Extractive industries

Extractive industries are the business of exploring for and taking raw materials, including oil, coal, gold, iron, sand, and other minerals, from the earth for sale and consumption. Extraction means to “take out.” The industrial processes for extracting minerals include drilling and pumping, quarrying, and mining. Extractive industries are generally divided into two sectors: mining, and oil and gas.

Scarabeo9_Thailand

An oil drilling platform near Phuket, Thailand. Photo by Vidar Lokken, 2011, Wikimiedia Commons. Taken 4 September 2011. Licensed under CC BY-SA 3.0.

Mineral resources

The Lower Mekong countries are rich in mineral resources. The region has proven reserves of approximately 1.2 billion cubic meters of natural gas, 0.82 billion tons of oil, and 28.0 billion tons of coal. Myanmar, Thailand, and Vietnam possess large natural gas deposits, while Cambodia is opening up for natural gas exploration. Within the region, Thailand and Laos possess the greatest coal deposits and Vietnam has the largest oil reserves.1 Other mineral resources in the Lower Mekong—in addition to the energy-related commodities above—include gold, copper, jade, lead, zinc, phosphate, potash and gemstones, including rubies and sapphires.2 Myanmar, which is mostly outside the river basin, is endowed with substantial quantities of copper, nickel, zinc, manganese, and tin as well gemstones ruby, sapphire and jade.3

Minerals extracted

Mineral extraction is a key sector for driving economic development as reflected in ASEAN Minerals Cooperation Action Plans (AMCAP). The current AMCAP 2011-2015 calls for a “dynamic mineral sector initiative for a prosperous ASEAN through the expansion of trade and investment, cooperation and capability for sustainable mineral development in the region.”4

Extractive industries are at varying levels of development across the five Lower Mekong  countries, with Cambodia having progressed the least. The other four countries contribute significant amounts to the world’s production of two or more metals or minerals. Vietnam, Myanmar and Thailand also produce crude petroleum, with Vietnam leading production. As is reflected in the table below, between 2009-2013, Cambodia was only recognized for its salt production, a mineral also produced in all of the other Mekong countries.

Thailand and Vietnam have the most developed extractive industries. Myanmar’s, which until recently was dominated by military-owned companies, has been opening up to private investment since at least 1988, and between 2001 and 2012 was one of the few sectors to see substantial Foreign Direct Investment (FDI.) 5  Despite sanctions against Myanmar, international oil companies, such as Total SA, PTTEP and Chevron were active in the country between 1997 and 2012.  6 Cambodia, while possessing substantial oil reserves and various metals, including gold and bauxite, has seen relatively little Foreign Direct Investment (FDI)  in the extractive sector, due largely to a lack of infrastructure.7

The Lower Mekong counties were amongst the top ten producers by quantity for several minerals in 2014: Vietnam was the number two world producer of both tungsten and bismuth, and number five for titanium; Thailand was the number three producer of gypsum and number five for feldspar; and Myanmar was the number three producer of tin globally. Laos’ top mineral production ranking came as the number 18 global producer of copper.8

Managing mineral wealth

Activities related to mining, oil and natural gas have been controversial throughout the Mekong, as elsewhere, often bringing  corporate interests into conflict with farmers or risking environmental impacts such as pollution and deforestation. Yet, in many cases, there has been a close relationship between development of oil and gas industries and a nation’s own energy needs and economic output. For instance, Vietnam and Thailand have both subsidized their oil industries, thereby keeping energy prices in their countries low.  In 2012, the U.S. Energy Information Administration noted that in 2010 Vietnam had consumed 320,000 of the 400,000 barrels per day that it was producing and estimated that by 2013, it would be consuming more than its production ceiling.9 In 2011, Thailand produced 1,360 billion cubic feet (bcf) of natural gas but consumed more (1,645 bcf), so it relied on imported natural gas to make up the difference.10  

Extractive industries, by their nature and conduct, are often incompatible with traditional land uses and risk  harm to existing ecosystems. Extractive industries are often particularly problematic for  indigenous peoples; the destruction of their livelihoods, community structures and culture by mining and other projects has been termed by some observers as ‘development aggression.’11

Extractive industries may have significant environmental effects, contributing to deforestation, significantly altering landscapes, and contributing to pollution. Industrial accidents, such as oil spills, may also have harmful and long-lasting effects on the environment and biodiversity.

Tĩnh Túc Tin Mine, Cao Bằng, Vietnam. Photo by Gavin White. Licensed under Attribution-NonCommercial-NoDerivs 2.0 Generic.

