Economists urge Govt: Check the fine print of US$750M steel plant revival

Akash Sama­roo

Lead Ed­i­tor–Pol­i­tics

akash.sama­[email protected]

While the planned US$750 mil­lion re­vival of the for­mer Arcelor­Mit­tal steel plant at Point Lisas could pro­vide a much-need­ed boost to Trinidad and To­ba­go’s econ­o­my, two econ­o­mists are warn­ing that the po­ten­tial risks and fine print sur­round­ing the in­vest­ment can­not be ig­nored.

Econ­o­mists Pro­fes­sor Patrick Wat­son and Dr Jamelia Har­ris both be­lieve the project could gen­er­ate for­eign ex­change, stim­u­late eco­nom­ic ac­tiv­i­ty and cre­ate em­ploy­ment, but say its ul­ti­mate ben­e­fit to the coun­try will de­pend heav­i­ly on the arrange­ments un­der­pin­ning the in­vest­ment.

Wat­son, how­ev­er, is par­tic­u­lar­ly cau­tious, ques­tion­ing whether the coun­try has seen enough in­for­ma­tion to de­ter­mine if the deal is as ben­e­fi­cial as it ap­pears and warn­ing that multi­na­tion­al cor­po­ra­tions ul­ti­mate­ly pur­sue their own in­ter­ests.

“I don’t know if this is a Tro­jan horse. I don’t know if these are Greeks bear­ing gifts,” Wat­son told Guardian Me­dia.

The warn­ing fol­lows Mon­day’s an­nounce­ment that Ibis Steel Com­pa­ny, backed by US-based Pin­na­cle Steel and Vana­di­um Cor­po­ra­tion, plans to restart the Point Lisas steel plant with a US$750 mil­lion in­vest­ment, cre­at­ing up to 1,000 jobs. The fa­cil­i­ty is al­so ex­pect­ed to process vana­di­um, which US of­fi­cials say will help se­cure crit­i­cal-min­er­al sup­plies out­side Chi­na.

Wat­son said that if the ven­ture suc­ceeds, one of its most im­por­tant con­tri­bu­tions could be for­eign ex­change rather than di­rect em­ploy­ment.

He ex­plained that steel pro­duc­tion would ef­fec­tive­ly al­low T&T to again mon­e­tise its nat­ur­al gas by us­ing it to trans­form im­port­ed raw ma­te­r­i­al in­to a prod­uct for ex­port.

“These high­ly in­dus­tri­alised, so­phis­ti­cat­ed com­plex­es, they are not great gen­er­a­tors of em­ploy­ment,” Wat­son said, ques­tion­ing whether em­ploy­ment ex­pec­ta­tions could prove ex­ag­ger­at­ed.

In­stead, he said the for­eign ex­change gen­er­at­ed could have a wider mul­ti­pli­er ef­fect across the econ­o­my, help­ing busi­ness­es that re­quire for­eign cur­ren­cy to im­port goods and sus­tain em­ploy­ment.

But Wat­son stressed that he was wait­ing to see re­sults be­fore de­clar­ing the ven­ture a suc­cess.

He not­ed that steel pro­duc­tion had pre­vi­ous­ly failed at Point Lisas, with the Arcelor­Mit­tal op­er­a­tion clos­ing in 2016. He said he was not yet aware of what changes in mar­ket con­di­tions now make the in­dus­try vi­able.

“I am not go­ing to be hap­py if when the time comes, we hear ex­cus­es about why it doesn’t work and then even­tu­al­ly, some­where down the road, an­oth­er de­ci­sion is tak­en to shut the plant down,” he said.

Wat­son al­so raised con­cerns about the avail­abil­i­ty of nat­ur­al gas, not­ing that do­mes­tic pro­duc­tion has de­clined and ques­tion­ing where the gas re­quired by the re­vived fa­cil­i­ty will come from.

He said ad­di­tion­al Venezue­lan sup­plies could po­ten­tial­ly help but main­tained there re­mained in­suf­fi­cient pub­licly avail­able in­for­ma­tion on the is­sue.

