The Mining Curse

Two poor, fragile, post-Soviet democracies, two spectacular holes in the ground. Mongolia’s Oyu Tolgoi, or “Turquoise Hill”, is a vast mine in the southern Gobi desert, just 80km from the Chinese border. Kumtor in the Tian Shan mountains of Kyrgyzstan, operating since 1997, is if anything even more remote. Located beside a series of glaciers at 13,000 feet above sea level, it is the world’s second-highest gold mine.

It is hard to exaggerate the importance of these two mines to their respective economies. Once completed, Oyu Tolgoi will be the world’s fourth-biggest copper mine. When the contract with Rio Tinto, an Anglo-Australian mining giant, was first signed in 2009, Oyu Tolgoi was predicted to add five percentage points to Mongolia’s annual economic growth, which, for a while, it did. The mine has created 15,000 jobs directly and another 45,000 indirectly, for a Mongolian population of 3.3m. As for Kumtor, its owner, Centerra, a Canadian exploration company, is the country’s largest private investor. In a good year the mine generates a tenth of Kyrgyzstan’s GDP and is the biggest contributor to the state budget.

Both mines loom large in national life. Both foreign operators won sweet, initial deals when naïve young states opened their doors to foreign investment. Controversy surrounding the mines was thus inevitable. Oyu Tolgoi has long been controversial. Politicians often accuse Rio Tinto of fleecing the country…In Kyrgyzstan the goverment accuses Centerra of corruption, enriching politicians instead of the national budget. 

Accusations of being cheated are common in poor, resource-rich countries. With Oyu Tolgoi, the stand-off is more easily resolved….A recent independent review makes it hard for Rio to deny it bears some blame for delays and cost overruns in developing the mine…. In Kyrgyzstan the situation is bleaker. There, bribery and corruption are not incidental to business but central to it….Foreign investors too often blame “resource nationalism” for their woes in host countries. That is self-serving. After all, the resources usually belong to the state. It is reasonable for citizens to ask how best to benefit from them…. 

Excerpts from Banyan: Mine for the Taking, Economist, Nov. 6, 2021

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s