Analysis of Gold Mining Industry in Armenia - Research Paper Example

?Gold Mining Industry in Armenia Table of Contents Table of Contents 2 Introduction 3 2. PESTEL Analysis of Gold Mining Industry in Armenia 3 2 Political Elements 3 2.2. Economic Elements 4 2.3. Social Elements 5 2.4. Technological Elements 6 2.5. Environmental Elements 7 2.5.1. Air Pollution 7 2.5.2. Water Pollution 8 2.5.3. Land Pollution 9 2.6. Legal Elements 10 3. Conclusion 10 References 12 1. Introduction Arguably, a major part of gold along with other minerals is stated to remain undiscovered in Armenia till date (Safirova, 2010). Such forecasting has resulted in greater invasion of the foreign investors in the country with a motive to extract a larger volume of gold. However, critical analysis to the context reveals that such repeat and continuous invasions in Armenian gold industry have resulted in a major consequence of hazardous mining activities (Abrahamyan, 2012). To obtain a better insight of the gold mining advantages and industrial disadvantages of the same, a PESTEL (Political, Economic, Social, Technological, Environmental and Legal) analysis of the country has been considered in this essay. Based on the analysis results, the discussion in this essay further attempt to measure the extent to which, the gold industry can be sustainable. Moreover, the essay also aims to provide rational solutions on the basis of which gold industry is likely to operate in a more sustainable manner. 2. PESTEL Analysis of Gold Mining Industry in Armenia 2.1. Political Elements In order to attract a larger percentage of global investments in gold mining industry, the political system of the country has adopted a comparatively flexible international trade policies and plans with a vision to promote its exports, which acts as the main source of national income for Armenia (CIA, 2013; Stuhlberger, 2012). Although the increased foreign investments in the gold mining industry of Armenia has resulted in its augmented national income prospects, with the inflow of a greater volume of foreign currencies, the country witnesses immense complications in terms of corruption. Furthermore, the currently persisting unfavourable relationship amid governmental bodies and the mining sector investors have also resulted in greater degree of corruption within the national context (Stuhlberger, 2012). In addition to these national issues, the country has also been facing political conflict issues with Azerbaijan and Georgia, which has further affected its potentialities to attract a larger volume of foreign investment in the most sustainable manner for its gold mining industry (Nichol, 2013). It is thus recommendable that a stable and more organised political system must be developed by the responsible governmental bodies in Armenia in order to develop its gold mining industry in a socially responsible manner. 2.2. Economic Elements The economic condition of the country has developed quite rapidly, wherein the contributions made by the gold mining industry can be argued as inevitable. However, the economic crisis situations on a global context have adversely affected the economic stability conditions of the country to a large extent being majorly depended on foreign investments. As a matter of fact, with the shrinking purchasing power of customers in the gold industry, the investment trend also declined, which affected the Armenian economy adversely. However, in the recent years of post-recessionary phase, the increased demand for gold has attracted a large number of foreign investors in Armenia (Business Reporter, 2013; UN, 2012; Chshmarityan, 2005). It is worth mentioning in this context that in order to be favourable towards the development of mining sectors and suffice the increased demand of valuable metals and minerals, the Armenian government levied taxes and regulations at a marginal extent, focusing more on charging royalties on the miners. However, unlike expectations, these tax control measures to facilitate greater independency of investors in the gold mining industry increased complexities in its political environment, further inhibiting its ability to operate efficiently and sustainably. It is particularly owing to the fact that with reduced barriers in the gold mining industry, investors have often been argued to extract the country’s mineral resources unsustainably and thereafter, affecting the national interests of Armenia (Business Reporter, 2013). Considering these lacunas persisting in the economic policy framework of the country, it can be recommended that a more objective oriented economic policies needs to be developed where incentives and penalties must be ensured according to the sustainable practices of the investor companies. Additionally, strict tax regimes must be applied in the industry, with the vision to control monetary inflow in the nation. 