The United Nations said that the South Korean company POSCO (ADR) (NYSE:PKX) (KRX:005490)’s steelmaking project in eastern India could displace more than 22,000 people, putting them at risk of falling into poverty, the AFP reports. UN experts have asked Posco, which Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) owns a 5.1 percent stake in, to stop construction on the plant immediately.
POSCO’s largest foreign investment in India
POSCO (ADR) (NYSE:PKX) (KRX:005490), which is the world’s fourth largest steelmaker, has said that it will continue with the $12 billion project which will be the largest foreign investment in India once it is completed. The deal was originally announced in 2005 but it has been delayed by environmental concerns and local opposition. The steel plant and port together will span more than 4,000 acres, according to the Hindustan Times, and the Odisha government has already acquired more than 2,700 acres and turned over 1,700 to Posco. A Posco official said they are expecting another 1,000 acres to be turned over in the near future.
UN team asking Indian government to back out
“People should not be impoverished in the name of development. Their rights must take precedence over potential profits,” said Magdalena Sepulveda, the UN Special Rapporteur on extreme poverty and human rights. Sepulveda and the rest of the UN team that issued the report have also tried to convince the Indian government to back out of the deal. A POSCO (ADR) (NYSE:PKX) (KRX:005490) spokesperson said that the company has no comment at this time because it has not yet had time to look through the UN report.
This deal is being closely watched by other companies who want to make capital investments in India to take advantage of its growing economy, but concerned that the regulatory environment might be difficult to contend with. Large investments and industrialization have the potential to create new jobs, but local farmers have contended that they have been forced to sell their land below market rates and that their livelihoods have been ruined.
Warren Buffett first bought into POSCO (ADR) (NYSE:PKX) (KRX:005490) in 2006, paying approximately $768 million for 4 million shares. “It’s a great company. And great companies get worth more and more all the time,” he said at the time, and so far he has more than doubled his money on the investment.