For the past week, The Grey Chronicles analyzed the investment forays of Global Steel Holdings Ltd. [GSHL] from the Balkans, Bulgaria, Nigeria, Libya, India and Zimbabwe. The series of posts was triggered by a review of Pramod Mittal’s promise, or dreams, made during the inauguration of National Steel Corporation in the Philippines back in 04 February 2004. This post continues the epilogue of the series for insights which could be gleaned from GSHL’s incessant requests for enabling platforms in foreign lands and their repercussions to Global Steel Philippines.
Enabling Platforms
All the terms enunciated by Global Infrastructure Holdings Ltd. [GIHL] in 2004 were met by the Federal Government of Nigeria. Furthermore, Nigerian government decided to make GIHL business environment even more conducive. Julius Berger was given the contract for the construction of a 25km rail line between Agbarbo to Delta Steel jetty and Warri port, to be completed by April 2007 just before President Obasanjo’s departure. A contract was also awarded for the dredging of parts of Warri River and moving out of oil pipelines to create lanes for the movement of goods by GIHL, clearly indicating Obasanjo’s personal interest in the business (Sahara Reporters, 2007). It also asked for government support in form of finance or granting it the right to lift 160,000 barrels of oil per day, land allocation of 50,000 acres, supply of natural gas at subsidized rates and long-term rights to some iron ore mining plants located across Kogi State (News Nigeria, 2007).
Before the probe panel was set up on 30 October 2007 by Chief Sarafa Isola, Minister of Mines and Steel Development, Mr. Sunil Manwati, President of Global Infrastructure (Nigeria) Ltd. [GINL] dismissed all the allegations against the company, describing them as politically motivated. He said the company was not afraid of the probe as the panel would reveal that the federal government had not kept its part of the agreement. Aside the rail line, GIHL wanted the government to dredge the Warri River to enable big ships bring raw materials that would be used at DSC. Manwati claimed that to produce one million tons of liquid steel, at least 11 million tons of raw materials would be required (News Nigeria, 2008).
Yet, after the cancellation of its concession management for its Nigerian plants, on 03 April 2008, GSHL said it had “not been receiving the promised support from the Federal Government of Nigeria (FGN).” (Business Standard, 2008).
Accused of removing equipment and other materials from Ajaokuta in the name of “borrowing” (Melah, Elendu Reports, 2007) in Nigeria between 2005 to 2007, GSHL scuttled the proposed US$400M investment in August 2006 (The Zimbabwe Independent, 2006), citing massive corruption at Zimbabwe Iron and Steel Company [ZISCO] involving high-level government ministers (VOA, 2006; Engineering News, 2006), plus the lack of assurances on coal supplies (Financial Gazette, 2006). It was found out later that ZISCO’s lack of coal was seemingly due to nonpayment of its bills to the colliery (Engineering News, 2006).
Annotations: In 2004, the Philippine government supported the proposal to declare Global Steelworks Infrastructure Inc. [GSII] an economic zone (Philippine Daily Inquirer, 2004). In 2005, aside from government rules bent for GSHL (Manila Times, 30 May 2005), it was granted a “slew of fiscal and non-fiscal incentives under a double registration both with the Board of Investments [BoI] and Philippine Economic Zone Authority [PEZA].” (Daily Tribune, 2009).
By 2006, the Board of Investments [BoI] was hesitant to grant a certification of commercial operation to Global Steel Philippines (SPV-AMC), Inc. [GSPI], formerly GSII, pending validation of its purported exports. The start of commercial operation is crucial to a BoI-registered enterprise as it is also the reckoning date to avail of income tax holiday incentives. Moreover, under Executive Order 375, the tariffs on imported steel would revert to a high of 7% from the 3% once Global Steel is already in full commercial operation as certified by the Committee on Tariff and Related Matters [CTRM] (Manila Bulletin, 2006).
