There are no proper incentives for new investors in Nigeria, says Mundra

Manish Mundra

Manish Mundra

Manish Mundra, the Managing Director of Indorama Eleme Petrochemicals Limited, Port Harcourt, Rivers State, spoke with the media on the investment climate in Nigeria and the feat of creating a new fertilizer plant within 34 months. SUNNY OGEFERE was there for The Guardian. Excerpts:
How would you assess government’s involvement in oil business, against the background that your organization used to be public sector controlled?
It has been proven globally that government has no business in doing business. When it comes to petrochemicals, refineries where day-to-day decisions have to be made, bureaucracy does not work no matter how efficient the government is. If a petrochemical plant has a breakdown and you need to fly in engineers tomorrow, I sitting here can say let’s fly them in. Even before that happens and our people say this can happen and we should bring in engineers, I have the power to bring them in, even if it may be a wrong decision. So, you need a lot of actions, which are based on preventive maintenance. But this does not happen in government establishment. Government’s role is to create the enabling environment for businesses to thrive.

This place was run more as a government organisation. Today the leadership is responsible for everything. We cannot blame anybody for anything but us. So, day and night, we take care of this place but if you keep retiring and transferring the MDs, nobody will have the ownership. The most important aspect of running petrochemicals is that you need to have spares in place because you cannot afford the plant to shut down and we did that when we took over from NNPC and that is the world-class management that we are talking about. In the fertilizer plant, we have invested more than $25m in the spare parts, even before the plant takes off. In Eleme Petrochemicals, we invested more than $80m in spare parts when we took over and that is why we are successful and it happens in all the petrochemicals in the world. It is not as if we have done magic. It is the basic rule of management of a petrochemicals plant. Preventive maintenance, proper shut down every 24 to 36 months are important. Like this plant, from when we took over in 2006 to date that is for 11 years, not a single shut down had been done. But from when it was started in 1995 to when we came in, they had not done Turn Around Maintenance (TAM). It was never done in 11 years and you can imagine the position of the plant.

How far has your company been able to generate new job opportunities for Nigerians?
The first part is the construction phase. The construction phase we can easily say on an average that we used about 4500 workers each day. About 2000 Nigerian workers are involved for a period of six months of the construction of this plant. The second phase is the operations. In the operations, we expect more than 300 to 350 direct employment in the plant; because a world-class plant is fully automated, we don’t need many people working around. Everything is controlled from the control room. About 800 people will be on contract with respect to loading, packing, bagging, among others. It doesn’t include the port operations, which will have 80 to 100 people. That is the direct employment. But indirect employment,such as transport facilities, and the usage of fertilizer will create indirect employment. We expect $200 to $300m coming in as foreign exchange earnings. We can expect around $1 billion GDP impact.

Are there prospects of another probe into the privatization of the company, in view of change of government?
Whenever new government comes in, the first thing is another round of probing. As far as the privatisation of Eleme Petrochemicals is concerned, I know a lot because I was heading the privatisation process from the point of view of Indorama Group. I landed in Nigeria in 2005. We and Dangote went through the whole process. The presence of Dangote itself ensured nothing went wrong.

Otherwise he would have won. I am very clear that the whole process was very transparent and we have no fear about any probe. It is not the first time this probe would happen or has happened. We have already had discussion with the House Committee on Privatisation. They were here on a visit. They gave us questionnaires and we have given them answers. As per privatisation law and our agreement with the Federal Government, which we signed in 2006, the monitoring period is five years and after five years is over and the performance is fine, they set us free from any involvement in this thing. There has been proper shareholders agreement and sales agreement and we have complied. That is the confidence on which we have invested $1.5 billion in this place. We have nothing to hide. We have all the documents.

One of the reasons for the probe is said to be that the investment on Eleme Petrochemicals was $2.4 billion and that it was sold cheap. Somebody said that and did not provide proof. The Eleme Petrochemicals was part of NNPC. It was a subsidiary of NNPC. So, all assets of Eleme Petrochemicals were warehoused in NNPC. When the privatisation was done, it was agreed by BPE and NNPC to unbundle Eleme Petrochemicals and give it to us to move the balance sheet forward. So, when they unbundled EPCL from NNPC, the total assets value was $750m. The net asset was around $300m because there was depreciation over 11 years. You know Nigeria better than us.

When it comes to spreading rumours, anybody can do it but when it comes to presenting the papers, you will not find credible information. We have those proper evaluation and we have those proper papers in our hand. It is true that there was an investment plan of phase two and phase three in the same place but it never took off. Even the land that was acquired from this place was more than 900 acres but we only got 350 acres. The balance is still with NNPC because they said they were still working on phase two and phase three and that only phase one was privatised. We know we are truthful. We know we have gone through each and every phase of the privatisation transparently. Most importantly, Dangote was our competitor and we could not have tried to play in front of Dangote so that also ensured a second safety net.

The International Finance Corporation funded our acquisition when we had won and International Finance Corporation did their own due diligence and they have their report on their website. You can also demand and we also provide their own report on the due diligence and their value of the assets. All these international agencies were involved in the privatisation process. Even the bidding process was live on television. I was a participant. We all know that Dangote bided $135 million. We bided $215 million and we increased our bid by $100 million when we were asked to revise our bid in 15 minutes. Everything was transparent. So, we have no fear on that. We have gone far that going back is very difficult because if the probe says something else, we will like to get our refund of $1.5 billion investment. We have given dividends more than $600 million plus to federal and state governments. We have paid between $200 millionto $300 million of taxes. All these are value addition.

Have you really enjoyed pioneer tax status?
One thing I can say as Indorama Group is that we follow the rule of law. If there is a pioneer status law, we have applied for it and we have gotten it as per the law, no special request was granted. We don’t even send letter to the Presidency or anywhere for special favour or grants. The question is whether it is important to have pioneer status, yes it is. In fact, it is too low and that is why no investment is coming to Nigeria. In the last 20 years, countries like Iran, Qatar, Saudi Arabia, Kuwait and all the Middle East, including southeast Asia, in totality would have gotten $100 billion to $120 billion investment in petrochemicals and downstream gas. In 20 years, Nigeria got nothing. Yet it has one of the highest gas reserves in the world. The question is that nobody is paying attention to proper incentives for the new investors to come in.

Companies like Exxon-Mobil and Total are one of the largest petrochemicals producers in the world. They have one of the largest petrochemicals complexes in Saudi Arabia, in Qatar, in Singapore but they did not find time to invest in Nigeria. Somebody should question that and the reason is that Nigeria, the economic team of Nigeria, has never focused on the petrochemicals investment drive for this country.

Today that the crude oil price has gone down, everybody is talking about non-oil base revenue. But non-oil base revenue doesn’t come overnight. It takes years to calculate and cultivate. If you can imagine Qatar, which has huge amount of oil and Saudi Arabia, which has huge amount of oil investing more than $60b to $70b in the last 20 years just to harvest the potentials of gas and non-oil business, they were very smart. They knew that oil prices may go up and down but if you go into petrochemicals, you enter into fertilizers, you enter into LNG, Nigeria was one of the first to enter into LNG, but it entered and it stopped. Qatar has more than 60 trains of LNG. Nigeria started four, five, six and seven.

If you invest $1 million in Nigeria, you will still get the pioneer status of five years and if you invest $1billion, you still get five years irrespective of the quantum of investment. It should have two phases: segment specific and sector specific incentives where Nigeria can focus whether it is agriculture, whether it is petrochemicals, whether it is gas, whether it is power. You should have sector specific incentives. It should also have to do with what you have invested. They have to be scientific about the incentive.



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