New Zealand Surprised by Pull-Outs by Mobil, Alusuisse

The conservative government in New Zealand led by Robert Muldoon, an aggressive promoter of foreign investment, recently found out what unreliable allies multinational companies can be.

In a 24-hour period during the first week of October, Muldoon witnessed the delay of two separate development projects on which he had staked his economic program-and perhaps his political future. National elections are set for November 28, and economic issues most often decide the outcome.

On October 1, the giant Swiss aluminum company, Alusuisse, unexpectedly pulled out of a proposed smelter complex project it was to have built with Fletcher Challenge, a New Zealand conglomerate, and Gove Alumina of Australia. "Alusuisse notified Fletcher on a very sudden basis" that it would not proceed with project, says Michael Wintringham, economic counselor for the New Zealand embassy in Washington.

According to Wintringham, Alusuisse pulled out one week after "there was a final agreement reached with those negotiating on behalf of the government on the electricity rate to be charged the consortium and the tax benefits the consortium would be eligible for."

One reason Alusuisse decided to drop the project was because it can get cheaper electricity elsewhere. "They got a better deal from the government of Zaire, particularly on the price of electricity," says Wintringham. Alusuisse in August decided to invest in a major smelter project in Zaire. The price Zaire reportedly charged for electricity was 0.3 cents per kilowatt hour; New Zealand charged 2.25 cents per kilowatt hour. The New Zealand "government went as far as it would go on that," says Wintringham.

The day after Alusuisse announced its decision to pull out, Mobil Oil's New Zealand affiliate postponing signing a contract with the government for the development of a synthetic fuel project which could produce 13,000 barrels a day of gasoline and provide about one third of the country's gasoline needs, according to company estimates.

Mobil's affiliate, Mobil Oil New Zealand Ltd., issued a statement explaining its decision. "It would be improper to sign binding contracts just before the election," the statement said, "particularly in view of Labor Party statements that they would like the opportunity to fully review the project, should they be victorious in the election."