Mining Wealth & Employment
Today, few doubt that the path to economic growth for the country passes through industrial development. Each industry contributes differently to the economy. Rich reservoirs of energy in general and gas and minerals in particular are the potential areas where any planning for industrial development should start from. Mining and mineral industry hold relative comparative advantage in Iran’s economy.
In its effort to develop a comprehensive solution for ending recession, the administration has looked at mineral industries as progressive enterprises. This has made Iran's House of Mines to take a close look at mining sector and examine ways to develop the sector and create job opportunities. The report, prepared by the vice-chairman of Iran House of Mines, outlines the existing challenges for job creation in the sector as: disabling business environment, lack of competitiveness as a result of difficult working conditions and lack of local and foreign investment despite educated human resources. As job creation remains the main difficulty faced by the country, the report proposes six strategies to develop mineral production chain as well as corrective measures to improve the mining sector.
According to the report, the 57-billion-ton mineral reserves known in the country, their diversity and their existing strategic situation provide a unique chance for economic growth. Optimal exploitation of the mineral reserves together with other national advantages can serve as major drivers of growth.
Studies suggest that in recent years, several strategies have been developed; however a large part of them failed or were never translated into tangible results. This is partly due to basic strategic management errors, not at the stage of formulation of strategies but their implementation. The report identifies the strategic issues of mining sector in 5 main areas including: 1. Business environment; 2. Sustainable development; 3. Productivity; 4. Supply and support; and 5. foreign relations
By the end of the 5th National Development Plan, it is possible to multiply productive and enduring employment in the sector by fostering an enabling business environment, directing wandering capitals of Iranians in and out of the country to mining sector and processing mines with high added value. Although government's decisions and measures influence employment generation to a great extent, mere instructions do not work. It should, instead, focus on removing obstacles and ease the difficulties and encourage private sector to play a more active role in economy and employment generation.
Six strategies to develop production chain
The best solution to unemployment is to focus on sectors where employment generation happens faster such as mining sector.
2011 statistics indicate that foreign investment globally stood at $1.5 trillion ($1500 billion) of which ECO countries attracted 2.7% equal to $41 billion. With a wise strategy, Iran can easily attract 1% ($15 billion) given its population, geography, and vast mineral and energy reservoirs.
As determination is built up to best utilize country's potential through developing resistance economy, the following measures can provide good opportunities for the development of mining sector and related activities including job creation:
- Encouraging full exploration of potential resources;
- As mining-dependent industries are energy-intensive, it is essential to pay close attention to energy productivity and standardizing production processes. In the meantime, relevant authorities should support laying required infrastructure including gas and electricity.
- Upgrading technology to help complete mineral added value chain; transforming relative advantages of the country to comparative ones should be treated as a priority;
- Improving shipping and transport facilities in export terminals based on export targets such as cement, steel and other minerals;
- Encouraging the formation of technical associations and unions and involving them in decision and policy-making process, defining government's role as policy maker, supervisor and leader.
- Expecting closer cooperation from banking system to allocate facilities to the mining sector.
Studies suggest that every dollar invested in exploring minerals creates at least $2.8 worth of added value in this sector. However, achieving sustainable development through mining activities entails simultaneous attention to ecological, social and economic dimensions. Neglecting any of the said aspects will not only hinder sustainable development but also result in economic and social backwardness.
Currently, despite the considerable size of known reserves, Iran's mineral exploitation level remains below standards. Proper planning encompassing all economic, social and ecological aspects together with coordinated supervision and solid regulations in the mining sector are needed to drive economic growth at all levels including ecological and social. This cannot be achieved unless all social and ecological policies are brought in line with mining policies targeting exploration and exploitation. In the meantime, it is essential to change traditional views towards mining. Boosting investment should position mining sector at the heart of world markets. This is only through intensified efforts and macro planning that the country can rank first in the region in the area of mining.
As its main mission, Geological Survey of Iran should focus on a wide range of activities from conducting geological studies, collecting basic data, exploring new mineral deposits to conducting pre-feasibility studies and comprehensive information sharing.
