Construction sector outlook: Finding a place in an economic downturn

Kavena Ramsoobhag, MSc. Economics
Email: [email protected]

The global economic downturn has now engulfed the nations of the Caribbean and has reached the shores of the booming economy of Trinidad & Tobago. This resourced based twin island has come a long way from the 1980’s and today stands in a much better position than many of its CARICOM counterparts in withstanding the global economic slowdown. The sovereign was  given an A- rating from international rating houses, such as Moodys’, based on several factors, which included strong growth in its foreign exchange reserves, reduction in the unemployment rate, comparatively low debt ratios and is currently holding on to the position as a net external creditor. The economy has shown strong growth patterns over the period 2002-2007, growing on average of 9%. The construction sector is one of the many sectors that has benefitted significantly from this expansion.

The construction sector has grown an average of 10% over a five (5) year period, 2002- 2007, and has increasingly contributed to the growth in the Gross Domestic Product (GDP) of the economy. In percentage terms, this industry contributed 9.4% to GDP in 2007; up from 7.1% in 2004. This comes as no surprise as the main driver of the sector has had its feet on the accelerator moving full speed ahead to attaining a ‘developed’ nation status by the year 2020.  In recent years, whilst facing supply-side constraints, the construction industry has been one of the main driving forces in the expansion of the non-energy sector. This sector has accounted for 5.2% of the growth within the non-energy sector in 2007; up from 4.2% in 2006.

Employment within this sector has been on a steady decline since 2004, declining to 9.2% in 2007 from 10.5% in 2004. One proposes that a reduction in employment within this sector would have been a result of the reduction in the supply of skilled workers coupled with rising labour costs within the industry. The Central Bank of Trinidad & Tobago noted in its Annual Economic Survey 2007, that a shortage of skilled workers exists within this sector. The government of Trinidad and Tobago has attempted to address this scenario with its many training programmes offered by agencies such as the National Training Agency (NTA). However, as the economy begins to feel the effects of the slowing global growth, the government has now decided to decrease its speed towards infrastructural development. The recent reduction in the proposed government expenditure for fiscal year 2008/9, in large part, affects the construction industry. These cutbacks have been geared towards a reduction in the construction of various infrastructures such as housing, schools and hospitals. Amidst calls from the Prime Minister to “tighten our belts” one must then ask the question, “Can the construction sector survive a belt tightening?”

The answer to this question depends a great deal on the ability of the construction industry to increase its productivity, the skills of their workers and their ability to access relatively cheaper cost of funding from international creditors. In recent times, the construction sector has been forced to rely on international workers, many of whom are from the Asian continent and Latin America, to satisfy their need for skilled workers. The Asian workers are known for their unique mindset to increasing productivity and efficiency with a seemingly genuine pride for the products/services that they provide at the lowest cost (cost efficiency). Therein, lies very important lessons for all parties within the local construction industry. An understanding between all parties that increased cost efficiencies from the local contractors, lowered wastage, and an increase in the number of productive hours by workers may reduce the expenditure of the public sector. This, in turn, may result in a steady flow of revenues during this period of slow growth.

The planned expenditure for the continued expansion of the energy sector has been left untouched in the recent government expenditure cutback. This unaffected expenditure translates into a continued demand for skilled construction workers within this sub sector (those construction workers who apply their skills to the construction of plants within the energy sector) of the construction industry. The construction company that can quickly adapt its capital equipment and labour to fill this need should be able to maintain a steady flow of revenues during the slowdown. One suggests that for the companies who are unable to access credit readily in the local market, a look towards low cost credit facilities within the North American market would be beneficial. The US Federal Reserve has recently reduced their federal funds rate to a target range between 0 – 0.25%.

The construction sector has contributed to the overall growth of the economy and with the willingness to adapt to the changing economic environment one believes that the construction sector can find a place within the local economic slowdown. However, this is dependent on the willingness of all parties within the sector to commit to increasing cost efficiencies, lowering the wastages of raw materials, increasing the number of productive hours on the job and the ability to adapt itself to meet the needs of the various sectors within the economy. In essence, for the construction sector to rise above the downturn, a ‘tightening of the industry’s belt’ is not just an option but a necessity.

TTTI Welcomes Caribbean Construction Digest

Victor Hart Chairman, Trinidad and Tobago Transparency Institute.

The Trinidad and Tobago Transparency Institute (TTTI) welcomes the launch of the Caribbean Construction Digest (CCD) and the opportunity to contribute to its Pilot Issue. We note the aims and objectives and identify with many of its areas of interest, particularly that of ‘procurement’. If all plans are achieved, CCD will make an important contribution to the development of the construction industry. For those of you who may not be familiar with TTTI, or our parent body Transparency International (TI), I shall introduce both organizations briefly.

