Patience is a virtue: Problems of regulatory governance in the Indonesian mining sector

Mining investment in Indonesia has been at a standstill for a decade. Clearly. international mining companies regard the country as a high risk destination for capital. Yet Indonesia is one of the most highly mineralised countries in the world and has expressed a desire to increase investment in the sector in the coming years. As a first step in this direction the government has introduced a new mineral and coal mining law to replace the highly regarded Contract of Work system. The government argues that this new law will reinvigorate mining investment in the country. This paper suggests that the new mining law will do little to improve the situation. Indeed, it is unlikely that Indonesia will become a preferred destination for mining investment in the foreseeable future. Poor regulatory architecture, endemic corruption, and a lack of institutional capacity continue to be of concern to investors.     

安徽矿业企业境外资源开发模式研究

为了缓解资源供给压力,保证经济健康与可持续发展,安徽省政府在2008年明确提出要“走出去”开发境外的矿产资源。在国际矿业市场主流资源开发模式研究的基础上,对安徽矿业企业的投资环境进行战略分析,提出安徽省可以将“走出去”分为三个阶段,在每个阶段分别配合实行相应的矿产开发模式以顺利达到开发目标,实现自身发展。     

Japan's develop-for-import policy

Much of the world's remaining mineral resources lie within the underdeveloped nations of the Third World. The current crisis of confidence characterized in international investment and trade in extractive resources has become detrimental to both the resource-rich developing countries and the resource-hungry industrialized countries. Japan is one nation that has developed a strategy to foster mutual trust and to restore confidence in the international extractive industries. This paper examines Japan's develop-for-import policy, ‘kaihatsu yunso’, and its design, implementation and effects on securing foreign resources supplies.     

International mining taxation issues and comparisons

This paper presents the quantitative results of recent research on Canada's minerals and metals industry, and its international competitiveness for mineral investment. The information and analysis presented are derived from the work of a Canadian government-industry task force that was created in 1991, under the auspices of the Intergovernmental Working Group on the Mineral Industry (IGWG). Much of this work deals with mining taxation in several Canadian provinces. More importantly, an attempt is made to evaluate the total tax burden that the mining industry must bear, on a project basis, at all levels from exploration through refining operations in many important competitor countries. While the focus of the paper is on an international comparison of mining taxation, some non-tax issues relating to Canada's competitiveness for mineral investment are addressed .     

The capital shortage phenomenon : Its impact on the US mineral industries

After examining the concept of a capital shortage, the author analyses the impacts of sectoral shortages in the mineral industries. He analyses the future capital needs of certain segments of the mineral industries and the prospects open to them. Finally, the author discusses some policy proposals to stimulate investment. These include the reduction of corporate tax, increasing investment tax credit, changing depreciation allowances to allow for inflation, and changing the tax treatment of capital gains.     

Economic liberalisation, innovation, and technology transfer: opportunities for cleaner production in the minerals industry

The liberalisation of investment regimes for mining over the past decade is encouraging an inflow of foreign investment for mining and mineral processing projects in developing and former centrally-planned economies. This new investment is occurring at a time of technological change within the international mining industry as market and regulatory pressures lead the most dynamic firms to invest in the development or acquisition of new technologies and management practices. The effective transfer and assimilation of these technologies enable mining companies to combine gains in productivity with improvements in environmental management. Joint ventures and other strategic alliances between inwardly investing firms and the newly privatised or remnant state-owned mining enterprises may provide an effective vehicle for the transfer of the techniques for more productive and cleaner operations. Specific examples of innovative process and remediation technologies are analysed and it is suggested that the ability of innovative technologies to improve competitiveness and sustain best-practice environmental management in the recipient is linked to the transfer and effective acquisition of the capacity to manage the complex processes of technological and organisational change. The paper closes with some recommendations for further research directed towards a systematic examination of this hypothesis.     

The future markets for minerals: Some causes of uncertainty

This paper argues that the major uncertainties surrounding the future markets for minerals derive from three serious lacunae in mineral intelligence – first, the altered investment climate for minerals, the undetermined magnitude and geography of its effects, and its prospective impact upon supply; second, the paucity of macroeconomic, medium-term forecasts for the OECD economies, a deficiency that has seriously undermined the possibility of generating useful resource demand forecasts; and third, the indeterminate speed at which changes in the geography of mineral processing activities and metal manufacture are likely to occur.     

