By Mustapa Mohamed, Minister of International Trade and Industry
On June 4, the International Panel of Independent Experts appointed to review the Lynas project returned to Vienna to complete its work. The panel had been in Malaysia to study safety aspects of the proposed rare earth processing plant in Gebeng, Pahang, and will submit its report to the government at the end of the month.
This completes one phase of a decision-making process that has important implications for the government and the nation. Public safety will not be compromised by this People’s First Government.
Let me explain.
The economic considerations
Lynas Corporation Ltd is an Australian company which was given a license in January 2008 to set up a manufacturing plant in Pahang. As a foreign investor, the company is no different from other foreign investors here. They come to our
shores because they think they can earn a decent return on their investment, and because they believe they will be treated fairly according to established rules and regulations.
We welcome foreign investments because they help us to modernize and grow our economy. Not any investment, of course, but the right type of investment.
When we evaluate an investment proposal, we ask questions like: What benefits will it bring? Will there be spin-offs that can benefit other sectors of the economy?
Will it create jobs? What kind of jobs? Will there be any transfer of technology or skills? And so on.
These are standard factors we take into account when evaluating a foreign investment proposal. A comprehensive due diligence exercise will be undertaken for this purpose, and a yes or no decision will be made depending on its findings.
Issues of governance
When the Lynas investment proposal was first submitted to the Government in 2006, however, it raised questions that went beyond the ambit of these economic considerations. Issues of public safety and health, and environment were also involved.
The Government was well aware then that the rare earth industry was associated with health and safety issues, especially after the experience of the Asian Rare Earth (ARE) project in Perak in the early nineties.
So it was pertinent to ask what impact will the Lynas project have on public health? How will it affect the environment and the livelihood of people living in its vicinity? Are these risks measurable, and within acceptable limits? Do we have the rules, regulations and institutional framework to monitor and manage these risks?
Critical to the Government’s decision was the fact that the authorities had by then learnt from the ARE experience and had a better understanding of how to manage radiological risks. By 2008, the rules and regulations governing such activities had been revised and brought up to international standards. A repeat of ARE was not possible under the new regulatory regime.
This explains why when Lynas was granted its manufacturing license, the company was specifically required to comply with the safety standards and good practices established by the Atomic Energy Licensing Board (the regulator for
the Atomic Energy Licensing Act 1984) and the Department of Environment (regulator for the Environmental Quality Act 1974).
Among other things, these standards define the amount of radiation exposure that is considered dangerous to workers, the public and the environment.
These standards apply to all phases of the Lynas project: construction, pre-operations, operations, transportation, waste management, decommissioning and remediation.
A key feature of the work procedure involved is the staged-approval process Lynas has to undergo. For example, the company must meet safety standards imposed at the construction phase before it can proceed to engage in pre-operations activities.
And it cannot do the latter without first satisfying the AELB and DOE that the safety standards applicable in this next phase can be met.
This approval process therefore ensures that the safety standards imposed by the regulatory bodies cannot be bypassed, postponed or avoided. Monitoring is continuously carried to ensure that they are adhered to.
At this point in time, Lynas has not applied for nor has it received approval to proceed to the pre-operations stage.
Independent Panel of International Experts
The Lynas project was discussed at public briefings in Kuantan and in Parliament in 2009, but became a topic of more extensive debate only after the Fukushima incident in 11 March this year.
It soon became clear that some people living in the vicinity of the Lynas site believed the project would pose unacceptable health and safety risks to human life and the environment. In the view of some at least, the project should be terminated.
This despite assurances by AELB and DOE that Lynas had to date complied with all safety standards required of it.
While the government remained confident in the integrity of the decisions taken by the regulatory bodies, it felt it owed the public, and the people of Kuantan in particular, a duty to ensure that their health and safety would not be compromised.
This was, and remains, the government’s highest priority, and overrides all other considerations.
Accordingly, on 22 April, I announced the government’s decision to invite the International Atomic Energy Agency (IAEA) to appoint an independent panel of international experts to study all safety issues related to the Lynas project.
The IAEA nominated a nine-member panel to do the job. The panel consisted of a leader and eight members. All are world-renowned experts on issues of radiological safety. Four members are from the IAEA itself, and the rest are from
the Netherlands, Canada, India, United Kingdom and Italy. No one from Australia, China or Malaysia was invited to be a panel member to avoid any possibility of a conflict of interest.
The panel began its work immediately and visited Malaysia from May 29 to June 4 to meet members of the public, representatives of Lynas, government officials and visit the Lynas site.
The government also made elaborate arrangements to ensure that anyone who wanted to make representations to the expert panel could do so either in person or in writing. Public announcements outlining these arrangements were made in all mainstream newspapers in Bahasa Malaysia, English, Chinese and Tamil.
In the event, representatives from residents’ associations, NGOs, community organizations, political parties and professional bodies did take advantage of the opportunity to meet the expert panel and make their submissions at meetings held in Kuantan and Putrajaya.
Among the political parties participated in the sessions include UMNO, MCA, PKR, PAS and DAP. Of course, YB Fuziah Salleh, the MP of Kuantan, was invited and she used the opportunity to submit her case to the expert panel.
The panel has undertaken to submit its findings and recommendations to the government by the end of this month, and the government will make the report public.
Where do we go from here?
How will the Lynas issue be resolved?
The government’s decision on the future of the project will be guided by a few fundamentals. First, the health and safety of the rakyat is the No. 1 priority. This overrides all other considerations, and any decision on Lynas will not be made at its expense.
Second, any decision taken will be based on facts, not emotion or political considerations. The IAEA-appointed expert panel will determine the facts in this case, and the government’s decisions will be guided by its findings and
Thirdly, the government continues to welcome constructive public discussion of this issue, and views it an important component of the democratic process. On its part, the government has sought to contribute to this process by making sure that anyone who wants to make a submission to the expert panel is able to do so either
in person or in writing.
Fourthly, the government will continue to act transparently in its dealings with the public on this issue. All public information and reports related to the Lynas project are accessible through relevant web links.
These guidelines will ensure integrity in the government’s decision-making and in the decisions that will finally have to be made.
There are about 10 days to go before the expert panel submits its report. Until then, it is appropriate that all parties refrain from making comments that may pre-judge the panel’s findings.
I think investors will welcome the fact that this government makes its decisions based on facts and reason, and does not act arbitrarily.
This incident also highlights the need for investors to be responsible corporate citizens in their host country. They should adhere to standards of conduct and governance which are not in any way inferior to those practised in their home country.
I think these are legitimate expectations, and no enlightened investor will have any quarrel with them.