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Productivity and innovation “First Meeting of the Network of Mining Regions” Productivity and innovation Jane Korinek OECD Trade and Agriculture Directorate Good morning, introduce my self Kick off session

The challenge Firms engaged in extraction seek to drive down costs whilst national governments capture revenues which can leave the local economy not getting much from mining activities Commodities are traded in global markets and are coordinated through global value chains (GVCs) with complex backward and forward linkages that include other sectors such as manufacturing, transport, construction and other services Regions need to understand their role and niche within these value chains Policy challenge for mining regions = how to increase the productivity of the mining sector in the region, and the scope for local value-adding related to it Specificities of mining: location of econ activity determined by geology Challenge of mining regions: capture some of the value added in the mining supply chain, in addition to that provided by the mineral resources, especially since mining is capital intensive and creates few jobs There is greater fragmentation of production in all sectors made possible by lower trade costs and easier communications channels. Production is organized in global value chains with backward and forward linkages between sectors, countries and regions

Potential action areas Policy implications Key issues Potential action areas Regions stuck in an extraction and first stage processing “low value-adding” trap Bottlenecks in regional transport and logistics systems Development and retention of highly specialised skills Lack of information and expertise in local firms to participate in mining supply chain Limited transfer of knowledge and technologies between local firms and higher education institutions   Providing support for local firms to deliver services to mining and extractive operations Working with local mining services firms to expand markets outside the region and into related sectors Long-term planning and investment strategies for regional transport networks Public-private partnerships to deliver infrastructure Improving local and regional education and training systems Strengthening relationships between research and educational facilities and the private sector Key issues for many mining regions are to : develop and retain a highly skilled workforce, equip and advance local firms that can provide services to mining operations, and potentially even export them, and deliver quality infrastructure that will support the economic activity in the region and lower costs of production thereby raising competitiveness.

OECD Trade and Agriculture Directorate Mining offers substantial benefits, in particular procurement of services We know that the mining sector offers substantial potential benefits in terms of procurement, in particular in the procurement of services. Value added in exports. Domestic vs. foreign content. Refers to share of services in value added that goes into the sector, 2009, OECD and BRICs – 17%. (Low compared with sectors such as food products, or the car industry, but still highly significant). [[[ This is in value added terms so about 70% of value added is from the mining sector itself, half of which created by capital investments in the sector (and about ¼ by the ore itself). ]]]] This suggests that there may be room for increasing local procurement in services, or by importing new business processes and know-how in order to increase knowledge transfers and up-skilling. Work programme on services as inputs into the mining sector ; preliminary research suggests that many of these services are first imported, then a greater share is produced domestically ; and finally some countries have managed to export mining services. Ex. Of Australia: 7% of GDP, and 7% of employment is in METS (machinery, equipment, technology and services) for mining. There are different ways in which countries have fostered local suppliers to the extractive industries, some of which we will hear from panel members here. OECD Trade and Agriculture Directorate

In Finland, policies support R&D and foster innovation LCPs targeted development of mining services and capital goods and, in particular, innovation Capacity development was prioritized by hiring foreign experts, training Finnish engineers abroad and “learning-by-doing” Today, Finland is a "solutions" provider Finland has successfully managed to evolve from a raw materials based industry towards a knowledge intensive economy with higher value added. Now, Finland’s mining services and equipment industry far outweighs its mining industry. Finland was a natural-resource based economy for many decades but policy priorities shifted as it aimed to strengthen its position as a world-class supplier of goods and services to the mining sector, with a particular focus on innovation. Capacity development was prioritized, in particular by hiring foreign experts, training Finnish engineers abroad and “learning-by-doing”—i.e., the opposite of local content requirements. Finland also prioritized the role of investment in technology creation, including through state subsidies. The Finnish government favoured a cluster strategy and aligned policies in education, science and technology, industrial and economic development, into a more coherent approach. R&D has been strongly prioritized, including through financial support, and specialized training programmes at universities of applied sciences and technical trade schools have been reinforced. OECD Trade and Agriculture Directorate

One example of innovative means to increase productivity in the mining sector comes from right here in the Norte Grande. Mining is very energy intensive Chile’s roadmap for increased use of solar energy, in particular in its mining sector. Through strengthening its infrastructure and human capital to develop solar technology industry. Created the Open Innovation Platform which contributes to closing the existing information and knowledge gaps between suppliers and demanders of energy solutions and facilitates access to financing to materialize the proposed innovations Achieved through a policy mix of public-private financing for innovation in renewables, large-scale solar infrastructure investments, some by mining firms themselves, and other regulatory design mechanisms. Mechanisms of changing the tendering process and introducing blocks of energy supply which can be supplied, for example, only during the daylight hours, increasing the participation rate in tenders from the renewables sector which was no longer restricted by needing to supply energy continuously. And allowing producers to freely sell the electricity they produce back to the grid. Grid which was created in the Atacama desert. The aim is to have 20% of the energy needs of the mining sector in Chile satisfied by renewable energy by 2020. Salient example of: increasing productivity through lower energy costs, contributing to industrial diversification since energy is a need throughout the economy, as well as increasing demand for local solar energy suppliers, and of course, contributing to reducing emissions.

Theme 2: Productivity and Innovation Session panel Theme 2: Productivity and Innovation Jane Korinek, Trade Policy Analyst OECD Mauro Valdés Raczynski, Director Alta Ley Programme (Chile) Ulises Neri Flores, Director National Hydrocarbons Commission (Mexico) Kristiina Jokelainen, Senior Adviser Regional Council of Lapland (Finland) Juan M. Biset, Undersecretary of Mining Policy, Ministry of Energy and Mining (Argentina) 10 minutes

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