When the topic of our International Finance Centre is being discussed by our Government and even some of our financial community one gets the distinct impression that such a centre is to be established, not as a vehicle to facilitate economic diversification, but as a standalone industry as part of this diversification. Financial services normally offered to the international community include banking, investment, insurance, intermediation and advisory services for asset management etc. Unlike off-shore financial services (which GOTT says it is not exploiting) is it possible to just ‘ups’ and build a tall building on the waterfront to house the centre, pass some legislation and the world will beat a path to the docks of Port of Spain? The more knowledgeable of us talk about the creation of a policy and a prudential framework that are necessary to support such an International Financial Centre. These include a framework that protects property rights, banking laws and regulations, a court and arbitration system that enforces contracts quickly and fairly, all supported by a modern technological platform that facilitates global trading, payment and securities system. We have in place some rudiments of these requirements and our government is planning to improve these. But the question still remains- why would the world players flock to the Port-of-Spain docks?

Listen to a quote form the firm, ABRAAJ Capital, from Dubai:
‘A financial centre exerts a great enabling influence within its sphere. The great financial centres of Europe and N. America, London, Frankfurt and New York, have played a colossal role in the development of their respective continents. They have overseen the spawning of entire new industries, financed world wars and taken the human race from a horse-carriage negotiating the dirt roads of N. America to Space Ship One beholding heavenly visions (if only) for the sake of nothing more important that amusement of men and women of leisure. Financial centres catalyse development in a region making available that which is most required for development- capital across the region. The post war rebuilding of Europe may not have been possible without the support of the titans in finance from New York. Two vast and populous continents were transformed by a few square miles of sky scrapers across New York, London and Frankfurt.’

Therefore, another and more credible approach to building a financial centre is to see it as one of the twin pillars- the other, an entrepreneurial economy- which is needed for economic development. Such a success would catapult it into the magnet that attracts the human resources and the companies that can create an International Financial Centre. This is exactly what Dubai and Singapore did in their regions and what created the world renowned NYC and London centres. With the imminent depletion of our petroleum resources economic diversification is urgent, as is the restructuring of the regional economies. Neither of these will come about without the creation of a national, if not regional, finance centre. The region including T&T is short of capital required to generate regional wealth. T&T may have some cash from the rents from the exploitation of its petroleum resources. But, unlike Dubai, there is nothing available locally to turn this cash into capital. We are witnessing high liquidity with the accompanying inflation since the other pillar, an entrepreneurial economy is not in place to build the economic assets of wealth creation.

The EPA, that will soon bind us to the EU, promises that EU investment will find its way to the region- so, we hope, stimulating regional economic development. If this does materialise for whatever reasons, one would expect that the cash generated by these investments, like in our energy sector, will be in part repatriated to the EU’s finance and economic systems and the rest to remain ‘dead’ in the region. Hence regional foreign investment even accompanied by its cash generating assets is not the solution to the region’s economic woes. This is the crux of the contention between the Sir Arthur Lewis’ model of economic development of the West Indies and the ideas of the New World Group of UWI. Sir Arthur’s model depended on foreign direct investment while the New World Group saw that this kind of investment has always been the problem of our plantation economies. Unless a system exists in our islands, which can take the cash generated and transform it into capital and wealth, economic development is a non-starter.

Besides a small cache of cash in T&T the region is short of cash and its institutions have failed to produce any significant capital or an entrepreneurial economy. This is the challenge our proposed financial centre should address.