Tĩnh Túc Tin Mine, Cao Bằng, Vietnam. Photo by Gavin White, Flickr. Taken 4 May 2007. Licensed under CC BY-NC-ND 2.0 Generic.

Environmental impact assessments (EIAs) are a critical safeguard in protecting the landscape from the adverse effects of extractive activities. Questions have been raised regarding the efficacy of current EIA regimens in the region and the five countries are acting to improve these.12 Cambodia has a draft revision to its EIA law that observers have called robust.13  Responsible companies also commit to plans to rehabilitate mining sites at the end of extraction.

The management and allocation of the large revenues generated from fossil fuel and other extractive industries can also lead to controversy. As the International Monetary Fund has noted, in developing countries resource riches, especially oil, present “very large, quickly growing, but time-limited production and revenue flows, combined with a high degree of volatility because of fluctuating world prices.” 14 They go on to observe that this provides a circumstance where weak administration, inefficient policies, and “outright corruption” can lead to the misallocation of national resource wealth. Around the world, this situation is termed the ‘resource revenue curse.’

Governance is a crosscutting issue in the region. Of the five Lower Mekong countries, only Thailand ranks in the top “cleanest” 100  of 175 countries in Transparency International’s 2014 Corruption Perception Index.15 An indicator more closely associated with resource management is the Natural Resource Governance Institute’s Resource Governance Index (RGI), which scores and ranks countries with production in the oil, gas and mining sector on associated management policies and practices. The table below reflects the results of the 2013 RGI with respect to three of the  five Lower Mekong countries; only Cambodia, Myanmar and Vietnam were assessed. The ranking is out of a pool of fifty-eight (58) countries, with “1” leading the ranking. The scores for institutional and legal setting, reporting practices, safeguards and quality controls, and enabling environment are out of a possible 100.16

Resource governance rankings for Vietnam, Cambodia and Myanmar (2012)

Mineral visualization

Despite its placing last in the 2013 RGI, Myanmar is now taking steps toward extractive industry transparency. In mid-2014, Myanmar’s application for candidacy in the Extractive Industry Transparency Initiative (EITI) was accepted, so that it joined “44 countries that have signed up to the EITI Standard, which requires extensive disclosure and measures to improve accountability in how oil, gas and minerals are governed.”17 In late 2013, Vietnam announced its intention to participate in EITI by 2015.18

Civil society organizations across ASEAN collaborated with the Institute for Essential Service Reform (IESR) in 2014 to support the development of The framework for extractive industries governance in ASEAN,19 which advances four principles for good management in the sector: (1) Protection of the environment; (2) Respect and protect human rights; (3) Transparent and accountable practices; and (4) Sound Fiscal framework and revenue management.20 

