Majority of aluminium money does not stay in Iceland

The majority of funds that went to build the Karahnjukar hydroelectric dam in East Iceland have not found their way back to the Icelandic state and last year more than half of Alcoa’s export revenues were sent overseas.

A new report into the effects of heavy industry on eastern Iceland has just been released. One of the conclusions of the report is that the foreign labour force used to build Karahnjukar was far bigger than predicted – at around 80 percent of all workers. The huge size of the project, the then-low unemployment and the then-high value of the krona are named as reasons.

The report also says that only a portion of the damming costs stayed in the country. Of the ISK 140 billion invested, only a third actually went into the Icelandic economy. The report says that the Alcoa aluminium smelter in Reydarfjordur (which the Karahnjukar dam was built to power) cost ISK 126 billion overall; but of that figure, only ISK 36 billion stayed in Iceland. There is no way of knowing what percentage of the money stayed in the east of Iceland, RUV reports.

On the positive side, the smelter continues to return funds to the economy. Last year it exported ISK 74 billion worth of aluminium and bought electricity from Landsvirkjun for at least eleven billion. The report calculates that ISK 28 billion (or around 40 percent of the export value) remained in the Icelandic economy. That is somewhat higher than previously estimated – partly because tax has been added to the purchase of electricity since the plant opened, thereby increasing tax payments to the treasury.

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