High-level Forum on Multi-Stakeholder Partnerships 2024 - Side event
[As prepared for delivery]
Recalibrating international cooperation in value addition and diversifying exports in the global value chain of critical energy transition minerals
Dear (Mr.) Tubagus Nugraha, Deputy Assistant of Mining, Coordinating Ministry for Maritime and Investment Affairs of Indonesia;
Dear Dr. Marit Kitaw, Director of the African Minerals Development Center of the African Union;
Distinguished guests, ladies and gentlemen,
First, I want to extend my sincere gratitude to the Indonesian government for inviting me to this significant event focused on local value addition and diversification.
This topic has long been central to the global development agenda, and it still is.
In our global fight against climate change, critical minerals have gained unprecedented attention. These minerals are essential to the energy transition we urgently need. The increasing demand for and competition over these resources have elevated their importance on both national and international policy agendas.
A large share of these minerals is found in developing countries, with about a fifth in the African region, presenting these nations with immense opportunities.
However, history has shown that commodity abundance has often been a curse rather than a blessing. Many resource-rich developing countries have struggled to move beyond merely exporting raw minerals. They lacked—or were not provided with—the tools and means to add local value to these commodities and transform their economies. This left them vulnerable to the volatility of commodity prices and unstable revenues.
As we have just heard from Dr. Marit, the experience of many African countries highlights this challenge. Despite their wealth of mineral resources, most of the value addition still occurs outside their borders.
The Democratic Republic of Congo is a prime example. Although it is the world’s largest producer of cobalt ore and cobalt hydroxide, it still has little to no involvement in the downstream industries associated with this mineral, such as EV batteries or solar panels.
Today’s event is about seizing opportunities and learning from past experiences. And there are indeed insightful examples to consider.
Mr. Tubagus Nugraha shared how Indonesia has successfully transitioned from exporting raw nickel ore to producing more downstream nickel-based products, thereby capturing greater economic benefits. This success story has attracted the attention of many other developing countries.
At UN Trade and Development, we have extensively researched the opportunities and challenges commodities present for development. There are common threads in the success stories that I would like to share with you today.
Resource wealth has led to development when countries have successfully strengthened their national productive capacities, enabling them to build mid- and downstream industries while maintaining competitiveness in the upstream sector. These countries implemented complex, coherent policy frameworks that aligned industrial, education, innovation, and investment policies, and created a conducive business environment.
I want to highlight five key elements essential for effective national strategies for value addition and economic diversification:
- Infrastructure:
Robust infrastructure is crucial. Reliable transportation networks and power grids significantly reduce the costs and challenges of establishing and operating processing and other downstream and also upstream facilities.
- Access to Technologies:
The transformation of mineral ores into intermediate and final products depends on access to advanced technologies. Partnerships with international companies can facilitate knowledge and technology transfer. Negotiating favourable terms in foreign direct investment (FDI) in critical minerals can help host countries develop their technological capabilities and close the technology gap.
- Financing:
Value addition cannot occur without adequate financing. While commodity export revenues can provide some resources for building mid- and downstream activities, it is unrealistic to expect commodity-dependent developing countries to generate all the funding needed. Therefore, countries should consider joint ventures with international partners who have the necessary resources to invest. Crucially, these partnerships must benefit both parties—the foreign investor and the host country.
- Institutional Set-Up:
Successful value addition and diversification of critical minerals require dedicated institutions. There are exemplary models, such as SONATRACH in Algeria, SONANGOL in Angola, ARAMCO in Saudi Arabia, and CODELCO in Chile, which have built strong institutions covering most aspects of specific commodities.
- Governance:
Good governance is a key factor in investment decisions. Countries can make on-site value addition and diversification viable and attractive if their governance systems are stable, predictable, and welcoming to both domestic and foreign investment.
Naturally, there is no one-size-fits-all approach to leveraging critical minerals for broader economic development. Strategies must be tailored to the specific context of each country, considering their unique resources and capacities.
