Materials Plant Problem Statement Construction Essay

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Lynas Corporation, Ltd. is an Australian mining rare ore earth company which listed as a SP/ASX 200 company by Australian Securities Exchange and the company has two major operations now which is mining and concentration plant at Australia and refining facility plant called Lynas Advanced Material Plant (LAMP) that cost RM700 million which now under construction at Kuantan, Pahang [1].

The refinery function is to process concentrated rare earth using hear and thousands of tons a year of powerful sulphuric acid to separate valuable minerals from dirt and radioactive contaminants where this valuable minerals are used for manufacturing a wide range of high-technology products including electronics product such as smart phones and electric cars. Once heard, it sound like with building this plant it have an excellent advantages for Malaysia, but there are also critical impression that need to be think by those who are responsible for the future.

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This location was chosen because of all resources such as tax, natural gases and labour cost that can be obtained with lower cost compared to other places and Australia. The Gebeng Industrial Estate at Kuantan offers an excellent chemical and petrochemical manufacturing facility for investors. The Gebeng bypass eases traffic flow from the industrial estate to Kuantan Port. It links Kuala Lumpur and Kuantan directly through the East Coast Highway. This route provides a cost effective and convenient means of transportation. It makes it a lot easier for investors as it allows more efficient transfer of freight and raw materials locally as well as for international channels [2]. The area where the plant is being built also offers much knowledge infrastructure, such as technical and trade skills and chemical industry experience. The government infrastructure is in place and provides accountable and reliable regulators and clear legal frameworks. Malaysia has the clearest set of regulations compared to other countries. Additionally, the Malaysian government also offers good foreign investment incentives. Furthermore, as stated by Curtis in a video interview posted in Lynas Malaysia channel in YouTube, Malaysia has a very well trained workforce in the chemical industry [3]. This will bring great benefits to Lynas as they need a professional workforce. Further, Curtis also stated that Malaysia has a solid and rapidly growing industrial economy.

The Malaysian government has appointed a panel of experts to review the safety aspects of the project. The International Atomic Energy Agency (IAEA) has been asked by the Government to appoint an expert panel for a second opinion on the issues raised. There are reasons behind the Government's decision on letting Lynas to proceed further with the project. Though the government insists that the project will definitely bring advantages, it is the disadvantage that worries the citizens of the country. The concerns are over the storage and further safety of this radioactive material that will be processed in the factory; it this aspect of the business that fuelled protests in Malaysia.

From the research that has been conducted, there are several advantages and disadvantage in perspective of economics, human resource management, law, ethics and technology in society for Malaysia. The perspectives are being compare, contrast and analyse in the following chapter.

MALAYSIAN ECONOMICS

Lynas's Advance Materials Plant (LAMP) is said to be the world's largest rare earths processing plant that cost RM700 million and the operations start in September 2011. Malaysia government will stand to benefit in several ways from the construction of the plant. First, the project will contribute towards increasing Malaysia's gross domestic product (GDP). It is reported that the plant may generate up to 1% of the nation's GDP for Malaysia [4]. Lynas' Executive Vice President Matthew James stated that Lynas will pour an initial AU$350 million that is equal to RM1.1 billion into the first phase of LAMP before an on-going investment of AU$10 million per annum. There are also companies that have shown their interest from the beginning [5]. This means there is already interest from customers with regard to this aspect. It shows that the market for processed rare earth is a growing market and this will definitely benefit Malaysia.

On the other hand, the government and peoples who are responsible should think is it worth enough for the future. Although with the construction of the largest Lynas plant, there is a report that local community in Kuantan don't believe they will benefit economically even with the creation of 350 jobs [6]. This is because they believe that the legacy of toxic waste left behind far outweighs any economic gain such as long-term waste disclosure and disposal management to compare with economic gain. The critics also have questioned the real economic benefit of the project, pointing to the 12-year tax holiday Lynas will receive after being accorded pioneer status. Local residents are concerned that radioactive waste from the facility will put them at risk and potentially leave a costly legacy. Locals fear a repeat of the toxic wasteland left behind by the Mitsubishi Chemical plant in Bukit Merah which is now blamed for birth defects and cancers such as leukaemia.

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In conclusion, there are benefits to the Malaysian economics but the government should think and analyse that is it worth enough in the future considering all perspective such as the disposal, effect to the environmental and health of Malaysian citizens itself.

