The world's largest steel group Mittal Steel exploited a legal void in war-torn Liberia to snap up enormous iron reserves in a deal which makes it a "state within a state", Global Witness said in a report, according to Reuters. The corporate governance campaigner said the $900 million deal signed by Liberia's unelected interim government following the 1989-2003 civil war ceded important state rights. The 25-year deal, agreed in August last year, is under review by the new administration of President Ellen Johnson-Sirleaf, which completed its own study of the contract last month and is in talks with the Netherlands-based company. The deal grants powers to Mittal -- whose sales are worth 10 times Liberia's gross domestic product -- to dispossess local communities of land, mine in national parks and establish prices for iron ore, thereby setting its own royalty tax payments. "While Mittal's behaviour is not unusual or illegal the company had a duty as the world's biggest steel company and a self-professed good corporate citizen to lead by example," Global Witness concluded in the report released this week. The massive deal was hailed as a sign of investor confidence in the West African state after the civil war shattered its infrastructure and killed some 250,000 people. It is expected to boost Mittal's iron ore production by 15 million tonnes a year. Before the war Liberia was the world's fifth-largest producer of iron ore. A Mittal spokesman said the company was holding constructive talks with the Liberian government and expected to reach a deal which would satisfy both parties. "We are confident that our investment in Liberia will be of considerable benefit to the people of Liberia," he said, declining to give further details. Global Witness, however, said the deal set a bad precedent for other developing countries by granting Mittal sweeping powers. The contract also hands the company founded by Indian-born billionaire Lakshmi Mittal control over state assets including Buchanan port and a railway line, which the government would then have to pay to use. Production from Mittal's mine is expected in late 2007. "This is important not just for Liberia but for any developing country which Mittal invests in. If the company can reach a 'bad' deal in Liberia, then it can do so elsewhere," the report said. Global Witness questioned Liberia's decision to offer the huge company a five-year tax holiday at a time when the country desperately needs to rebuild water and electricity infrastructure, schools and hospitals. "It is hard to believe that in signing the agreement the national interim government was acting in the best interests of the nation, and Mittal seems to have taken full advantage of this," the report said, calling for an investigation of the "vested interests" behind the deal. Mittal's $3 million community projects were tiny by comparison with the profits from the venture, the report said. Mittal posted sales of $28 billion in 2005 -- almost exactly 10 times Liberia's GDP. The company clinched the acquisition of rival Arcelor in June to create Arcelor Mittal, and the new firm will be incorporated in 2007. After the merger, the new group would have production capacity of 113 million tonnes, equivalent to a tenth of the world's steel output, according to the company's Web site.
