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In 1953, one year after bauxite mining began in Jamaica, the Government could not convince the companies to increase the royalty from the paltry one shilling to two shillings per long dry ton of bauxite. Robert Newton, the Government’s Financial Secretary wrote in frustration at the time: “Facts mean money. At present only the bauxite companies know the facts and, therefore, we should hesitate before reaching any agreement with them until we are well-equipped to bargain as they are”.
It was another way of saying, “information is power”. When the 1956/57 bauxite negotiations came around, the Government was a little more equipped because it had contracted the services of an international consultant in the industry, Samuel Moment. The royalty moved to US$2.24 per ton and in 1966 reached only US$3.08. But afterwards, it declined right up to 1973.
Up to the conclusion of the pivotal 1974 negotiations, which led to the imposition of the controversial Bauxite Production Levy, Jamaica never received more than US$20 – combining royalty, taxes, local wages and purchases – for the 4.3 long tons of ore required to produce one short ton of aluminum ingot.
Yet by 1957 Jamaica was the largest bauxite producer in the world, accounting for 23 per cent of world output. It was a position Jamaica held until 1971 when it was overtaken by Australia.
Jamaica also became the world’s fourth largest alumina producer, yet because the island did not develop its own expertise on the industry and did not have an institution looking after its vital interest, it failed to reap the commensurate benefits for the Jamaican people before the imposition of the levy and the crucial decision to establish a bauxite institute, which would be the repository of knowledge and expertise on the industry and which would advise the Government in its negotiations with and monitoring of the industry.
Before this, Jamaica was at the mercy of the bauxite companies and what they decided to disclose. What Jamaica was gaining directly from the bauxite industry was the meager royalty and tax on company profits.
But, as the late Hu Gentles explained in an article in the JBI Journal of November 1980, “since they (the bauxite companies) were not trading in bauxite and alumina, but transferring the products from Jamaica in its vertically integrated aluminum companies, the income of the wholly-owned local companies was whatever their parents chose to state as their margin over expenses. To overcome this difficulty, ‘notional’ values were put on the transferred commodities for Jamaican tax purposes. These notional values were largely determined by the companies themselves”.
So, despite rising production of bauxite over the period 1970-1973, total receipts by the country actually declined. In 1972 the Government established a National Bauxite Commission consisting of specialists in tax, law, business, finance, diplomacy and earth sciences. The objective of the commission was to advise the Government on how best to increase the benefits of the industry to the country.
But Gentles put his finger on the problem the Government faced then: “It was quickly apparent that the data base for arriving at sound recommendations was inadequate. If the Government were to bargain with the aluminum companies with anything approaching comparable strength, it needed information of a kind and quantity it was never previously concerned with.
And it needed that sort of information continuously.”It became clear, therefore, that the country needed an institution with the technical expertise to guide the Government on the development of the industry in the national interest. Thus was born the Jamaica Bauxite Institute (JBI), which began its operations 1976. This year the JBI proudly celebrates 30 years of incalculable and invaluable service to the Jamaican people.
“When we began our work at the Bauxite Institute we had no idea what our bauxite reserves were. We previously had to rely on the estimates that the companies themselves gave us,” informs Dr. Carlton Davis, the first Executive Director of the JBI and its current Chairman.
Indeed, after the research was done it was discovered that the facts about Jamaica’s reserves were the very opposite of what the country was told. The island had 80 per cent commercial deposits of bauxite and 20 per cent non-commercial deposits, contrary to what the companies suggested.
Erwin Angus, who wrote the original paper setting out the case for a bauxite institute, says the existing bauxite companies would tell Government negotiators that much of the bauxite reserves were not really of high quality, that there were large deposits of bauxite in competitor countries and that substitutes to bauxite were being developed.
Mr. Angus chuckles as he recalls how the companies tried to exploit the country’s ignorance of the industry, simply because the country had no institutional expertise or capacity to verify their claims.
“You see why a Jamaica Bauxite Institute was and is critical though,” he asks rhetorically in an interview with JIS News, pointing out that “when we began to develop our own expertise, we could then go to the negotiating table armed with information and, therefore, able to extract the concessions we wanted”.
The JBI was able to advise the Government on pricing, international bauxite trends, and bauxite reserves. “Before, we were isolated from what was happening in other countries and had no idea of reference pricing. They could tell us anything about the quality of our bauxite grade and we had no way to testing that. Now all that changed with the establishment of the Jamaica Bauxite Institute,” says Mr. Angus, former Permanent Secretary in the Ministry of Mining and Natural Resources.
The man who played a pivotal role in the establishment of the JBI was distinguished Jamaican attorney-at-law, Pat Rousseau, a member of the legendary and brilliant bauxite negotiating team, whose work saw the country increasing its take from a ton of bauxite from US$2.01 per ton in 1973 to $12.21 one year later. It was Mr. Rousseau who pressed then Prime Minister, Michael Manley, to establish the JBI amidst considerable resistance from the civil service.
