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By Dennis D. Estopace and Niel V. Mugas , Reporters
Last of 3 parts
ILIGAN CITY: After attending a flag-raising
ceremony here, Vice Mayor Henry Dy walked to the City Assessors’
Office and, five minutes later, called The Times to say that the new
owners of National Steel Corp. are facing penalties.
“The deadline we agreed upon was April 15 for
Global Steelworks International Inc. [GSII] to pay P38 million,”
Dy said, adding that for every month that the Indian-owned company
failed to pay, the city government would impose a 6-percent penalty.
Beginning January, the Iligan City government
would exact from the GSII P760,000, or P3.04 million additional fees
by the end of May.
This money, Dy said, can build four new
classrooms for the city, based on the Public Works and Highway
estimates of P700,000 to build one classroom for 30 students.
Dy said that if the GSII wouldn’t be behind in
paying obligations to the city, the company agreed to pay the P800
million it owes the local government. He added that the amount is
equivalent to Iligan City’s budget for this year, excluding the
supplemental fund requirements.
More than allegations of smuggling by the Bureau
of Customs, industry and government leaders like Dy are worried that
the Indian-owned GSII seems to be running short of finances, since
it cannot pay some of its obligations.
This has raised questions over the company’s
ability to pay the P13.25 billion it needs to take over National
Steel Corp.
The GSII agreed to pay that amount with a down
payment of P1 billion with which it will pay the corporation’s
creditor banks, most notably the Philippine National Bank, by 2012.
The remaining P12.25 billion will be paid on installment over the
next eight years beginning last year, with the remaining debt to be
paid on installment.
Top officials of the Philippine steel industry,
however, doubt whether the GSII can keep its side of the bargain,
because the company seems to be strapped for cash.
However, in reply to The Times’s emailed
questions that the company rewrote in a press release last week,
GSII President Sushant C. Das maintains his company is financially
healthy.
Over and above the P600-million debt that the
National Steel Corp. ran up before the GSII took over, Das said
“all our obligations are current.”
“We have paid $1.564 million in duties and
taxes in a two-month period, and we will become one of the
Philippines’ largest taxpayers in the next 12 months,” he said
in an email passed through the public relations firm that the GSII
hired in mid May.
Global company
Das is confident that the company will be
“100-percent operational by June, producing 1.2 million tons of
steel annually.”
“We are optimistic about increasing foreign
sales because we have received orders for a variety of steel
products from other Asean countries, in addition to our first export
client in China,” Das added in a statement.
The GSII—a subsidiary of Global Infrastructure
Holding Limited—acquired the National Steel Corp. in February
2004. Das said the Iligan plant had been in disuse for more than two
years at the time. As a result, it was in disrepair and required
considerable rehabilitation, he said.
“This is why we are carrying out our plan,
under our Approved Purchase Agreement, to invest $50 million-60
million to rehabilitate the plant and create a truly world-class
facility,” he said.
Das added that his company also paid an initial
P1 billion to assume control of the plant. In all, it will pay the
government P13 billion for the National Steel Corp. The next payment
is due in 2006.
The GSII reported revenues in excess of US$30
million for domestic and international sale of 45,000 million tons
of steel during its preliminary startup and rehabilitation phase.
But records from the Securities and Exchange
Commission show that the GSII had only about P11 million initial
capitalization for National Steel’s rehabilitation. Some industry
leaders maintain that money isn’t enough for any upgrading.
One official noted that steel producers in
Taiwan and Korea spent about P1 billion to upgrade their hot and
cold mills.
“This fund [P11 million] allowed the GSII to
rehabilitate National Steel’s plant, which, during the takeover,
could already be considered a half-built, dilapidated house,” the
official said. “The company needs more money for upgrading.”
Das said in a statement, however, that the GSII
has invested around $30 million to rehabilitate the Iligan plant in
the past 12 months.
“We plan to invest at least another $25
million,” he added. “This is in addition to our payment schedule
for the company itself.”
Das said that from their current 1,125 workers,
the GSII would have 1,400 “people on staff by end July.”
Played down
For all the promises of progress that the
rehabilitation of National Steel would bring, it is the City of
Iligan that should be exuberant.
Not so, said Vice Mayor Henry Dy, who played
down Das’s claim of generating employment for his city. Dy told
The Times that the number of workers employed by the GSII wouldn’t
exceed 800 but still is above 600.
He looks forward, however, to the startup of the
billeting plant by June that would process metal scrap and be sold
to the local economy. Nonetheless, asked if the GSII could bring
back the “glory days” of National Steel, Dy just shook his head.
Before the corporation shut down in November
1999, it had 3,800 workers and was, besides the city’s majestic
waterfalls, Iligan’s source of pride and income.
And just like the corporation, which has become
deeply indebted with almost P16 billion, its employees were strapped
for cash not long after. The workers added to the unemployment
figure of 14,000 for the city and cut down almost P80 million in
contributions to local revenues. Some P10 million of that would have
gone to Barangay Suarez, where National Steel is located, to pay for
real-property taxes.
Today, Iligan City Councilor Alfredo R. Busico
said National Steel’s new owners owe the local government P153
million in real-property taxes alone.
“But despite the obligations the GSII owes us,
we’re not about to choke,” Dy said, adding that the people of
Iligan City have learned from the mistakes of relying on National
Steel for their economy.
Indeed, Iligan City has become the industrial,
commercial and education hub of the province of Lanao del Norte.
Today, the city has 14 major manufacturing industries turning out a
dozen major products including cement, caustic soda, and burned and
unburned bricks. Its waterfalls have been tapped by the National
Power Corp., which energizes the whole Mindanao.
Thus, Rubico said, Iligan City can afford to
give incentives to companies like the GSII. The city, he said, can
remain proud not only because the GSII is just one of the major
revenue contributors to it but because the city could get paid if
the new owners can’t pull it off and decide to shut down again.
“We can always get paid when they sell their
machineries, for example, or their land,” Rubico added. “When
National Steel closed, we were hurt but we never lost. If the GSII
closes again, we can always sell the land.”
Indeed, the GSII has been given all the breaks
it needs.
And Das said he and his company are committed to
its investment in the Philippines, “to our people who have
contributed to our success, and to Iligan City which is again a
strong industrial center as a result of the plant’s reopening.”
“We look forward to continue contributing to
this positive economic transformation,” Das added.
In July, when the GSII completes a month’s
commercial operation, these incentives will show if the government
has used a good hammer on its anvil to shape industry and business.
Part 1 | Part
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