Chinese company to invest $2.3b in steel plant

[bluesky]

Problem with the figure is 30,000 jobs is way too high for 2 MT capacity. (5 times more inefficient than the global norm).

At global average (about 330 tonnes per worker per year), the jobs created would only be around 6,000....plus minus some amount depending on corollary activities setup. As comparison, the recent steel mills currently recently finished or under construction in India have 10 MT steel capacity output for 30,000 jobs.

This (if this ratio is true for this project) has all the hallmarks of another debt trap provided by a loanshark nation with increasing numbers of zombie steel enterprises (among other heavy industry sectors generally)...combined with a corrupt kickback friendly receiving govt (who will also have their minions and thugs benefit).....i.e over invoice the capacity transfer through extremely old mothballed equipment with 5 times less labour efficiency than the current standard....to create a long drawn out debt extraction, largely dictated by current and future seignioriage trends of the USD (esp when its stagnant stockpiled to the degree of trillions that China does).

Combine this with such ham-fisted approach of the receiving govt to this industry (and more importantly the demand industries like transportation where the duties continue to be of in crazy-high region, leading to just 600 cars being assembled in BD each year), and it is clear who is going to benefit (loanshark + few elite) and who gets stuck with the bill long term (people, most not even born yet).

Employment of 6,000 or 30,000 is no issue. It is a private investment and the company will decide how many are required to be employed. 30,000 may be a newspaper idea. Also, since it is a private project, so, the GoB is not directly involved and has nothing to lose. It will get its taxes and BD people will be employed.

But, I am worried about the worthiness of this news itself. Note the headline. It says the company executives will arrive on Monday, July 16. But, I found no follow-up news. I would appreciate if someone uploads it.

 

[Nilgiri]

Employment of 6,000 or 30,000 is no issue. It is a private investment and the company will decide how many are required to be employed. 30,000 may be a newspaper idea. Also, since it is a private project, so, the GoB is not directly involved and has nothing to lose. It will get its taxes and BD people will be employed.

But, I am worried about the worthiness of this news itself. Note the headline. It says the company executives will arrive on Monday, July 16. But, I found no follow-up news. I would appreciate if someone uploads it.

Well it just seems silly what Bangladesh is focusing on (high capex, low employment investment) when it makes sense to reduce all VAT, duties to 0 (or close) for manufacturing sector more broadly where you get much better return on jobs/dollar invested....and then buy the cheapest steel you can find for those on international market. You will get both much more MVA production and jobs created.

And GoB is heavily involved btw, this is one part of the MOU loan stuff that GoB signed with China. Where do you think the working capital will come from? Not the Chinese company, but a typical not well known Chinese bank (with levers from their govt). It is how they operate in Africa and Asia largely esp for infra and large assets.

You can wait to see for yourself in the final fineprint.

 

[UKBengali]

Problem with the figure is 30,000 jobs is way too high for 2 MT capacity. (5 times more inefficient than the global norm).

At global average (about 330 tonnes per worker per year), the jobs created would only be around 6,000....plus minus some amount depending on corollary activities setup. As comparison, the recent steel mills currently recently finished or under construction in India have 10 MT steel capacity output for 30,000 jobs.

This (if this ratio is true for this project) has all the hallmarks of another debt trap provided by a loanshark nation with increasing numbers of zombie steel enterprises (among other heavy industry sectors generally)...combined with a corrupt kickback friendly receiving govt (who will also have their minions and thugs benefit).....i.e over invoice the capacity transfer through extremely old mothballed equipment with 5 times less labour efficiency than the current standard....to create a long drawn out debt extraction, largely dictated by current and future seignioriage trends of the USD (esp when its stagnant stockpiled to the degree of trillions that China does).

Combine this with such ham-fisted approach of the receiving govt to this industry (and more importantly the demand industries like transportation where the duties continue to be of in crazy-high region, leading to just 600 cars being assembled in BD each year), and it is clear who is going to benefit (loanshark + few elite) and who gets stuck with the bill long term (people, most not even born yet):

https://www.thedailystar.net/business/steel-millers-oppose-15pc-vat-rod-1403842

Welcome back butt-hurt.

Why is BD getting billions and billions of US dollars in FDI from multiple sources like China, USA and Germany? Just the German power investment in BD will come to nearly 9 billion US dollars.

 

[bluesky]

Well it just seems silly what Bangladesh is focusing on (high capex, low employment investment) when it makes sense to reduce all VAT, duties to 0 (or close) for manufacturing sector more broadly where you get much better return on jobs/dollar invested....and then buy the cheapest steel you can find for those on international market. You will get both much more MVA production and jobs created.