An overview of global gold market and gold price forecasting

The global gold market has recently attracted a lot of attention and the price of gold is relatively higher than its historical trend. For mining companies to mitigate risk and uncertainty in gold price fluctuations, make hedging, future investment and evaluation decisions, depend on forecasting future price trends. The first section of this paper reviews the world gold market and the historical trend of gold prices from January 1968 to December 2008. This is followed by an investigation into the relationship between gold price and other key influencing variables, such as oil price and global inflation over the last 40 years. The second section applies a modified econometric version of the long-term trend reverting jump and dip diffusion model for forecasting natural-resource commodity prices. This method addresses the deficiencies of previous models, such as jumps and dips as parameters and unit root test for long-term trends. The model proposes that historical data of mineral commodities have three terms to demonstrate fluctuation of prices: a long-term trend reversion component, a diffusion component and a jump or dip component. The model calculates each term individually to estimate future prices of mineral commodities. The study validates the model and estimates the gold price for the next 10 years, based on monthly historical data of nominal gold price.     

Harnessing the bonanza: economic liberalization and capacity building in the mineral sector

Over the past decade many developing and transition economies have liberalized their investment regimes for mining and privatized formerly state-owned mineral assets. In response, these economies have witnessed increased foreign investment in exploration and development, growth in the number and diversity of mineral projects, and the opening up of new channels for harnessing increased economic and social benefits from development in the minerals sector. The restructuring of fiscal and regulatory regimes to encourage foreign investment, and the associated influx of mining capital, technology and skills, is transforming traditional relationships between mining firms, local communities and the government. This transformation necessitates a re-evaluation of the most effective policy approaches to capture increased economic and social benefits from mineral production. This article considers effective mechanisms for improving the capacity of developing and transition countries to maximize the economic and social benefits of mineral production. Common challenges associated with minerals economies are reviewed. Consideration is given to the opportunities for harnessing foreign direct investment and the possibilities for creating new partnerships between local communities, industry, government, and multilateral development agencies through social investment projects. The article concludes with a series of recommendations for the design and implementation of policy approaches towards harnessing mineral production for economic and social benefit following the liberalization of investment regimes for mining.     

Mining during the next 25 years: issues and challenges

This article examines possible future trends in the mining industry in the light of past developments. After a preliminary discussion, the article considers various aspects of demand, supply, corporate structures, geographic distribution of investment, and social and environmental factors influencing the minerals industry. Scepticism is expressed about the smooth, exponential growth envisaged by many commentators. Some risks are elaborated, and a digression about gold is included.
The article argues that, while the minerals industry has concentrated on reducing cash costs through technical innovation and productivity improvement, new approaches may be needed in future that are not directly linked to economies of scale. Contracting out is an interesting trend with major implications.
The view that the mineral industry's corporate structure is becoming increasingly concentrated is challenged. Developments in consumer countries as well as historical precedents strongly suggest a more diverse structure.
The spread of minerals investment from North America and Australasia, and the resurgence of foreign direct investment in minerals projects, are placed in context and discussed from the viewpoints of both companies and host countries.
Although the appropriate responses to many of these issues can only properly be made by governments at all levels, the industry has to play its part.     

Local Dirt, Global Dreams: mining investment and land use change in Arizona

A central problematic for researchers working at the interface of economic and environmental change is the development of research designs and methodologies that can satisfactorily link economic processes of global reach (such as direct investment) to environmental change at local and regional scales. This article reviews recent efforts to couple economic and environmental change and finds that relatively little effort has been made to use the direct investment process as a means of linking industrial restructuring to land use change. The article argues that direct investment, when conceptualised as a political-economic process involving the assemblage of a package of rights (to land, water, pollution permits etc), can be an effective vehicle for tracing through the impacts of industrial restructuring on local environments. To develop this analytical approach, an empirical case of mineral investment in the Gila Valley of eastern Arizona is presented. The case study identifies the acquisition of land and water rights as central strategic issues for mineral firms seeking to make investment, and traces through the impact of these acquisition strategies on existing patterns of land ownership and land use.     

Determinants of foreign direct investment in the mining sector in Asia: A comparison between China and India

The aim of this paper is to assess the conditions that influence foreign direct investment in the mineral industries of China and India. The paper first surveys literature on the determinants of foreign direct investment to identify key conditions, under which host countries attract mining FDI. It then builds an evaluative framework which allows for comparative analysis. The paper then comparatively evaluates the performance of foreign investment regimes that govern mineral industries in China and India. Its findings show that the overall conditions for foreign mining investment in China and India are not favourable and that substantial policy, regulatory and other changes in both countries need to be made if more investment is to flow.     

Private capital: What impedes its entry into China's minerals industry

The paper commences with an analysis of the nature and status of private capital investment in the minerals industry in China. Based on the analysis, the authors examine the main barriers in terms of the mineral rights market, industry access and investment security that impede the participation of private capital into exploration and development of China's mineral resources. The discussion addresses how to encourage the participation of private capital into mining investment and it concludes that it is of significant importance to ensure the soundness of mineral rights market, impartiality of industry access, and security of mineral rights.     

