Mining and construction post-COVID
Published by Jessica Casey,
Global Mining Review,
The current COVID-19 pandemic has severely affected the global economy. Coronavirus has infected millions worldwide, killing many and creating a global health crisis, which in turn is causing a severe economic crisis across the globe. The immediate impact of the crisis is loss of life, job losses and trillions of dollars of lost production, leading to deep recessions in most countries. However, the effects of the pandemic on economies are likely to persist in the short, medium and long term, affecting specific-industry trends and thus changing the landscape of some economic sectors. Therefore, it is important that countries and their financial partners collaborate to build resiliency in their economic backbone by promoting competitive industries. That is why the Islamic Development Bank is launching a range of new initiatives to build resiliency of key industries in its 57 member countries.
Since assuming tenure at the Islamic Development Bank (IsDB), Dr Bandar Hajjar, President of the IsDB, has established a programme which puts an emphasis on strengthening the competitiveness of IsDB member countries in strategic industries through public investments and private resource mobilisation. It is a programme that focuses on driving development, growth and innovation together promoting member countries’ core, competitive industries such as mining and construction.
Under the current COVID-19 global pandemic, understanding what shapes the future of these industries and the value chains within them is essential in rebuilding and introducing resiliency in them. This understanding is especially important when mining and construction industries are key drivers for economic growth for many of our member countries. Adopting a forward-looking industrial policy can enable member countries to capture more value from mining and construction through higher revenue, more diversified economy and an increased number of skilled jobs.
The key questions the bank is asking itself include:
- What will the industries look like with the global pandemic?
- What is the current standing of IsDB member countries and how ready are they for the industries’ future?
- Ultimately, how can the potential of IsDB member countries in a highly volatile world be unlocked?
To answer these questions, the IsDB has launched a report examining future trends in core industries, such as mining and construction considering – among other things – future technological, environmental and demographic trends.
Current and impending innovative technologies will disrupt the path of the mining and construction industries. The mining of the future will be smart with the advent of advanced analytics and Internet of Things (IoT) leading to more automation and labor-augmented technologies, which will lead countries to move from extraction-only activities to high value-added processing activities. 3D printing and modular construction and building information modelling with enhanced digital connectivity will substantially raise productivity in the construction sector, which will have significant positive impact on housing affordability.
However, for its member countries to adopt forward-looking industrial policies under the context of the important trends highlighted, the current standing of IsDB member countries and how ready they are to adapt and to build resiliency for the future must be understood. Currently, IsDB member countries hold the vast majority of the world mineral reserves, an important share of which is still untapped due to several economic and technical constraints, indicating there is significant potential to increase production. More importantly, many of the bank’s member countries focus mainly on extraction, so the potential to unlock additional value by expanding into processing and even manufacturing is significant.
The report answers the last question of how to unlock IsDB member countries’ potential under a volatile world by providing key recommendations centred on building resiliency value chains. Given the energy intensity of both mining and construction industries, and environmental sustainability concerns, IsDB recommends in the report that its member countries heavily and strategically invest in cost-effective and renewable energy generation, especially when many of them already display great potential in solar and hydro renewables. IsDB member countries can succeed in these investments by taking firm steps in becoming early adopters or even innovation leaders in the new technologies and processes that generate energy-efficient solutions. However, for IsDB member countries to be successful in developing resilient industries, major investments and proper strategies are needed, which requires collaboration with key partners such as other countries, and other private sector organisations.
For example, a strategic collaboration in the area of electric vehicles between Indonesia and Guinea with potentially another member country with a strong automotive production base can be fruitful. Electric vehicles require key minerals such as nickel for batteries, copper for wires and motor windings, as well as aluminium for structural elements. Aluminium share of the electric vehicle market is set to rise from around 30 – 55% while demand for nickel is likely to grow as it forms a core component of the battery. As demand for electric vehicles booms, especially with the sharing economy becoming increasingly important, countries rich with key electric vehicle minerals such as Guinea (aluminium), Indonesia (nickel, copper) and Morocco (copper) can expand into processing, increasing value-add.
Therefore, the report provides not only key insights of current and future trajectory of the mining and construction industries in IsDB member countries, but it also highlights strategic opportunities for governments, investors and other development organisations to invest, finance and collaborate for the development of these industries. As such, the report provides a vision and a path forward where key interventions are identified to address important issues and provide forward-looking solutions for the industries. New collaboration models will help share risk and unlock growth potential. Unlocking private investment will require fair risk sharing in large-scale projects. Finally, collaboration between IsDB member countries can provide opportunities for complementarities and promote large investments benefiting all parties.
Read the article online at: https://www.globalminingreview.com/special-reports/07082020/mining-and-construction-post-covid/
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