Sector Project Policy Advice Mineral and Energy Resources

Mineral and energy resources are the basis for most of our technical achievements and devices used in our day-to-day routine. Global demand for these resources has been continually on the rise – both due to economic growth and a growing world population.

For developing countries, the increasing demand offers tremendous opportunities. Many resource-rich developing countries rely heavily on energy and mineral resources for domestic revenue generation (for the share of export revenues see map). The exploitation of mineral and energy resources has direct effects on the economic growth of developing economies. If properly managed, the extractive sector and resource revenues can make a significant contribution towards the sustainable development of a country.

Mineral and Energy Resources as percentage of total exports in 2009 Source: BGR, WTO, ITC

However, often only a small section of the population benefits from the wealth in resources. In many cases this is due to a lack in state capacities to effectively regulate and supervise the extractive sector. Heavy dependence on resource exports also poses major challenges such as vulnerability to price volatility. High levels of corruption and governance deficiencies further undermine the positive effects of resource revenues. In the worst case scenario, resource revenues can even contribute  to financing existing conflicts. As the extraction of minerals always affects the environment and local communities nearby, poor management of the sector can have broader negative impacts.  

Therefore, the promotion of good governance, the establishment of transparency and accountability, and effective management of the extractive sector are necessary for developing countries to benefit from their natural resources. In view of the limited employment opportunities within the mining sector itself and the negative effects of one-sided dependencies, it is also crucial to diversify and broaden the basis of the country’s economy in the long-term. Integration of the extractive sector into the local economy, investments in the value chain associated with resource extraction and other productive sectors as well as infrastructure and education are key measures to induce sustainable development and foster broad-based growth.

Against this background, the BGR sector project “Policy Advice Mineral and Energy Resources” was launched in 2013 to advise the German Federal Ministry for Economic Cooperation and Development (BMZ) and organisations of German development cooperation on the development aspects linked to the extractive sector.

The sector project builds on experiences gained throughout a preceding project on “Policy Advice Mineral and Energy Resource” which was implemented by BGR from 2007 to 2013.