Category: FDI

The geopolitics of China in Chile鈥檚 lithium strategy and the trouble with critical minerals

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the Chilean government confirmed a report published earlier that morning: Chinese companies BYD and Yongqing Technology (Tsingshan Group) had abandoned their planned lithium cathode production facilities in Chile. This announcement dealt a significant blow to the ambitions of a country with a longstanding mining tradition, now striving to build industrial capabilities and develop value-added products from its mineral resources amid the global energy transition. However, just one day later, the Chinese embassy in Chile both the initial report and the Chilean government’s confirmation. After consultations with both companies, the embassy clarified that neither had officially withdrawn their investment plans. Instead, they reaffirmed ongoing interest in maintaining dialogue with Chilean authorities. The embassy further emphasized Chile’s continuing attractiveness to Chinese businesses, highlighting the numerous firms eager to participate in the country鈥檚 National Lithium Strategy. the Chinese embassy鈥檚 statement鈥攊ssued amidst escalating trade tensions and shifts in the international order鈥攕uggests this chapter is far from concluded.

This episode highlights the complexity and uncertainty confronting peripheral economies attempting to industrialize by leveraging their comparative advantages amidst the so-called energy transition and broader geopolitical tensions marked by trade wars. While significant global attention remains focused on the socio-environmental impacts of critical mineral extraction, less consideration has been given to examining how peripheral economies鈥攃ountries heavily reliant on natural resource extraction鈥攁re strategically navigating or capitalizing on this 鈥渃ritical minerals moment鈥� in relation to their own ambitions to industrialize.

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Who will Benefit from the Bitcoinization of El Salvador?

Guy Cowman-SharpeLeave a comment

On 8 June, El Salvador鈥檚 Legislative Assembly voted to pass the (Bitcoin Law), with a majority vote of 62 out of 84. The legislation was presented to the Assembly days after President Nayib Bukele , speaking via video broadcast to the Bitcoin 2021 Conference in Miami. Effective from 7 September, all businesses in the country will be required to accept bitcoin alongside the United States dollar, El Salvador鈥檚 current currency. Since the bill鈥檚 passing, and have expressed interest in recognizing bitcoin as legal tender.

Rather than China鈥檚 or Venezuela鈥檚 , El Salvador will not be pursing the creation of its own cryptocurrency. Bukele is adamant that at this stage Bitcoin will not make up any of the nation鈥檚 reserves, held in the Central Reserve Bank of El Salvador. Rather, (BANDESAL) worth US $150 million will guarantee convertibility to dollars as a safeguard against bitcoin鈥檚 volatility. In doing so, the BANDESAL trust would make sure that the price of a commodity does not widely fluctuate between point of purchase and completion of transaction.

In Bukele鈥檚 address he made mention of the lack of financial inclusion for Salvadorans being a motivation for the law. In a country where informal employment makes up around 70% of the labor force, anonymous peer-to-peer cash transfers without the formal requirements of a bank account or the high charges of Western Union make sense as an alternative. Bukele has also expressed his hope that the move will make El Salvador 鈥溾�� on the United States, given that dollarization ceded monetary independence to the Federal Reserve. But given the increasing centralization of Bitcoin and its reliance on big tech money, it is far more likely that bitcoinization will merely make El Salvador dependent on a different section of US capital.

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Struggles Over Value: Suppression of locally-led capital accumulation in the Congo

Ben RadleyLeave a comment

By Ben Radley and Sara Geenen

Over the last few decades, African governments have liberalised and privatised their mining industries, attracting significant foreign direct investment. Transnational corporations (TNCs) have become the dominant forces. Their en masse arrival across the continent has been accompanied by the displacement and marginalisation of artisanal and small-scale mining (ASM). This has been a political process not just to create value, but to transfer value to foreign firms. In this same process, particular production modes are devalued. According to Jennifer Bair and Marion Werner (2011), this is a deliberate process linked to 鈥榚veryday practices and struggles over value鈥�, whereby certain forms and logics of value creation are prioritised and asserted over others.

Yet a consideration or even acknowledgement of these everyday practices and struggles is generally absent from the Global Value Chain (GVC) analysis which dominates the African mining literature (especially the more influential  and ). This literature is mainly preoccupied with how African firms can integrate into and 鈥榰pgrade鈥� within TNC-led industrial mining GVCs. It remains largely blind to a consideration of how and from whom value is transferred when recently established TNC-led mines interact with pre-existing and more locally-anchored ASM economies.

Locally driven mechanisation and capital accumulation in the Congo (Sara Geenen).

In our  in ROAPE鈥檚 journal looking at the case of South Kivu Province in the eastern Democratic Republic of the Congo (DRC), we redress this imbalance by documenting precisely these 鈥榚veryday practices and struggles over value鈥�. We demonstrate how a coalition between foreign corporate capital and the Congolese state has marginalised and held back locally-led processes of technological assimilation, capital formation and mechanisation in ASM. By so doing, we direct attention towards the developmental potential of domestically embedded networks of African mining production, and how these networks are disrupted by incoming TNCs.

