Australia's new role as adviser on mining for development

Wolframite and casserite miners of Kailo Territory in the Democratic Republic of the Congo. Miners dig up to 10 meteres to find mineral ores. Photo by: Julien Harneis / CC BY-SA

Many developing countries are poised to earn billions in revenues from natural resources. Australia, with its long history in sustainable mining, aims to help these countries reap the social benefits of the industry, AusAID’s James Gilling tells Devex at the International Mining for Development Conference.

The two-day International Mining for Development Conference opens on Tuesday in Sydney, with delegates from over 60 countries convening to discuss how the developing world’s natural resource wealth can be translated into development outcomes which enhance people’s lives and reduce poverty.

The conference forms part of AusAID’s Mining for Development Initiative, an AU$127 million ($126.5 million) program launched in 2011 to assist developing countries such as the Philippines and Nauru in sourcing sustainable social and economic benefits from the use of their natural resources.

AusAID has reported vast untapped mineral wealth in other developing countries: Afghanistan is set to earn AU$1 trillion from mining revenues, while Papua New Guinea is expected to raise its gross domestic product by 15 percent when its new Liquified Natural Gas project breaks ground in 2015.

AusAID First Assistant Director General James Gilling spoke with Devex about Australia’s new role as adviser to developing countries on mining and the strides it has taken under this initiative.

Why is mining for development relevant today?

First, over the last decade or so, the price of basic minerals has shot up with rising global demand. This has pushed mining companies throughout the world to expand their exploration for new sources of minerals to satisfy a growing, wealthier population, and a lot of that exploration is taking place in the developing world. It has come to a point where many mines are about to start producing and investing, so it’s an important time to begin looking at this issue.

Second, because of the scale of investments, there’s a potential for huge amounts of money to flow into developing countries. If we can’t make sure that money flows into the right direction, to the right people, then we miss the opportunity of harnessing the investments for poverty reduction.

Countries rich in non-renewable natural resources tend to have worse development outcomes. How can Australia help resource-rich developing countries avoid this “resource curse?”

Australia has a very strong history in mining and not just in its technical aspects, but also in terms of taking revenues from those products and converting it into better social outcomes. Australia is second in the United Nations Human Development Index and this demonstrates that a resource-rich country like Australia can use resources for social progress.

We’re very committed to sharing lessons from Australia’s mining industry with the rest of the world.

Too often, when countries discover minerals, or when they start exploiting minerals, the exploration and the exploitation is not properly managed. This can cause conflict, because the people whose lands are being dug up don’t benefit so they turn against the mining companies. It can also cause technical economic problems, such as dutch disease.

When minerals are found, it’s not just the case of being able to take them out of the ground, but also being able to manage the revenue flow. In addition, prices of minerals bounce up and down, making it hard for countries to cope with fluctuating income. You’ve got to have quite a sophisticated management capacity to deal with that.

Does transparency also play a role?

That’s exactly right. The reason why Australia puts a lot of money into the Extractive Industries Transparency Initiative [$12.7 million] is that mining is often very opaque — it’s not clear how much money is being recovered from the ground, how much money is being paid to governments and to local populations. And when that’s not clear, it encourages corruption, and dissatisfaction from affected communities. When there is a lack of transparency, people cannot hold companies or governments to account and that can generate conflict.

Another important point is that when a government gets most of its money from extractive resources, that government doesn’t have to build a relationship with taxpayers so it also doesn’t build a habit of accountability. Once again, you can produce an unaccountable government and unaccountable authorities. One lesson Australia has learned is that this is bad for development.

How will Australia’s Mining for Development Initiative, and the conference, help developing countries manage their resources better?

The initiative is still quite young at 18 months old, and the issues that we’re taking on are big. It’s not a massive program — it’s AU$127 million ($126.5 million) over four years — so our ambitions are relatively modest, but our ambitions lie in seeing an improvement in transparency.

We want to look at training governments, communities and staff from developing countries, so they can manage their industries more effectively and their situations better. We have a major training program in two universities in Australia, and we’re also looking to build a stronger relationship with other donors who are doing similar programs, such as Norway, Canada and Germany.

How can aid groups, implementers and donors get involved?

It’s not about money, so it’s not about transferring a lot of money to developing countries to help them manage this issue. It’s more about the role that donors play in sharing ideas and in facilitating conversations.

In terms of who is actually doing work on the ground, we provide funds to multilateral groups such as the EITI, the World Bank and the IMF, so we have a group of multilateral organizations that we work with. Then we have a group of Australian-based organizations which are, in this case, universities such as the University of Queensland and the University of Western Australia.

Are there plans to extend the initiative’s reach?

We work where partner governments want us to work, so it’s important that we’re responsive to demand for assistance. At the moment, that means that we will work in some parts of Africa, we will work in Mongolia, we’re hoping to work in Papua New Guinea and a small number of other countries in Asia and the Pacific. The large focus will be on Africa, and Asia and the Pacific.

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About the author

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    Johanna Morden

    Johanna Morden is a community development worker by training and a global development journalist by profession. As a Devex staff writer based in Manila, she covers the Asian Development Bank as well as Asia-Pacific's aid community at large. Johanna has written for a variety of international publications, covering social issues, disasters, government, ICT, business and the law.