THE importance of the ASEAN mining industry as a supplier of minerals to China and India over the medium term is well entrenched.The challenge, in the longer term, is for the ASEAN countries to take advantage of this window of opportunity while dealing with the dynamics of a globalised world.
In terms of global economic performance, China and India’s growth has doubled during the past 20 years. Analysts predict that the economic performance of these two countries will again double in the next 20 years, such that they will account for about 20% of the world’s total gross output. By 2030, China is expected to have become the second largest economy, while India will be the fourth largest.The continuing impressive growth of these emerging giants will ensure a long-lasting demand for minerals and metals.
The demand for minerals and metals has been triggered by the insatiable needs of China’s enormous infrastructure programme. For example, over the next 15 years, China plans to build about 30 nuclear power plants.
Analysts say China is urbanising at the rate of two Boston-sized cities every year, consuming about 40% of the steel and 60% of the cement produced in the world. By 2020,300 million rural people are expected to have moved into the country’s sprawling cities.
India, on the other hand, has set an ambitious target of achieving an average annual growth of 8% in its latest five-year plan.While agricultural development remains at the core of the plan, priority is also being given to sectors that create employment opportunities (such as construction, transport and tourism) as well as small-scale industries.
Mining is the backbone of India’s industrial expansion, with the country having concentrated on developing its iron and steel industry over the past few years. India is now one of the world’s top producers of iron ore, bauxite, manganese and aluminium.
China’s growth during the past twenty years was brought about by the relocation of most of the world’s manufacturing industries to the country due to its cheap labour supply and fairly low price of land. Relocations to China in the electronics industry have soared, taking the place once occupied by Hong Kong and Taiwan.
China has become the dominant Asian trader, and the thousands of new factories have created millions of jobs, which in turn has fuelled the growth in consumption and trade in domestic merchandise.
In its report for 2007, the World Bank reported that “developing countries that were previously presumed as the periphery of the world’s economy will become the driving force of the global economy. These countries will account for a third of the global output and their combined purchasing power will exceed half of the world’s purchasing power. Half of the increase in global commodities, services and trade will come from developing countries, enlarging their share in the global output of products and services”
ASEAN’S MINING ROLE
Copper, nickel, zinc, iron ore and coking coal have been identifi ed to be the primary commodities that industrialising China and India most require during the next 20 to 40 years. Analysts predict that the two countries will need 125% of today’s copper and nickel supply in 2030, and 200% and 300% of today’s copper and nickel supply, respectively, by 2050.
The ASEAN countries account for a substantial share of world trade in many mineral resources (for example the region contributes 58% of the global trade in tin). Exports of concentrates and refi ned copper account for 16% and 6%, respectively, of world trade (in terms of value). ASEAN countries have recently made signifi cant increases in the export of nickel, chromite and aluminium. Eight of the ten members (Indonesia, Philippines, Malaysia, Thailand, Lao PDR, Myanmar, Vietnam and Cambodia) are host to these mineral resources in varying quantities. Except for Indonesia, the Philippines and Vietnam the rest of the countries have yet to increase the contribution of the mining sector in their respective gross national product. However, the mining industry of Indonesia already contributes 3.3% of the country’s GDP, while Vietnam and the Philippines’ mining sectors account for about 2%,This proportion is still relatively small compared with the mineral endowment.
Indonesia and the Philippines lead the ASEAN countries in terms of mineral endowment, although recent exploration activities have indicated substantial mineral resources also in Vietnam, Lao PDR, Malaysia, Thailand, Myanmar and Cambodia.
Indonesia ranks top in terms of ASEAN mineral resources, and the country’s deposits include an estimated nickel resource of l,300Mt, 207.9Mt bauxite, 66.2Mt copper and 47.2Mt iron sand.There is considerable overseas investor interest in the sector. For example, China Nickel Resources Holdings plans to invest about US$800 million in the next five years to expand its stainless steel business, mainly in Indonesia, where an iron-nickel mine in southern Kalimantan will benefit from the US$450 million IMt/y steel plant.
The Philippines has significant resources of copper, gold, nickel, chromite and iron but has yet to see production capacity reaching the levels attained during the 1970s and 1980s.
The other ASEAN countries also have significant mineral resources, with Myanmar and Laos, for example, also having significant gemstone resources.
ASEAN’s strategic location as a source of mineral supply can be considered advantageous to both China and India in terms of transport costs and logistics. Instead of sourcing copper from South American countries, ASEAN countries would be a more favourable option for both China and India.
As the ASEAN mineral resources are developed, so the region will become a market for machinery and equipment, processing facilities, modern technologies and services. Australia has been aggressive in this respect, creating an Australian Pavilion during the 7th Asia Pacifi c Mining Conference, where a good number of companies specialising in mining machinery, equipment and services participated.
With the long-term development focused on adding value to mineral resource development, ASEAN would likely develop downstream processing industries and create high-value finished products. For example,Thailand has become the ASEAN jewellery centre, and this can be replicated in Myanmar. Malaysia has specialised in tin products, while the other countries have yet to develop industries and market niches where they can be competitive.
The long-term policy to industrialise will enlarge ASEAN’s market for technologies, heavy industries, manufacturing facilities and other product brands.
The Philippine mining industry is now capitalising on the gains resulting from a clearer investment policy and on more aggressive investment promotion. Investment in several projects and exploration activities have been placed at US$10 billion with production capacity in major mineral commodities being maximised within the next five years.
Malaysia, aside from making mining a’first-land use’ policy, has made inroads in mining investments in some ASEAN countries because of the country’s capital resources.
Thailand is aggressively looking into the delineation of mineral areas that can be developed, while Indonesia should already be over the crossroad in the development of the country’s vast mineral resources with a new mining law.
Lao PDR has already started several mining projects that have brought about economic progress, while Vietnam and Cambodia are into aggressive investment promotion. Myanmar’s gemstones could be the country’s catalyst for development as these highly-priced resources hold great promise.
While ASEAN has responded quickly to the increasing market demand for minerals and metals by expanding capacity and production, the challenge is in bringing several projects into production.
The regional economic integration proposal byAPEC is expected to provide an added push for ASEAN to consider an ASEAN Charter. Linking ASEAN countries by road, and other infrastructure, are now in preparation.Trade flows, human resource mobilisation and enhanced services can be expected as countries embark on their own infrastructure programmes.
ASEAN can revisit plans for complementation and joint-venture projects which were considered in the early 1980s, when globalisation was not yet an idea. It can venture into manufacturing and processing of minerals and metals and into highly competitive products and product brands while keeping control of the input sources.
The ASEAN mining industry should be able to concentrate on the opportunities resulting from China and India’s industrialisation without losing sight of pursuing the same path towards seeking ‘first country’ status in the next decade or so.