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Text 18percent of global economic output. By 2011, there were 81 such countries,
More developing countries are turning to extractive industries
accounting for 26percent of global economic output (ExhibitE1).
Exhibit E1
The number of resource-driven countries has increased by more than
40 percent since 1995, and most new ones have low average incomes
Lower-middle income 19 27
Upper
Upper-middle income middle 25%
8 54% Low
High income 16
9
1995 2011
11%
% of world GDP 18 26
Lower
middle
% of world population 18 49
1 We define resource-driven countries using three criteria: (1) resources are more than 20 percent of exports; (2)
Source: McKinsey
resources are Global
more than 20 percentInstitute (2013:2).
of fiscal revenue; or (3) resource rents are more than 10 percent of GDP. Where
data were not available, we estimated based on the nearest years data.
2 World Bank income classifications based on per capita gross national income (GNI) by country; thresholds updated
annually. In 2011, the World Bank thresholds for categorization were $1,026 for lower-middle income, $4,036 for upper-
middle income, and $12,476 for high income.
NOTE: Numbers may not sum due to rounding.
SOURCE: UNCTADstat; International Monetary Fund; World Bank; IHS Global Insight; McKinsey Global Institute analysis
growth rate. Even when resource-driven economies manage to sustain above-
average economic growth over the long term, they do not necessarily enhance
prosperity in the broader sense, as measured by MGIs economic performance
scorecard.9 On average, resource-driven countries score almost one-quarter less
than countries that are not driven by their resources, even at similar levels of per
capita GDP (ExhibitE4). In Zambia, for example, poverty levels increased from
Text
Resource driven economies tend to have lower income per capita
2002 to 2010 despite strong economic growth.10
Exhibit E4
Resource-driven countries have struggled to Not resource-driven
transform wealth into longer-term prosperity Resource-driven
0.8 Not
Resource- resource-
0.7 driven2 driven
0.6 01,000 0.24 0.28
There are three broad reasons for this. The first is that many countries have
struggled to develop sufficiently competitive resources sectors and ensure that
Text
Main features of the resource curse
Economic volatility
Unsustainability
Infrastructure
Developing
resources Institutions and
governance
Spending the
Transform value windfall
into long-term
development Economic
development
Source: McKinsey Global Institute (2013:8).
Text
The Philippine Mining Industry
+ Tax revenue
Public Spending
Investment
Job creation
MINING Processing Inputs for Downstream
Industries
INDUSTRY Tax revenue
-
Environment Risk of Degradation
Tensions with China despite thawed relations
PRC military
installations on
Michief Reef
6,000,000,000.00
5,000,000,000.00
4,000,000,000.00
3,000,000,000.00
2,000,000,000.00
1,000,000,000.00
-
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Source: Philippine Statistics Authority (2017)
60 million tonnes of additional Chinese steel
Of all the
segments of
Based on a 2003 iron/steel
Roadmap for the processing, only
Upgrading of the Continuous
PH Iron and Steel (Category A) Billet
Industry prepared to Bar Conversion
for MIRDC/DOST having lower
costs in PH
Volatile supply and cost of raw materials for processing (e.g. Singapore 5th
coking coal for steel) Malaysia 32nd
Trade-offs between environmental/social standards and cost of Thailand 45th
technologies (e.g. blast furnaces, HPAL facilities)
Indonesia 64th
Lower grade of local ores (e.g. nickel, iron) leading to more
processing costs, and lower investor preferences Vietnam 64th
Bureaucracy and permitting problems Brunei 70th
Policy inconsistency across administrations; peace and order issues Philippines 71st
Tariff distortions and smuggling concerns Cambodia 73rd
Is processing advantageous?
Taganito HPAL Plant
Begun operations in 2014 in Surigao del Norte
Owned by Nickel Asia (10%), Sumitomo (75.0%),
Mitsui (15.0%) as of 2017
100% of ore feed (30k m.t. of Ni; 2.6k of Cobalt)
from Taganito Nickel Mining Corp
Net income margin in 2014: 9.1%; but profitability
affected by lower nickel prices in 2015 and 2016
Factors lowering The financial feasibility of smelters does not look particularly good in
commercial prospects: Indonesia, given the complementary public infrastructure required,
the huge capital costs involved and the complexity of financing them,
Competition with low capital and current problems in the business environment. On top of these
and operating costs in China issues, world markets today have substantial excess capacity in
Capital investments very
high, imposing steep
downstream mineral processing and extremely low TRCCs (treatment
opportunity costs and refining charges)
Low treatment and refining
charges due to global excess - USAID (2013), Economic Effects of Indonesias Mineral-Processing
capacity in processing Requirements for Export
Expensive, complementary
public investments required
(energy, transport)
Financing challenging due to
significant debt financing
required
The Blue Economy:
Develop the PHs maritime potential
Vertical Ocean
Farming: Marine
Shellfish, seaweed biotechnology:
Farming with Marine biodiversity
climate restoration, products for
food security and health/cosmetic,
energy benefits environmental, and
nutritional purposes
Ocean-based
Renewable Energy:
Harnessing tidal,
wave power, and
marine biofuels for
sustainable and
reliable energy
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The Blue Economy: Benham Rise
13-million-hectare
underwater plateau
located near Aurora.
It is larger than
Luzon, and is
considered part of
the countrys
continental shelf
Potentially a rich
source of natural gas
Source: Screen grab from a document the Philippines submitted to UN; as seen in Rappler. and other resources
such as heavy
metals.
The Blue Economy:
The Ship-Building and Maritime Industry
Hanjin made LPG Carrier Kaprijke ordered by BRP Tagbanua, a Navy cargo ship made by
Belgian shipping company Subic-based Propmech Corp (2011)
Manufacturing
Low
Upstream Downstream
Source: Stan Shih: World Bank (1992)
The Blue Economy:
Industrial Development in the Blue Economy
Text
From Curse to Blessing?