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The Contribution of the Mining Sectorto Socioeconomic and Human
Development
Paulo de SaPractice Manager
Energy & Extractives Global PracticeThe World Bank Group
January 13, 2015
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Agenda
Mining Contribution to Socioeconomicand Human Development
The World Bank Group: Who we are and What do we do?
Global Mining Industry … Issues and Challenges
How can Mining Contribute to Socioeconomic and HumanDevelopment? Three Channels for Action:
Revenue Mobilization Sound Macroeconomic Management Inclusive Growth
Evaluating Mining’s Contribution: The case of Sub -Saharan Africa
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Mining Contribution to Socioeconomicand Human Development 4
WBG Extractive Industries Financing Trends: FY2005 - FY2014
US$ 9 billion of cumulative investment over the past decade
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14
IBRD/IDA IFC MIGA
WBG EI Financing Volume: FY2005 -FY2014
(US$ Millio ns )
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Mining Contribution to Socioeconomicand Human Development 5
World Bank Group Extractives Current Portfolio
IDA: US$437 million. 14 Dedicated EI TA Projects , of which 85% in
Africa (Burkina Faso, Cameroon, DRC, Ghana, Guinea, Kenya, Malawi,Mozambique, Sierra Leone, Tanzania), plus Afghanistan, Mongolia, PNG.
• IFC: $401 Million: 32 Projects in 21 Countries.
Iron, 43%
Diamonds, 18%
Gold, 17%
Industrial Ores,12%
Other Metals, 8%Copper, 2%
Sub-SaharanAfrica, 78%
LAC, 16%
Europe andCentral Asia, 4%
Middle East &North Africa, 1%
World, 1%
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Mining Contribution to Socioeconomicand Human Development 6
Robust E&SMitigation
Adequate GovernanceCapacity & Institutions
Transparency
Tax revenues for public investmentsand safety net programs for the
poor and vulnerable
Job creation and skills development
Developing local supply chains
Sharing extractives-relatedinfrastructure
Fostering trade and foreigndirect investment
EndingExtremePoverty
BoostingShared
Prosperity
Tax Revenues For PublicInvestments & Safety Net Programs
For The Poor & Vulnerable
Job Creation & Skills Development
Developing Local Supply ChainsSharing Extractives-related
Infrastructure
Fostering Trade & ForeignDirect Investment
EndingExtremePoverty
BoostingShared
Prosperity
CommunityEngagement
Extractive Industries Support The WBG’s Twin Goals
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Mining Contribution to Socioeconomicand Human Development 7
Potential Outcomes of the Current Price Declines:
Concentration of supply, with return to safe havens andless focus on emerging markets.
Possible Macroeconomic Windfall with greater gains formineral consuming countries.
Fiscal Adjustments for Mineral Exporters.
Less Dependency and More Economic diversification forResource Rich Countries?
Global Mining Industry … Issues and Challenges
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Mining Contribution to Socioeconomicand Human Development 8
Strategic Setting: Global Issues in Mining
Commodity prices declining after sustained high levels overthe last 10 years bringing a lot of instability into the sector.
On the Demand Side: Global economic risks continue to hinder growth prospects . Theglobal economy remains fragile and prone to policy uncertainty. Slower growth in China is pulling down demand for and prices ofexports of metals and minerals.
On the Supply Side: Record levels of investment in exploration and development ended. Need to reduce excess supply : Marginal producers are closing, hugeinvestment write-offs . Risk of supply concentration (iron ore, copper) threatens futureprice increases.
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Mining Contribution to Socioeconomicand Human Development 9
High expectations from shareholders of mining companiesrequesting adequate returns from past investments.
Increased expectations by governments and communitiesfor a bigger share of benefits , leading to trend in revising fiscalregimes, renegotiation of contracts, and local conflicts.
Resource Rich Countries seeking higher contribution fromthe sector aiming at inclusive growth, bigger share in themarkets.
Environmental and Social “ licenses to operate ” becomingindispensable for any mining project.
Adjustment Taking Place on Background of Conflicting Expectat ions
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Mining Contribution to Socioeconomicand Human Development 10
Possible Outcomes: A Macroeconomic Windfall?
World Bank Global Economic Prospects: Lower Commodity prices will boost world output by 0.5%. Global Inflation will fall by 0.4-0.9% over the medium term. Resource Risk Countries are going through Fiscal
Adjustments because of reduced revenue mobilization . Fewer countries are falling on the “ Debt Trap ” created by
excessive consumption and increases in public sector wages.Price volatility will affect Subnational Governments and
Local Communities benefiting from Revenue Sharing
mechanisms or Earmarked Revenues
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Mining Contribution to Socioeconomicand Human Development 11
Location Of Mining Activity HasShifted Towards Emerging Markets
Resource Exports(Average, 2005 - 2010)
Possible Outcomes: Less Dependency?
