In the light of the recent happenings in mineral-rich States of Orissa, Bihar, Jharkhand and Chhattisgarh, the transformation of mineral deposits into sustainable development gains would be a daunting task if the interests of all the stakeholders are not adequately addressed.

In the face of local resistance to mining, multinational companies such as South Korea’s Posco would find the going tough if they lack a clear strategy on how to obtain, manage and use the revenue generated from mineral extraction and dovetail it into an overall development strategy.

Even as India is new to the game of entertaining foreign companies to invest in extraction industries for domestic purposes and exports, the experience so far has been agonising enough to put paid to the interests evinced by prospective investors or transnational companies. The authorities need to address the myriad problems such engagement with foreign companies bring in its trail.

Role of transnationals

In its latest World Investment Report, 2007, the UN Conference on Trade and Development (Unctad), highlights the role of transnational corporations (TNCs) in extractive industries and documents their presence in many of the world’s poorest economies.

The UN Secretary-General, Ban Ki-moon, in the preface to the 290-page well-researched report, states thus: “TNCs can bring in the finance and management skills these economies need to transform their products into products that can be used locally or exported. The rise of new transnational corporations from the South, not East Asia, has given mineral-rich countries a wider spectrum of potential sources of investment.”

Unctad states that TNCs could improve the overall performance of the extractive industries by contributing capital, technology and management skills and, hence, boost output, exports and government revenues. They could also complement domestic investment and expose local companies to competition.

Moreover, responsible TNCs might be better placed to address adverse environmental and social impacts of their activities. But it is not all unmixed blessings as there could be shortcomings to their presence in developing countries that are related, for instance, to their ownership and control over production and revenues, transfer pricing, limited local procurement and linkages and various environmental and social effects of their activities, as well as to the unequal bargaining power of host-country governments vis-À-vis the TNCs.

Justifying its focus on extractive industries, the Unctad report states that as a consequence of rising mineral prices, the share of extractive industries in global FDI has recently risen, though it is still much lower than those of services and manufacturing.

Global mineral markets are characterised by an uneven geographical distribution of reserves, production and consumption. These imbalances foster concerns among importing countries over the security of supply, and among exporting countries over market access. TNCs could be important for both host and home countries in this context.

The current price boom reflects in part a surge in demand for oil, gas and various metallic minerals, especially from rapidly growing economies, notably China. Though by mid-2007 the prices of commodities such as aluminium, copper, gold and oil remained close to their pinnacle levels in nominal terms, their future trends are fraught with uncertainty.

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