This is the second part of the Chamber News & Views’ interview with Mr. Marcelino Quant,
entrepreneur and President of the San Nicolas Business Association.
Did you see the closure of the refinery coming, even before 2009?
The first closure in 1985 came as a total surprise. Negotiations with oil companies in Venezuela for better prices per barrel did not lead to a solution, so Exxon decided to shut down the refinery. And it is exactly the same now with the closure of Valero. A few people saw this coming but most just did not want to acknowledge it was a possibility.
Was there a plan for when the unexpected happened?
No, there was no plan. With the opening of Coastal in 1991, no one questioned if it could be temporary. Everyone was happy; Coastal would come with a delayed coker, cat cracker, etc. Not all of this was realized and Coastal too, ended their operations. And even with these red flags, no one thought that Aruba should start thinking of different industries other than the refinery. But let’s leave it to that as it is in the past now.
When SNBA realized that this challenge could not be avoided, we started thinking of alternatives; a fiscal zone among others. We brought the idea forward during the Social Dialogue of last year, where it got a lot of attention and it became a “Special Economic Zone (SEZ)”. (The SEZ is mentioned in the first part of this interview. As of June 28, 2013, the SEZ was introduced, read about it at the end of this article*, red.)
Can the refinery have a negative impact on San Nicolas’ future development?
It is not really attractive to have a refinery in your backyard, especially if you are a hotel developer. But a hotel is not a short term investment; it is something that takes a few years to be developed. Maybe we are being optimistic, but at SNBA we believe that in ten years the refinery is not going to be there. And if it still there, then it would not have been replaced by something else.
What would you suggest we could do with the refinery premises?
The government of Aruba has to make a decision, from a strategic point of view. We either close and dismantle the refinery, or we continue to look for a buyer for the refinery, knowing that within a couple of years we will need to replace it anyway. That is a decision that I, as the president of SNBA, cannot make. It is a decision that should be made as a country. Once the decision has been made, then we can start planning.
I would choose a long term plan, where a new economy will be built without the refinery, capitalizing on new frontiers. For instance, if Aruba wants to become a sustainable island, then we should maintain and work on sustainability. This could be the dismantling of certain industries, where Aruba could become an expert in. We can benefit from our relations within the Dutch Kingdom, and political stability.
I would advise the government to postpone any plans to exploit the tourism industry in San Nicolas. If you have a good tourism industry on one side of the island, I would not recommend building another one in San Nicolas, where the two sides would have to compete against each other, with price reduction as a possible consequence.
The idea is to create new opportunities and to grow. Therefore a new sustainable industry would be best for Aruba; not a recreational industry that includes hotels.
One of the suggestions I have is ship dismantling. This is a lucrative business since the price of steel has become so high. I used to think of it as a “dirty” industry, with a lot of contamination. But I learned that this industry has been so much regulated that it has become a clean industry. As San Nicolas has a great harbor, this is a good opportunity.
What are the other opportunities you see for the harbor in San Nicolas?
SNBA regrets that the government of Aruba has never re-evaluated the development of the port in Barcadera, even after it was known that the refinery would stop its operations. Considering the high costs of investment necessary to develop the Barcadera port, in our opinion they should have at least considered the San Nicolas harbor.
We think it would be best if the commercial activities moved to San Nicolas, which is a natural and much larger harbor compared to the one in Barcadera. It would have been the obvious choice, but apparently the negotiations were already at an advanced stage.
Whatever happens, we think opportunities should be seized in industries related to the harbor to make optimal use of all assets and benefits the harbor has to offer. Next step is to make a strategic plan where the harbor is divided in smaller parts according to the needs and the remaining areas will be assigned to different types of developments.
For example, the transshipment industry will be assigned to the Zeewijk area. Other areas nearby can be assigned for light industry processing, such as chemicals or detergents. More to the east-side, you can reserve an area for future touristic development, taking into account that it will need room to grow. Assign an area to place docks for ship dismantling and re-shipping. Know which areas limit possible contamination. Look at the entire harbor and decide where to place different industries.
From there on, we have to “discover” new industries for the harbor, for instance installation of ship and navigation instrumentation. This is very precise technical work that is feasible and it adds value to the dismantling industry. Ships get dismantled because they become old, not because their instrumentation is not functioning properly. When ships get to a certain age, the insurance becomes too expensive, and with the inspection rules becoming more stringent it makes sailing these ships, unfeasible. But technically everything should be working just fine.
Thus, if we can dismantle aging ships here in San Nicolas, and we make a business of assembling the expensive instrumentation it into a new one, it would create a win-win. Of course, logistically it is not possible to dismantle an aged ship on one side of the harbor, and assemble another one on the other side, but I think we should cleverly look for where the demands are to dismantle ships, and specifically look for strategic partnering with shipbuilders who are in need of specialized instrumentation assembly.
Ship building is not in high demand at this moment compared to ship dismantling, and there are specific countries that are specialized in ship building such as Poland, so we cannot really compete with them right now, but ship dismantling is a new industry with new environmental regulation. And this can be our edge.
As the president of SNBA, how do you think SN is going to turn the tides around?
With good planning and execution, therefore we will need a platform, and I think what the Chamber’s event “Aruba without the refinery” is a good way to create public awareness on this topic, as it will not only benefit San Nicolas, but the island as a whole. We cannot be one happy island, if the happiness is not equally divided everywhere.
Secondly, we have to update and adapt our laws, this is vital if we want to execute a new industry successfully. Third, we need incentives to stimulate (local) entrepreneurs to take that first step in investing. And last but not least, we need to keep on talking and we need to keep promoting these ideas. One day, someone will listen.
What do you think makes San Nicolas resilient?
I think the strength of San Nicolas lies in its people; most of us are immigrants or descendants of immigrants. People who took a risk and decided to come to this small island called Aruba, primarily to work in the refinery and make a living, without knowing what to expect. We enjoy life and we are fighters and that is what makes us resilient.
*On June 28, 2013, the Government of Aruba approved the introduction of a series of tax reforms, to make it easier for entrepreneurs and investors. These reforms also include a special taxation zone in San Nicolas to stimulate business activity; this is the special economic zone (SEZ).The tax policy for the SEZ will apply for a minimum duration of 10 years. Companies that meet certain conditions and that conduct their activities in the San Nicolas district may be awarded “special economic zone” status. They must submit an application to the Aruba Financial Center (AFC), which will award the status after it has consulted the SNBA. The requirements that apply are: • Minimum investment of Afl. 150.000 (exceptions apply in case it is a hotel) • The business must have a minimum of 3 employees (FTEs), when its revenue is less than Afl. 1 million • A minimum of Afl. 30.000 must be spent on maintenance over a period of 5 years. • Businesses already based in San Nicolas may also apply for SEZ status • Businesses that existed before January 1, 2013, are to comply with the investment, employment and maintenance requirements as well.