Trinidad and Tobago - Economic development
To diversify the economy and raise the national standard of living, foreign capital and technical assistance are actively solicited. Major incentives are duty-free imports of equipment and raw materials, income tax holidays, accelerated depreciation allowances, unlimited carryover of losses, and repatriation of capital and profits. To encourage diversification toward non-oil/gas sectors, the government has undertaken comprehensive reforms in the trade and exchange rate regimes, and the investment environment. A major downsizing and refocusing of the public sector with an extensive program of divestment and reduction of public employment has occurred.
Nonetheless, the country remains largely an oil economy even though oil reserves are being depleted. While the natural gas sector will benefit the economy in the future, it will not solve the country's most crucial economic problems. Only by diversifying into more labor intensive export industries and services will Trinidad and Tobago generate employment and growth and minimize its external vulnerability. The key ingredients for development are a buildup of reserves consistent with the maintenance of a competitive exchange rate; the use of monetary policy to contain inflation and sterilize reserve accumulation; and the strengthening of fiscal balances to reduce government debt and lower interest rates.
Trinidad and Tobago experienced strong growth in the early 2000s, after eight years of economic decline in the 1990s. The debt service ratio fell, as did unemployment. The government invested heavily in public sector physical and educational infrastructure projects in the early 2000s. Improvements in water and electricity supply were being undertaken. The government has an ongoing divestment program.