EDITORIAL - Responding to UC Rusal

Fortuitously, Carlton Davis is not only still around, but is a close adviser to Prime Minister Portia Simpson Miller.

He is an expert on the global alumina industry, who represents institutional memory, much of which he has documented in books. He was, for instance, head of the Jamaica Bauxite Institute (JBI) when, in the recession of the 1980s, Alcoa closed its alumina refinery at Halse Hall, Clarendon.

When Alcoa wanted to resume control of the refinery, Jamaica negotiated a new ownership arrangement that today translates to 45 per cent of the operation.

Additionally, for several years Dr Davis was chairman of CAP, aware of the strengths it has afforded Jamaica, the problems it has faced and the pitfalls that can cause the level of accumulated losses now carried by the company.

Surprise, surprise

Our point is that we expect that the Simpson Miller administration would have long tapped institutional memories, Dr Davis' included, to develop contingencies for a development such as occurred this week - the announcement by UC Rusal that it will close its Ewarton refinery before year end. For as shocked as the mining minister, Phillip Paulwell, professes to have been, our surprise is that he was surprised.

Jamaica's primarily oil-burning power plants, including those that fire our alumina refineries, place the industry in the lower half of global efficiency. The inclination during periods of global stagnation and lower aluminium prices is to use Jamaica as a swing site for global production.

This has clearly been factored in Rusal's strategy for Jamaica, where its three refineries account for 65 per cent of potential alumina production. Two of those plants are closed. Ewarton has remained open only because of the Government's concession on the production tax, based on the price of aluminium, as well as the royalty that the companies pay.

The Government was willing to waive the entire levy but Rusal apparently insisted on even more concessions, including not having environmental management upgrades and capacity and efficiency enhancements.

More economic woes

Of course, Rusal, controlled by the Russian oligarch, Oleg Deripaska, would have been aware that the closure of Ewarton, with a loss of 600 jobs, would be another body blow to the Jamaican economy, and in particular to rural communities, already limping from the earlier mothballing of refineries.

Whatever the reasons for Rusal's action - and energy and markets are substantive issues - it is also a fact that Mr Deripaska's company has serious governance issues - evidenced by its problems in Guyana, Guinea and Europe over the manner in which it does business and, sometimes, relate to host governments. Indeed, Jamaican technocrats have complained of Rusal's seeming lack of a medium to long-term posture for its Jamaican assets.

Ewarton further highlights the urgency with which Jamaica needs to convert from expensive oil to cheaper forms of energy to give its economy as chance of survival.

In the meantime, as the template of the 1980s demonstrates, Rusal need not be the only game in town. There are others, we believe, who might wish to gain a toehold in Jamaica's bauxite/alumina sector. And it is the responsibility of our Government to protect the economy.

The opinions on this page, except for the above, do not necessarily reflect the views of The Gleaner. To respond to a Gleaner editorial, email us: editor@gleanerjm.com or fax: 922-6223. Responses should be no longer than 400 words. Not all responses will be published.