Trinidad's service sector merits FDI consideration as Chuck E. Cheese's launch announced

Posted by Investt

Last month, the Trinidad Guardian reported that Yay! Entertainment Ltd. will invest TT$40 million (US$6.2 million) to open three Chuck E. Cheese’s restaurants and entertainment centers in Trinidad and Tobago.

Yay!’s purchase of local rights to the Chuck E. Cheese’s brand, with more than 500 locations worldwide, is a significant financial commitment to the country and the region. The reasons for the decision may merit attention by foreign investors in Trinidad and Tobago’s service sector.

Chuck E. Cheese Trinidad

The service sector is the largest sector of Trinidad and Tobago’s economy. It has grown each of the past three years, employs 60 percent of the labor market and accounts for 48 percent of GDP.

Service subsectors have seen stronger foreign direct investment activity in Trinidad and Tobago in recent years, with financial and tourism/travel leading in project commitments. Corporate leaders have referenced a stable political environment, low cost of doing business, significant government incentives and proximity to the gateway of Latin America and the Caribbean as factors in their investment decisions.

The Central Bank of Trinidad and Tobago’s July 2013 Summary Economic Bulletin noted particular growth in the financial arena (6.1 percent), consistent with an uptick in financial services investments since 2011.

Major insurance company Pan American Life Insurance Group announced plans in late 2012 to open a multimillion-dollar corporate hub. Two months ago, Scotiabank selected Trinidad and Tobago over other options for its US$15.5 million investment in a regional back-office hub.

The move followed RBC Royal Bank’s decision the year before to open a back-office service center in Port-of-Spain. Project decision-makers cite the country’s low cost of doing business, investor-friendly policies and a high-quality labor force as factors in their decisions.

Independent cost analyses put T&T ahead of its competitors. fDi Intelligence, a subsidiary of the Financial Times, ranked Trinidad and Tobago first among Caribbean and Central American (CCA) countries for cost-effectiveness in its most recent report, CCA Country of the Future 2013/2014.

Travel/tourism is another viable subsector. Jet Blue’s recent announcement that it would offer two daily flights from New York and from Fort Lauderdale, Florida, to Port-of-Spain seems to indicate that foreign direct investment through tourism holds promise. Right now, major international hotel investments lead the subsector’s activity and include Marriott, Hyatt Regency and Radisson. Leisure tourism on Trinidad’s northwest peninsula is ripe for investment, and the government is currently inviting proposals.

While there’s room for improvement in T&T’s travel/tourism competitiveness, the World Economic Forum’s Global Competitiveness Report 2013-14 mentioned regulatory framework, priority placed on tourism and travel, and T&T’s human, cultural and natural resources as strengths to consider. Leisure FDI aside, there are also opportunities in ecotourism, where investors could take advantage of assets in coastal and remote areas of Trinidad and in less-developed Tobago, and in health and wellness tourism, in which the private sector is taking the lead.

With two-thirds of FDI worldwide in the services sector, investors should consider Trinidad and Tobago’s proximity to both South America and the United States an attractive option for companies looking for offshoring or nearshoring solutions.

T&T’s recognized low cost of doing business offers an important advantage, and the country’s infrastructure allows for more location flexibility in operations today than in the past. Its Free Zones policies are a particularly attractive incentive: Services exported to other places from T&T are exempt from corporation tax and export duties.

This advantage cannot be underestimated. One services company benefitting from this policy is healthcare software solutions company Medullan, headquartered near Boston, Massachusetts, USA, but with an operation in Trinidad.

Taken together, these factors increase the likelihood of solid ROI for companies looking to expand to Trinidad and Tobago to improve their global competitiveness. The advantages of locating here merit serious consideration. The chart below shows latest figures for service sector contribution to GDP.

services-sector-gdp-contribution-trinidad-2013

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