In 07 October 2007, GSHL proposed to convert GSPI’s 1.8-million-ton Hot Strip Mill into a 3.2-million-ton integrated project in the Philippines at an investment of around $1.6 billion, with formal agreement likely to be signed in December with the Philippine government, which assured adequate raw material and energy linkage to facilitate the plant (Hindu Business Line, 2007).
When it re-opened GSPI’s steel plate mill last July 2008, Lalit Kumar Sehgal, Managing Director of GSPI told reporters that “government policy must pamper foreign investments” to push through with its proposed $1.6-billion integrated steel plant project. Sangram Mohanty, Vice President for Corporate Communications, said it was all about government putting in place “an enabling platform to make our planned investments a reality.” In meetings with the BOI, GSPI identified the various “problematic” areas of concern to the company: over P50 million payment in its monthly electric bill and thus sought preferential rates being one of the biggest power users in Mindanao (Manila Standard, 2008). The Department of Trade and Industry also went out of its way to intervene when state firm National Power Corp. [Napocor] cut the power supply line of GSPI when it missed paying its electric bills for several months (Daily Tribune, 2009).
Despite its repeated failure to honor commitments on steel production with the government, whereby Philippine-based steel producers asked the government to allow importation under the Japan Philippines Economic Partnership Agreement [JPEPA], GSPI demanded in June 2009 that the government increase tariffs on hot rolled coils [HRC] and cold-rolled coils [CRC] to 15% from 7% following its claim that the surge in imports poses a serious threat on its operations, although it was operating on a per order basis (Daily Tribune, 2009).
Notes:
The Business Standard (2008). Nigerian shock for Global Infra, Kolkata: The Business Standard, 04 April 2008. back to text.
Campbell, Keith (2006). Indian group rejects ‘corruption cesspit’. Creamer Media’s Engineering News, 20 October 2006. back to text: 1 | 2.
Estopace, Dennis D. and Niel V. Mugas (30 May 2005). Govt rules bent for Nat’l Steel owners, Special Report. Manila: The Manila Times, 30 May 2005. back to text
The Hindu Business Line (2007). Global Steel to set up 3.2 mt plant in Philippines. New Delhi: The Hindu Business Line, 08 October 2007. back to text
Infante, Ayen (2009). Delinquent NSC operator wants more gov’t perks. Manila: The Daily Tribune, 08 June 2009. back to text: 1 | 2 | 3
Mafunda, Kumbirai (2006). Hwange blamed for failed ZISCO deal, The Financial Gazette. The Zimbabwe Situation, 15 September 2006. back to text.
Cahiles-Magkilat, Bernie (2006). BoI to validate Global Steel exports. Manila: The Manila Bulletin, 07 June 2006 . back to text
Melah, Bonaventure (2007). Mega Fraud at Ajaokuta. Elendu Reports Elendu Reports, 18 April 2007. back to text.
Nyakazeya, Paul (2006). Talks over ZISCO collapse. Harare: The Zimbabwe Independent, 07 July 2006. back to text.
The Philippine Daily Inquirer (2004). President backs ecozone bid for National Steel plant. Manila: Philippine Daily Inquirer. 05 February 2004. back to text
Odunlami, Tayo (2007). Privatisation Scams Of OBJ’s Era. Abuja: The News, 24 September 2007. back to text.
Oriloye, Clement (2008). Voiding A Dubious Deal. Lagos: The News Nigeria, 07 April 2008. back to text
Ramos, Elaine Ruzul S. (2008). Global Steel seeks friendly policies, lower power rates. Manila: The Manila Standard Today, 21 July 2008. back to text
Umar, Col. Abubakar (2007). How Obasanjo and Co. Looted Nigeria in 8 Years. Sahara Reporters, 2007. back to text.
Zulu, Blessing (2006). Indian Steel Firm Withdraws From Venture With Harare, Cites Interference. Washington: Voice of America News, 25 August 2006. back to text.
Disclaimer: The posts on this site do not necessarily represent any organization’s positions, strategies or opinions; and unless otherwise expressly stated, are licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 License.
The Grey Chronicles 