Jumpstarting our economies by building resilient mining and construction industries post-Covid

The current COVID-19 pandemic has severely affected the global economy, a situation that is likely to persist in the long term unless strategic long-term industrial policies are developed. Coronavirus has infected millions worldwide, killing many and creating a global health crisis, which in turn is causing a severe economic crisis across the globe. The immediate impact of the crisis is loss of life, job losses, and trillions of dollars of lost production, leading to deep recessions in most countries. However, the effects of the pandemic on economies are likely to persist in the short, medium, and long term, affecting specific-industry trends and thus changing the landscape of some economic sectors. Therefore, it is important that countries and their financial partners collaborate to build resiliency in their economic backbone by promoting competitive industries. That is why, at the Islamic Development Bank, we are launching global reports on building resiliency of key industries of our 57 member countries.

Since assuming tenure at the Islamic Development Bank (IsDB), I established a 5-year President’s program (P5P) which puts an emphasis on strengthening the competitiveness of IsDB member countries in strategic industries through public investments and private resource mobilisation. The program puts forward IsDB’s new approach of doing business; an approach that focuses on driving development, growth, and innovation together promoting member countries’ core, competitive industries such as mining and construction. To better assist our member countries and lay out a path for developing these industries, IsDB is launching a report on the future of the mining and construction industries. 

This report is timely. Under the current COVID-19 global pandemic, understanding what shapes the future of these industries and the value chains within them is essential in rebuilding and introducing resiliency in them. This understanding is especially important when mining and construction industries are key drivers for economic growth for many of our member countries. The mining and construction sectors are fundamental to many IsDB economies. Adopting a forward-looking industrial policy can enable member countries to capture more value from mining and construction through higher revenue, more diversified economy, and an increased number of skilled jobs

The IsDB report answers the following questions: how will the industries look like with the global pandemic?  What is the current standing of IsDB member countries and how ready are they for the industries’ future? How to unlock the potential of IsDB member countries in a highly volatile world? To answer these questions, the report examines key future trends that will shape the future of the industries, which include but not limited to technological, environmental, and demographic trends. 

Current and impending innovative technologies will disrupt the path of the mining and construction industries. The mining of the future will be smart with the advent of advanced analytics and Internet of Things (IoT) leading to more automation and labor-augmented technologies, which will lead countries to move from extraction-only activities to high value-added processing activities. 3D printing & modular construction and building information modelling with enhanced digital connectivity will substantially raise productivity in the construction sector, which will have significant positive impact on housing affordability.

However, for our member countries to adopt forward-looking industrial policies under the context of the important trends I highlighted, we must understand the current standing of IsDB member countries, and how ready they are to adapt and to build resiliency for the future. Currently, IsDB member countries hold the vast majority of the world mineral reserves, an important share of which is still untapped due to several economic and technical constraints, indicating there is significant potential to increase production. More importantly, many of IsDB member countries focus mainly on extraction, so the potential to unlock additional value by expanding into processing and even manufacturing is significant. 

The report answers the last question of how to unlock IsDB member countries’ potential under a volatile world by providing key recommendations centred on building resiliency value chains.  Given the energy intensity of both mining and construction industries, and environmental sustainability concerns, IsDB recommends in the report that IsDB member countries heavily and strategically invest in cost-effective and renewable energy generation, especially when many of them already display great potential in solar and hydro renewables. IsDB member countries can succeed in these investments by taking firm steps in becoming early adopters or even innovation leaders in the new technologies and processes that generate energy-efficient solutions. The report highlights the new technologies at the frontier that are providing solutions to the mentioned issues. However, for IsDB member countries to be successful in developing resilient industries, major investments and proper strategies are needed, which requires collaboration with key partners such as other countries, IsDB, and other private sector organisations. 

For example, a strategic collaboration in the area of electric vehicles between Indonesia and Guinea with potentially another member country with strong automotive production base can be very fruitful. Electric vehicles require key minerals such as nickel for batteries, copper for wires and motor windings, as well as aluminum for structural elements. Aluminum share of the electric vehicle market is set to rise from around 30 to 55 percent while demand for nickel is likely to grow as it forms a core component of the battery. As demand for electric vehicles booms, especially with the sharing economy becoming increasingly important, countries rich with key electric vehicle minerals such as Guinea (aluminum), Indonesia (nickel, copper) and Morocco (copper) can expand into processing, increasing value-add. More importantly, taking advantage of these complementarities and with the assistance of IsDB, these countries can establish a collaboration platform to enter the electric vehicle market.

Therefore, the report provides not only key insights of current and future trajectory of the mining and construction industries in IsDB member countries, but it also highlights strategic opportunities for governments, investors and other development organisations to invest, finance, and collaborate for the development of these industries. As such, the report provides a vision and a path forward where key interventions are identified to address important issues and provide forward-looking solutions for the industries. New collaboration models will help share risk and unlock growth potential. Unlocking private investment will require fair risk sharing in large-scale projects. Finally, collaboration between IsDB member countries can provide opportunities for complementarities and promote large investments benefiting all parties.