TI is a civil society organisation based in Berlin, Germany, that leads a global coalition in the fight against corruption. The organization has been at the forefront of the world’s anti-corruption movement since its formation in 1993.TI is also a non-profit, independent, nongovernmental
organisation, dedicated to increasing transparency and accountability and curbing both international and national corruption. The organization operates in conjunction with all stakeholders to seek a consensus on ways and means to combat corruption, mainly through the promotion of good governance in both the public and private sectors. TI’s long-term vision is that of a world in which government, politics, business, civil society and the daily lives of people are free from corruption. Furthermore, its mission is to work towards creating change towards a world free of corruption.

TTTI is one of nearly 100 National Chapters of TI worldwide and was formed in 1998. Our vision is the same as TI’s but our mission differs in the sense that we work towards a country and region that are free of corruption. We emphasize the word region because, as the only TI National Chapter in Caricom, we have committed ourselves to spreading the TI message to our neighbours and to assisting those who may wish to form National Chapters. Membership of TTTI is usually by invitation but persons or companies can apply for membership without solicitation.

There are two categories of membership available:

• Individual membership at an annual fee of TT$200.00.
• Corporate membership, depending on the size of the company, at an annual fee ranging from TT$1,000.00 to TT$5,000.00.

Procurement

Amongst all the issues that have occupied TTTI’s attention during the past 10 years, procurement generally and construction procurement, in particular, take pride of place and it is not difficult to see why. Procurement is easily identified as the activity which has attracted the most corruption in our country. I recall that, as a child, the first time I heard of corruption was in the 1950s in connection with the construction of the Caura Dam.

Thereafter, other major corruption scandals (proven and unproven) were mostly associated with procurement: The Gas Station Racket, Caroni Racing Complex, Airplane purchases for BWIA, Tesoro Scandal, Piarco Airport Project, Inncogen and Desalt Plant, to name a few. More recently corruption accusations against UDe- COTT led to the formation of the ongoing Uff Commission of Enquiry into the Construction Industry. It is beyond doubt that, because of the large sums of money involved in procurement this activity acts as a magnet for those who wish to corrupt the process and illegally enrich themselves.

We at TTTI see it as our duty to seek to reform the procurement systems currently in use in T&T. To date, we have done this by carefully monitoring procurement practices and procedures in order to identify any shortcomings and so be able make recommendations and lobby for reform. Our efforts have been supported globally through the work being done by TI on the international “stage.” Corruption in procurement is a worldwide phenomenon in response to which, TI has developed and continues to develop a broad range of tools and strategies to combat the problem. These mechanisms begin with promoting government’s ratification of and full compliance with International Conventions such as the United Nations Convention Against Corruption and the Inter-American Convention Against Corruption.

The process continues with monitoring the enforcement of laws such as OECD Convention on Combating Bribery of Foreign Public Officials and the USA Foreign Corrupt Practices Act. It extends to campaigning at the national level for systemic changes through legislative reform to introduce and enforce the best procurement practices among practitioners, at the risk of criminal prosecution for breaches. The process further involves lobbying for the enactment of new laws such as Whistleblowers Protection Act to encourage civil society to expose suspected corruption. Finally, it also includes the development of tools to introduce additional checks and balances in the procurement process in order to increase transparency, to make circumvention more difficult and to emphasize the issue of accountability to everyone involved in the process, through the exposure of transgressors.

Challenges

Many may wonder about the challenges which TTTI faces in confronting corruption in T&T. One major challenge faced is that people traditionally have a very high level of tolerance for corruption and this continues in today’s society. Stories and/or jokes about Trini ‘smartmen’ who try to outsmart others to make a fast buck are legendary. We grew up hearing the exploits of some of the more famous (infamous?) Trini “smartmen” lauded in calypsos and in local literature. We have grown up hearing about major corruption scandals and not seeing anyone being made accountable. Over time, this situation has caused our people to become more accepting of corruption almost as though it is a norm in society. The general consensus is that nothing can or will change.

That mindset leads some to believe that the voice of TTTI is a voice crying in the wilderness and no one is hearing, let alone listening. They feel that we are wasting our time as nothing will change. Notwithstanding the pervasiveness of that perception, members of TTTI do not succumb to that point of view. We know that the country’s future, in general, and the future of our youth, in particular, will be imperilled if corruption is allowed to continue unchecked. We also unwaveringly believe that the battle against corruption can be overcome if it is attacked by more people who care. However, to be successful in our quest, we must be mindful of our challenges; the specific challenges facing TTTI are:

• identifying and implementing, with limited resources, effective anti-corruption programmes;
• securing the human and financial resources needed to materialize programmes;
• designing and constructing a governance model that effectively supports its mission;
• overcoming the perception that TTTI is anti-government (regardless of which political party is in power) when in fact we are only ‘anti’ corruption and poor governance, in both the public and private sectors, as both elements work against the best interests of the civil society, especially its underprivileged members.

