The Jamaican government and the owners of the island's alumina refineries and bauxite-mining operations are haggling over what concessions the island will have to provide for firms to stay open in the face of a slump in demand for aluminium.

"The companies have placed what they want on the table and the talks are turning on what they, in turn, are willing to give in return for any reduction in the bauxite production levy," senior government and trade union sources said yesterday.

The levy was projected to bring in more than $8 billion in revenue for the Government this year, but is off target so far by a third. The negotiations form part of efforts by the Golding administration to shock the economy back to life.

The stimulus package unveiled by Golding amounts to no less than $28 billion to be injected in the economy mostly in the form of loans to businesses.

More details to come

Indeed, the package is con0siderably higher in value, but the mortgage relief to be provided by National Housing Trust, the likely concessions on the levy and the bigger pay-outs for government contracts under the 10 per cent procurement concession have not been costed.

Finance Minister Audley Shaw has said the details of the stimulus package, including its financing and fiscal impact, would be addressed in January when the revised budget is tabled.

Administration officials, meantime, have declined to divulge the government's negotiation position, but trade union sources told the Wednesday Business that the alumina firms would like to see the suspension of the levy for up to two years.

"My reading of it is that the administration does not believe that it can make a concession at this level, but is perhaps willing to meet the companies somewhere in between the extremes," one trade unionist said. "However, how the far the government goes will depend of how much production they undertake to keep in Jamaica," he said. "There could be a kind of sliding-scale, benchmarking me-chanism."

Bauxite is the raw material from which alumina is refined.

Alumina, in turn, is smelted into aluminium - a metal widely used in the aviation, motor vehicle and building industries.

The Jamaican Government earns most of its income for the exploitation of the mineral from a levy on the companies that is linked to the price of aluminium on the London Metal Exchange.

One company, Jamalco, a joint venture between Alcoa and the Jamaican government, is governed by a regular income tax regime, to which it moved in 2001 when it undertook a 25 per cent increase in its capacity. That offer was open to all firms operating here.

In the current financial years, which ends on March 31, 2009, the government projected earnings of $8.6 billion from the bauxite production levy, or just over two per cent of $265 billion in taxes it expected to pull in for the fiscal year.

But with the with aluminium prices having collapsed in the world market in the face of the global recession, the government's earnings from the levy for the first seven months of the fiscal year — up to the end of October — at $3.21 billion, was $1.55 billion or 32.5 per cent below projections.

Bauxite production for 2008 is to projected to be marginally above last year's 14.6 million tonnes.

This shortfall in levy earnings, which is expected to grow worse, will leave a substantial gap in the government's budget and make it even harder for the Golding administration to meet its target of a fiscal deficit of no more than 4.7 per cent of GDP.

However, the government is prepared to provide the companies with concessions to prevent them from closing plants that would throw up to 5,000 workers employed in the industry out of jobs.

Already the firms have laid off at least 350 workers and could cut more.

The major players in the industry here are Alcoa and UC Rusal, the Russian firm, which controls two refineries formerly owned by Alcan, and has a 65 stake in Alumina Partners, which it owns with the Norwegian firm, Norsk Hydro.

St Ann Bauxite, a mining operation, which used to be controlled by Kaiser, is now owned by Century Aluminium and Miranda Minerals.

CONFIRMATION

In a broadcast Sunday night Golding confirmed that his government had offered "certain concessions" to keep the firms from mothballing their operations, but took it as a given that jobs would go.

"... We may not be able to avoid a cutback in production, but we are doing everything possible to keep the plants in operations and save the jobs of the workers in the industry," Golding said.

The PM has already signalled that a portion of the finacing for his stimulus plan will come from multilateral sources, saying some US$600 million of inflows are due in six weeks, but some of the funds are already costed in the budget.

business@gleanerjm.com

Stimulus funds

Taxes foregone	$862m
DBJ loans	$500m
Infrastructure	$2.4b
Ex-Im loans	$23.6b
Small business loans	$650m
Total	$28 billion   More Business Print this Page Letters to the Editor Popular Stories   © Copyright 1997-2008 Gleaner Company Ltd. Contact Us | Privacy Policy | Disclaimer | Letters to the Editor | Suggestions | Add our RSS feed