The discovery of vast untapped mineral resources in a developing country used to be a cause for celebration, promising inward investment, job creation and a significant boost to the local economy and government revenues. But too often realising the full benefits from extractive industries was much harder than anticipated, with countries often experiencing economic turmoil as a result of the mining or petroleum sectors.
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?
How can government ensure that the profits generated by overseas mining companies translate into revenue for the state? How should nations best distribute that revenue to support economic and social development? And crucially, how can they manage the time lag between the arrival of multinationals in the country, and the boom in taxation income – typically some years down the line?
The low impact of extractive industries on social development is not the result of a lack of investment. Instead, the problem is how mining companies have traditionally invested in development – pouring sums of money into construction projects which are not integrated with wider social change.
OPM’s research for ICMM highlighted the fact that all too often mining companies’ efforts to support development have not been integrated into wider regional planning. One of the recommendations of the research was therefore to create development partnerships between mining companies and multilateral-bilateral development agencies – as well as government bodies – to align investment and approaches.
Economic impact assessments and political economy analysis provide a vital insight into whether a development should go ahead and how it should be structured. In OPM’s experience, such insight is a vital ally in tackling the so-called ‘resource curse’ which has historically dogged resource extraction projects.