Mining and Local Economic Development

Mines are often the key economic engines of the communities in which they are located. Evidence to date shows, however, that in many countries the positive impact of foreign direct investment on local communities is often extremely limited due to the lack of automatic spillover effects. However, with appropriate local economic development (LED) instruments, mining projects could bring more than their own direct employment to a community. By voluntarily participating in or even driving a LED program in a community, mining companies and other local stakeholders (local government, education institutions, other businesses) can work together to ensure that the local population, including the poorest segments, can benefit from the presence of new investments and share in the growth potential of the local economy. Importantly, LED strategies and programs are increasingly been seen as an entry point for national level reform especially in countries with weak national government and limited private sector development (FSU, Africa).

For the Mining Industry more specifically, a successful LED program would improve community and employee relations, develop supplier linkages, reduce dependence on the mine for local economic wellbeing over time as well as bring substantial benefits in terms of reputation and good corporate citizenship.

There has been considerable relevant experience in the EU, particularly in declining coal and steel areas, as well as experience in northern Mexico, Morocco and elsewhere that provides lessons that can be adapted in the context of mining investments.

Components of LED Strategies and Programs
(return to top)

LED is about local communities (including public, private, not-for-profit sectors) working together through a proactive process to achieve sustainable economic growth that ensures increases in employment, prosperity and quality of life for their communities. In the case mining, communities are often dominated by a particular mine, being the only major source of revenue/employment in the area. An important component of a LED program is the development of micro, small and medium sized enterprises (SMEs). This can be encouraged as suppliers to, or downstream producers from, the mine or as entrepreneurs/businesses independent from mining that strengthen the overall competitiveness and economic development of a region. However, it is important to note that LED strategies and programs go beyond the realm of SME development. LED includes the analysis of the local economy, development of strategies, policies, programs and projects in a range of key ares.

Broader LED programs (not necessarily related to a mining community) may contain a number of activities which normally include:

• "Traditional" investment promotion and retention activities
• SME support including networking and specific business development issues (as well as the traditional financial and non-financial assistance instruments)
• Infrastructure investment and planning, including investment in both hard and soft infrastructure (cluster programs) for business and the community
• Micro-enterprise initiatives
• Environmental improvements to existing facilities (in mainly urban areas), including town centre enhancements, brown field reclamation, industrial estate and business parks upgrading and site reclamation
• Training and education, including access to work
  Environment Issues, contaminated site remediation and sustainable development
• Regeneration strategies and action plans (these are area based and particularly relevant for mine closure, usually aimed at giving declining areas opportunities for renewal, through integrated action in terms of the local economy, the built environment and related human resource and social issues)
• Crime and personal safety
• Inclusion strategies (specifically social and anti-poverty strategies)

LED programs aimed at regenerating and enhancing mining and industrial regions concentrate upon:

• Development of SME suppliers and downstream
• Manufacturers to the mining industry and other non-mining SMEs in the surrounding community
• Mining-related environmental remediation
• Mining related health programs (HIV/AIDs, Malaria, other diseases)
• Small-scale mining programs
• Development of human resources including creating re-employment opportunities for low-skilled mineworkers in preparation/following mine closure
• Adapting infrastructure/services provided at the mine site or in the community to facilitate future social/business development
• The promotion of new/alternate economic actitivities

Note: The existing landscape of a mining community, including the range of SMEs, will differ from region to region. However, it should be noted that in areas of limited existing development, where micro-enterprises and subsistence agriculture predominate (eg. La Colorada in Zacatecas, Mexico), the scope for a LED program would differ vastly from one close to an existing urban or peri-urban business district where infrastructure, SMEs and existing institutions may be more developed (Mozal aluminium smelter near Maputo, Mozambique).

Leadership and Partnerships (return to top)

LED is normally led by local governments but firms or associations in the private sector have also been drivers of successful LED programs in their communities. (There are also examples of non-profit sector driven LED and cases where local education/training institutions have taken the lead.) In all situations, however, the process involves a multi-faceted partnership of the private, public and supporting services sectors, with strong support from local government being critical. Individual "champions" are a prerequisite for success and the need to build appropriate local capacity within the public, private and not-for-profit sectors is an important starting point in an LED program.

While local government support is key, research also shows that there are significant benefits to be achieved from national and supra-national government involvement and that there are a number of LED activities that should be delivered within at least a national framework. LED programs for mining communities would require similar - if not more - leadership, partnerships and support from all levels of government.

Poverty Reduction (return to top)

Poverty reduction is being seen as an increasingly important driver of LED, not only an objective but as a strategy in itself. In order to target the poorer segments within mining communities, LED assistance can establish eligibility criteria as was done in the EU Community Initiative for applications for LED assistance – such as unemployment levels, levels of poverty, social and environmental problems, population size etc. In addition, there is a growing understanding that specific measures are needed to assist the unemployed, underemployed and otherwise disadvantaged to have access to jobs and/or improved qualities of life.

Local Economic Development & Mining Reference (Large file with application) The online reference is not completely functional. Click here to send for the complete CD. To obtain the CD, send a request to ogmc@worldbank.org.