The challenge of mineral wealth

A major mining industry project calls for action to improve socio-economic outcomes of resource endowments.

Speaking this week at the World Economic Forum in Davos, International Council on Mining and Metals (ICMM) Chairman Wayne Murdy called for concerted action to strengthen the economic benefits and poverty reduction that flow from mining investments in developing countries. “ICMM member companies are aware that, too often, the socio-economic performance of mineral dependent developing economies has been poor.”

 A ground-breaking, 18-month research project by the ICMM has found that mining has significant potential to drive economic growth and poverty reduction in mineral-rich states under certain conditions. The project’s conclusions are in marked contrast to academic literature which purports to show the “resource curse” paradox of resource riches coinciding with low economic growth.

The research found that particularly for the poorest countries, mining can provide opportunities for early-stage development that other industries do not offer. For example, in Ghana since the mid-1980s a boom in mining investment has coincided with an upturn in economic growth. As a result, poverty has fallen especially in regions with a high level of mining activity (IM, January 2006).

ICMM Secretary General Paul Mitchell, who joined Wayne Murdy in Davos, says that a stronger focus is required on managing and using the generated revenues transparently and effectively (at national, regional and local levels) if mineral wealth is to deliver on its economic promise over the long-term.

In particular, he says that “governance weaknesses at the regional and local level must be remedied to achieve the full economic and social development potential of mining investments. These findings should inspire those in the industry to seek more collaborative solutions to challenges, ideally at an early stage in project planning.”

Wayne Murdy, Chairman and CEO of Newmont Mining Corporation, added: “For the world’s leading mining companies, this project is of the utmost importance. We have stepped up our own sustainable development efforts in recent years – and without doubt, we need to continue to push ahead in this respect. However, we increasingly recognize that translating mineral wealth under the ground into social development and broad-based economic growth is a task that we simply cannot achieve by working alone.

“States, development agencies like the World Bank, and civil society agencies need to play their own part by strengthening economic management, governance and sound and participative institutions at national and importantly at regional and local levels. Without such joint action, unrealistic public expectations of what companies alone can deliver are likely to continue to grow.

“Ultimately the long-term interests of the industry will be served if mining contributes to achieving – and is seen to achieve – significant reductions in poverty and sustained economic growth across the developing world.”