2.3. Social Elements The socio-economic conditions of Armenia has been in a stable condition since the year 2000 with better employment rate, increased wages along with effective budget expenditures. Moreover, the development of the private sector, along with the aid of its growing gold mining industry, has facilitated in reducing poverty level within the nation to a substantial extent. The mining sector has undoubtedly assisted the country in developing and surviving through the economic recession to a certain extent. However, an in-depth understanding of the scenario shall reveal that a major proportion of the nation’s labour force tend to be associated with the agricultural and services sectors, having only a minor percentage of local labourers involved in industries, including the gold mining sector. Fundamentally due to privatisation in the gold mining industry, unemployment and poverty can be witnessed within the Armenian backward societies, which have further contributed to the social polarisation of the nation (Stuhlberger, 2012). Thus, it can be argued that the privatisation policies taken by Armenian government has contributed to the social disparity within the nation and hence, lacked in providing a sustainable development to the nation. As a solution, the government needs to ensure better effective intervention of regulatory bodies in assuring greater benefits to the stakeholders of the gold mining industry in Armenia. Additionally, focusing on the technology advancement prospects, the government and industrial players must ensure that literacy rates and employment opportunities are developed keeping parity in the national workforce, which will aid in obtaining greater sustainability for the country. 2.4. Technological Elements Increased numbers of foreign investors in the country has paved the ways to advanced technologies in Armenian gold mining industry. The mining sectors has adopted the information along with communication technologies with the intention of improving the processing and manufacturing system, so that the production of precious metals and minerals can be accomplished in a time efficient and economically beneficial way. Moreover, these technologies have improved the production methods through open-pit mining along with in-plant processing of gold (Movsisyan, 2011). However, from a critical perspective it can be observed that rather than balancing the production quantity and the sustainability needs of the industry, the technology advancements have been principally focused on the extraction of minerals at larger quantities that has further resulted in unsustainable procurement of natural resources in Armenia. Technology misuse or limitations have also resulted in various environmental hazards in the gold mining industry context of the country. Therefore, a certain degree of technological upgradation is demanded in the Armenian gold industry to ensure sustainable management of wastes and more responsible extraction of the mineral based on rigorous research and development strategies. 2.5. Environmental Elements As argued in the above sections, due to privatisation and limited sustainability measures taken by the investor companies in the Armenian gold mining industry in respect to technology, social responsibilities and economic welfare, environmental hazards has also become a major concern area in the current field of industrial operations (Simonyan, 2013; AMCHAM, 2012; Abrahamyan, 2012). The environmental hazards caused due to the lack of sustainable performance of investors in the gold mining industry of Armenia have been discussed in further details below. 2.5.1. Air Pollution In the mining process of gold and also to perform other operations, investors require huge amounts of machineries along with vehicles to support its transport, extraction and processing functions. It is in this process that toxic elements are emitted in the air unfavourably affecting the atmosphere causing pollution (AMCHAM, 2012). In order to overcome these issues, the gold mining industry performers in Armenia should adopt and implement advanced technologies in their operations with the objective of ensuring that production and other operations are executed with minimum emission of toxic and other hazardous gases in the atmosphere. Moreover, the government of the country is also required to develop certain policies and measures to impose a limit on the hazardous gases emission rate of the gold mining industry. To be noted in this regard, in its recent affairs, the government has adopted different measures with the aim of protecting the atmosphere by implementing provisions like impermeable covers, prevention of industrial dust emission and restriction to burning wastes among others. Additionally, the government has introduced ‘e-Atmosphere’ websites with the aim to assist gain better efficiency in measuring the extent of harmful elements emitted from the mining industry are accordingly impose regulatory norms (AMCHAM, 2012). 2.5.2. Water Pollution The gold mining industry in Armenia is also perceived to be adversely affecting the water resources through the dumping of wastes comprising heavy metals and acid solutions and also owing to the fact that modern technology measures require greater amount of water in processing the extracted gold. This particular issue has been imposing a negative impact on the availability of abundant water to suffice the needs of the local habitats. Respectively, water pollutants have affected the nature and the people to a considerable extent, mainly in the areas of vegetation, wildlife, agriculture and other natural conditions (AMCHAM, 2012). The major water pollutants including arsenic, lead along with mercury are dumped by gold mining companies after being used in gold production have also been identified to impose considerable threat to the social health of the nation, by increasing chronic health risks in the mining areas (Petrosyan, 2012). Keeping into account these negative impacts of the expanding gold mining industry in Armenia, the government has initiated different measures on the basis of which the waste materials are directed to be properly drained and managed in a more responsible manner. The government has also implemented ‘National Water Programme’ with the intention of managing water basins in the mining areas of the nation (AMCHAM, 2012). It is further suggestible in this context that in accordance with the implementation, proper controlling measures must also be taken to ensure that these measures are being effectively and responsibly performed by the mining companies. Additionally, the water resources should be filtered essentially, so that clear water is provided to locales, which shall also aid in measuring the effectiveness of the environmental protection strategies applied by the government in respect to the gold mining industry. 