TTTI’s main objectives contained in our Strategic Framework for the period 2007 to 2009 are the promotion of integrity and reduction of corruption in:

• Public contracting
• Politics
• Law Enforcement
• The Judicial System
• The Private Sector, in general, and the financial sector, in particular.
• The daily lives of citizens, particularly in their relations with public officials.

TTTI would welcome a continued dialogue with readers of CCD on some of the corruption related issues facing the construction industry. These issues prevent the creation of a level playing field for all involved and have taken much of the joy from working in the industry. They also hinder greater transparency and accountability and prevent the country from realizing maximum value for money from public and private sector projects.

TTTI’s contact information:
Telephone: (868) 663-2322
E-mail: [email protected]
Website: www.transparency.org.tt

Genesis of a Regional Contractors Association

KINGSTON, Jamaica – The contractors associations of Trinidad and Tobago, Barbados, Jamaica and Dominica have signed a Memorandum of Understanding (MOU) to form the Coalition of Caribbean Contractors Association. Presently sitting on the organization’s steering committee are presidents of the various regional associations Ronald Cooper (Jamaica), Achal Moorjani (Barbados), Mikey Jospeh (T&T), and Stuart Parris (Dominica’s immediate past President). According to Cooper, the  committee’s chairman, the coalition was formed with the objective to protect and promote the region’s construction industry and facilitate corporation between Caribbean contractors as well as to provide a lobby at the level of CARICOM.

Secretary-treasurer of the association, Mikey Joseph compares the new association to CSME. He says that one of the most prominent characteristic of the association is to enable contractors from around the region to freely operate in any island without having to immobilize mass amounts of resources. Both presidents have indicated that once the coalition is fully operational there will be funding available for the strengthening of institutions, training, etc. Once accessed, this funding is anticipated to work in tandem to bring the entire regional construction sector to a higher standard of performance through a combination of business interest and industry development.

Cooper further stated that since the organization’s inception there have been a few joint venture initiatives in Jamaica and Trinidad and Tobago as well as between Jamaica and Barbados. The next step for the coalition will be the establishment of a secretariat as well as an invitation to all interested regional associations to sign the MOU. Other countries which have expressed interest in the coalition are Bahamas, Antigua, St. Lucia, St. Vincent and Grenada. The Coalition of Caribbean Contractors Association is hoping to meet again in Jamaica between June and July.

BITS Trade Show

PORT OF SPAIN, Trinidad – From Friday 2nd October to Monday 5th October 2009, the built industry’s highly anticipated annual Building, Interiors, Technology and Safety (BITS) Trade Show will be held in Trinidad and Tobago. The show, which is in its eighth year, will this year be presented by the Trinidad and Tobago Institute of Architects (TTIA) in conjunction with Premier Events Caribbean Limited, the title holders of the event. Of the many benefits and advantages available to participating industry professionals, BITS hopes to provide participants with a unique opportunity to view and compare building construction and interior products and services in an environment that enables informed decisions on purchases as well as discourse on pertinent safety, maintenance and value issues.

During the trade show, the TTIA will host a number of construction related seminars, facilitated by distinguished architects from the Caribbean and North America. In recognition of the importance of Health, Safety (HSSE), Security and the Environment to the building industry, this year BITS will place emphasis on HSSE with workshops, seminars and competitions in conjunction with the OSHA agency, who along with Scotiabank are the main sponsors. Also, within the very packed schedule for this year’s show is the very much anticipated prize ceremony for the Most Innovative Design (MID) awards which recognizes industry professionals and students in the Caribbean.

The MID Awards are fully endorsed by the Trinidad and Tobago Institute of Architects (TTIA), the Faculty of Engineering at the University of the West Indies, the Association of Professional Engineers of Trinidad & Tobago (APETT), and the Joint Consultative Council (JCC). The MID Awards are intended to encourage and celebrate innovation in regional design work.

T&T’s Waterfront project builds profile

PORT OF SPAIN, Trinidad – Trinidad and Tobago has yet again appeared on international radar as Canadian construction giant GENIVAR copped the coveted 2009 Canadian Leonard Prize Award for their management of the Port of Spain International Waterfront Centre Project. The project, which fell under the portfolio of the Urban Development Corporation of Trinidad and Tobago (UDECOTT), concentrated  on the waterfront revitalization of Port of Spain with the goal of injecting life into the city and improving the urban quality of the environment.

The four year US$300M project which began in 2004 and concluded in 2008 won GENIVAR the best managed international project which was one of nine categories out of a jury evaluating forty three (43) international projects. Hosted by the Association of Consulting Engineers of Quebec, the awards ceremony, “Grands Prix du génie-conseil québécois”, was in its 7th year. It honours and celebratesthose who have demonstrated the highest standards in consulting and engineering expertise.