Tim Sahay
October 2024
Johns Hopkins, Net-zero industrial policy lab
The Polycrisis, Phenomenal world
asahay@gmail.com
Mining and Economic Development
Source: IRENA (2023)
Consumer countries (often in global north)
Producer countries (often in global south)
Resource curse and commodity dependency can undercut any benefits mining might provide. So mining development must be linked to a broader strategy that aims to transform the economy and break from primary production and commodity dependency.
The problem of Mining development
-Develop enough mining assets to deliver metals for energy transition
-Price volatility makes mines hard to finance
-Long time taken to develop a mine so supply-demand mismatches
-Mines are very capital-intensive so problem of jobs
-Dirty metals are cheaper and drive out greener metals
Resource curse and commodity dependency can undercut any benefits mining might provide. So mining development must be linked to a broader strategy that aims to transform the economy and break from primary production and commodity dependency.
The problem of Economic development
How to create a more complex, low- carbon economy that meets the basic needs and enhances the capabilities of all people?
Industrial policy is recognized as a key means to supporting this goal. It requires a certain level of state capacity; and without strong governance it can lead to corruption and bad investments.
The problem of Mining development
-Develop enough mining assets to deliver metals for energy transition
-Price volatility makes mines hard to finance
-Long time taken to develop a mine so supply-demand mismatches
-Mines are very capital-intensive so problem of jobs
-Dirty metals are cheaper and drive out greener metals
Why are there Rising export restrictions in over 80 Producer countries?
To develop downstream industries
Source: IRENA (2023)
Theory of Change for Mining-led development (Carlota Perez)
Mineral-rich countries can leverage natural resources by creating upstream and downstream production networks to create value-added manufacturing opportunities in adjacent sectors
It is knowledge formation that allows countries to move up the value chain into technological, innovative manufacturing niches in these networks.
Countries need to accumulate the skills and know-how to position themselves within global supply chains and production networks. When that know-how is in upstream, highly productive sectors like metal manufacturing or chemical processing, countries can create complex, diversified economies.
Source: Carlota Perez
Theory of Change for Mining-led development (Carlota Perez)
Mineral-rich countries can leverage natural resources by creating upstream and downstream production networks to create value-added manufacturing opportunities in adjacent sectors
It is knowledge formation that allows countries to move up the value chain into technological, innovative manufacturing niches in these networks.
Countries need to accumulate the skills and know-how to position themselves within global supply chains and production networks. When that know-how is in upstream, highly productive sectors like metal manufacturing or chemical processing, countries can create complex, diversified economies.
Source: NZIPL
Example of natural resources-led development: Malaysia
In the 1970s, Malaysia was dependent on tin and rubber. Together, these accounted for 85% of Malaysia’s exports.
Today, Malaysia has value-added industries in petroleum, electronics and electrical, and rubber products
“The sustained growth of the rubber-based industry can be attributed to the role of several specialized government agencies that undertook R&D in rubber- related areas, FDI promotion to gain access to foreign technology and export markets, ensured quality control to promote sales in foreign markets, and incentivized value addition through tax incentives” - Lebidoui (2022)
Source: Amir Lebidoui
Lack of domestic value add and extractive regimes in sub-saharan africa are because of the post 1990s Northern liberalizing preference for Foreign owned mining versus Domestic owned mining. Led to “enclave” economies where mining is not linked to domestic development.
Post 2000s BRI Regime in China, Indonesia has a strong preference for domestic owned mining over foreign owned mining, and has allowed for increasing domestic development
Source: Radley (2024); lMF (2024)
What should northern trade campaigners demand?
Continue to demand high road ESG standards in World Bank/Regional MDBs/Trade agreements to aid Southern campaigners in fight against extractive and destructive interests
Supplement with cheaper and more MDB finance during a crushing global debt crisis, closing of Northern tax loopholes to stop kleptocratic southern elites and MNCs from siphoning resource wealth, and equitable trade treaties that require technology transfer or cheaper IP rents for green technology held by northern companies
Source: IRENA (2023)
What are Leverage points for EU Campaigners to make these demands?
EU Global Gateway has an aim to promote local value add inside partner countries using strategic partnerships on raw materials that take the form of MOUs (e.g., Chile, DRC, Zambia) and negotiations of Energy and Raw Material chapters in free trade agreements.
European Investment Bank is expected to provide loan guarantees to mining and green industrial projects abroad. It has an ambitious goal of mobilizing up to €300 billion in public and private investments by 2027
EU Member countries are expected to use their Export Credit Agencies to de-risk mining projects abroad and secure mineral imports for domestic buyers
UN Tax Convention: Many developing country governments that generate significant revenue from mining lose 5-10% of it from tax avoidance by MNCs that are headquartered in OECD countries of the global north
Source: NZIPL