2.5.3. Land Pollution The gold mining industry is also identified to cause deforestation at a large extent in the recent decade, owing to its continuous expansion. In this respect, growing deforestation has led to soil erosion and negatively affected the vegetation as well as wildlife of the country simultaneously. To be noted, in search for the undiscovered gold hidden beneath the earth’s surface in Armenia, the continuous expansion of the gold mining industry has intensified the issue of environmental degradation by affecting the availability of natural resources including water reserves, soil, biomasses and the natural vegetation of the mining areas (AMCHAM, 2012). With the intention to overcome this particular issue, the government has developed and implemented forest management plans focusing on reforestation, rendering due significance to natural vegetation protections and development of wildlife (AMCHAM, 2012). However, it is also suggestible in this context that controlling measures to ensure effective implementation of the plans development must be considered on a continuous basis in order to accomplish the determined objectives of more sustainable gold mining operations. 2.6. Legal Elements The Armenian government has been criticised by analysts when considering the performance of the gold mining industry in the recent context as reluctant in the enforcement of strict provisions of taxation and other legal regimes. Imposition of a greater degree of regulatory intervention to the gold mining industry can be presumed as beneficial in assuring a more sustainable attitude amid the investors. In this context, the country has been under the prevalence of corrupt practices that have adversely affected its overall social along with environmental conditions (Movsisyan, 2011). It is suggestible in this context that the Armenian government needs to implement measures that focus on binding the industry players to take sustainable approaches not only concerning environmental sustainability, but also with due significance to economic and social stability of the country. Notably, better association of the political parties with the industry performers will be essential in this regard so as to minimise conflicts when focusing on lower privatisation and greater influence of regulatory regimes in the Armenian gold mining industry. 3. Conclusion Armenia is a major source of gold wherein a considerable proportion of the mineral has been argued to remain undiscovered in Armenia. This particular fact, as argued above, has been able to attract a huge sum of foreign investments in its mining industries. Although such developments have given rise to the economic growth prospects of the company, it has also raised considerable sustainability challenges for the economy, especially in terms of its environmental and social stability. The fundamental limitation of the government in assuring greater sustainability in the gold mining industry can be identified as the applied privatisation methods. Hence, with an in-depth understanding to these sustainability issues, the study suggests that greater regulatory intervention is required in the Armenian gold mining industry with due significance towards enhanced liaison between the government and investor companies in this particular sector. References Abrahamyan, G., 2012. Armenia: Is Gold Mine a Blessing or a Curse? Armenia. [Online] Available at: http://www.eurasianet.org/node/64961 [Accessed November 22, 2013]. 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(2013). Armenia, Azerbaijan, and Georgia: Political Developments and Implications for U.S. Interests. Congressional Research Service. Petrosyan, V., 2012. Influence of Mining Related Activities on Environmental Health in Armenia. College of Health Sciences. [Online] Available at: http://aua.am/wp-content/uploads/2012/12/Blacksmith_presentation_Nov30-2012.pdf [Accessed November 22, 2013]. Safirova, E., 2012. The Mineral industry of Armenia. Publications. [Online] Available at: http://minerals.usgs.gov/minerals/pubs/country/2010/myb3-2010-am.pdf [Accessed November 22, 2013]. Simonyan, S., 2013. Armenia Poisoned by and for Gold. Home. [Online] Available at: http://www.keghart.com/Simonyan-Poisoned [Accessed November 22, 2013]. Stuhlberger, C., 2012. Mining in Armenia. Resources. [Online] Available at: http://www.armeniatree.org/thethreat/resources/2012_Zoi_Environment_Network_Mining_in_Armenia.pdf [Accessed November 22, 2013]. UN, 2012. “RIO+20” National Assessment Report. Documents. [Online] Available at: http://sustainabledevelopment.un.org/content/documents/800Armenia_Report_Final.pdf [Accessed November 22, 2013]. Read More