The proposal by the president of the newly formed Malaysian Steel Association (MSA), William Cheng, to impose export duty on iron ore and scrap metal is most disgusting.

These big conglomerates are using their clout and political connection to influence government policies to maximise their profit and enrich themselves at the expense of small local miners and SME entrepreneurs.

Iron ore mining became active in Malaysia as a result of a sudden demand from China during the last two years. Iron ore mines which were not viable in the past are now revived. Many entrepreneurs have invested heavily in machinery and equipment.

If the proposed export duty is imposed, iron ore from Malaysia will not be able to compete with those from Thailand, Indonesia, India and the Middle East.

Many miners will suffer big financial loses leading to closure of the mines and causing many people to lose their jobs, especially those in the lorry transport business.

I hope the Najib administration will not succumb to this steel cartel. The New Economic Model (NEM) and Economic Transformation Program (ETP) must not be seen as a tool to help the rich and powerful at the expense of the small entrepreneurs.

After all, the PM has promised to liberalise the economy and not creating more protectionist policies.

The government has in place many policies which protect the steel industries. The most unpopular policy is the one introduced in the late 90’s when Dr Mathatir was the prime minister.

Under Dr M, the government imposed an AP ruling and a 50 percent import tax on imported steel plates in 1998 to protect the Mega Steel cold roll mill.

This policy is still in place although slightly modified after much protest. At that time, the price of mild steel plates in the world market was around RM1,000 per mt or below.

Because of the protectionist policy, Mega Steel was selling at around RM1,500 to 1,600 per mt. This policy caused many steel fabricators and equipment manufacturers to go bust and suffer great financial losses.

    

The furniture industry was also badly affected but luckily they had Lim Keng Yaik as their minister and he managed to get an exemption for them. The rest were not so lucky.

Other protectionist policies include:

1. Import duty on seamless pipes, to protect the welded pipe industry.

2. Import duty on roll section, like the I beam to protect Perwaja.

Steel mills also get other benefits like special discounts for their electricity tariffs.

After getting help from the government for so many years, the steel mills must learn to compete in this globalised world. Local miners are willing to sell iron ore to local steel mills but it has to be based on world market prices.

If the MSA is sincere in developing the local iron ore mining industry they should propose to the government to impose an import tax on iron ore.

Already, there is an ongoing project in Perak where the Brazilian iron ore giant, Vale, is investing in a big iron ore processing plant to supply blended iron ore and pellets for the Southeast Asian market. Therefore, the steel industry has no worries on shortage of supplies.

The amount of iron ore exported from Malaysia as reported by the Malaysian Chamber of Mines from 1995 to 2007 is hardly 10 percent of the imported tonnage. Therefore, there is no need for the government to take the proposals by the MSA seriously.