The supply behaviour of state mining enterprises: A case study of the Jordanian phosphate industry

Abstract

An important feature of export-oriented production in mineral-rich developing countries for almost three decades after 1960 was the growth of state-owned enterprises. For the phosphate industry, this was reflected in the expansion of companies such as Office Cherifienne des Phosphate (OCP) in Morocco and the Jordan Phosphate Mines Company (JPMC). There was a strategic importance of the industry for these nations and the large capital outlays necessary for phosphate and fertilizer production expansion often required considerable government assistance because of the perceived high risks of private investment in the industry. An associated issue with state-owned mining companies in developing nations during this time was their operation to facilitate overall government policy. Governments often required these public enterprises to increase production in times of lower world prices to reduce pressures on a balance of current account deficit. The empirical analysis in this paper suggests that this occurred on several occasions in Jordan. Such behaviour by several major producers tends to bring distortion to the operation of the world market over an extended period. Debt service obligation has also been an important determinant of mineral exports for highly indebted mineral rich developing nations. This appears to have been the case in Jordan, where external debt obligations often created pressure on the JPMC to expand its exports in order to earn the hard currency required to service the debt.