The report also recommends the government to take on a supervisory role and involve the private sector in exploration, exploitation, processing and production of minerals using advanced technology. Protecting environment and work force, improving HSE standards in mines and establishing the required supervisory mechanisms should also be taken into account. While developing mining sector, special importance must be attached to competitiveness in the world markets and planning in order to achieve sustainable development, create productive employment and prevent immigration.
Funding research projects on raw and low-grade minerals and useful mineral residue for recycling is another positive measure. Exports should shift from mineral products to higher value-added ones while observing the principals for domestic industries' competitiveness. One good policy in this respect which is also in line with other countries is to apply export tariffs depending on the type of mineral.
The said proposed policy package indicates that a well-structured strategy for mineral exploration can help identify and exploit a large number of mineral deposits within a decade. Such achievement would definitely act as a driving-force for the growth of all economic indicators, prospering the country and eradicating unemployment particularly in less-developed regions of the country as a result. This would also transform Iran from a mono economy to an industrial, mineral-dependent economy with solid infrastructures. Mining in Iran remains underdeveloped at exploration level particularly when it comes to studying internal layers of earth as a result of poor equipment. At extraction and exploitation level, processing and production also lag behind. Both weaknesses need to be well studied, researched and invested in.
Local and foreign investment can significantly contribute to technological development and productivity in the mining sector through technology transfer and advanced management styles for mining enterprises. Adjusting the current Mining Code within the framework of foreign investment regulations is one of the pre-conditions to attract investors. Investors usually migrate to low-risk markets with high return on investment. Fostering an enabling environment for the development of mining sector should replace traditional and general prescriptions envisaged in the past four National Development Plans which only called for a greater share of mining in economy. In this respect, special attention must be given to attracting local and foreign investment, technology transfer and developing and laying the required physical and institutional infrastructures. The report recommends the policy makers to focus on developing a unified strategy for mining and minerals (fitting the economic growth rate) instead of thinking about increasing the share of mining added value in GDP. It further calls on them to review the existing strategies for each mineral based on competitive targeting.
Amendment of Mining Code
Relevant regulations play an important role in establishing a framework within different sectors of economy for the stakeholders to interact and carry out various activities. Mining sector is no exception and all the above said expectations cannot be met unless required amendments as suggested below are made to the relevant provisions:
1- The following note to be included in Article 19:
Any real or legal entity causing interruption or assuming ownership without obtaining legal permit shall be prosecuted. In such cases, disciplinary officers shall be obliged, upon the request of the Ministry of Industry, Mines and Trade or permit holders, to repress such activities forthwith and to report the accused to juridical authorities for prosecution.
2- The following amendment to be made to Article 24:
To accelerate the exploration and exploitation of the mineral deposits, when contacted, the related executive agencies of the Government shall be obligated to communicate their opinion within maximum of two months with respect to the inquiry of the Ministry of Industry, Mines and Trade in connection with the legal boundaries related to roads and railways, cities, dams and water distribution network, reservoirs and ponds, forests and range, holy sites and historic buildings, barracks and the armed forces establishments and the regions, subject of paragraph A of Article 3 of the Environment Protection and Improvements Act. No response within the deadline provided, shall be taken as the agreement of the agencies with the issuance of an exploitation license.
Note: Inquiry by the Ministry of Industry, Mines and Trade on a given area for issuing exploration permit shall be conducted maximum within 3 months. Re-inquiry is allowed only if the applicant requested so.
3- Article 26 to be modified as follows:
Areas required for various mining activities such as extraction, accumulation and exploitation of mineral substances or dumping the mine wastes, situated within national resources and the area of which is stated in the license issued, shall be the operational territory of the related mine and shall be at the disposal of the Ministry of Industry, Mines and Commerce in the form of public property to the end of the life-span of the mine, and any work beyond those stated in the license issued, shall be deemed usurpation of public property. The said area shall be registered by Forests, Range and Watershed Management Organization at the request of Ministry of Industry, Mines and Commerce.
4. The following phrase is suggested to be added to Article 14:
"…. Any person with exploitation permit is obliged to pay to the Ministry of Industry, Mines and Trade, as state share, a certain portion of the price of extracted mineral on day rate, as indicated in the permit, (no less than 3% and no more than 10%) in the field …. "