Developing countries with potential mineral riches have often fallen prey to corruption and mismanagement. As a result, they’ve failed to benefit from their natural resources and remained in poverty. Now, new guidelines have been drawn up to help such countries harness their mineral wealth.
The World Economic Forum and The Boston Consulting Group have identified six steps to help poor countries cash in on their mineral deposits. The recommendations are based on the advice of 400 experts from NGOs, governments and mining companies.
Learning from the past
“Historically, there have been so many cases where countries, who have lots of minerals, have systematically not developed those correctly. They haven’t done them in a socially or economically, what we call, responsible manner,” said Alex Wong, World Economic Forum’s senior director.
He said the “six steps” or “building blocks” can help prevent history from repeating itself.
“What’s happening now with the commodity price cycle that we’re in and the emergence of several countries onto the global stage - such as Mongolia, Guinea, Peru – these are countries who are now, for the first time in a way, having the opportunity to develop their mineral resources and using it as a major way for their countries to grow economically. So, it’s actually an incredible moment where we don’t want to make the same mistakes that have been made in the past,” he said.
Poor, yet mineral rich, countries face a number of challenges in developing their extraction industries. These include not having the expertise, skills or resources at hand to develop the industries. Another issue may be a failure to get local communities and civil society involved in the process. And often the negotiating process has not been transparent.
“So, people actually don’t understand what are the terms of the agreement. They have, therefore, mismatched expectations and lack of communication, which then obviously causes lots of tension and misunderstanding,” said Wong.
Doing what’s right
Wong said the recommendations help create a climate of trust, which can lead to all the stakeholders benefiting from the mineral wealth.
“First of all, promoting capacity building and knowledge sharing. And that includes making sure everybody understands how to do it. How to develop these mineral resources in a responsible manner. Making sure people understand the costs and benefits associated. The second category of actions is around collaborative processes, processes both at the national level and at the local level. So that you have mechanisms and processes for people to be included in the discussions and have a feeling that they’re part of the negotiations and the outcomes,” he said.
The final category of recommendations concerns transparency and dispute resolution.
Wong cautioned there is not an immediate return on investment for mineral rich countries, as there may be for oil-rich nations.
In for the long-term
“In mineral development, in particular, it’s especially challenging because governments don’t actually often get their revenue that comes from the process of extracting their minerals until a good 10 to 15 years later in some cases. And whereas oil is probably a little more immediate because you get stuff under the ground, you ship it out and the government’s seeing revenues,” he said.
Wong said there’s been a good initial response to the Framework for Advancing Responsible Mineral Development. It highlights 22 successful projects in such countries as Mongolia, Liberia, Ghana and Chile. He says a second initiative promoting responsible mineral extraction is the World Bank-led Extractives for Development initiative, or E4D.