MANILA, Philippines – The Board of Investments (BOI) has restored the iron and steel in the 2012 Investment Priorities Plan because of strong private sector interest and to build the country’s existing capabilities.
Trade and Industry Undersecretary Adrian S. Cristobal Jr., who is also managing head of the BOI, said this after submitting the 2012 IPP to DTI Secretary Gregory L. Domingo and for approval by Malacañang.
“We see very strong interest in both foreign and domestic investors in the iron and steel sector,” Cristobal said.
This sector had been a constant fixture as a preferred priority sector in the annual IPP. It was, however, delisted in the 2009 IPP and was placed under the preferred “manufactured products” heading of the 2010 IPP. The nowhere was totally delisted in the 2011 IPP.
“Situation has changed with the expected growth of public spending and the interest of investors in shipbuilding and we have also some capability worth developing,” Cristobal said.
Cristobal, however, refused to say if there have been specific new interests or prospective investors in this sector.
So far, the only huge iron and steel plant in the country is the Indian-owned Global Steel Philippines Inc. (GSPI), formerly government-owned National Steel Corp., which had the distinction of the first integrated iron and steel project in Asia. The NSC was among the basic industries being put up by the Marcos administration to propel the industrialization of the country.
When it was acquired by GSPI, the company was importing steel slabs and converts them into hot-rolled and cold-rolled flat steel. The company has an installed capacity of 1.5 million tons per year.
The Indian operation, however, was beset with financial and labor problems. It stopped operations in 2010 and been unable to get back on its feet since then.
It could be recalled that the Indian firm, which is owned by Pramod Mittal, acquired the firm for P13.25 billion including an upfront payment of P1 billion down payment it owed to secured creditors and the balance to be paid over an eight-year period in compliance with the asset purchase agreement governing the sale of the Iligan-based National Steel Corp. in 2004.
In 2008, however, GSPI took the creditors to a Singaporean arbitration to stop its lenders from declaring it in payment default.
In filing the case, GSPI claimed the creditors and the liquidator were in breach of their obligations when they failed to deliver clean titles of the facilities owing to unpaid real estate taxes of the then NSC between 1999, the time when the plant closed, and September 2004 when GSPI took over the facilities. GSPI claimed it was not able to secure loans to fund its operations for failure to take possession of the titles to the property.
The company also incurred power debt from the National Power Corp. and real estate taxes to the local government of Iligan City.
Since it has stopped operation, the Board of Investments had lifted the 7 percent tariff protection on steel imports allowing imports to come in.
Earlier, the BoI aired concern at the fact that the country has been left behind in its steel and iron development and the GSPI situation was posing a big challenge.
The country, however, has a good chance of developing an integrated iron and steel operation. It has a copper smelter plant in PASAR (Philippine Associated Smelting and Refining Corp., which produces copper cathodes, a raw material for wiring harness.
There are also smaller steel plants in the country but none could compare the opportunities of the Iligan steel plant, which was originally envisioned to become an integrated steel complex.
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By: Bernie Cahiles-Magkilat
Source: Manila Bulletin, May 8, 2012
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