Counting the cost of major new projects

Press, 26 March 1981, Page 16

Counting the cost of major new projects

By

OLIVER RIDDELL

j in Wellington

- New Zealand is embarking on major projects over the next decade which, if all are completed, will have cost the country $4064M to build, in 1980 prices. This figure is the total sum of the major projects listed in the Quarterly Predictions made last December by the New Zealand Institute of Economic Research, and are an updated version of calculations made a year earlier.

The calculation was made originally to check whether investment expenditures in 1980- were likey to be much affected. The Institute says that in the event, they were not. The Institute says expenditures on major “out-of-the-ordi-nary” projects are expected to be much more significant in 1981- Also, some further unusually large projects have been announced, particularly in en-ergy-intensive basic metal industries. Such projects have a sizeable impact on investments, on employment (direct or indirect), and on the balance of payments. Information on these aspects was obtained by circularising companies and corporations involved in the projects.

This list does not include the ongoing power development programme. A big investment, but in a different category, is Air New Zealand's plan to" buy (or lease) five new Boeing 7475, plus spares, during.- 1981-83 which will be worth about S4OOM in 1980 prices. This will be offset by sales of the existing fleet of seven DClOs. There are-also a number of

other projects which were left off the list because they were not big enough. Among the more definite are the CarterOji conversion of their Whirinaki mill to thermomechanical pulp production (1980-82, S2SM); Portland Cement Works in Northland (1980-82, S3SM); planned wood pulp mill in Otago (?30M): U.E.B.’s Te Rapa paper mill (S3OM); and others. Not all the listed projects will necessarily proceed. The Institute had labelled them "definite,” “probable” and “possible” to show how likely it regards them. The dates and costs are estimates only, and a good many of them are pri-vately-financed or owned, or only in part Government funded. The Institute estimates tha the listed projects will provide 100 direct jobs during construction in 1980-81; 2500 in 1981-82; 5700 in 1982-83; 5600 in 1983-84; 4400 in 1984-85: 3300 in 1985-86; and 1300 in 1986-87. Permanent employment on completion will begin with 80 in 1982-83, 785 in 1983-84, 785 in 1984-85, 985 in 1985-86, and 4285 in 1986-87. Energy or petrochemical projects will have cost $1475M by 1986-87, energy-intensive basic metals SI4OOM and for-estry-based and other industries $665M. Of these totals. S29J)OM will be found by the private sector, SSSOM by the public sector, and $1770M will be the approximate imported content of expenditure.

These totals of costs exclude projects such as the ethylene production and also the con-

struction of the Maui B platform which, if it goes ahead, will most probably be in the latter part of the decade. Broken down into annual expenditure, 1983-84 looms as the most expensive year at SB4OM, with SB3SM being spent in 1982-83 and S63OM in 1984-85. Direct employment on the project amounts to several thousands at peak construction periods. A report by the Ministry of Works and Development and Davy International, on which detailed studies are being done by the Project on Economic Planning at Wellington’s Victoria University, looked at the subject in considerable detail.

. The report foresaw the additional construction workforce requirements peaking at an extra 7400 in early 1983. Probable delays or even cancellations in some projects will probably smooth out this peak. The peak was comprised of about 4000 to 4500 labourers and 3000 to 3500 tradesmen. The report also foresaw a shortfall in numbers of fitters and welders, particularly in Northland.' New Zealand's balance of payments will be influenced by imports of capital goods during the construction phase, net export earnings (or net import savings) once the projects are in operation, and servicing of the debts and the distribution of after-tax profits to overseas investors. The initial .burden of getting the projects underway will be eased by overseas borrowing, but at some future cost.