004,” he says.

REPUBLIC BANK is the oldest financial institution in the country, and its stellar performance confirms its place at the top of the industry

Republic Bank already has a 40% share of the domestic lending market. “We see our significant growth now coming from outside Trinidad and Tobago,” says Mr. Harford. The bank is well placed for future expansion into South America thanks to an already extensive network, including a subsidiary in the Cayman Islands.
“We have a varied slate of mutual funds to be launched very shortly. We also have a very strong forex and treasury operation, so customers can move their money in and out without any difficulty. Our offshore banks are the areas in which we attract foreigners most significantly,” he says.

“Our biggest challenge going forward is to find the right investment opportunities. When you have a bank that is producing a return on assets and profits at the rates at which we have been, it is not easy to find opportunities which will add value.”
He concludes: “I am very confident that Trinidad and Tobago is going to be the financial center of the Caribbean. We have the strongest banks, with the most advanced technology, most efficient service, and widest range of products.”