Oct 26 2008

This post is also available in: Icelandic

From One Mess to Another

Andri Snær Magnason, Fréttablaðið – In these turbulent times interested parties use the opportunity to offer us “solutions” and relief. This time around it involves “alleviating all restrictions” and putting public energy companies up as 300 – 400 milliard collateral for two to three new aluminium plants. This is what is on the drawing board when the total debt of OR and LV (the central public energy institutions) are already at a dizzying 550 milliards – mostly because of Alcoa and Norðurál (Century Aluminum). This is why the banks always preached large-scale industry policies – more debt – more joy. It’s down to the price of aluminium to repay these loans, but aluminium prices are plummeting and a level of overproduction has already been reached. The nation believes that the magic term EXPORT EARNINGS is money that will end up in the nation’s pocket. News of export earnings and foreign currency receipts have time and again been directly false and treacherous. A bar chart published in the Morgunblaðið newspaper the 11th of October depicts the aluminium industry as more important than the fishing industry and considerably larger than the tourism industry. But the presentation is exactly as the INTERESTED PARTIES would like to have it portrayed in the media. When Alcoa Fjarðaál claims to export for 70 milliards a year, most Icelanders believe that this is currency that we can use.But the fact of the matter is this: If the average salary is 5 million, Alcoa’s labour cost is 2 milliards per annum. Since the Icelandic krona took a nosedive, Alcoa’s labour cost has fallen from 30 million dollars to 20 million. Alcoa is therefore now saving a whole milliard per annum because of the weakening of the krona, and our foreign currency income diminishes at the same rate – this is somewhere around 10 million dollars a year. Alcoa saves around 200 million dollars p.a. in energy costs, compared to Europe and the USA. That is equivalent to 4000 annual salaries, so this business has a lot to gain from this – use the crisis and make 40 year contracts with a weak nation and save a total of 8000 annual salaries with a aluminium plant at Bakki.

Alcoa pays 6-8 milliards for energy. ALL THIS MONEY GOES OUT OF THE COUNTRY TO PAY LANDSVIRKJUN’S DEBTS for the next 40 years and will therefore never run into the economic system to facilitate student loans, consumption, or the health care system. Here we find the distinct and enormous difference on how the outcome is, for Alcoa on one hand, and Landsvirkjun on the other, of investments similar in scale. This means that with the meagre 5% tax that Alcoa negotiated especially – the actual impact of Alcoa Fjarðaál is around 3-4 milliards and not the 70 milliards the company claims when it boasts about its export earnings.

The remainder – more than 65 milliards, ENTIRELY bypasses the country. These milliards do not have any more to do with us than the airplanes that fly in and out of our airspace. It is immoral to try to dupe a nation into believing that it lives on, or can live on, a company that has so little importance in the big picture. An entire nation will never live on the salaries of 400 workers in Reyðarfjörður, the income is within the margin of error. The exposition of monumental export earnings has resulted in people taking risks based on false information, taking on debt in fits of optimism, and sacrificing more than they would have for a profit that is not to be had. Economists confirm these figures, but you don’t have to be an economist to figure this out. Anyone who can do simple domestic bookkeeping can make these calculations. The difference is twenty to thirty times fold but the aluminium companies and the energy companies choose to circulate the higher number. Unfortunately the difference is so great that these statistics can only properly be described as lies and deception. I repeat: 70 milliards in export earnings is a false figure, and not acceptable in public discussion as it has nothing to do with us. Any reporter that uses crude figures on export earnings has been played too easily by PR representatives.

In comparison, the actual income of the fishing industry is well over one hundred milliard ISK, and aside from oil costs nearly all of it stays in the country. According to Statistics Iceland air passenger transport counted for 50 milliards ISK of the total consumption of tourists in Iceland in 2006.  Purchasing of accommodation services and food and beverage services was around 26 milliards ISK, or 19.3% of the tourism industry gross value, and is split almost half-and-half between these two service sectors. This means that cafés and restaurants rendered 4 times the income of Alcoa – and so the cafés should, in the same way, be hailed in editorial articles as the nation’s greatest foreign currency earners after the fishing industry. The Kárahnjúkar and Hellisheiði power plants return next to NO foreign currency income because all earnings go straight out of the country to foreign creditors. The media has to stay alert when interested parties seek to use the fear and the chaos to set in motion activities that can lead us into even more troubled water. All talk of abolishing laws and regulations is nothing but corruption and the reception is based on false information people have been fed. The situation is serious, no doubt about that, but to put public energy companies up for collateral for hundreds of milliards can not be the answer to our problems, and factories that are to open in 2012 -2015 have no validity in the current debate. If we manage to create twenty companies with staff of 50, similar to Össur, Marel, CCP, and Actavis in the next 7 years, we will have created considerable more value, a stronger economy, in addition to having established less debt without sacrifice. The large scale industry’s offer to make Iceland one of the largest aluminium plants in the world, is of the same cloth as when the banks became 10 times bigger than Iceland. It is the desire for a strong leader, the protection of a superpower, a noble mogul or giant corporation that people can point to because they don’t dare to stand on their own two feet. We should be able to get ourselves out of this mess, accept our independence and renounce all those that want to weigh us down with even more debt. The proposed remedies are good for nothing but delivering the final blow.

Translation: Helga Soffía Einarsdóttir

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