Local Content Policies in the Mining Sector: Fostering downstream linkages

There is a strong belief in many resource-rich developing countries that in order to achieve industrial development raw materials should be processed domestically rather than being exported in their unprocessed form.

Driven by this objective of fostering industrialization, some governments have undertaken measures to either prescribe or incentivize downstream beneficiation.

This paper summarizes key policy options generally adopted by governments to encourage downstream activities, pointing to the strengths and weaknesses of each type of policy. These include various forms of fiscal and non-fiscal incentives; prescriptive measures such as export duties; bans or legal obligations to engage in beneficiation; the use of bargaining power in negotiations; beneficiation conditions linked to bidding processes; and government-led investments. The paper concludes with policy recommendations.

The discussion is built on a selection of geographically and economically diverse case studies and several commodities, namely copper, diamonds, iron ore, nickel and oil. Five of the case studies—Australia, Botswana, Nigeria, Indonesia and Singapore—have been published as stand-alone notes on the IGF local content guidance webpage. The paper is part of a set of expert documents to substantiate the IGF Guidance for Governments on local content policies, released in July 2018.