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Neoliberalism on Trial: Jokowi 2.0, Omnibus Bill and the New Capital City

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When the majority of Southeast Asian countries began to enact more aggressive responses to the novel coronavirus, Indonesia turned a deaf ear to virus mitigation efforts. As it had no confirmed cases of the coronavirus as of February, Joko Widodo鈥檚 (Jokowi) government instead kept pushing extensive economic reform agendas. It submitted a 1,028-page Job Creation Omnibus Bill on 12 February, calling the bill the country鈥檚 third great structural reform program after the聽 1998 International Monetary Fund鈥檚 (IMF) Letter of Intent and the 1967 Foreign Direct Investment Law. Despite criticism from the opposition, the president insisted on this neoliberal agenda, claiming that the objective of the bill is to promote more foreign direct investment (FDI) in the manufacturing sector and thus create more jobs.聽

What effects do neoliberal policies have on political and economic life in Indonesia and state-capital relations in particular? This blog post follows David (2006) in taking a historical-geographical approach to investigate this question, with a focus on policies put in place in the current president Jokowi鈥檚 second term. For , such a bold move to deregulate the economy signals the resurgence of state-led development in a new form. Put differently, what this article would like to argue is that deregulation, an all-encompassing hegemonic ideology rather than simply a policy, has become some sort of 鈥榖anner to unite under鈥� for the ruling capitalist class in Indonesia.聽Read More »

Should the African lion learn from the Asian tigers? A comparison of FDI-oriented industrial policy in Ethiopia, South Korea and Taiwan

Jostein Hauge1 Comment

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The Huajian shoe factory in the Eastern Industrial Zone in Ethiopia. Photo: .

Ethiopia is being hailed as one of the most successful growth stories in Africa. Because of the country鈥檚 rapid economic growth, the high degree of state intervention in the economy, and the state鈥檚 focus on industrialization, people have started to compare Ethiopia to the Asian 鈥榯igers鈥� (; ; , ; ) 鈥� four countries in East Asia (Hong Kong, Singapore, South Korea and Taiwan) that underwent rapid industrialization and maintained exceptionally high growth rates in the post-WWII era.

However, this emerging literature on Ethiopia-Asia comparisons has not yet sufficiently addressed one of the most important aspects of Ethiopia鈥檚 industrialization strategy 鈥� the attraction of foreign direct investments (FDI) into the manufacturing sector.

The rationale of my was this gap in the literature. In it, I ask the question: Should the African lion learn from the Asian tigers with respect to FDI-oriented industrial policy?聽

In short, my answer is yes. While Ethiopia鈥檚 policies are bringing about short-term economic success and showing promise for further industrialization, the state could arguably bargain harder with foreign investors, like it did in South Korea and Taiwan.Read More »

Hirschman鈥檚 Linkages: Pass茅 in the Age of Global Production Sharing?

Wannaphong durongkaveroj3 Comments

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How does economic development happen? After World War II, many development economists rose to prominence, such as Paul Rosenstein-Rodan (the big push), Arthur Lewis (the dual-sector model), Walter Rostow (the linear stages of growth) and Albert Hirschman (unbalanced growth and linkages). Given the continued importance of industrial policy, it is particularly worthwhile to revisit the idea of forward and backward linkages 鈥� one of the central tenets of development thinking pioneered by Hirschman.Read More »

Rethinking the Failures of Mining Industrialisation in the African Periphery

Ben Radley1 Comment

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The remains of one of SOMINKI鈥檚 industrial gold mines (author photo).

The World Bank interpreted the failure of mineral extraction to drive structural transformation in the early decades of African Independence as due to badly managed state-owned enterprises (SOEs), excessive state intervention in the economy, and government corruption. To right these wrongs, since the 1980s, the Bank has loaned hundreds of millions of dollars to the governments of mineral-rich (and mostly low-income) African countries to privatise and liberalise their mining sectors. Spurred on by the most recent commodity super-cycle beginning in the late 1990s, foreign direct investment poured in, and for many low-income African countries today, 鈥渢he mining sector represents one of the most crucial sources of investment and income in their economies鈥� (Farole and Winkler 2014: 177). A major theoretical assumption underpinning this process has been a belief in the superior expertise and efficiency of experienced transnational corporations (TNCs) compared to corrupt and mismanaged SOEs. In this post, I unpack and question the validity of this assumption, by drawing on some of the findings from my doctoral thesis on mining reindustrialisation in South Kivu Province of the Democratic Republic of the Congo (DRC). 聽聽聽 Read More »

From Addis to Davos: International Development Finance gets Conspicuous

Rose WordenLeave a comment

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The theme of the 2018 World Economic Forum was, 鈥淐reating a Shared Future in a Fractured World.鈥� Its six richest attendees each boasted an estimated net worth of, or the same amount as the total burden of Somalia鈥檚 outstanding debt, which, amid the splendor of the event, Somali Prime Minister Hassan Ali Khayre to discuss . In this era of extreme global inequality, it is estimated that the United Nations agenda of seventeen sustainable development goals (SDGs) known as, will require of investment per year to be realized, or more than twice the amount expected to be available from traditional official development assistance (ODA) alone. Due to the increasing concentration of private wealth in the global economy, discussions around development finance have focused on private sector engagement, rather than more traditional, ODA from predominantly Western donor governments and multilateral institutions.Read More »