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Letter: Global competitiveness is not simply about investment in plant and machinery
Published on August 24, 2017 Email To Friend    Print Version

Dear Sir:

The Trinidad and Tobago newspapers report that the Trinidad and Tobago Manufacturers’ Association (TTMA) is requesting export incentives from the government, which could encourage the manufacturers to create additional foreign exchange revenue streams for the economy.

This, according to the TTMA, can only take place if government were to provide an enabling environment, so leading to greater production, employment, exports and earning foreign exchange. These incentives would help manufacturers to compete in the global market; it has always been the complaint that the few onshore exporters that Trinidad and Tobago possesses operate mainly in the CARICOM market since they are not globally competitive.

Further, only some 14% of the onshore companies earn any part of their income from exports (IDB report). The TTMA emphasises that the government and the manufacturing community agree wholly, it is crucial that the industry needs to take the lead in the diversification drive, presumably by these incentives.

However, what the TTMA appears to be asking for to realise this expansion into the global market are certain measures to serve as a catalyst for investment in plant, machinery and operations, allowing for greater productivity and output from the factory floors across the country.

What this appears to be is that the TTMA manufacturers need some encouragement to invest capital (the purchase of plant and machinery to increase productivity) so as to penetrate the highly competitive global market.

It is useful to trace the growth of economic production in the world and what are the inputs that drove and continue to drive competitiveness. Early in the development of companies they depended on basic factors of production, e.g. cheap labour, natural resources, climatic conditions particularly in agriculture.

Then the next stage was capital investment in production plant and systems which improved productivity and allowed the company to gain technological knowledge, which led it into innovation in both production processes and products so enabling the growth of national innovation systems.

Today global competitiveness depends almost exclusively on knowledge, whose acquisition, implementation and creation drive continued innovation in new products, processes, machines (in particular the digital technologies and robotics of the fourth industrial revolution). Coupled with these are the new product delivery methods in which a product is bound tightly with the services it provides – all done by the manufacturer.

For example, Rolls Royce not only manufactures airplane engines; it delivers a service wherein its engines are monitored in real time all over the world for performance and kept in tip top condition by its maintenance programme.

Also, the Internet is allowing the customer to interact with the manufacturer in the design of a general class of products so as to make the customer’s purchase unique. For example, cars can now be ordered where the customer can choose the features she requires.

Hence global competitiveness of a manufacturer is indeed about productivity, which is now defined as using knowledge, innovation to produce new goods and services and improving customer satisfaction by the use of the digital, robotic and communication technologies.

If this is what the TTMA means whereby incentives in plant and machinery and operations are requested, then they are on the right track: Still, I do not think they are.

With a stretch of the imagination one could accept that the TTMA is envisioning an integrated relationship with the government, which over years normally meant obtaining tax breaks for change out of machines and plant.

However, the basic ingredient today that drives competitiveness globally is innovation and the TTMA has completely ignored this. Indeed, the TTMA has omitted the fundamental requirement to diversify our economy which is the provision of a national innovation system – the triad of the private sector, the government and the R&D institutions, the centres of excellence.

New ideas are what drive competitiveness and this forms no part of the TTMA requests. The TTMA seems stuck in the second stage of economic development in which investment of capital in process and plant gains the company increased productivity and competitiveness.

Unfortunately today, the companies with which we will have to compete in the world market have available the best in plant, machinery and digital technologies. They compete on innovation in products, process and marketing; competition that requires the private sector to invest in higher risk activities, which is not the business culture of the current on-shore private sector of this plantation.

Still, this move by the TTMA can be an opening gambit upon which the government can build.

Mary K King
St Augustine
Reads: 2193

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