For instance, Indonesia’s restriction on nickel exports, combined with other investment, education and industrial policies, successfully attracted investments. However, the effectiveness of this policy mix depended on Indonesia's specific conditions and characteristics. Market access requirements can help build productive capacity but may deter investors if too stringent. Understanding the country’s context and its position in the global market is, therefore, crucial.
It is important to note that for critical minerals to truly become a development opportunity, the process does not end with value addition and diversification. Benefits must also be shared broadly, and negative impacts must be mitigated. This requires enforcement of regulations to prevent environmental degradation and to protect communities affected by critical mineral activities.
So far, I’ve focused on national strategies.
Now, I want to emphasize the vital role of regional and global cooperation in helping developing countries maximize the economic benefits of their critical mineral resources while ensuring sustainable and equitable development.
Regional cooperation offers a means to share costs, learn collectively, and create regional economic opportunities.
For example, regional cooperation can enhance human capacity for value addition and diversification by establishing capacity-building centers. The Africa Higher Education Centers of Excellence and the Copperbelt University Africa Centre of Excellence in Sustainable Mining are excellent examples. These centers could serve as regional hubs for training, research, and knowledge dissemination. Their effectiveness could be further enhanced through multi-stakeholder engagement.
Another excellent example is the African Minerals Development Center headed by Dr. Marit Kitaw, which oversees and coordinates the African Mining Vision and its Action Plan.
A promising regional partnership in building industrial capacity for critical minerals is the DRC-Zambia agreement to manufacture battery precursors. This partnership has just started.
Furthermore, regional trade agreements (RTAs) can be instrumental in supporting value-addition initiatives. RTAs can include more flexibility for provisions like rules of origin and local content criteria and help lower trade costs by simplifying customs procedures.
Leveraging opportunities presented by frameworks like the African Continental Free Trade Agreement (AfCFTA) or the Regional Comprehensive Economic Partnership (RCEP) is vital. But also the multilateral trading system has a responsibility, including on technology transfer.
This brings me to the importance of international frameworks and cooperation.
Many developing countries face challenges in participating in critical minerals value chains due to the high costs of complying standards – often multiple standards. Standardized international guidelines could reduce these barriers, facilitate market access, and increase participation by developing countries. However, guidelines need to be designed with sufficient flexibility to accommodate the varying capacities of developing countries, and be supported by international assistance mechanisms.
In the context of our climate challenges and the need for social responsibility in these industries, adopting international standards and certifications for sustainable and responsible production practices is essential.
Traceability is an important factor to improve transparency, provide better consumer information, combat illicit trade, and promote conflict-free sourcing. But the significant costs and challenges of implementing these systems in developing countries must be recognized and backed by international support in the form of funding, technical assistance, and phased implementation strategies.
Also at the global level, facilitating multi-stakeholder dialogue on value addition is invaluable for learning, exchange, and mobilizing support.
In line with this vision, I want to highlight a timely global initiative: The Critical Energy Transition Minerals (CETM) Panel established by the UN Secretary-General in April. This panel is tasked with developing common, voluntary principles to guide critical energy transition minerals towards equity and justice. These principles are unique because they apply to the full value chain, not just the extractive industries, and cover economic, social, and environmental aspects.
The CETM panel is inclusive, bringing together experts from government, industry, civil society, and international organizations. This inclusivity enables a dialogue that reflects the diverse and complex interests at stake.
A key recommendation discussed by the panel is establishing an initiative to facilitate multi-stakeholder dialogue on accelerating value addition of critical energy transition minerals with a focus on equity.
This initiative will support governments and stakeholders in CETM-producing developing countries in various areas, including financing, capacity building, research and analysis, knowledge transfer, technical assistance, and peer learning.
UN Trade and Development has been an integral part of the CETM Panel Secretariat and remains fully committed to supporting developing countries in transforming critical minerals into genuine development opportunities.
Thank you for your attention.