South-East Asia Next Focus: Gold Mining

Laos, Mekong river, young woman panning for gold

East Asia in general has untapped gold ores reserve. The most countries needing to tap this opportunity are the deprived South-East Asia.

The two giant neighbors of South-East Asian countries, China and Australia are already the world top two gold producing countries. Australia has an already established gold mining industry that earns its billions of dollars each year. China, on the other hand, saves money from gold imports by producing their own gold.

South-East Asian countries may not have enough capital to fund exploration and mining operations. But they will surely benefit from this new business. Then again, after the recent slump in the gold price will keep these dreams in our heads. Moreover, it might shutdown already operating new mines and exploration projects.

The leaders of South-East Asian countries know the value of these untapped reserves. They are open for foreign mining companies to lend them a hand to take advantage of this newly discovered resource. But they are under pressure from the local communities that don’t see any direct benefits from these companies “taking their gold” and “harming their land”.

Local communities have a point here; the negative impact of mining affects them more directly than the gains of these mining projects. Moreover, the political instability and deprived state these countries are in make their basic and immediate needs more urgent than earnings a decade later, they might not be there to see the benefits.

The local communities experience water pollution resulting from mining operations first hand. Note dear reader that most of these countries population are either farmers or fishermen. Moreover, local communities usually doesn’t benefit from taxes on gold mining, as these taxes are used in developing national capitals and urban areas, rather than rural areas, where gold is being mined. It is understandable why they are angry and protest against establishing gold mines in their land.

However, that’s not the case in every South-East Asian country, Philippines, Indonesia and Myanmar took measures to encourage gold mining companies to come over. Papua New Guinea and Indonesia succeeded in attracting foreign mining companies to operate and fund excavations to find gold. The latter has the largest gold mine in the world, Grasberg, operated by the American Freeport Gold-McMoRan Company while Papua New Guinea succeeded in attracting mining companies mostly from gold mining industry leaders Australia, Canada and the South African Harmony Gold Mining. These countries realized that the economic impact of capital mining company in the area would create job opportunities with decent pay for the local communities. Moreover, they will learn how to make their own national mining companies later. It’s a win-win situation for these emerging economies to boom and prospect.

On the other hand, foreign mining companies face obstacles operating in such new areas. Corruption levels and legalization structure might not suit some of these western-based companies. It is a harsh and risky environment to expand precious capital without having enough guarantees. Moreover, many mining companies failed to convince the public of their social role. But the cheap labor and high project yields might offer exceptional awards for gold companies who are willing take the risk and do it right. It is imperative that companies that do their homework and their math the correct way will get the outstanding rewards.

It is remarkable that a considerable portion of gold demand is for making jewelries. Also, the world top gold consumers are India and China, especially from rural parts of the country. The cultural similarity between South-East Asia and its two titanic neighbors is to be noted. Gold in these countries is an investment and “money”. They might have invented paper money and introduced it to Europe and the rest of the world, but gold is considered the base of government-issued papers they carry. Gold could be sold directly in the local markets with decent profits, and cutting transportation costs. In other words, it could serve the high-Asian demand with lesser expenses on both sides; the suppliers and the consumers, thus.

To sum up, South-East Asian countries might be sitting on a gold mine, but they don’t have an axe to use it. They must co-operate to take this gold out of the ground with western countries, and both will be happy. The west will open new markets in Asia, and South-East Asia will develop their economy. It would be beneficial for both sides of the bargain, but both need to play along nicely.