Wat­son said he hoped those be­hind the in­vest­ment had done the nec­es­sary home­work and wished the project suc­cess.

How­ev­er, he warned, “If this is some­thing that is hasti­ly done just to gain po­lit­i­cal points and to score points on promis­es of greater em­ploy­ment and a greater earn­ing of for­eign ex­change, that is not some­thing that I am go­ing to ap­plaud at all.”

He spec­u­lat­ed that the in­vest­ment could al­so re­flect T&T’s in­creas­ing­ly close re­la­tion­ship with the ad­min­is­tra­tion of US Pres­i­dent Don­ald Trump, al­though he stressed that this was spec­u­la­tion.

Har­ris sim­i­lar­ly be­lieves the project has sig­nif­i­cant po­ten­tial but said much will de­pend on the agree­ments ne­go­ti­at­ed by the Gov­ern­ment, par­tic­u­lar­ly re­gard­ing lo­cal con­tent.

She said strong pro­vi­sions en­sur­ing that equip­ment, ma­te­ri­als, ser­vices and work­ers, in­clud­ing em­ploy­ees at man­age­r­i­al lev­els, are sourced lo­cal­ly wher­ev­er pos­si­ble would al­low more of the in­vest­ment to cir­cu­late with­in the do­mes­tic econ­o­my.

“If the agree­ment is like that, then there’s a good po­ten­tial for them to be bring­ing in for­eign ex­change in the restart­ing phase and al­so in the op­er­a­tional phase,” Har­ris said.

How­ev­er, she warned that the op­po­site could oc­cur if equip­ment and ser­vices are large­ly im­port­ed and se­nior per­son­nel are brought in­to T&T on ex­pa­tri­ate con­tracts.

Har­ris al­so wants greater clar­i­ty on pos­si­ble tax con­ces­sions and oth­er in­cen­tives grant­ed to the in­vestor.

She said while an in­jec­tion of for­eign di­rect in­vest­ment would pro­duce eco­nom­ic ac­tiv­i­ty and growth, the more im­por­tant ques­tion was how those gains would be dis­trib­uted.

The coun­try, she said, should there­fore look be­yond the head­line num­ber of jobs and ex­am­ine the qual­i­ty and lev­el of em­ploy­ment be­ing cre­at­ed, in­clud­ing whether Trinidad and To­ba­go na­tion­als will have op­por­tu­ni­ties to move in­to se­nior and man­age­r­i­al po­si­tions.

Har­ris posit­ed that en­vi­ron­men­tal safe­guards sur­round­ing steel and vana­di­um pro­duc­tion must al­so be close­ly scru­ti­nised.

“I think that there’s a lot of unan­swered ques­tions. I think the Gov­ern­ment has to pro­vide a bit more in­for­ma­tion to the coun­try as to how this will ac­tu­al­ly look,” Har­ris said.

She added that while T&T is fac­ing dif­fi­cult eco­nom­ic cir­cum­stances and needs in­vest­ment, the coun­try should not be dri­ven sole­ly by the prospect of im­me­di­ate gains.

“We need to be mind­ful that we shouldn’t rush in just for short-term gains. We al­so need to think about some­thing long-term,” she said.

Har­ris al­so cau­tioned against view­ing clos­er in­te­gra­tion in­to a US-con­trolled crit­i­cal-min­er­al sup­ply chain pure­ly through an eco­nom­ic lens.

She said T&T has tra­di­tion­al­ly main­tained a de­gree of bal­ance in its for­eign pol­i­cy and re­mains eco­nom­i­cal­ly in­ter­con­nect­ed with coun­tries such as Chi­na.

As a small state, Har­ris said T&T must recog­nise that geopo­lit­i­cal re­la­tion­ships can change quick­ly and avoid plac­ing it­self in a po­si­tion where clos­er align­ment with one pow­er im­pacts im­por­tant re­la­tion­ships else­where.

“We have to be mind­ful of that in the long term,” Har­ris said. “We think about main­tain­ing that sort of bal­ance.”