Seminar on Good Practice Mining:
Part of a strong and growing Lao economy
Settha Palace Hotel, Vientiane, 5 April 2016
Opening remarks by John Williams, Australian Ambassador to the Lao PDR
The Australian Embassy is delighted to bring you all together this morning to look at what the Lao Government can do to promote best practice mining here, and the value that will continue to bring to this country's socio-economic development ambitions.
We will, in particular, be analysing the ideas in a quality research paper John Fargher authored as head of the Laos-Australia Development Learning Facility. We very much look forward to your contributions on some of the major issues in our panel discussion later this morning.
It was a research paper Minister Khammany asked us to prepare to support inter-agency policy discussions ahead of the Party Congress in January, on the future of the moratorium on new mining concessions and other policy changes on mining governance in the Lao PDR that would help attract quality new mining investment.
Australia has every right to be proud of the pivotal role our mining companies have played in supporting Laos' rapid economic growth over the past two decades, and the development gains this has helped deliver.
I have lost count, but I believe collectively MMG and Phu Bia Mining have contributed around USD $1.5 billion to Lao Government revenue - in tax, dividends and royalties - since the early 2000s.
The problem, of course, are the 290 other mining companies in Laos that contribute very little - given MMG and Phu Bia (1% of the companies) deliver 99 per cent of mining revenue.
The ownership of both companies might have changed in recent years - mark that down as a sign of their success.
But the mining model has not changed, and both very much remain Australian operations, in practice.
Indeed, both Phu Bia and MMG's mining operations in the Lao PDR are world standard - in terms of their environmental management, their investment in Lao staff (both technical and managerial skills), their dedication to mine safety, their contributions to government revenue and their focus on supporting the local communities around their mine sites.
Both companies trade on their reputation, and have won awards for their community development work, to support local health and education service delivery, and to maximise the local economic impact by sourcing as much labour and produce they can locally.
So what's the future of Laos' mining industry that has contributed so much over the last 15-20 years?
We hear a lot about the need for Lao policy makers to promote diversification of the Lao economy.
Reducing the overall reliance on the natural resource sector and seeking to increase investment in agriculture, manufacturing and services will help create more wealth and jobs, no doubt.
But that does not mean Laos should forego further growth opportunities in mining and hydropower. Economic diversification is not a zero sum game. Just as the rapid growth in hydropower dams to feed an energy hungry region does not mean Laos should focus less on opportunities in mining.
There's also the myth, I have to say perpetuated by well meaning economists, that mining does not deliver jobs.
On the contrary, with the right policy settings to encourage new quality investments, mining will remain an important part of Laos' employment future.
And a large part of Laos' industrial workforce, such as engineers and skilled tradespeople.
Mining directly employs over 6000 people in Laos, with mining contractors and service providers engaging up to 30,000 others. And I've lost track of the number of trades-related businesses in major centres now being run by former employees of MMG and Phu Bia. Graduates of their trades schools and in-house training programs.
So the employment story is real. In fact, the challenge for Laos is how to compete with other possible investment destinations to attract more companies like Phu Bia and MMG, that will invest so heavily in their local workforce.
So Laos' experience, just like Australia, is that a quality mining sector can be an important engine of growth. Better certainly than having to import all the commodities you need.
And mining is a valuable source of foreign investment to deliver the technology and expertise to ensure Laos can maximise the economic benefits from its natural resource wealth.
As John's research paper spells out, good practice mining is going to be important for the Lao PDR to achieve the growth targets it has set in the 8th NESDB, and to achieve its LDC graduation ambitions.
The key will be getting the policy settings and implementation right to attract and retain investors of the right quality.
Australia will continue to support policy reform in a constructive way, through dedicated funding for mining under the World Bank's Hydropower and Mining Technical Assistance project (HMTA), and through the placement of several Australian mining sector experts within the Ministry of Mining and Energy and Ministry of Natural Resources and Environment to support reform. At least two are in the room with us today.
That's enough from me. I hope that helps set the scene for an interesting discussion this morning. We all want the same outcome - a better managed, world-standard mining sector that will continue to deliver strong socio-economic development gains for the Lao PDR.
I hope today's workshop will highlight some of the policies that can help get us there.
The policy changes the Lao Government implements now, and the perceptions it creates internationally about its commitment to a high quality and transparent mining sector, will be decisive in Laos’ ability to compete to attract the quality investors required to deliver concrete returns to the Lao economy in the years ahead. To attract future investors of the quality of MMG and Phu Bia.