Last updated 27 April 2016

References

  • 1. Asian Development Bank. 2012. The Greater Mekong Subregion Power Trade and Interconnection: 2 Decades of Cooperation. Manila: ADB. Accessed 21 July 2015. http://adb.org/sites/default/files/pub/2012/gms-power-trade-interconnection.pdf. View on Open Development Datahub
  • 2.  Mekong River Commission. “Natural Resources.” Accessed 21 June 2015. http://www.mrcmekong.org/mekong-basin/natural-resources/.
  • 3.  Fong-Sam, Yolanda. 2012. “The Mineral Industry of Burma.” In 2012 Minerals Yearbook, Burma, Advance Release, 6.1-6.6. United States: United States Geological Survey. Accessed 21 July 2015. http://minerals.usgs.gov/minerals/pubs/country/2012/myb3-2012-bm.pdf.
  • 4.  ASEAN Minerals Database and Information System. 2013. “AMCAP 2011-2015.” Accessed 21 July 2015. http://amdis.bgl.esdm.go.id/index.php?option=com_content&view=article&id=26&Itemid=48.
  • 5. Bissinger, Jared. 2012. “Foreign Investment in Myanmar: a Resource Boom but a Development Bust?” Contemporary Southeast Asia 34(1): 23–52, 30. Accessed 21 June 2015. http://www.academia.edu/1534773/Foreign_investment_in_Myanmar.
  • 6. Offshoretechnology.com. 2012. “Spotlight: Myanmar’s controversial oil and gas industry.” Accessed 21 June 2015. http://www.offshore-technology.com/features/featurespotlight-myanmar-controversial-oil-gas-industry-abuse/.
  • 7. Soto-Viruet, Yadira and Yolanda Fong-Sam. 2011. “2011 Minerals Yearbook: the Mineral Industry of Cambodia.” In 2011 Minerals Handbook, Cambodia, Advance Release, edited by United States Geological Survey, 8.1-8.4. Accessed 21 June 2014. http://minerals.usgs.gov/minerals/pubs/country/2011/myb3-2011-cb.pdf.
  • 8. C. Reichl, M. Schatz, G. Zsak. World Mining Congress. “World Mining Data. Volume 31: Minerals production, 2016.” Accessed 27 April 2016. http://www.wmc.org.pl/sites/default/files/WMD2016.pdf
  • 9. Energy Information Administration. 2012. “Country Analysis Briefs, Vietnam.” Accessed 21 June 2015. http://www.iberglobal.com/files/vietnam_eia.pdf.
  • 10. Daiss, Tim. 2013. “Running Out of Gas: Thailand’s Growing Energy Dilemma.” Energy Tribune, 22 March. Accessed 21 June 2015. http://www.energytribune.com/75236/running-out-of-gas-thailands-growing-energy-dilemma#sthash.UhFzbsoB.3ypJCAu2.dpbs.
  • 11. The UN Declaration on the Rights of Indigenous Persons (UNDRIP) requires “free, prior and informed consent” from indigenous peoples, as well as fair compensation, before they can be relocated from their land. All five Lower Mekong nations supported adoption of the UNDRIP.
  • 12.  Rodolfo Stavenhagen cited in Anongos, Abigail, Dmitry Berezhkov, Sarimin J. Boengkih, Julie Cavanaugh-Bill, Asier Martínez de Bringas, Robert Goodland, Stuart Kirsch, Roger Moody, Geoff Nettleton, Legborsi Saro Pyagbara and Brian Wyatt. 2012. Pitfalls and Pipelines, Indigenous Peoples and Extractive Industries. Philippines, Denmark, London: Tebtebba Foundation, International Work Group for Indigenous Affairs, Indigenous Peoples Links, 3. Accessed 22 June 2015. http://www.iwgia.org/iwgia_files_publications_files/0596_Pitfalls_and_Pipelines__Indigenous_peoples_and_extractive_industries.pdf. 
  • 13. “The UN Declaration was adopted in 2007 by a majority of 143 states in favour, 4 votes against (Australia, Canada, New Zealand and the United States) and 11 abstentions (Azerbaijan, Bangladesh, Bhutan, Burundi, Colombia, Georgia, Kenya, Nigeria, Russian Federation, Samoa and Ukraine).” United Nations Office of the High Commissioner for Human Rights. 2007. “Declaration on the Rights of Indigenous Peoples.” Accessed 22 June 2015. http://www.ohchr.org/EN/Issues/IPeoples/Pages/Declaration.aspx.
  • 14.  USAID. 2015. “Mekong Governments, Civil Society, Reach Agreement on Environmental Impact Assessment Agenda.” Accessed 22 June 2015. http://www.usaid.gov/asia-regional/press-releases/may-15-2015-mekong-governments-civil-society-reach-agreement. 
  • 15. USAID and RDMA. “Cambodia Consults Private Sector on Draft Environmental Impact Assessment Law.” Accessed 22 June 2015. http://lowermekong.org/news/cambodia-consults-private-sector-draft-environmental-impact-assessment-law.
  • 16. International Monetary Fund. 2012. Guide on Resource Revenue Transparency. Washington DC: IMF, 2. Accessed 21 June 2012. https://www.imf.org/external/np/pp/2007/eng/101907g.pdf.
  • 17. Extractive Industries Transparency Initiative. 2014. “Myanmar Admitted as EITI Candidate.” Accessed 22 June 2015. https://eiti.org/news/myanmar-admitted-eiti-candidate.
  • 18. 2013. “VN Pledges to Adopt Global Mining Standard.” Viet Nam News, 9 October. Accessed 22 June 2015. http://vietnamnews.vn/economy/245980/vn-pledges-to-adopt-global-mining-standard.html.
  • 19. Institute for Essential Services Reform. 2014. The Framework for Extractive Industries Governance in ASEAN, First Edition. Jakarta: IESR. Accessed 22 June 2015. http://www.resourcegovernance.org/sites/default/files/FrameworkExtractiveIndustriesGov_20141202.pdf. View on Open Development Datahub
  • 20. PanNature. 2014. “Launching ‘The framework for extractive industries governance in ASEAN.’” Accessed 22 June 2015. http://www.nature.org.vn/en/2014/12/launching-the-framework-for-extractive-industries-governance-in-asean/.
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