And GoB is heavily involved btw, this is one part of the MOU loan stuff that GoB signed with China. Where do you think the working capital will come from? Not the Chinese company, but a typical not well known Chinese bank (with levers from their govt). It is how they operate in Africa and Asia largely esp for infra and large assets.

You can wait to see for yourself in the final fineprint.

China has promised loans for the development projects, such as the ports and harbors, bridges and highways. But, the steel company is a private one. It borrows from whatever its source. The GoB has no obligation on paying back a money that it has not borrowed. It is very simple.

BD purchases steel from the foreign sources right now. Its small steel companies also buy scarps and smelt them to produce not so high-quality steel. A private investment by a professional company is miles different from importing the same goods because it will be in our own land.

It will be a highly integrated mill starting from smelting in the furnace to produce ingots, and all other subsequent finished/semi-finished products. The existence of high-quality furnaces means the steel company will produce various grades of steel. As you know the steel used to produce plates for ships is not the same as the steel to produce deformed bars, angle, channel or roof cladding.

 

[Nilgiri]

China has promised loans for the development projects, such as the ports and harbors, bridges and highways. But, the steel company is a private one. It borrows from whatever its source. The GoB has no obligation on paying back a money that it has not borrowed. It is very simple.

BD purchases steel from the foreign sources right now. Its small steel companies also buy scarps and smelt them to produce not so high-quality steel. A private investment by a professional company is miles different from importing the same goods because it will be in our own land.

It will be a highly integrated mill starting from smelting in the furnace to produce ingots, and all other subsequent finished/semi-finished products. The existence of high-quality furnaces means the steel company will produce various grades of steel. As you know the steel used to produce plates for ships is not the same as the steel to produce deformed bars, angle, channel or roof cladding.

Firstly, increasing the VAT on steel products from 5% to 15% is counter to all of this. Same with increasing the duties or keeping duties high on steel consuming industries.

Secondly, if for example 1 million dollar investment into one thing creates 10 good paying jobs, and the same investment into another thing creates 100 good paying jobs....which one would you pick? BD govt is more inclined to pick the former, because optics +kickback potential. China is only too willing to help them because it can loan shark in long run....this is not a quality private investment, this steel company is Chinese SOE:

http://portal.infospectrum.net/searchorder/GoogleCompanySearch.aspx?CompanyId=95745

So let's see how much is investment and how much is loan-based.

For some stupid reason, BD govt is keeping high taxes on the sectors of manufacturing that can create jobs with much less investment. Steel is notoriously heavy investment for few jobs....perfect debt trap these days especially in era of overcapacity and low priced steel internationally.

Why is BD getting billions and billions of US dollars in FDI from multiple sources like China, USA and Germany? Just the German power investment in BD will come to nearly 9 billion US dollars.

Um its not FDI. Did you look at UNCTAD figures for FDI into Bangladesh? Decrease from 2.3 bln to 2.1 bln from 2016 to 2017.

Given the low amount to begin with, the decrease is quite the reverse of "billions and billions".

http://unctad.org/sections/dite_dir/docs/wir2018/wir18_fs_bd_en.pdf

What's even more concerning is the FDI stock in Bangladesh....it increased by only 18 million dollars from 2016 to 2017 even with an inflow of 2.1 billion dollars. That is some heavy depreciation of assets indeed.

So called investment from Germany also actually has to materialise....rather than just be a proposal/commitment/MOU. They all come, they all go just as quickly....few stick.

 

[bluesky]

China is only too willing to help them because it can loan shark in long run....this is not a quality private investment, this steel company is Chinese SOE

It has nothing to do with GoB even if the steel company KISC is a state-owned enterprise (SOE) of China. KISC will invest Chinese money and it is not a headache for BD. BD is happy to see this company employ many thousand workers, its production to raise the GDP and to supply steel materials for the local market that will heat up also the local economic activities. So, why BD should be worried about it?

 

[Nilgiri]

It has nothing to do with GoB even if the steel company KISC is a state-owned enterprise (SOE) of China. KISC will invest Chinese money and it is not a headache for BD. BD is happy to see this company employ many thousand workers, its production to raise the GDP and to supply steel materials for the local market that will heat up also the local economic activities. So, why BD should be worried about it?

Like I said and you said, there is yet to be a follow-up. All I am saying is that MOUs for the Chinese loans included the steel sector...so let us see what is actually done in the end. Bangladesh has this tendency to have one thing announced and then later something else takes place, esp when it comes to hard FDI collateral.

 

[Hasan89]

Marhabah... BD & China

Those who are bitter