ANALYSIS

From the research that have been done, it can be assumed that the cost of leasehold land acquisition RM 97.5 million and the plant construction that includes machinery and equipment that cost RM343 million [7]. The cconstruction workers will be maximum at 2,500 workers. Let say the assumption of 70%/30% on the plant construction that cost RM343 million , 70% goes to plant equipment and machinery, and 30% goes to infrastructure cost needed, including building material, construction workers' pay, etc. This means for RM343 million spent on the plant, only approximately of RM110 million contributes to domestic economy such as for building materials and construction workers.

The ratio of worker's remuneration versus building material can again be assumed at 70/30, where 70% goes to workers, and 30% goes to materials. Means workers getting approximately RM77 million and materials get the rest of RM33 million, over the 4 year period. Assumed that all 2,500 workers in full force during the 4 year construction period, each worker gets RM641 per month, although not 2500 workers are presence for the entire 4 year period, we may want to assume that only 1250 workers at any one time, this brings the monthly income of the worker on average to RM1, 282 per month, which is pretty realistic. From typical construction site in Malaysia, we can probably tell that there are almost 80% foreign workers, and 20% locals. Thus we further divide the RM77 million per 4 year to 80% goes to foreign worker, and 20% goes to locals. With the 80% of the money goes to the foreign workers that is as much as RM61.6 million and 50% likely to remit out from the country which leave 50% within the economy, that is RM30.8 million in 4 year period. This is probably the contribution of Lynas for their plant construction to the economy, RM30.8 million plus RM15.4 million to locals, and RM33 million on building materials and other related expenditures that is RM79.2 million for the 4 year period. So, the first contribution is from land acquisition that is RM97.5 million. Second contribution is money channeling back to local economy that is RM19.8 million per annum for the 4 year construction period.

From another side, what did lynas get from their operation are lynas enjoys tax holidays of 12 years [8], expected output is RM5.1 billion per annum, at today's rare earth price [8], corporate tax is assumed at 26% for the next 12 years, no other tax element is included in this calculation such as export duty and Lynas will employ maximum of 450 workers, composition of nationality unknown of how many Australians, assuming that their people are going to hold high positions and we assumed that average pay is RM6,000 per job. This will make a total of RM32 million payroll per annum which mean Malaysia is losing collectable tax of RM5.1 billion X 30% X 26% = RM397.8 million per annum and for the next 12 years, total losses is RM397.8 million X 12 years = RM4.773 billion. From the analysis that have been done, it is unlikely that Lynas will park its profit in Malaysia after the 12 years tax exemption, it is highly possible that the profit to be parked at offshore Labuan if Australian tax is not favorable, means Malaysia is still getting nothing after 12 years.

From the above calculation, which is primitive, Malaysia economy is gaining land acquisition, to unknown party approximately RM97.5 million and from construction of plant from 2007 to 2011 that is RM79.2 million and what Malaysia are losing are potential tax collection of RM 397.8 million per annum for the next 12 years. So the rough analysis has been done to view the benefits that Malaysia can gain in perspective of economy.

HUMAN RESOURCE MANAGEMENT

Human Resource Planning is also called as manpower planning consists of putting right number of people, right kind of people at the right place, right time, doing the right things for which they are suited for the achievement of goals of the organization. Human Resource Planning has got an important place in the arena of industrialization. Human Resource Planning has to be a systems approach and is carried out in a set procedure. The procedure is as follows:

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Analysing the current manpower inventory

Making future manpower forecasts

Developing employment programmes

Design training programmes

Regarding this perspective, there are some benefits and disadvantages to Malaysia human resource management. From the construction of lynas plant, it offer job opportunities in Malaysia and as it is said that 99% of those employed will be local. LAMP will require some 350 skilled workers and this includes senior leadership positions. Malaysia after all has a well trained work force in the chemical and mineral industry. Curtis said that of the 350 skilled workers the plant would hire, only a handful of R&D staff would be non-Malaysian, who will be given the best knowledge in the world on the processing of rare earths and the potential to modify those processes to meet special application needs. Asked if there were the right skills in Malaysia to fill those positions, he replied,

"We advertised for 30 positions last week and received 10 Malaysian applicants per position. I firmly believe that the best people to run a plant in Malaysia are Malaysians. It's their home, they will look after it as though it is their home and they will actually be proud of it," Curtis said [9].

Lynas Advanced Materials Plant is a simple but state of the art chemical plant. It operates at atmospheric pressure and temperature so there is no possibility of high pressure explosions. There will be no significant exposure and no health or safety risk from Lynas emissions to air. The rare earths concentrate used by the facility is classified by independent authorities as safe, non toxic and non hazardous. The facility will be the most modern of its type in the world and will incorporate state of the art environmental protection designs and systems.

