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September 2012 Policy Study, Number 12-11

   

Orascom or OraScam? Corporate Income and Property Tax Reform Needed

   

Orascom Can Do It Without Taxpayer Money

   

 

Orascom Construction Industries (OCI), a major international construction and fertilizer company, publicly traded on the London and Cairo stock exchanges, but with controlling interest owned by the Sawiris family from Cairo, Egypt, is getting an initial $50 million tax credit deal and other incentives from the state of Iowa and local communities to build a $1.4 billion fertilizer plant in southeastern Iowa. The company building and running the plant, Iowa Fertilizer Company, will be a wholly owned subsidiary of Orascom.[1] Additionally, they are buying an Iowa home-grown family- and employee-owned local construction company, The Weitz Company from Des Moines. Though “local,” Weitz is itself a major player in the U.S. general construction industry, placing in the top 10 in several national construction ranking categories and with over $675 million in annual revenue.[2]

 

This fertilizer plant is the largest capital investment project ever in the state of Iowa. Lee County and southeastern Iowa need the jobs, estimated at 2,000 or more during the two-year construction period and 165 once the factory is running. Some of the questions which have been raised, especially following the promises and failures of the American Reinvestment and Reconstruction Act “shovel ready investments” in “created and saved” jobs, and major “investment” failures such as Solyndra, are how much is the government putting up per job? And is this an appropriate tax incentive? Did Iowa get “taken to the cleaners,” as State Senator Joe Bolkcom (D - Iowa City) alleges?[3]

 

In the grand scheme of things this project is, well, pretty minor for OCI. This is because Orascom is a major multi, multi-billion dollar company, with an alphabet soup of branches, subsidiaries, and spinoffs, each building its own projects and holding significant contracts with private-sector developers and the U.S. federal government in many locations worldwide. These contracts include building a fuel depot in Afghanistan and a gas turbine power plant in Iraq. OCI has offices and work on virtually every continent in the world, including Europe (a large Swiss resort project and a fertilizer plant in the Netherlands), the Middle East (where they own whole towns in addition to a significant number of hotels and media services), Central Asia, and North Africa. [4] According to their Website, Orascom Construction alone has over 72,000 employees, with revenue of $5.5 billion in 2011.[5]

 

Subsidiaries include Gavilon Group – the third largest grain merchant in the U.S. Gavilon has 320 million bushels of grain storage and is part owner of the Kalama Export Company. This is one of the largest West Coast shipping terminals. OCI is currently selling Gavilon to Japanese trader Marubeni Group, another commodity food trading company with major contracts in China. The sales price is $5.6 billion.[6] Gavilon, the “largest independent importer of fertilizer into the U.S.,” brought in 7 million tons of fertilizer in 2009.[7]

 

OCI Beaumont (Texas) is the first American fertilizer plant owned by Orascom, bought in 2011, which produces anhydrous ammonia and methanol as an integrated facility.[8] The facility had been mothballed in 2004. Orascom purchased it and did some $250 million in retrofitting. It is now in full operation, with the capacity to produce 250,000 tons of ammonia and 750,000 tons of methanol.[9] The management team of OCI Beaumont is primarily from the Netherlands; they have joined the Greater Beaumont Chamber of Commerce at the highest level and are employing about 150 people in “well-paid” jobs, according to the President of the Chamber of Commerce.[10] An expansion of this facility is already being discussed. From all accounts, Orascom is a good member of the community, hiring the number of people promised and paying solid wages.

 

Another group, OCI Nitrogen and OCI Agro, according to their Website, are “the second largest nitrate producer in Europe and the world’s largest producer of metamine.”[11] Clearly Orascom has experience successfully owning and operating fertilizer plants.

 

Orascom Telecom Media Technology (OTMT) is another company owned by Mr. Nassef Sawiris. In February it sold controlling interest in Egyptian telephone/cell phone service provider Mobinil to a French telecommunications company for about $1 billion U.S.[12] OTMT still has about 30 percent interest in Mobinil and major contracts throughout the Middle East, along with over one million users in North Korea.

 

Do you see why 165 new employees in southeastern Iowa are a minor blip on their screen?

 

   

 

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