Exports of Mineral Commodities and The Impact on Economy-wide Growth

There is a belief that restricting exports of minerals may have multiple values on the supply chain, such as increased local employment opportunities. This is far from the truth. Read more on the importance of exporting mineral commodities.

It's evident and a no-brainer that mineral resources play a significant role in determining a country's national wealth. From gold to diamonds to graphite and coal, in several countries with mining sectors, gross national income has developed favorably, benefiting from these natural resources. However, this abundance only sometimes translates to direct money conversion for some countries. Some nations need more necessary investments, such as technological know-how, poor policies, and a lack of adequately laid structures to process these materials internally. This has been termed as "resource-scarce."

In other countries, there is a belief that restricting minerals exports may have multiple values on the supply chain, such as increased local employment opportunities from the processing factories, improved business growth from local markets, and supply of foreign currency. Other issues these governments seek to achieve are curbing illegally mined products, reducing environmental degradation, and overseeing the mining industry. However, data has shown a different trend from this. The Organisation for Economic Co-operation and Development (OECD) analysis suggests that there are better ways to achieve these objectives than export restrictions. It also states that mining generally provides little direct employment in the countries and regions where mining occurs.

Export controls and its lack of competitiveness

In other regions, the few nations that have embraced mineral exportation have enjoyed and experienced strong economic growth for a decade or longer, propelled by a rapid increase in the prices of these commodities. This sustained strong financial performance has indeed contradicted widely held beliefs that, while the mining sector can generate foreign exchange and fiscal revenues, it contributes little to long-term economic growth and, by extension, human development. Data from World Bank shows that in addition to trends and patterns of various indicators such as economic growth, countries rich in minerals other than oil have experienced significant improvements in their human development index (HDI) scores that are, on average better than those experienced by countries that impose export of mineral commodities.

Economy-wide Benefits

Looking at these arguments presented, the question remains; what are the advantages of exporting mineral commodities to a country? The benefits of exportation towards a country's economic growth are many. Instances such as an increased Gross Domestic Product (GDP) have been witnessed. Other benefits include:

1. Foreign direct investment (FDI) – Countries looking to purchase raw export commodities often pay using their national currency. This translates to increased foreign exchange within the country, which can be used to buy other needed imports across the region or globally.

2. Reduced operating costs - Most mining operations require significant upfront capital investment in machinery, equipment, and labor. Rather than investing in modern, expensive machinery, countries that choose to export the raw minerals save money that can be re-directed to other much-needed areas like agriculture, education, transportation, and other infrastructures.

3. Increase in global demands - global demand for resources to support construction booms and rapid urbanization experienced in major cities worldwide means significant boosts in world commodity prices. This translates to higher income for the country from the exportation of the commodities.

4. Global growth - Access to a worldwide market of buyers is one of the primary advantages of exporting. Exporting your products and going global exposes your company to more than 95% of the world's population; failing to ship limits your sales to less than 5% of potential buyers. According to the International Trade Association (ITA), exports accounted for 20% of annual earnings for 60% of small businesses and 44% of medium-sized companies.

5. Increased profits - Profitability is another advantage of exporting. Access to a global buyer market means sales will rise, resulting in higher profits. This is especially true when direct exporting is used. With the rise of e-commerce, marketing and selling your product online has never been simpler.

6. Risk Mitigation - Another advantage of exporting is the reduction of business-related risk. Introducing your products to foreign markets and buyers broadens your customer base, reducing your reliance on and vulnerability to changes in a single domestic economy and in addition, exporting shields your company from fluctuations in the domestic business cycle, protecting both your revenue and employees.

7. Economies of Scale - Another example of export benefits is economies of scale. Increasing sales abroad indicates a need for your company to increase production. Increasing production can result in lower costs per product unit, depending on your company's efficiency. This enables your company to take advantage of economies of scale, lowering overall costs and increasing net income. Moreover, this frees up resources for your company to reinvest in other areas, resulting in increased growth.

Metallika in supporting exportation

Exporting your mineral commodities can be a game changer for the country and its value chain, which includes investors. We also understand that the life cycle of mining contains many stages, which are accompanied by a large amount of data. Metallika, a unique and innovative Decentralized Autonomous Organization (DAO) based platform that uses blockchain technology to facilitate the exploration and production of minerals, is interested in making mining data available to all project participants. Metallika provides an opportunity for fast, convenient, reliable, and transparent communication between various participants in the exploration and mining cycle—forming partnerships and obtaining investments at each stage of the process.

Similarly, we offer a SaaS solution that organizes convenient access to company services. The platform provides a marketplace for mineral lease holders, junior miners, and Investors, a mineral trading platform, and a product manufacturers portal. After registration and verification, the user has access to all services and can participate in the life cycle of exploration and mining without the hustles of additional intermediaries and consultants.

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