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Keeping the Long Term in Sight: Institutional Challenges of the Transition

Rosemary Thorp BIF and PSG Conference on Mining March 4th 2013. Keeping the Long Term in Sight: Institutional Challenges of the Transition. Macro and micro challenges. The macro challenge: given bonanza in revenue, you need: to set revenue against depletion of exhaustible resource

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Keeping the Long Term in Sight: Institutional Challenges of the Transition

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  1. Rosemary Thorp BIF and PSG Conference on Mining March 4th 2013 Keeping the Long Term in Sight: Institutional Challenges of the Transition

  2. Macro and micro challenges • The macro challenge: given bonanza in revenue, you need: • to set revenue against depletion of exhaustible resource • to compensate for fluctuations in revenue • to hold any savings you decide to make in such a way that you are protected against Dutch Disease and raiders • to turn savings gradually into domestic investment, to create alternatives to mining

  3. The fashionable response: • Sovereign Wealth Funds and Stabilisation Funds • of the top 550 SWFs today, 50 created since 2000 • no magic bullet - only as good as the institutions and the politics behind the Fund • a horror story…The Cameroons. • institutional needs. Example and exceptionality of Chile….

  4. Turning savings into domestic investment • the really tricky bit • this brings us to the micro side. • whole problem of development when institutions are weak • mining-based countries tend to have legacy of weak institutions - not by chance

  5. The huge need and the poor supply • need to diversify - sectorally and regionally (i.e. locally) - why? • implies huge institutional need. • wrong incentives over time to produce supply of institutions • example of Tintaya

  6. Tintaya mine, Espinar

  7. Tintaya mine, Espinar

  8. More on needs… • support to small businesses and to agriculture • physical and human channels for information flows and access • education and health for capabilities and motivation • channels between local and other levels • CONSENSUS on what revenue should go to each level...

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