Mine capacity and mineral price

The loss of foreign mineral supplies may affect domestic supply and price. To investigate the assumption that prices, a simple mine investment model that relates mine capacity to deposit attributes is used. A test of the model to see how well it approximates industry investment practice illustrates its accuracy. The model suggests that price changes can substantially affect the optimal capacity of planned or existing mines as well as the mineral supply in the USA.     

Local Dirt,Global Dreams: Mining investment and land use change in Arizona

A central problematic for researchers working at the interface of economic and environmental change is the development of research designs and methodologies that can satisfactorily link economic processes of global reach (such as direct investment) to environmental change at local and regional scales. This article reviews recent efforts to couple economic and environmental change and finds that relatively little effort has been made to use the direct investment process as a means of linking industrial restructuring to land use change. The article argues that direct investment, when conceptualised as a political-economic process involving the assemblage of a package of rights (to land, water, pollution permits etc), can be an effective vehicle for tracing through the impacts of industrial restructuring on local environments. To develop this analytical approach, an empirical case of mineral investment in the Gila Valley of eastern Arizona is presented. The case study identifies the acquisition of land and water rights as central strategic issues for mineral firms seeking to make investment, and traces through the impact of these acquisition strategies on existing patterns of land ownership and land use.     

An assessment of long term ecosystem research activities across European socio-ecological gradients

Integration of European long term ecosystem research (LTER) would provide important support for the management of the pan-European environment and ecosystems, as well as international policy commitments. This does require appropriate coverage of Europe and standardised frameworks and research methods between countries. Emerging interest in socio-ecological systems prompted the present assessment of the distribution of LTER activities across European socio-ecological gradients. This paper presents a European stratification with a 1 km² resolution, delineating 48 broad socio-ecological regions. The dataset is based on an existing biogeophysical stratification constructed using multivariate clustering of mainly climatic variables and a newly developed socio-economic stratification based on an economic density indicator. The coverage of European LTER facilities across the socio-ecological gradients is tested using this dataset. The analysis shows two strong biases in the present LTER effort. Firstly, urban and disturbed regions are consistently under-represented, illustrating a bias for traditional ecological research away from human activity. Secondly, the Mediterranean, for which some of the most extreme global change impacts are projected, is receiving comparatively little attention. Both findings can help guide future investment in the European LTER network – and especially in a Long Term Socio-Ecological Research (LTSER) component– to provide a more balanced coverage. This will provide better scientific understanding of pan-European environmental concerns and support the management of natural resources and international policy commitments in the European Union.     

Environmental issues for developing countries arising from liberalized trade in the mining industry

This review analyses some of the environmental and economic implications of current trade policies and changes in the world trading system for mineral producers and consumers. A principal factor which determines environmental performance is whether firms have the resources and capabilities to undertake innovation. We therefore place particular emphasis on the anticipated effects of liberalized trade on innovation and competitiveness at the firm level. Evidence indicates that improvements in environmental management would be expected to occur irrespective of the country hosting the investment. Due to the opening investment climate and relatively large quantities of mineral reserves, we expect these effects to be positive for many mineral producing developing countries. One difficulty which may arise is whether policy measures to promote production efficiency and develop innovation in mining and mineral processing operations could be interpreted as protectionism. The creation of new lines of credit, to promote, but not subsidize, technological and organizational innovation, may be the best way forward for developing countries .     

国际投资风险防范分析与策略

国际投风险的防范是国际投资中一个十分重要的问题。本文分析了国际投资风险的内涵，论述了国际投资风险分析的主要内容，指出了国际投资风险防范的基本策略和投资者风险自我防范策略。     

Indonesia's mineral resources: Performance and prospects

This paper discusses the present position and future prospects of mineral exploration and exploitation in Indonesia. It places the industry within the economic and political context of the country as a whole and considers the development of government policy towards the sector. Although the mineral resources of Indonesia are believed to be vast, the performance of the industry in the past has been erratic. The relative political stability of the last few years, combined with rising prices, has encouraged the opening up of new mines, and has also emphasised the need for more local processing of those minerals that are produced. At present, income from oil provides most of the government revenue and consequently the prospects of this sector are critically important for the nation's future. Increased diversification can, however, be expected in the next few years as the resources of tin, bauxite, nickel, copper, coal and many other products are developed. Given a favourable political and economic climate, Indonesia could be one of the world's major mineral producers by the end of the century.     

Joint mineral ventures in the former Soviet Union: prospects, problems and realities

This paper traces the gradual opening up to foreign investment of the rich mineral endowment of the vast territory of the former Soviet Union, containing the world's largest mineral industry. It analyzes the current status of mineral joint ventures in some of the new Republics, including Russia, Kazakhstan, Tajikistan and the Ukraine, including new legislation and other measures taken by individual states to facilitate foreign investment, as well as prospects, risks and uncertainties associated with investment in FSU mining activities that may be encountered by foreign companies. A successful gold joint venture in Tajikistan is described and evaluated to provide an understanding of the many aspects of an operational FSU project.