Markets and multinationals

Markets and multinationals

Not only do cement producers need easy access to large quantities of raw materials, fuel and cheap labour and local transportation. They also, of course, require profitable markets. While national cement manufacturers in Asia and Africa have tended to serve local needs (and therefore foundered when demand has fallen, as in the 1997-98 crisis among "tiger economies" in Asia) (3), a newer breed of multinational cement supplier has emerged. In its search for markets, these too are examining opportunities to site plants close to mines and fuel sources (in order to save on bulk transportation costs).

Increasingly, however, these global players are looking to benefit from economies of scale and to exploit the lower cost inputs of raw materials, fuel and labour available in the South - to the extent that they can seriously propose increasing cement output from Asia in order primarily to serve North American buyers. A clear strategy of take-over and amalgamation of smaller, regionally-based companies is emerging: as with recent bids by CEMEX of Mexico for shares in Philippine and Indonesian cement companies, and by HANSON in Malaysia. Here are two major corporations (one incorporated in a medium-income country but with open access to North American markets, the other serving both North American and European demand) which appear to be trying to benefit from the growing demand for cement in the "developed" world while exploiting opportunities for cost reduction in "lesser developed" states.

This appears to be a rapidly developing scenario - although it may change if state policies in Asia alter towards foreign takeovers and privatisation. On the one hand, the two Asia-Pacific countries with the biggest potential for "growth" in construction (China and India) cling to a cement industry based on small plants, in a large number of locations, under a myriad of managements (some of them state rather than private). The opportunity for foreign penetration here is currently limited.

On the other hand - in Indonesia and the Philippines - there seems to be a greater opportunity for intervention by overseas companies (Mexican, Japanese, North American and European) both to service pretended "national needs" and the hoped-for regional resurgence in construction, once demand for "public works" picks up again, and to profit from exports to rich countries, based on low-cost inputs and modest capital expenditures. An integrated "globalised" cement supplier clearly has its eye on a number of opportunities.

If existing cement plant and limestone mines are taken over by these corporate players, without their establishing much stronger environmental, safety and health standards, then local communities and workers will continue to be exploited, opportunities for national reconstruction (if and when they emerge) may be compromised, and the interests of manifestly corrupt players (such as Japanese construction companies) will be served, at the expense of locally-defined "development" .