sharing in governance of extractive industries
In the second policy brief (No. 02/2016, by SNL) of our European Union (EU) funded research project STRADE (Strategic Dialogue for Sustainable Raw Materials for Europe) the consortium have traced the external raw materials based engagements undertaken by five major industrialized countries (China, Japan, Australia, Canada and the USA). All conduct some form of natural resource diplomacy. The desired outcomes of resource diplomacy are different, some want to secure access, whilst others want to promote their own companies in order to gain a foothold in nascent industries and emerging economies.
Unsurprisingly, China takes the most assertive strategy. It employs a Resourced Financed Infrastructure (RFI) model, where the Chinese Development Bank provides loans to resource rich country governments for infrastructure (in ‘bundled’ deals this infrastructure is often ancillary to mine development) with the loan ‘repaid’ in commodities. Although a long term strategy, it delivers a new model of development in Africa, secures a supply of raw materials for China and promotes its private sector abroad as deals regularly see Chinese companies contracted carry out construction work.
Japan, through JOGMEC (Japan Oil, Gas and Metals National Corporation), funds and implements geological surveys through a Joint Venture (JV) model. In 2015 JOGMEC explored 36 regions in 21 countries through its JV model. The survey results are made available to the partner government and to Japanese companies only, providing the latter with a competitive edge in securing exploration licenses. JOGMEG also provides equity capital and loans for Japanese companies with interests in projects outside Japan. In 2014 JOGMEG provided three Japanese companies exploring in Mexico, the US and Australia with equity capital worth USD 13 million.
Australia and Canada (both leading mining economies), position themselves as experts in sustainable mining. Both undertake economic diplomacy missions in resource rich countries, promoting their own companies as leaders central to expansion into underexplored regions. In 2015 the Turkish Government approached the Australian Government to conduct an investigation into recent mining disasters in the country including a road map for the policy and regulatory reform of the industry; the Australian Government estimate that procurement from Australian firms related to the study will be USD 76 million.
Finally, the USA employs a passive strategy when it comes to government support for US mining companies abroad. The Rare Earth crisis of 2013 encouraged the USA to employ a more internal and regional strategy to harmonise the exploration licensing process across states and looking to its nearest geographical neighbours, Mexico and Canada for resource security.
Now that STRADE has mapped other countries approaches; over the next two years, the project will consider options for fit-for-purpose raw materials engagement strategy for the EU.
The policy brief is available as free download on STRADE Project Publications.
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