The London School of Economics and Political Science Mining
Total Page:16
File Type:pdf, Size:1020Kb
The London School of Economics and Political Science Mining Enterprises and Regional Economic Development: An Exploratory Analysis of the Sustainable Development Model Nicolas Di Boscio Thesis submitted to the London School of Economics for the degree of Doctor of Philosophy London, March 2010 Declaration I certify that this thesis is solely my own work other than where I have clearly indicated that it is the work of others. The copyright of this thesis rests with the author. Quotation from it is permitted, provided that full acknowledgement is made. This thesis may not be reproduced without the prior written consent of the author. I warrant that this authorization does not, as far as I know, infringe the rights of any third party. I wish to extend my thanks to Rio Tinto for the data and material provided and for their support throughout the investigation. As a Rio Tinto employee at the time of writing, I declare that no attempt to interfere with this work or to influence the results of this research has been made by the company or any of its employees. All the views and conclusions put forward are solely my own and do not necessarily represent those of the corporation. 1 Table of contents Abstract ....................................................................................................................... 11 Introduction ................................................................................................................ 12 Chapter 1 - New developments in growth theory ................................................... 18 1.1. Redefining the policy question ............................................................................. 19 1.2. New developments in growth theory .................................................................... 25 1.3. The institutional view ........................................................................................... 30 1.4. Down to the local and regional level .................................................................... 35 1.4.1 Large firms and local economic development .............................................. 39 1.5. Bringing mining back in: large mines and the region ........................................... 41 References .................................................................................................................... 48 Chapter 2 - Mining and its contribution to development over time ...................... 54 2.1. Localisation of mining companies and the concept of soft sustainability ............ 55 2.2. Identifying the economic contribution of mining companies ............................... 58 2.2.1 Economic rent ............................................................................................... 63 2.2.1.1 Optimal allocation of the economic rent .................................................... 66 2.3. The role of mining in regional development over time ........................................ 67 2.3.1 The Regional model (or the strong local-linkage model) ............................. 68 2.3.1.1 The industry’s response ............................................................................. 70 2.3.2 The Global model (or the weak local-linkage model) .................................. 70 2.3.2.1 The industry’s response - a paternalistic approach .................................... 73 2.3.3 The Sustainable Development model in mining ........................................... 74 2.3.3.1 The industry’s response – Corporate Social Responsibility ...................... 77 2.3.3.2 Did it work? ............................................................................................... 83 References .................................................................................................................... 86 2 Chapter 3 - Defining the study object: Rio Tinto and its three subsidiaries ........ 91 3.1. Rio Tinto and the industry structure ..................................................................... 92 3.2. Rio Tinto’s quest for regional economic sustainability ........................................ 95 3.2.1 The economic contribution of Rio Tinto ...................................................... 95 3.2.2 Rio Tinto and the embracing of sustainable development ............................ 97 3.2.2.1 The Regional model ................................................................................... 98 3.2.2.2 The Global model ...................................................................................... 99 3.2.2.3 Rio Tinto and the age of post-paternalism – or the SD model ................. 102 3.3. Methodology ....................................................................................................... 106 3.3.1 The case studies .......................................................................................... 109 3.3.1.1 Planning for closure: Rössing, the Erongo Region, Namibia .................. 109 3.3.1.2 Full operation and expansion: Pilbara Iron in Western Australia ............ 112 3. 3.1.3 The mine of the future: the QMM project, Fort-Dauphin, Madagascar . 115 3.4. Summary and final remarks ................................................................................ 118 References .................................................................................................................. 121 Chapter 4 - Planning for closure: the economic legacy of Rössing ..................... 124 4.1 SD and the challenges of closure ......................................................................... 125 4.1.1 Mining and the economy in Namibia .......................................................... 128 4.2 The economic contributions from RUL ............................................................... 131 4.2.1 Payments to suppliers ................................................................................. 137 4.3 The local economies: Swakopmund and Arandis ................................................ 142 4.3.1 A long tale of economic impact assessments .............................................. 146 4.4 The economic impact of early closure ................................................................. 152 4.4.1 The economic sustainability of Arandis ..................................................... 154 4.5 Further reflections on Arandis ............................................................................. 157 4.6 Final remarks ....................................................................................................... 160 References .................................................................................................................. 162 3 Chapter 5 - The expansion challenges of Pilbara Iron - and the local ambitions for economic sustainability ...................................................................................... 165 5.1. The meaning of economic sustainability in the Pilbara ...................................... 166 5.2. The company’s economic contribution ............................................................... 170 5.2.1 Payments to suppliers ................................................................................. 175 5.3. The Pilbara economy .......................................................................................... 180 5.3.1 The interface between mining and the rest of the economy ....................... 184 5.3.2 Making sense of town finances ................................................................... 189 5.4. The people of the Pilbara .................................................................................... 193 5.4.1 The Aboriginal community ......................................................................... 197 5.5. Implications for the state and local economies ................................................... 202 5.5 Final Remarks ................................................................................................ 205 References .................................................................................................................. 207 Appendix 5.1 – Pilbara Iron payments to suppliers in 2004 ...................................... 211 Appendix 5.2 – Input/Output tables and multipliers .................................................. 212 Chapter 6 - QMM, the mine of the future ............................................................. 230 6.1. The mine of the future ......................................................................................... 231 6.2. Background to the region and project ................................................................. 235 6.2.1 Madagascar and the Anosy region .............................................................. 235 6.2.2 The QMM project ....................................................................................... 239 6.3. Building capacity – and a regional development plan ........................................ 246 6.4. A concurrence of interests .................................................................................. 251 6.5. Delivering the mine of the future ........................................................................ 257 6.5.1 Community issues ....................................................................................... 259 6.6. Final remarks ...................................................................................................... 264 References .................................................................................................................