To compare the numbers of jobs offered by Lynas, Malaysian have the advantage of maximum jobs that can be occupied which bring benefits to Malaysian people where it can reduce the number of unemployment of workers in Malaysia but most of the high rank or high skilled job will be occupied by Australian workers themselves which mean there is possibility that we will gain new knowledge in their advanced system and technologies. In this perspective, there are possibilities that Gebeng industrial zone could grow into a hub for research and development (R&D), resulting in distinctive Malaysian intellectual property as rare earth metals was making cutting-edge products like smartphones, hybrid cars and laptops possible. For health and safety perspective, with the technologies and advance system form Lynas Coperation, they compromise that the protection and systems design is maintain at a high level although there is possibility that accident might occurred.

LAW

In order to construct and working with something that is involved with society, there is law practice that must be followed by an organisation before proceeding with the project. Law is define as a binding custom or practice of a community where a rule of conduct considered to be obligatory and to which is attached some legally recognized punishment or sanction if broken [10]. We can conclude from this definition that the law is a set of rules governing human behavior that, if broken, result in a certain set of consequences. A parallel with engineering can be drawn here as it, just like the law, is based on rule sets that also have consequences when broken.

Lynas Advanced Materials Plant (LAMP) has complied with international standards and Lynas have fully endorsed and applied these standards from the start. An independent report by the International Atomic Energy Agency, the world's pre-eminent authority on radiation safety, confirmed the LAMP as safe and posing no threat or impact on the health and safety of the local population. This is important to in ensuring that Lynas have the license to conduct the project. Prior to commencing construction, Lynas also completed a detailed year-long Environmental Impact Assessment and Radiological Impact Assessment. Both assessments and regulatory approvals are on the public record showing the LAMP to be safe.

In meeting the highest regulations and standards, Lynas also complies with Australian, International and Malaysian standards and that's the way it should be. It should also be known that many Malaysia standards are equivalent to, or exceed international standards. LAMP has consistently met the highest safety standards from the world's pre-eminent authority on radiation safety, the International Atomic Energy Agency, and Malaysia's Atomic Energy Licensing Board. Thus, Lynas will continue to comply with the requirements of the Malaysian Government regulatory authorities in relation to the LAMP.

By considering the law and standards that have been complied by Lynas, all regulations and standards have been analyzed by Lynas in terms of its impact on the environment and population. Bodies involved also conduct experiments and produced reports that with the establishment of the Lynas, it will not cause adverse effects to the environment and to society. However, research needs to be conducted from time to time to ensure that the process and the work carried out by the Lynas do not have an adverse effect in the future.

ETHICS

TOWARDS

SUSTAINABLE

DEVELOPMENT

Lynas Corporation is committed to Sustainable Development.

The Lynas strategy is to create a reliable, fully integrated source of supply

from mine through to customers, and to become the benchmark for security

of supply and environmental standards in the global Rare Earths industry.

Rare Earths are vital for the growth of green technologies.

Lynas will make an important contribution towards Sustainable Development.

The health of our planet is dependent on an environmentally sustainable future.

We are driven to explore how to become greener tomorrow than we are today.

We will continually work to minimise our environmental footprint. At Lynas, we

will strive to make positive contributions to the communities in which we live.

James also stated that the current move is for advanced chemical companies to

locate or co-locate around a stable, long-term, secure, safe supply of rare earths .

mpact on environment and people?

The main concerns that have been raised about the refinery are related to the operating plant's infrastructure and its waste management plant.

The New York Times reported on 29 June 2011 that current and former engineers of the Lynas plant have expressed concerns about the plant's construction and design flaws.

http://peilinggan.com/wp-content/uploads/2012/04/radioactive-waste-management.jpg

Concerns have already been raised over the radioactive waste management centre (© Agensi Nuklear Malaysia | nuclearmalaysia.gov.my)

"The problems [the engineers] detail include structural cracks, air pockets and leaks in many of the concrete shells for 70 containment tanks, some of which are larger than double-decker buses. Ore…would be mixed with powerful acids to make a slightly radioactive slurry that would be pumped through the tanks, with operating temperatures of about 200 degrees Fahrenheit.

"The engineers also say that almost all of the steel piping ordered for the plant is made from standard steel, which they describe as not suited for the corrosive, abrasive slurry. Rare earth refineries in other countries make heavy use of costlier stainless steel or steel piping with ceramic or rubber liners," The New York Times journalist Keith Bradsher highlighted. There were other construction concerns.