Mr. Rousseau says that before the establishment of the JBI, the bauxite portfolio was being handled by 12 departments and seven Ministries. “My idea was that there should be a one-stop shop where you had the expertise, the information etc., so you could negotiate efficiently,” Mr. Rousseau tells JIS News. He points out that the establishment of the JBI also benefited the bauxite companies themselves, as they formerly had problems getting certain information scattered throughout the Government bureaucracy. “Now they could sit with one team of persons who did not have to delay the negotiations while they checked with 12 departments and seven Ministries,” Mr. Rousseau emphasizes. He goes on to stress that when the Government was going up against “well-appointed, well-funded and internationally-savvy negotiators” from the bauxite companies, if they did not have a permanent institution, which would be a source of knowledge, the country would be at a disadvantage.
He has high praise for persons such as the JBI Chairman and General Manager, Parris Lyew-Ayee, both of whom have been there from the beginning. Mr. Rousseau says both have made an enormous contribution to national development through their work at the institute. “They, along with the high-level team whom they lead at the JBI, have been invaluable to this country,” he tells JIS News.
Mr. Rousseau says that he would later be “seated on the other side” as part of the negotiating team for Glencore and Alpart, “and I can attest to the high level of expertise and skills which exist at the JBI. I was very impressed. And the international negotiators were very impressed with the professionalism of the JBI team, too”. Former JBI Chairman and later Minister responsible for the JBI, Hugh Hart, another highly reputable lawyer, also attests to the high calibre of the expertise which exists at the JBI and the level of respect the professionals there command internationally. “These people are highly rated internationally. I can tell you that,” he says in an interview.
With reference to JBI Chairman, Dr. Carlton Davis, the former Minister under the Edward Seaga Government says, “there is absolutely nobody in the world who knows as much about the bauxite industry as Carlton Davis. Jamaica does not understand what they have in Carlton Davis. He is in a class by himself. He’s absolutely fantastic”. He also has high praise for Mr. Lyew-Ayee. “Parris also is an absolutely superb individual, a first-rate professional. Parris could be getting three times what he is getting from JBI, but he is totally committed to serving the public sector,” Mr. Hart says.
He points out that the JBI is very confidential and that, “this is very important to the industry and a part of the reason why they are so respected”. Mr. Angus tells JIS News that if it were not for the existence of the JBI, Jamaica would be in a crisis when the bauxite sector went into recession in the 1980s and when several companies pulled out of Jamaica.
It was because of the expertise of the JBI why the Government could assume control of the companies and rebuild the industry to the point where the sector is now the second largest foreign exchange earner. Bauxite earnings have accelerated from US$300 million in 1978 to over US$900 million last year, with earnings projected to reach US$1 billion this year. Last year the country recorded its highest level of production since 1974.
“If we did not have the expertise and did not hone our skills in the industry we would not be having the kind of expansion we are having now,” Dr. Davis tells JIS News.
Mr. Angus expresses the view that a company like Alcoa would not have come back to Jamaica, had the Government not been able to carry on the operations at Halse Hall. Alcoa has since announced the largest single investment in Jamaica’s history, a US$1.3 billion plant expansion.
“Here at the JBI we have been fortunate to have a group of highly competent, highly committed professionals who are determined to serve their country to the very best of their ability,” says Mr. Lyew-Ayee. He notes that the company has, in the past, attracted such persons as the current Prime Minister of Barbados, Hon. Owen Arthur; Dr. Clement Jackson, former Director General of the National Planning Agency (now Planning Institute of Jamaica), the current head of the PIOJ, Dr. Wesley Hughes, as well as well-known consultant, Dr. Conrad Douglas.
Mr. Lyew-Ayee points out that the JBI’s research station at its head office does bauxite testing for not only local bauxite companies and companies developing products for the bauxite/alumina industry, but for other bauxite-producing states. Countries like Ghana look to the JBI for guidance as to how to further develop their bauxite industry.
Among the main responsibilities of the JBI are the protection and monitoring of the country’s bauxite reserves; the management of bauxite lands, including mined-out lands; research on the use of reclaimed bauxite lands; and the development of commercial, infrastructural and community projects involving the use of these lands.
The institute also monitors the environmental management of the industry and works closely with the companies to ensure that environmental best practice is maintained. In short, everything which impacts on the bauxite/alumina industry and which has implications for Jamaica’s bauxite development falls under the purview of this most critical institution. The economic literature has been stressing over the last few years the importance of institutions to national development, and the JBI is a primary example of the difference highly-efficient, professionally-run and technically competent institutions can make to a county’s economic and social development.