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Australian mining industry: development or detriment?

By Nattavud Pimpa - posted Monday, 4 February 2013


Mining is one of the most sensitive industries, due to its economic and environmental impacts. Clearly, it is significant to Australia. According to the Australian Bureau of Statistics (ABS), total industry gross value added of the mining industry increased by 21% over the period 2005–06 to 2009–10. More importantly, the mining industry's contribution to Australian GDP was 8.4% in 2009–10. In the period 2006–07 and 2010–11, the value of exports from the mining industry more than doubled.

The growth of Australian mining industry is evident. We, however, still question the roles of mining multinational corporations (MNCs) from Australia in the host countries, mostly developing nations in South East Asia, Africa and South America. The dialogue on the relationship between social and economic conditions and international mining activities is ongoing and robust. Current debate on the contributions of mining MNCs from Australia, in the form of corporate social responsibility (CSR) in the host countries, is one of the most critical issues of government and international business.

Described as an 'almost truism', CSR by most Australian mining MNCs is perceived as a set of taken-for-granted ideas within society or institution but requires further attention among stakeholders in international mining industry.

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It might be fair to claim that Australian mining MNCs in developing countries contribute to economic growth and, perhaps, better quality of life. However, we still wonder if mining MNCs can really do something 'better' to improve some chronic socio-economic conditions, such as poverty, equity or health, in the host countries.

Mining MNCs often operate in areas of developing countries which are characterized by limited governmental presence, a high incidence of poverty, a lack of basic social infrastructure, and other social and political problems. Financial assistance from mining MNCs alone to such countries – some $2.5 trillion has been provided in the last 50 years – has often not helped the neediest of citizens. In fact, it may have worsened their plight by sustaining corrupt or otherwise inefficient governments which contribute to their misery, by leaving nations with mountainous debt.

Clearly, Australian mining companies have the unmatched power and competence to work with various other stakeholders on socio-economic issues in the host countries. Increasingly world opinion, as well as the inclinations of their own managers and staff, urges Australian mining MNCs to use that power more effectively and fairly. However, mining MNCs lack a vehicle to make that transition in a sustainable and legitimate way. From the international business perspective, their involvement in development issue is limited due to a lack of clarity regarding their role, and the absence of detailed exploration of the links between socio-economic issues and Australian mining companies. There is an acute absence of research at the level of mining community in terms of the role Australian mining business can perform in social issues such as child labour, prostitution and human trafficking, corruption or poverty alleviation.

A study by a research team at RMIT University pointed that it is critical for Australian mining MNCs to engage with local and international stakeholders in the host countries prior to the execution of business strategy to 'contribute' back to the local community. We, however, learn that not all Australia companies do well when they try to engage with local stakeholders.

Occasional interaction with the local communities and stakeholders, persistent reliance on International Governmental Organisations (IGOs), Non-Governmental Organisations (NGOs), and considerable autonomy by Australian mining MNCs in the allocation and decision-making of various social projects in developing countries have lead to the failure to identify committed partners, engage them in authentic dialogue, and learn from each other. Several poverty alleviation programs conducted by Australian mining companies have degenerated into global 'charity' rather than serving to build local and sustainable community entrepreneurship development and fail to support long-term development among groups such as women, minorities or different religious groups.

In terms of social groups that Australian mining MNCs need to understand how they operate, it also includes a number of informal groups such as housewives group, influential families in the local villages, or religious leaders in the community. Some of them control the economic and political situation of the local community. They also play significant roles in supporting, promoting or demoting the contributions from Australian mining MNCs. Therefore, Australian companies must understand what role to play in different circumstances and cultural and managerial contexts.

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Although it is technically difficult and time-consuming to revolutionize from business strategy to developmental strategy, we can argue that international mining industry can drive social change through their business operations. With political and technical support from various local and international stakeholders in international business, Australian mining industry will be able to act as a key change agent in some socio-economic problems in the host countries. I believe that is how Australian business should behave.

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About the Author

Dr Nattavud Pimoa is an Associate Professor in international business at the School of Management, RMIT University.

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