The Case for Domestic Value Addition and Economic Diversification in Critical Mineral-Rich Developing Countries

Abstract This chapter examines the challenges faced by many developing countries with significant reserves of minerals critical for the energy transition, such as cobalt, copper, graphite, lithium, and nickel. The increasing demand for these minerals risks perpetuating the dependence of developing countries on exporting raw materials. The chapter discusses the structural challenges of commodity dependence, which keeps countries exposed to market volatility. It provides an in-depth analysis of trade flows for selected critical energy transition minerals, highlighting the significant market concentration in both export and import markets, with a few countries dominating the different stages of the value chain, from extraction and processing to manufacturing. This concentration increases risks, including supply chain disruptions and price volatility. The chapter emphasizes the urgency of moving away from raw material exports through local value addition and promoting diversification in upstream, midstream, and downstream sectors. In this regard, the chapter advocates for a comprehensive approach, including supportive policies, capacity building, environmental sustainability, regional cooperation, public-private partnerships, and multi-stakeholder engagement. This strategy can help developing countries create more resilient economies and contribute to and benefit from the energy transition.