Lynas Corp executive chairperson Nicholas Curtis has dismissed the influential daily's report as arising from "debate" that is to be expected among engineers. Curtis added that all the issues have since been resolved and gave an assurance that the plant would be safe. However, he did not respond to the specific engineering flaws that were raised in The New York Timesreport except to state that "every piece of piping has been engineered in accordance with the necessary conditions to contain that material safely and there is a wide variety of materials used in the piping".

The International Atomic Energy Agency (IAEA) has also proclaimed that the Lynas refinery's overall design and operations procedures meet international radiation safety standards. However, after a June 2011 visit, nine IAEA experts made 11 recommendations to improve the refinery's safety to our government regulator, the Atomic Energy Licensing Board. IAEA recommended that Lynas should be required to fulfill the conditions below before being allowed to start operations:

1. To submit a plan setting out its intended approach to long-term waste management, in particular of water leach purification (WLP) solids, after the plant's closure. This plan must take into account various safety aspects and protocol.

2. To submit a plan for managing the waste from the decommissioning and dismantling of the plant at the end of its life.

3. To make the necessary financial provision for establishing a fund to cover the cost of the long-term management of waste including decommissioning and remediation.

4. To intensify its communication with interested and affected parties in order to demonstrate how it will ensure the public's and the environment's radiological safety.

Although the environmental risks are being discussed openly over the media, many arestill arguing and the protesters are hoping for a miracle. From this observation the Governmentand Lynas failure to sincerely and constructively engage with the concerned Malaysians hasactually turned objectors and more Malaysians to reject LAMP. Expectation for explanations,information, clarifications is dismissed with disdain, spins or as opposition politicalopportunism. What the Malaysians want is simply to address public and societal concern oversafety and environmental issues and it could be from the perspective of regulation and betransparent about the disposal waste management method which still remain a question and didnot convince the general public. Although the Prime Minister mentioned on March 2, 2012 thatLynas must shift waste disposal site away from the populace however it still inadequate toneutralize the complex issue which remain debatable for the next decade.

9.0 TECHNOLOGY IN SOCIETY

More importantly, the building of the plant at Gebeng will bring in

new knowledge, information and technology into Malaysia. The project is well known

for its advanced technology and this will give an opportunity for Malaysians to learn

both the advantages and disadvantages of rare earths processing. This consequently

should help educate society and lead to the growth of the industry. This is very crucial

to Malaysia as we are a growing and developing country.

11.0 CONCLUSION

The government should do more, if they would like to proceed with Lynas or discontinue the project. The public opinion needs to be analyzed and considered in preventing the issue become a political decision. If the government decides to discontinue, the public also need to be in the know of the reason why and what is at stake. This is because the agreement between Lynas and the Malaysian government was made back in 2008, there is no evidence to support why it was originally set upon any public perception on its impact. There seemed to be communication problem in terms of lack of transparency, will ultimately become the political motive by the opposition for not addressing the rights of democracy. This shows that the government does not engage public in decision making and the people will feel frustrated because the government was chosen by the people of the country. On the whole, rare earth plan is just another issue that were being politicized by certain groups of people for their benefit, leaving the people who genuinely care about the safety no real support for understanding environmental risks. It reflects other tragedies that occurred before such as construction problems in public infrastructure such as the stadium, highways, and government buildings which of course lacking in monitoring and regulation.

12.0 REFEERENCES

[1] "S&P/ASX 200 Constituent List" Standard and Poors, 19 November 2008.

[2] Thong, Simon (2011). Lynas and Gebeng Kuantan. From http://simonthongwh.wordpress.com/2011/06/06/lynas-and-gebeng-kuantan/[Retrieved 6 June 2011].

[3] Curtis, Nicholas. Why Lynas chose Malaysia. From http://www.youtube.com/

watch?v=LjfYXqRqpIw

[4] Lynas Corporation Ltd official website. Retrieved from http://www.lynascorp.com/

[5] James, Matthew. Benefits to Malaysia. From http://www.youtube.com/watch?v=rhPcekFzplc

[6] http://stoplynas.org/economic-liability/

[7] Lynas Annual report 2010

[8] NY Times 09/03/2011

[9] http://www.themalaysianinsider.com/mobile/malaysia/article/rare-earths-refinery-benefits-kuantan-says-lynas/

[10[M. Barron, Section 1. What is law?, Unit 202 Legal Studies, MBA course notes, pp 1-2, 2004.