Trinidad & Tobago has adopted policy measures which have made it attractive to investors. The fiscal, regulatory and legal environment facilitates and supports foreign investments. The country has attracted more than US$4 billion in direct foreign investment from the USA during 1996.
In this article, Senator Philip Hamel-Smith (Senior Partner in M. Hamel-Smith & Co.) and Timothy Hamel-Smith (the Partner who heads M. Hamel-Smith & Co.'s Commercial Department) provide potential investors with a bird's-eye view of the legal and regulatory framework for foreign investment in Trinidad and Tobago.
THE ECONOMIC SYSTEM
The Trinidad & Tobago economy is the most diversified in the English speaking Caribbean. Nevertheless it remains heavily reliant on the oil, natural gas and petrochemical industries.
The country's hydrocarbon resources and, in particular, its natural gas (proven reserves are 12.3 trillion cubic feet) have enabled it to become the most industrialised Caribbean nation. Oil production and refining continue to be important but petrochemicals, and to a lesser extent steel, are assuming greater significance. When the latest methanol plant comes on stream, Trinidad & Tobago will be the largest exporter of methanol in the Western Hemisphere.
The government's economic policy is directed to the development of a robust and open market-driven economy. Trade liberalisation and public sector rationalisation are being pursued. Private enterprise is being strongly encouraged. While there is State involvement in public utilities and in oil, gas and petrochemicals the Government is intensifying its efforts at divesting ownership in these key areas. The Government has made a commitment to actively encourage foreign investment in Trinidad & Tobago. Legislation removing restrictions on foreign investment, removing foreign exchange control and providing various incentives to investors has been enacted.
Trinidad & Tobago experienced real growth rate of 3.5% in 1995 and further growth of 4.6% was projected for 1996. This makes three straight years of real growth after 8 years of economic decline. The estimated overall balance of payments projects a surplus of US$47.5 million in 1996 and further improvements are anticipated for 1997.
The inflation rate was estimated to be 5.4% at the end of 1995. A rate below 6% for 1996 was predicted for 1996. In 1995, Moody's rated the country's sovereign debt with a BA1 grade and in February 1996, Standard and Poor's assigned a BB+ Rating to Trinidad & Tobago's Foreign Currency Debt and a BBB+ Rating to its Local Currency Debt.
FOREIGN OWNERSHIP
The Foreign Investment Act, 1990 was proclaimed as an Act to provide for the acquisition by foreign investors of an interest in land or shares in local private or public companies and for the formation of companies by foreign investors.
In summary, the Foreign Investment Act, 1990 makes the following provisions:
- a foreign investor is permitted to own 100% of the share capital in a private company but, prior to the investment, the Minister of Finance is notified.
- foreign investors are permitted to own up to 30% of the share capital of a local public company without a licence
- a licence is required to permit foreign investors to own more than 30% of the share capital of a public company
- a foreign investor is permitted to own one acre of land for residential purposes and five acres of land for trade or business without having to obtain a licence
- no one is permitted to hold land in Trinidad & Tobago or shares in any local company in trust for a foreign investor who requires a licence but has not obtained same.
PROFIT REMITTANCE AND CAPITAL REPATRIATION
Exchange controls on foreign currency and securities were removed in 1993. There are no longer any restrictions on repatriation of capital, profits, dividends, interest, distributions or gains on investment. Repatriation may now be effected through the commercial banking sector. There remains the liability to pay withholding tax, where applicable.
INVESTMENT PROTECTION MECHANISMS
Bilateral Investment Agreements which guarantee foreign investors a level playing field exist between Trinidad & Tobago and the United Kingdom, Ireland and France.
A Bilateral Investment Treaty and an Intellectual Property and Rights Agreement have been entered into with the United States. Highlights of the Bilateral Investment Treaty include:
- A requirement that the treatment of foreign investments be no less favourable than that accorded domestic investments ("National Treatment").
- A prohibition against expropriation of an investment without just compensation calculated as the equivalent to the fair market value of the expropriated investment immediately before expropriatory action.
- A requirement that investments suffering losses from war or similar events be accorded National Treatment. A provision to allow financial transfers relating to the investments to be made freely and without delay into and out of each country.
- A provision to ease requirements relating to entry, sojourn and employment of aliens for establishing foreign investment of a substantial capital amount.
- A prohibition against performance requirements as a condition for investment.
- A provision for dispute resolution alternatives, including binding arbitration.
