Downtown we are building the physical infrastructure to house our proposed International Financial Centre. A recent symposium was held to discuss the way ahead. One of the concerns of GOTT reported in the newspapers was money laundering for which the Minister of Finance, Ms Nunez-Tesheira, said, some control legislation is being drafted. Making T&T into a financial centre has been on the cards for many years. However, the feasibility and viability have never really been discussed and examined in depth publicly apart from the extrapolation to the regional bond placements and more recently by improving the stock-market via ‘demat’ and introduction of the GOTT secondary bond market and depository receipts (DRs) of foreign companies. Also the ‘success’ of the local banking industry suggests to some that this is an indication that we can also succeed as a financial centre. Unfortunately the commercial banks are more about consumerism than wealth creation, about well secured debt or its facilitation for business expansion.

Strong financial centres are associated with vibrant entrepreneurial economies- e.g. UK, US, Japan, Singapore. Hence the basic tenet of  a financial centre is its ability, linked to such economies, to transfer cash, earnings, into capital (and vice versa) which in turn via derived assets generates more cash and the cycle repeats itself- creating wealth for both the holders of capital and the people in the related economies. T&T has been receiving a relatively significant amount of cash from the exploitation of its depleting petroleum resources. This cash is being put in part into non-income earning assets and further deepening of the resource based economy (aluminium smelters, steel plants, GTL etc). We are saving a bit of this cash in the RSF (hoping to invest it abroad) and we have foreign reserves to the tune of eleven months of imports. The cash we earn is small compared with that earned by the major oil producers, say, Venezuela or Saudi Arabia- still, without an entrepreneurial economy we cannot use our windfall to create wealth for the country. The Executive boasts about T&T’s GDP growth rate but this is cash driven, not wealth driven. As a result we have an economy hamstrung by high liquidity, high cash availability- contributed to by our devaluing dollar- now aggravated by the sale of RBTT which injects more cash into the market. The most pertinent objection to this sale is that we were transferring an asset into cash without an effective vehicle, a strong stock market and an entrepreneurial economy, to re-transform this ‘dead’ cash into capital. The Central Bank is telling us it may have to take this money out and freeze it!

Dubai sits in the midst of large oil producers who have large stocks of available cash. Dubai earns substantially less oil-cash but has used it in part to put systems in place that could turn this ‘dead’ cash of the region into capital which would continue to earn income. Dubai’s value contribution, unlike T&T, is in recognising that natural resources are a source of cash but cash is not the source of wealth. The source of wealth is capital. Dubai with access to this large supply of cash outside of the developed world seized the opportunity to create capital, then assets and hence increased wealth-generated earnings, for its neighbours via a financial centre.  One of the fundamental requirements for the creation of such a centre is a unified property system. The absence of one is a feature that defines an un-developed country. A unified property system records the various assets and securities of the country and provides the legal and other regulatory systems that allow efficient and timely transfer of assets, obtaining of loans etc. Dubai recognised the importance of this and took steps to develop such a system in the region and is now the front runner for the role of a regional financial centre. Dubai’s capital market has to play the fundamental role in the Centre since it creates the vehicle for enterprises to be created, traded and valued via their shares, giving the citizens ownership rights. Dubai’s success is that it is using income from a depleting resource to create assets that can be used to generate income on an ongoing basis well into the future, creating that which is fundamental to economic development- capital. To date the cash from our depleting resource has been contributing substantially to inflation, not wealth.

Dubai needs well qualified people and it has become a magnet for expatriate staff- a desired place to live, work and do business, sunny weather, good leisure activities, zero corporation and personal taxes, world class infrastructure and double digit GDP growth rates. (continued)