Building mining's economic linkages: A critical review of local content policy theory

Abstract

The quest for mining activities to deliver an enhanced positive impact on the host economy continues to dominate the debate on the pros and cons of mining investments in resource-rich developing countries. Following years of focusing on fiscal policies as the means for achieving positive impact, local content policies (LCPs) have resurfaced as another paradigm to enable linkage of the mining sector with the host economy. Synthesising the literature, this paper critically analyses whether the current conceptualisation of building linkages by deploying LCPs is effective in leveraging mining for the transformation of the host economy. Picking up on earlier critiques of local content policies, it argues that such conceptualisation falls short, because it focuses too narrowly on building mining supply chains as an end-goal rather than a pathway for achieving a transformed economy that delivers a broad-based and inclusive socio-economic development. Narrowly defined LCPs remain, in effect, mining centric creating a local economic system that is tailored to suit and become dependent on the mining industry. In consequence, the linked upstream supply chain industry remains exposed to volatility and short-term gains, undermining economic transformation. Identifying gaps in research, theorisation, and implementation, this paper offers observations and insights for rethinking theoretical approaches to linkage building, and it underlines the need for future research to develop an alternative theory for conceptualising linkages between mining and other economic sectors.