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Mining Contribution to Socioeconomicand Human Development 12
How can Mining Contribute to Socioeconomic and HumanDevelopment? Three Channels for Action:
Revenue Mobilization
Sound Macroeconomic Management
Inclusive Growth
Contribution to Socioeconomic and Human Development
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Mining Contribution to Socioeconomicand Human Development 13
1/ Fiscal:Optimizing revenue mobilization
2/ Macroeconomic:Avoiding the “resource curse”
3/ Contribution to Social and Human
Development through Inclusive Growth
Three Channels for Action
Mining
Contribution toSocioeconomicand Human
Development
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Mining Contribution to Socioeconomicand Human Development 14
1/ Fiscal - Optimizing revenue mobilization:
Build stable and transparent Legal andRegulatory Frameworks.
Invest in improving technical capacities andskills for the negotiation of equitable and flexible
fiscal regimes. Improve tax administration capacities to tackle
tax avoidance schemes such as transfer pricing. Build strong institutions which promote
transparency and good governance, ensure
property rights, and support political stability. Promote Transparency and Accountability , toavoid elite capture, and support participation ofthe majority of citizens in economic activity.
Mining
Contribution toSocioeconomicand Human
Development
Fiscal Route Channel
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Mining Contribution to Socioeconomicand Human Development 15
2/ Macroeconomic - Avoiding the “resource curse”:
Minimize pro-cyclical government expenditure byimplementing fiscal rules which insulate the national budgetfrom fluctuations in commodity prices. Revenues accruing abovea benchmark commodity price are saved in a separate fund.
Develop a rules-based stabilization fund
, creatingnational public savings. The stabilization fund provides savings tofinance public expenditure programs if commodity pricesdecline.
Aim at ensuring long-term income (once resourcesare depleted), by converting the natural resource into financial,human and physical assets. Resource windfalls may be partlysaved for future generations (Sovereign Wealth Funds).
Focus on investments in productive physicalassets like public infrastructure (such as power plants,transport infrastructure, etc.), which reduce the costs of doingbusiness for the private sector (avoid ‘ white elephant ’ projects).
Mining
Contribution toSocioeconomicand Human
Development
Macroeconomic Route
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MiningContribution toSocioeconomic
and HumanDevelopment
3/ Inclusive Growth - Contribution to Social andHuman Development:
Human Development:Jobs
Skills and EducationHealthGenderR&D and innovation
Economic Diversification (including local content)Shared infrastructure and Local EconomicDevelopmentValue addition and downstream integration
Inclusive Growth Route
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Mining Contribution to Socioeconomicand Human Development 17
Sound Investment Climate and Competitiveness of othersectors of the economyIdentification of National Priorities and preparation ofintegrated Development Plans at the Central and SubnationalLevelsInter Ministerial CoordinationIntegration of Mining Companies infrastructure and socialspending into Government Plans, namely through Public-Private Partnerships
Regional (Multi-Country) ApproachClose involvement of Civil Society OrganizationsContinuous Support from Donor Agencies
Inclusive Growth Route: Key Challenges
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Mining Contribution to Socioeconomicand Human Development 18
Inclusive Growth: Potential Partnerships With the EUC
Four Potential Partnerships With the EUC:
Support to Contract Negotiation
EILCD: Extractive Industries for Local Content Development
AMGI: African Minerals Geoscience Initiative
Mining Associated Infrastructure
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Mining Contribution to Socioeconomicand Human Development 19
Support to Contract Negotiation
Extractive Industries Technical Advisory Facility (EI-TAF) assists developingresource-rich countries to structure extractive industry transactions and relatedsector policies. EI-TAF facilitates rapid-response, third-party advisory servicesand capacity building for resource policy frameworks and transactions. On-goingprojects in 20 countries.
Through its Knowledge Management window EI-TAF supports the production
and dissemination of global knowledge products. The flagship products:EI Source Book : Developed in collaboration with Un. Of Dundee.
Mining Government Assessment: Developed in collaboration with Govt. ofGermany, the Adam Smith Inst. and Natural Resources Governance Institute
ASEI- African Sustainable Extractive Industries : New Trust Fund funded by the
French Government.
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Mining Contribution to Socioeconomicand Human Development 2020
Global activities : Global community of practice forsustained professional learningDevelopment of guidance notes and tool-kits for design and implementation ofLCPs
Knowledge exchange, Advocacy andPromotion Country-level and Regional-levelactivities :
TA and capacity building for design/reformof local content policies and strategies.
Demand for Skills in the extractivesindustry and potential for local contentSupply assessment
Employment and local supplies: 66% of the value created
EILCD: Extractive Industries for Local Content Development
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Mining Contribution to Socioeconomicand Human Development 2121
AMGI: African Minerals Geoscience Initiative
Geological Data(geo-database)
KEY DELIVERABLE from AMGI(at 1:50k to 1:100k scale density )
Cadaster Linked togeological mapping(rural land titling) withmineral inventory and
concession DB/cadaster
Remote sensingSatellite dataGeophysical
(geo-database)
A new initiativechaired by theAfrican UnionCommissionaiming at
making geo-data accessibleto a globalaudience inAfrica.
