Export Bans - Indonesia and Zimbabwe introduced new export restrictions

Two good examples for your Theme 4 macro notes! A growing number of countries rich in natural resources that the rest of the world needs are introducing export restrictions of raw, unprocessed extracted materials.

Indonesia has announced a ban on exports of bauxite, as part of a strategy to develop a domestic mineral refining and processing industry. The ban on exports of bauxite, the world's primary source of aluminium, will take effect in June 2023.

In a similar move, Zimbabwe has announced a ban on export of lithium which is essential for making electric car batteries. Zimbabwe holds the biggest lithium reserves in Africa and is banning exports of unprocessed lithium in a bid to develop an industry around this metal, which is critical to the energy transition.

Once again the main motive is to encourage inward investment at later stages of the supply chain – including manufacturing electric batteries - so that Zimbabwe can extract more of the resource rents from their reserves of lithium and invest in the wider economy.

Despite the hyper-inflation that has dogged the economy, they have ambition to become an upper middle-income country. Key to this will be developing more complex productive capabilities that extend beyond extractive sectors.

An export ban is designed to change the incentives for processing firms to relocate so that resource-rich nations can more of the value-added in - for example - the manufacturing of electric batteries. Whether or not these nations have the energy infrastructure, human capital and other inputs required to grow manufacturing capacity is open to question. Do export bans work in the long run?