The closure of the Luxembourg-based owned ArcelorMittal steel manufacturing company in Trinidad and Tobago resulted in an estimated average fall in non-energy exports of US$259.2 million over the period 2016 to 2018, according to a Working Paper released here by the Central bank of Trinidad and Tobago (CBTT).

ArcelorMittal, which was formed in 2006 from the takeover and merger of Arcelor by Indian-owned Mittal Steel and is the world's largest steel producer, with an annual crude steel production of 92.5 million metric tonnes as of 2018.

It closed its operations here in March 2016, following the downturn in the international iron and steel industry along with increased competition and domestic considerations.

According to the Working Paper titled 'Impact of the Closure of a Large Foreign Direct Investment: The Case of ArcelorMittal in Trinidad and Tobago,' the closure of the steel company resulted in an estimated average fall in non-energy exports of US$259.2 million over the period 2016 to 2018 and a forgone improvement in the external current account balance.

'Additionally, the fiscal accounts will not benefit from corporation taxes, business levy tax, green fund levy, Value Added Tax (VAT) and property taxes with the closure of this company. With respect to inflation, while it is expected that iron and steel imports will increase, global prices are forecasted to decline and as a consequence, the impact on inflation is expected to be minimal.'

The Paper, written by Ashley Bobb, Lauren Sonnylal, Kester Thompson and Reshma Mahabir of the Research Department of the CBTT, noted that more than 700 people lost their jobs as a direct and indirect consequence of the closure of the plant.

It said that the revenue streams of several statutory boards and similar bodies, and state enterprises such as Trinidad and Tobago Electricity Commission (TandTEC), the Water and Sewerage Authority (WASA) and the National Gas Company (NGC) were also adversely affected.

'On the other hand, the closure of this steel company resulted in a reduction in pollution, which positively affected the environment,' the authors of the study noted.

The Paper said that the closure of ArcelorMittal highlights the need to strengthened labour market policies.

It said that the International Labour Organization (ILO) stresses the role of skills development and active labour market policies to ensure the smoothest transition for dismissed workers from an unemployed status to one of being re-employed.

'These policies are aimed at providing income support for job loss such as unemployment insurance as well as facilitating the return to work through employment programmes, including employment-intensive programmes, skills development and entrepreneurship support measures.'

But it noted that in countries where unemployment insurance programmes are not available consideration should be given to designing and implementing a contributory unemployment insurance scheme. 'Additionally, skill training agencies/programmes can link training to occupations that are experiencing shortages (manufacturing sector) or where future job growth is projected.

'Finally, foreign investment is guided by polices outlined in bilateral investment treaties. One observation has been that while investors are protected from various forms of state actions, these treaties do not always outline the responsibilities of investors. Countries need to reassess their model bilateral investment treaties to ensure the best outcomes for their economies.'

© Pakistan Press International, source Asianet-Pakistan