PRIVATISATION
A key component in the Government's drive towards the modernisation and structural transformation of the economy is the divestment of selected public sector enterprises. Accordingly, the sale, liquidation or merger of public sector entities has been accorded priority status since 1992. The role of the State is seen essentially as a facilitator of economic activity. Participation in the commercial sector will continue only in limited or special circumstances, for example, in areas of strategic importance such as oil and gas and in enterprises providing social services.
The Government has established a Divestment Secretariat as the executing agency for Government's Divestment programme which has been engaged in some 33 divestment assignments. The major State Enterprises in which the Government has divested (wholly or partially) its interests thus far are:-
ENTITY INVESTOR
Caribbean Hotel Development Co.
Bella Forma - Joint Venture
Government (Crown Reef Hotel) John Jefferis, Robert Yorke-
Sponsors
Fertilisers of Trinidad & Tobago Arcadian
Iron & Steel Company of Caribbean ISPAT Limited
Trinidad & Tobago
Petrotrin's Oxygen/Nitrogen Caribbean Ispat
Separation Plant
Trinidad Cement Limited Cemex - 20% holding
Trinidad & Tobago Methanol Co. 31% to Ferrostaal G.M.B.H.&
Helm Ag.
Trinidad & Tobago Electricity Powergen Joint Venture - T
Commission (Power Generation) & TEC
(Government) Amoco & Southern Electric
Trinidad & Tobago Urea Company Arcadian
British West Indian Airways (BWIA) Acker Group, Alico
Water & Sewerage Authority (WASA) Severn Trent/Wimpey -
Management Contract
The other major State Enterprises which are in the process of or intended for divestment are:
- National Flour Mills
- Port Authority Stevedoring and Ferry Services
- Trinidad & Tobago Methanol Company
- Petrotrin Assets
- Urea Formaldehyde Plant
- Point Fortin Refinery
- Palo Seco Agricultural Enterprise
Telecommunications in Trinidad have already been privatised through a joint venture between the Government and Cable & Wireless. It is intended that 10% of the equity of Telecommunications Services of Trinidad & Tobago Limited will soon be offered to the public with provision for participation by employees.
The Government's remaining 10% share-holding in Trinidad Cement Limited is also expected to be offered to the public.
SENSITIVE AREAS
In the past, there has tended to be a bureaucratic approach in the public sector which sees its role as procedural rather than facilitative. A lack of transparency in its operations can sometimes make it difficult to determine the criteria adopted in the decision making process. However the present Government is actively seeking to sensitise the public service to the need to be more service-oriented.
Withholding tax is imposed on the profits of branches of non-resident companies (after making deductions for corporation tax) which are not re-invested (other than in re-placement of fixed assets) to the satisfaction of the Revenue. Stamp duties on property transfers and charges to secure loans are very substantial.
While company registration is a fairly routine matter for lawyers and poses no problems once the corporate name has been approved the process on average may take up to ten (10) days.
There are requirements for licences to be obtained in order to conduct banking and insurance activities which are strictly regulated. The acquisition by foreign investors of more than 30% of the share capital in a publicly owned company and more than 5 acres of land for trade purposes requires the issue of a licence under the Foreign Investment Act.
There is a strong trade union movement, certain segments of which have expressed their opposition to the government's policy of divestment of state enterprises, especially in the gas, petroleum and utilities sectors of the economy. The Union leaders however have never been able to obtain support in the national electoral process.
Price controls have been removed from almost all classes of goods other than a few basic food items. The price of gasoline which is sold on the domestic market is fixed by the Government.
In addition to the common law protections afforded to the consumer there are a number of statutes which govern consumer protection. However, the enforcement of these statutes have had minimal significance so far.
An Environmental Management Act has recently been introduced along U.S. lines but the regulations have not yet been formulated. The planning authorities require than an environmental impact study be conducted in the case of major developments as part of the approval process.
The issue of safety in the workplace is coming under the closer scrutiny of the authorities and draft legislation will shortly be placed before Parliament.
Nationals of all countries need a valid passport for the duration of their stay in Trinidad, with the exception of Canada and the United States from whom a Birth Certificate together with a document of identity with a photograph, is sufficient for a touristic stay of not more than two weeks. Nationals of any country who have not signed a Visa Abolition Agreement with Trinidad & Tobago must obtain an entry visa from a Trinidad & Tobago Consular Office. No visa is needed by nationals of Canada and the United States, Austria, Brazil, Denmark, Finland, Germany, Republic of Ireland, Italy, Norway, Sweden, Switzerland and Singapore.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
