Economic Diversification in Green Mineral Economies

Abstract The transition to green economies is increasing demand for critical minerals, such as lithium, cobalt and rare earths, creating new opportunities for developing country exporters. This paper draws on the experience of mineral exporters to offer some lessons on policies for economic diversification, a common objective of countries seeking more stable, sustainable and equitable growth. Not all have the same opportunities to diversify, but experience suggests some general principles. Countries need sound economy-wide policies—sustain macroeconomic stability in the face of commodity market cycles; strengthen their human capital base and seek to improve the business climate and reduce costs for all sectors, including through infrastructure investment. Selective policies to boost particular sectors, including downstream processing, should be undertaken with caution; screened for economic and social impact and financial viability and with adequate allowance for downside risk. Not all countries with rich mineral reserves have comparative advantage in processing.