Arthur Lok Jack, Executive Chairman, Associated Brands: Interview

Interview: Arthur Lok Jack

To what extent are the conditions that allowed a manufacturing cluster to be created in Trinidad and Tobago still present today?

ARTHUR LOK JACK: In the 1980s the T&T government managed to turn a comparative advantage in energy resources into a competitive advantage. Factors like a functioning democracy, an English-speaking workforce and the rule of law made it possible for investors to take a risk in a country of the size of T&T. In addition, our import substitution model protected local manufacturers and led several multinationals to set up plants in T&T in an effort to retain the local market share they had previously gained via marketing activities. As T&T and other economies around the world started to open up, we moved from import substitution to export promotion thanks to a set of incentives and policies such as tax waivers on export profits, export training sessions, trade missions, export advertising allowances and so on. The government allowed local producers to retool all of their plants through a 100% accelerated depreciation on equipment.

When oil prices collapsed in 1986, the government made some unpopular moves to increase competitiveness, such as adjusting the fixed exchange rate from 2.4 to 3.6, capital controls and freezing trade unions’ wage increases over a three-year period. In addition, many assembly and garment industries went out of business, but a core of local manufacturers became very competitive for exports to the CARICOM’s newly born single-market economy. In modern economies, productivity comes from equipment and automation more than labour, and this measure worked wonders in terms of stimulating investment and increasing productivity and export.

Today the economic contingencies are very different, but I believe the right conditions still exist to develop further downstream industries. For instance, just a few years ago, Alcoa wanted to build a worldclass aluminium plant in T&T, which had the potential to attract further assembly-type manufacturers downstream. The project was, at the time, considered to be sensitive and was shelved, yet T&T still has the potential to attract similar industrial ventures.

How can locally manufactured products become more internationally competitive?

LOK JACK: The accelerated depreciation incentives for manufacturers to invest in technology are still in place and, consequently, Trinidad’s plants are in good shape. At this stage we need to develop more firms that pursue the market rather than the product. Our domestic production systems have to transform to add more value locally and significantly grow export capacity according to market needs. Historically, T&T has supplied commodities to the world, including oil, gas, ammonia, methanol, sugar and cocoa. In times like these, it is important that we examine and redesign our national value proposition.

What kind of policies can be introduced to enhance access to markets?

LOK JACK: Aside from vital supply-driven government measures, such as budget cuts, improved ease of doing business and increased government efficiency, we should place a greater emphasis on policies aimed at stimulating demand, taking an example from countries like Australia, Chile, the Netherlands and Norway. These countries have built resilient economies through extensive labour reforms and pro-immigration policies, accelerated investment in renewable energy, tax incentives for exporters and international trade agreements. Similarly, T&T should develop a demographic policy that ensures population growth and new generations of young consumers. In addition, we should build further linkages between local companies and multinationals, such as Walmart, to insert these firms into global value chains as suppliers of goods rather than distributors.