TRINIDAD ECONOMIC HIGHLIGHTS - JUNE

UNCLAS SECTION 01 OF 02 PORT OF SPAIN 000808

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: EINV EFIN ELTN KFLU TD
SUBJECT: TRINIDAD ECONOMIC HIGHLIGHTS - JUNE


The following were notable economic issues in T&T
during the month of June:

(1) Desalcott chairman charged with fraud
(2) T&T Government confronts inflation
(3) Central Bank raises "Repo" rate yet again
(4) Rapid rail bidding process begins
(5) Avian flu drug for Trinidad
(6) Post-World Cup trade mission to Europe
(7) Tobago TT$2.7B budget passed

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1. Desalcott chairman charged with fraud
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After four years of investigations into alleged
corruption in the US$120 million Trinidad desalination
plant, Desalcott executive chairman Hafeez Karamath has
been arrested on fraud charges. In January 2005,
investigators raided Karamath's home and office in
search of documents. The state charges that Karamath
defrauded Trinidad and Tobago by dishonestly arranging
for a water supply contract to be awarded to
Desalination Company of Trinidad and Tobago
(Desalcott),a joint venture between Hafeez Karamath
Engineering Services Limited and U.S. company Ionics.
Karamath is being charged jointly with two Israeli
nationals. Karamath owns sixty percent of the issued
shares of Desalcott, in partnership with Ionics, an
American firm that specializes in the building and
operation of desalination plants. Ionics is now part
of General Electric. It has not been the subject of
any charges in this case.

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2. T&T Government confronting inflation
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Finance Minister Conrad Enill says the growing rate of
inflation is a concern. In recent comments on the
state of the T&T economy, Enill said the T&T government
has been taking several steps to ensure that the
situation does not continue unchecked. In order to
curb inflation, Enill said the Government first
intended to dampen demand through tighter monetary
policy, of which a consequence would be higher interest
rates to cut consumption and increase saving.
Secondly, the Government will attempt to scale down
construction. Thirdly, the Government is taking steps
to stimulate agriculture. Enill says the causes of
inflation in T&T are an increase in demand, agriculture
supply bottlenecks, and markups by wholesalers and
retailers. Enill suggests that this is the result of
increased spending in the public and private sector,
and also sluggish agricultural output because of
flooding and job competition. According to the
minister, 1,000 jobs were lost last year in the
agricultural sector alone. Notwithstanding, he said
the overall unemployment rate fell in 2005 from 8.4 pct
to 8.0 pct, as a result of growth in both the
construction and manufacturing sectors.

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3. Central Bank raises "Repo" rate yet again
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In light of rising inflationary pressures, strong
growth in consumer credit and the potential for further
narrowing of the differential between T&T and US short-
term interest rates, the Bank is taking intensified
action on two fronts with a view to reducing liquidity
and dampening demand. The actions included increasing
the "Repo" rate by 25 base points from 7.0 percent to
7.25 percent as of June 23. Additionally, they include
withdrawing TT$500 million from the banking system
through a special interest bearing deposit that is to
be lodged at the Central Bank for a minimum period of
one year. Recent statistical data shows that headline
inflation climbed 7.97 per cent on a year-on-year
basis, compared to 6.90 at the end of the previous
month.

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4. Rapid rail bidding process begins
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Works and Transport Minister Colm Imbert has revealed
that 81 firms (65 foreign and 16 local) are interested
in designing, building, operating and maintaining the
proposed rapid rail project. The minister said that
this initiative is taking place because Trinidad and
Tobago finally has the means to implement the
infrastructure plans. Minister Imbert noted that 40
percent of the population currently uses public
transportation and the volume will increase. Imbert
also mentioned that the Government was simultaneously

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developing several transportation initiatives including
toll roads, water taxis, new expressways, arterials,
and links. Imbert said the 81 firms are now coalescing
into consortiums, and the ministry has received
positive acknowledgement of its qualification forms and
instruction documents from 34 groups or organizations
from a wide range of countries. Those nations include
Britain, Canada, China, Germany, Japan, Korea, Spain,
USA, and Venezuela. The second pre-tender meeting for
the rapid rail project is scheduled for July 25. The
Government anticipates awarding the contract in
December of this year.

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5. Avian flu drug for Trinidad
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Tamiflu, a medication used in the treatment of avian
influenza (AI),is expected to reach T&T by July,
according to Health Minister John Rahael. Trinidad and
Tobago is the first country in the Caribbean to have
ordered the medication. The Government ordered the
drug last year, but it will not be available to local
pharmacies. Consistent with the policies of Roche
Pharmaceuticals, which manufactures the drug, and the
World Health Organization (WHO),the Government is
solely responsible for the distribution of Tamiflu in
T&T.

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6. Post-World Cup trade mission to Europe
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Edwina Leacock, Trade Ministry permanent secretary, has
announced that the Ministry is leading a trade mission
to Europe. In an official invitation to Amcham to
participate, she said, "The recent success of the
national football team in the World Cup Finals 2006 in
Germany, presents a unique opportunity for showcasing
Trinidad and Tobago as a premier investment destination
and a regional leader in export trade. In this regard,
the Ministry of Trade and Industry has scheduled a
Trade and Investment Mission to Europe. The mission
will be led by Minister Kenneth Valley, and the
countries to be visited are France, Spain, Germany,
Holland, Sweden, and the United Kingdom. The mission
seeks to promote Trinidad and Tobago as the
manufacturing hub and economic center of the region,
thus making it attractive for potential investment in
manufacturing from Europe. Besides ministerial
meetings, the mission will include a seminar on trade
and investment opportunities and technical meetings
with the business community." Leacock has told Econ
Chief that the dates, initially proposed for July, are
likely to be reset for some time in October.

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7. Tobago TT$2.7 billion budget passed
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The Tobago House Assembly (THA) passed a TT$2.7 billion
budget proposed by the ruling government. The fiscal
package covers the period October 1, 2006, to September
30, 2007. In the previous fiscal year, Tobago was due
to receive TT$2.2 billion, or 6.5 percent of the total
budget. This is viewed as a positive change from the
past, during which Tobagonians, which represent 4.6
percent of the T&T population, were battling for a fair
share of the total budget. The proposed budget calls
for a recurrent budget of TT$1.4 billion, and the
allocation of TT$1.2 billion for development, as well
as additional funds for other investments to stem
unemployment and enhance conservation efforts. NOTE:
The Tobago outlay generally becomes a line item in the
T&T national budget, which is announced in
September/October.

SWEENEY