Local economic development

Mining is by its very nature a limited-term operation. Once resources are exhausted, the mine closes – and all too often leaves massive gap in the local economy. So how can localities and regions harness the opportunities the mining project creates to support sustainable economic development?

The short-term impact of a mine or oil or gas programme on the local economy is immense. As well as the new employment opportunities at the extraction site itself, a host of other industries spring up to support it: creating and maintaining the transport infrastructure, manufacturing and assembling parts and supplies and not least accommodating the influx of workers. Even the currency can be affected, inflating rapidly on the back of the incoming dollars.

But as regions around the world could attest, the boom quickly turns to bust once the mining company moves out: the new industries are devastated while more traditional sources of income – including agriculture – may have fallen into decline due to under-investment.

For those in charge of local, regional and national development, the challenge is how to translate the economic boost of a mining programme into a sustainable foundation for further growth – building the right business infrastructure, supporting relevant industries with long-term potential and focusing on skills development. This may involve developing incentive schemes, channelling international assistance and making effective use of the taxation revenues that come from mining.

Drawing on extensive multidisciplinary analysis of mining and extraction projects across the globe, and applying dynamic computer-based modelling, OPM has helped local and regional governments respond to these issues and understand the risks and opportunities in their area. The underlying principle to our approach is the need to understand the entire mining and plan accordingly to ensure economic benefits are locked-in.

The role of local content rules

One of the most common ways countries seek to enhance long-term economic development through mining is by setting local content rules – essentially committing any extractive industry investor to purchasing a certain proportion of goods and services locally. However, for this to be sustainable, it is essential that the ‘local content’ is not solely appropriate to the mining industry, otherwise it too will evaporate when the resources run out.