The RM18b Aluminium Smelter - 1Project that I Could Never Understand

About a year ago, I wrote a rather xenophobia-tainted blog post titled "Bakun- Cheap Energy for Foreign Companies while Malaysian Consumers and Industries Pay for Expensive Energy". The Bakun Dam is something that I could never ever understand the logic behind building the whole thing. I do not understand why we need to flood a forest larger than the size of Singapore and displaced all the Orang Aslis living in this tropical forest so that we can sell cheap energy to some foreign firms in an industry that is very capital intensive, meaning, very little money will actually go to the rakyats pocket. 

The psychological damage done to the Orang Asli is probably quite serious- imagine if your whole life, you only know how to hunt. Now, when you are 45, you need another way to make a living. Is the few hundred jobs that are created through the dam justify the huge damage done to the least privileged amongst us?  The late US Vice President, Hubert Humprey said that ,"The moral test of government is how it treats those who are in the dawn of life, the children; those who are in the twilight of life, the aged; and those in the shadows of life, the sick, the needy and the handicapped.". Applying this test to the Bakun Dam, we probably failed the test.

Then, today, I read about the RM18b investment made by Abu Dhabi. It is the front page headline in the Star. The investment involve RM12.7b in an aluminium-smelter and RM 5.4b in downstream activity. This investment is another bad investment that I feel we are attracting in this few years - huge in quantity, lacking in quality. It makes a lot of sense to develop our O&G sector to bring the entire value chain into our country. But, it makes no sense to build a dam to cater to producing a metal in which is not mined in our country. 

The article state that 40,000 jobs would be created. I am not sure who is working on this projections, but, I think he must be having a really tough time adding up all the numbers in downstream activities to make up the 40,000 numbers. At 40000 jobs, it is RM450k per job. One expensive job creation project. I think, if we spent like 1% of the numbers i.e. RM180mil to create a venture capital fund to fund our young start ups, we would be able to create more jobs than that. Instead, our government venture capital is used to fund a listed company which should technically have no difficulty in accessing funding. That company, by the way, is also responsible for creating our 1Malaysia e-mail. 

Now, the RM450k per job number is a very big number. But, I think, we would not even get 40,000 jobs in the project unless the downstream sector really created a lot of jobs. Since there are no numbers on the output of the smelter, I will use some very rough benchmarking. Based on the recent Alcoa Icelandic smelter project,  a smelter should create around 200 jobs per 100000 tonnes of output. The planned Chalco plant in Sarawak cost US$1billion (roughly RM3.8b at previous exchange rate) for a 1.2 million tonnes of output. So, the Abu Dhabi plant should be 3x the size based on capital outlay and produce around 3.6m tonnes of output. The direct job creation from the plant alone is 7200 jobs. So, the forecasters are projecting that the remaining downstream activities will create 32,800 jobs. It is a 4.6x multiple. In US, the multiple is slightly more than 3x. Can our 1Malaysia smelter create 50% more jobs than US on a multiple basis? I don't know. Our government departments certainly can do it by being very inefficient. Perhaps, our 1Malaysia smelter can do the same too.

As most of our electricity in Bakun is actually sold to foreign investors via aluminium smelting, our action do not seems to be a lot different from those of Cambodia and Laos who are building some dams on the Mekong to sell to their neighbours like Thailand. The reason for the Cambodians in doing so is understandable. Their former leaders have the "foresight" to almost wipe out their entire generation of educated population through genocide. So, they have nothing much left in the country that is at a competitive advantage than its neighbours apart from making use of their natural advantage of the Mekong. But, it seems that, our country is as screw up as Cambodia that our only competitive advantage is to displace people and build dams. Satu lagi Projek Kerajaan Barisan Nasional.