2009 Index of Economic Freedom

Quick Facts

Population:

• 1.3 million

GDP (PPP):

• $23.5 billion
• 12.0% growth
• 10.2% 5-year compound annual growth
• $17717 per capita

Unemployment:

• 6.5%

Inflation (CPI):

• 7.9%

FDI Inflow:

• $788.0 million

Trinidad and Tobago's economic freedom score is 68, making its economy the 41st freest in the 2009 Index. Its score is 1.6 points lower than last year, reflecting worsened scores in six of the 10 economic freedoms, most notably in government size. Trinidad and Tobago is ranked 7th out of 29 countries in the South and Central America/Caribbean region, and its overall score is higher than the world average.

Trinidad and Tobago scores relatively well in many of the 10 economic freedoms. The economy has grown at an average rate of 10 percent over the past five years. The oil and gas sector accounts for about 40 percent of GDP. The government has tried to broaden the economic base, and the country has evolved into a key financial center in the Caribbean region.

Foreign and domestic investments are treated similarly in theory, but approval of foreign investment can be subject to lengthy delays. The financial sector remains relatively sound; the government does not intervene, and credit is allocated on market terms. The judiciary, though independent and competent, is inefficient in enforcing the protection of intellectual property rights. Privatization has progressed considerably.

Background Back to the top

Trinidad and Tobago is the Western Hemisphere's largest supplier of liquefied natural gas and has one of CARICOM's largest and most industrialized economies. The size of the economy has doubled since 2002, and energy accounted for more than 40 percent of GDP in 2007. A foreign investment boom has increased energy output significantly. The government created the Heritage and Stabilization Fund in 1999 to receive revenue during periods when oil prices exceed the long-term average. Other exports include petrochemicals, and there is potential for growth in financial services. A parliamentary democracy, the former British colony gained its independence in 1962.

Business Freedom 60.1 Back to the top

The overall freedom to conduct a business is limited by Trinidad and Tobago's regulatory environment. Starting a business takes an average of 43 days, compared to the world average of 38 days. Obtaining a business license takes slightly more than the world average of 18 procedures and 225 days. Bankruptcy proceedings are fairly easy and straightforward.

Trade Freedom 79.8 Back to the top

Trinidad and Tobago's weighted average tariff rate was 5.1 percent in 2006. Certain prohibitive tariffs, import taxes and fees, import and export licensing requirements, inefficient customs administration, and export-support programs add to the cost of trade. Ten points were deducted from Trinidad and Tobago's trade freedom score to account for non-tariff barriers.

Fiscal Freedom 79.7 Back to the top

Trinidad and Tobago has moderate taxes. Both the top income tax rate and the standard corporate tax rate are 25 percent. Petroleum company profits are taxed up to 50 percent. Other taxes include a value-added tax (VAT) and a property tax. In the most recent year, overall tax revenue as a percentage of GDP was 28.0 percent.

Government Size 75.6 Back to the top

Total government expenditures, including consumption and transfer payments, are moderate. In the most recent year, government spending equaled 28.5 percent of GDP. The high non-energy deficit illustrates the economy's dependence on the energy sector. Although oil and natural gas revenues are high, gains are being offset by rising fuel subsidies.

Monetary Freedom72.2 Back to the top

Inflation is high, averaging 7.9 percent between 2005 and 2007. The government retains price ceilings for a number of goods; controls prices for sugar, schoolbooks, and some pharmaceuticals; and influences prices through regulation, subsidies, and state-owned enterprises and utilities, including oil and gas. Ten points were deducted from Trinidad and Tobago's monetary freedom score to account for policies that distort domestic prices.

Investment Freedom70.0 Back to the top

Foreign investment receives national treatment but must be approved by the government. Certain projects must also be screened for their impact on the environment. Foreign investment in private business is not subject to limitations, but a license is needed to purchase more than 30 percent of a publicly held business. The investment approval process can be non-transparent and subject to lengthy delays. Residents and non-residents may hold foreign exchange accounts. There are no restrictions or controls on payments, transactions, transfers, or repatriation of profits. Foreign ownership of land is restricted.

Financial Freedom70.0 Back to the top

Trinidad and Tobago's financial sector is relatively well developed. State influence in the sector is not substantial, and credit is allocated on market terms. Financial regulations and supervision are generally transparent and improving, and the level of non-performing loans has fallen to below 2 percent. There are no restrictions on foreign banks or foreign borrowers, and all banks may offer a wide range of services. There are six commercial banks, including one state-owned bank and several foreign banks. Insurance is dominated by a single large company. Capital markets are well developed but small and are centered on the stock exchange.

Property Rights60.0 Back to the top

The judiciary is independent and fair, but cases are time-consuming, and the backlog is several years long. Legislation protecting intellectual property is among the hemisphere's most advanced, but enforcement is lax in some areas, particularly concerning copyright of music CDs and film DVDs. Prosecution for piracy is rare.

Freedom From Corruption34.0 Back to the top

Corruption is perceived as widespread. Trinidad and Tobago ranks 79th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2007—its fourth year of declining scores. The law provides criminal penalties for official corruption, and the government generally implements these laws effectively. However, there is a widespread and growing public perception of corruption. The law requires that public officials disclose their assets, income, and liabilities, but many officials and candidates for public office are reluctant to comply.

Labor Freedom78.3 Back to the top

Trinidad and Tobago's relatively flexible labor regulations enhance overall employment and productivity growth. The non-salary cost of employing a worker is low, but dismissing a redundant employee can be relatively costly. Regulations related to the number of work hours are flexible.