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Mining Contribution to Socioeconomicand Human Development 2222
Copper (DR Congo, Zambia)
Coal (Mozambique, Zimbabwe, SouthAfrica, Botswana, Namibia)
Iron Ore (Mauritania, Guinea, Liberia ,Sierra Leone, Senegal, Cote d’Ivoire,Rep. of Congo, Gabon, Cameroon)
Bauxite (Guinea, Ghana, Nigeria,Cameroon, Sierra Leone)
New mineral and oil/gas
discoveries are opening upcountries and sub-regions in SSA,
Vast untapped resources willrequire infrastructure for
development, but funding needsvastly exceed national budgets ofhost governments.
By partnering upstream withanchor investors, countries canleverage their natural resourcesfor the development of mega-scale, shared-use transport andpower assets.
Uganda
US$8-10 bn in oilinvestmentsUS$50 bn in oilexport revenue
TanzaniaUS$20 bn investmentin LNGPossible US$2bn ingov’t revenue p.a.
Mozambique
US$10 bn investment in mining
& infrastructureUS$70 bn investment in gas
Cameroon
US$7 bn in iron ore andaluminum investments
Ghana
US$8-10 bn in oilinvestmentsUS$40 bn in exportrevenue
Guinea
US$20 bn ininvestments inextractives & relatedinfrastructure
Mining Associated Infrastructure
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Mining Contribution to Socioeconomicand Human Development 23
Evaluating Mining’s Contribution to Socioeconomic and
Human Development:
The case of Sub-Saharan Africa
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The Case of SSA: Strong Economic Performance
Source: World Bank (2012)
Mining dependent low & lower-middle income SSA countries* posted the
lowest GDP growth rates in the region in 1991-2000 .
But they outperformed their non-mining and non-mining/oil peers in2001-2010 and 2007-2011 .
Mining Contribution to Socioeconomicand Human Development
SSA Low- and Lower-middle-income Countries – GDP Annual Growth Rate (%)
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Improving Human Development Indicators
Source: UNDP, 2012
Mining dependent low- and lower-middle income SSA countries* are bridging
the disparity gap and increasing access to quality health and education services.
Mining Contribution to Socioeconomicand Human Development
SSA Low- and Lower-Middle Income Countries – Change in Health and Education Indices (%)
Education Health
0
5
10
15
20
25
30
35
1990-2000 2000-2010 2007-20110
5
10
15
20
25
1990-2000 2000-2010 2007-2011
Mining
Non-Mining
Non-Mining/Oil
World
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Progress in Governance
Source: World Bank, 2012
Mining dependent low- and lower-middle income SSA countries are closing thegovernance gap at a higher rate than their regional cohorts, except for governmenteffectiveness.
Moreover, contrary to resource curse theory, higher increased dependence onmining did not result in deteriorating governance .
Voice Accountability (V), Political Stability (S) andGovernment Effectiveness (E) (% Change)
Mining Contribution to Socioeconomicand Human Development
SSA Low- and Lower-Middle Income Countries
1996-2003 2003-2010
V S E V S E
Mining 9.9 8.6 7.9 7.1 3.1 -3
Non-Mining
9.5 3.7 -5.9 -4.5 -0.4 -2.4
Non-Mining/Oil
5.4 0 -5.9 -3.7 -3.5 0.5
World -0.4 2.5 -1 1.2 1.2 1.2
1996-2003 2003-2010
R L C R L C
Mining 3.5 8.7 -0.4 6.1 4.6 6.8
Non-Mining
1.2 -0.6 -3.5 -2.3 -2.9 -3.5
Non-Mining/Oil
-0.9 -0.6 -4 -4.4 -6.5 -4
World 0 0 0 0 0 0
Regulatory Quality (R), Rule of Law (L) and Controlof Corruption (C) (% Change)
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Mining Contribution to Socioeconomicand Human Development 29
Early Indications of Impacts at the Community Level
Using a large sample of women and children living within 100km of a mine, the
establishment of a new mine increases income earning opportunities within theservice sector by 41%.
Other determinants of welfare are also affected:women are 23% less likely to state a barrier to healthcare access for herself.women’s acceptance of domestic violence decreases by 24%.
Despite risks of environmental pollution from gold mining, infant mortality morethan halves with the mine opening:Mine opening is associated with 6.5% decrease in the likelihood that a child diedwithin the first 12 months (which is equivalent to a two-thirds decrease).For boys, the change is 4.8%, equivalent to a 47% decrease in the incidence.The largest drop is among girls; an 8 % decrease in the mortality rate, equivalentto 85% decrease.
ANJA TOLONEN: Local Industrial Shocks, Female Empowerment and Infant Health: Evidence from Africa’s Gold Mining Industry, Nov ember 2014
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Thank you!
Mining Contribution to Socioeconomicd H D l