Reform investment
incentives says World Bank team

The length of time taken to obtain planning approvals and the structure of the system of investment incentives have been identified as two of the main impediments to investment in Trinidad and Tobago. According to a study conducted by the Foreign Investment Advisory Service of the World Bank (FIAS), these factors, together with the difficulties encountered when investors try to procure land for construction, the multiplicity of agencies requiring project approval and the complexity of the regulations governing work permits for foreigners, discourage investors interested in the twin island state.

The study, which was commissioned by the Trinidad and Tobago Tourism and Industrial Development Company (TIDCO) may well be true for the rest of the Caribbean, says Professor Alvin Wint, head of the research team, since many Caribbean countries, particularly Caricom members, have similar bureaucratic structures.

He noted that the length of time required to obtain planning approvals was a major impediment to investment because not only is it necessary to obtain authorization from the Town and Country Planning Division of the Ministry of Planning and Development, but approvals are also needed from other agencies, such as the Water and Sewerage Authority (WASA) and the regional corporations. Wint was critical of the role of agencies such as WASA and the regional corporations, "since they were ill- equipped and lacked the technical expertise to efficiently discharge these functions."

The other major obstacle identified was the system of incentives. The team felt that an automatic system of performance- based incentives with clear eligibility criteria for enterprises, would better contribute to the volume and efficient flow of investment funds, rather than the system now prevailing.

Wint continued, "The current system puts an unacceptable degree of power into the hands of the political executive, who, in the person of the Minister of Trade and Industry, controlled the granting of approvals for duty exemptions and other fiscal motivators. "The perception of unfair treatment of some investors would be removed and a measure of confidence injected with a more transparent system of incentives. In addition, these incentives need to be tailored to become sector- specific, if their application is to be more responsive to the needs of various industries."

The suggestion was made that the incentive package be streamlined and consolidated with the proper legislative support. This problem of accessing incentives seems to be the result of the criteria used, such as the degree of export orientation and the extent of labour and capital intensity. Furthermore, with regard to tourism, civil servants were said to be unaware of and insensitive to the requirements of the sector when applying the provisions of the legislation.

"Difficulties encountered when engaging in the timely procurement of land was identified as an obstacle in the investment process because the Land and Surveys Division does not have the resources to perform its functions, while the Registrar General's Office was yet another inhibitor," says Professor Wint. Delays were also being experienced through the "multiplicity of agencies with which an investor must deal prior to commencing production or the erection of any physical works involved in a project."

These agencies include WASA, the Town and Country Planning Division, the regional corporations, and the Factory Inspectorate. "Added to this is the remote character of the relationship between these bodies, which often work at cross- purposes to each other, thereby simulating a lack of coordination," he added.

The survey team concluded that the regulation relating to the granting of work permits and the delay involved in issuing said permits was "anachronistic," given the widespread removal of barriers to trade and the free flow personnel at the international level. In addition, the involvement of the Minister of National Security introduced and an unnecessary political element into what should be an automatic and transparent decision to grant work permits.

"The fact that the Works Permits committee, which meets on a fortnightly basis, rarely rejected applications is an indicator of the imperative to prolong the life of such a mechanism." Wint identifies other factors which contribute to attracting investment as the growth and size of the host country's market, political stability, the country's current account position, the rate of inflation, the level of corporate taxes, and the extent of the investment promotion effort.

Factors like the quality of the country's infrastructure, wage rates, risk of currency devaluation, length of tax holidays, ease of profit repatriation, the number of free zones and transportation costs also played significant roles in attraction of investment.

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