If a foreign company is allowed to exploit our mineral resources, it becomes their owner, while our state only receives mining royalties, which are among the lowest in Europe, pointed out Dejan Šoškić, professor at the Faculty of Economics and former governor of the National Bank of Serbia, in his text for FoNet. He supported the negative stance of experts at the Serbian Academy of Sciences and Arts (SANU) on the Jadar project.
The full version of Professor Šoškić’s editorial reads:
“In any economic project, the so-called net economic effects and the so-called negative externalities (mostly environmental effects) are crucial. First, about the economic consequences. Net economic effects answer the question of how much benefit a given project provides, minus the so-called opportunity cost, i.e., how much we miss out on other economic activities and the benefits that come from them by potentially realizing a given project.
How many new jobs are created, and how many ‘old jobs’ are lost? How much new budget revenue is generated, and how much ‘old’ budget revenue is lost? Finally, how much new GDP is achieved, and how much ‘old GDP’ is lost?
Thus, attention in assessing the effects of a project must be focused on net economic consequences. To assess the net economic effects of an investment project in exploiting the natural wealth of a country, the key question is: who becomes the owner of the extracted mineral wealth? If a foreign company is allowed to exploit our mineral resources, it becomes their owner, while our state only receives a mining royalty (which is a few percent of the extracted value, and in Serbia, the mining royalty is among the lowest in Europe).
In such a scenario, the vast majority of the new value remains with the foreign company, which doesn’t even have to pay taxes on profit to our country if it transfers the profit to its other legal entities abroad where tax conditions are more favorable (which multinational companies often do).
If this happens, i.e., if the profit is ‘transferred’ abroad, then the positive impact of such an investment on GDP will be smaller (potentially even nonexistent), because, let’s recall, the GDP of a country is the sum of gross added value increased by taxes and decreased by subsidies within one country. So, if a multinational company ‘transfers’ newly created value abroad, there is no direct positive effect on the country’s GDP.
When discussing large investments brought by a foreign company to exploit the natural wealth of our state, it should be noted that the majority of these investments are usually intended for technology that is predominantly imported from abroad. A portion of these investments will generate short-term additional revenue for the domestic construction industry (and its use of domestic cement, sand, etc., will have a short-term positive effect on domestic economic activity) while the necessary facilities are built, and one portion will generate one-time revenue for land sellers. The key question is: what happens afterward?
Guarantees for building battery factories, cars, and something else are hardly something to discuss because a mining company usually cannot influence the business policy of companies that build cars or batteries (unless they are part of the same conglomerate, which is not the case here).
Elon Musk didn’t need a mine to build a car or battery factory in California. Whoever wants to build a car or battery factory can do so now in Serbia without lithium mining in our country, but that is not being planned.
On the other hand, if a domestic state company were to exploit the natural wealth of our state, the situation could be different. Then the total value of the extracted raw materials (not just the negligible mining royalty) would remain with our state. The state, as the owner of significant mineral resources, could then attract foreign companies to open battery and car factories, with more favorable access to the necessary mineral resources. It is not surprising that wealthy Norway made a wise decision long ago to entrust the exploitation of its mineral wealth (oil and gas in the North Sea) to a state company, which invests its profits long-term for the benefit of Norway’s pension fund and partly transfers them to the budget for the benefit of all Norwegian citizens.
In Serbia, however, this is not being proposed. What is being proposed is handing over the mineral wealth of our state to a foreign company with a very controversial business history.
The second and very important question in assessing the net economic effects of this project is how much agriculture and tourism, which currently take place in that area and could continue much longer than the active exploitation of mineral wealth, are lost due to such a project?
Perhaps with additional investments and incentives, more could be achieved in that area than what is currently gained from agriculture and tourism. This is also a factor that needs to be considered.
Finally, environmental consequences (negative externalities). After the publication of the proceedings from the Serbian Academy of Sciences and Arts conference two years ago, titled ‘The Jadar Project – What is Known?’ and the conclusions of this conference, where the most eminent experts of our country predominantly expressed a negative stance on the realization of this project, this issue is closed for me.
Only a new independent scientific conference or independent scientific papers on this topic, or a specific positive ecological example of exploitation with the same technology and the same mineral wealth at another location in the world, could reopen this issue.
Until then, I think it is wise to stick to the advice of our most knowledgeable people in this field, published by the Serbian Academy of Sciences and Arts,” Professor Šoškić concludes at the end of his editorial.
Source :Fonet
