Escaping the "Middle-Income Trap" by Transforming Raw Materials into Technology, Brands, and Added Value

Escaping the mentioned trap by systematically increasing the complexity of these three sectors and transforming raw materials into technology, brands, and added value, is possible.

Touraj Zare, at the first Steel Price Conference on Gold, Silver, and Copper, explained the concept of the "middle-income trap and Iran's situation":

Countries with a per capita income between $1,000 and $12,000, whose growth is unsustainable, fall into the middle-income trap. This trap is not just economic but also structural, mental, and cultural.

Zare referred to the "tree of economic growth" and stated that developing countries pick the fruits from the tree’s lower part (such as production with cheap labor and simple technology), but to reach the higher fruits, they need a "ladder," which is industrial complication and governance. Meanwhile, countries like Hong Kong, Singapore, South Korea, Taiwan, and Poland have managed to escape this trap.

The Managing Director of the Iran Minerals Production and Supply Company, in explaining the strategies for escaping the middle-income trap, presented and identified three key pillars for overcoming this trap:

- Production-based (meaning increasing utilization from minerals and developing downstream industries)

- Complexity of knowledge and team building (meaning training skilled and capable human resources in teamwork, practical training, and linking education with industry)

- Complexity of governance (meaning creating advanced managerial and technological structures to bring the industry to the level of global competition).

Global Modeling and Examples

Zare, regarding the copper referred to Germany in his remarks, highlighting that the country imports $3 billion copper in order to produce knowledge-based products valued $50 billion. He noted that this is while Chile, producing 5 million tons of copper, only earns $23 billion in revenue.

Regarding gold, he pointed to Switzerland, which benefits from $90 billion in added value by importing and processing gold.

The Managing Director of the Iran Minerals Production and Supply Company, regarding the silver mentioned Japan, noting that despite lacking resources, Japan holds an advanced position in the electrical and renewable energy industries.

He emphasized that these examples indicate the importance of technologizing raw materials and creating global brands.

Linking with Future Trends

Zare stated: It is expected that due to the growth of renewable energies and electric vehicles, the global market for copper, gold, and silver, be in a high demand over the next 50 years.

For example, electric cars consume about 4 times more copper than regular cars.

He emphasized: Encouraging investment in the end rings of the value chain, establishing research and development (R&D) centers alongside mines, systematic benchmarking of successful countries, attracting foreign investment in the downstream mineral sectors, empowering human resources, training technological skills, digitalization, and using artificial intelligence, and blockchain to optimize the value chain and create large, world-class mineral brands are recommended.

Zare, by mentioning examples from his experience in the aluminum industry, noted: The added value from technology can increase the price per ton from $3,000 (Iran) to $23,000 (Germany). This gap is due to knowledge, technology, and human resources.