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August 2, 2013

Conflict minerals trade in India

There is an opportunity for India to build a governance structure that can help end the trade in blood minerals and also protect its long-term business interests and indicate its legitimacy as a responsible state. 

In November 2010 the district court of Surat convicted two men, Robai Hussain of Guyana and Yusuf Ossely of Lebanon to four years in jail for the trade of conflict diamonds. Hailed as an important step in improving India’s legitimacy in the fight against the blood diamond trade, today the judgment unfortunately remains a footnote in the otherwise thriving industry. While the Indian government continues to be embarrassed by its inability to curb the trade of blood diamonds, the country now faces a new taint on one of its most promising industries: the mining and usage of conflict minerals such as Coltan and tantalite in electronic devices. As the Indian government looks to navigate the growing international effort to end the mining of conflict minerals it should look to the past failures of the Kimberley Process and the country’s own institutional failures in combatting the trade of conflict diamonds. In doing so the country may yet have a chance to take advantage of a unique opportunity to remove a stain from one of its most important industries and rebuild international legitimacy.

Conflict

Failures of the Kimberley Process and the Indian government

The Kimberley Process (KP), established in 2003, is a certification scheme that seeks to prevent conflict diamonds from entering the market. India, a founding member, has supported the organisation for a decade in an effort to stop the trade. Unfortunately a number of Kimberley supporters and founders have accused the KP of suffering from a number of institutional barriers that have stifled its efficacy including ‘consensus’ decision-making that requires unanimity, ill-defined sanctions requirements, loose monitoring mechanisms, and operational disorganisation. At the heart of these problems, unfortunately, is often the recalcitrance of states locked deeply into political struggles for power and wealth.

The failure of this concerted international effort manifests itself no more clearly than in the city of Surat. Processing 92 percent of the world’s stones, nearly half a million workers frequently face unsafe work conditions as they process the flow of diamonds that have bypassed the KP certification scheme. The Indian government, meanwhile, struggles to make progress on the issue. Instead private organisations such as the Diamond Development Initiative (DDI) and the Responsible Jewelers Council, formed by partnerships between civil society and private sector companies, and now supported by a number of nations, have been created to succeed where the KP failed. As many countries in the G7 who welcomed the creation of the DDI at the 2007 summit continue to combat the trade of conflict diamonds, India is left behind.

Conflict minerals

Told in short and surface remarks, the brushstrokes of the story appear much the same as they did in the late 1990s when organisations such as Global Witness and Partnership Africa Canada were leading the charge against the trade of diamonds mined in conflict zones. Myriad boats arrive from the shores of Arabic and African nations, transactions are done in cash and with no questions asked, the diamonds are processed in with clean ones and afterwards shipped off to other manufacturers or retailers down the supply chain, ultimately ending up in stores as polished jewelry and, frequently, certified conflict-free. While this story encapsulates much of the conflict mineral trade it fails to engage with both the scope of our usage of the minerals in society today as well as the breadth of the industry producing and processing it.

Coltan is the industrial term for columbite tantalite, a metallic ore. Because of its high impact strength and unique ability to conduct heat and electricity, it is sought after as a material in electronic capacitors. Such capacitors power many of the devices that have become ubiquitous in our daily lives such as computers, mobile phones, DVD players, and video game systems. Manufacturers and retailers such as Nokia, Motorola, Compaq, Dell, IBM, Ericsson and Sony are among the major companies that produce goods with Coltan, often with India acting as the middleman between the companies and the conflict zones in which the mineral originates.

The comparative size of the electronic industry to that of the diamond industry also cannot be overlooked. While India’s diamond industry is the fastest growing in the world, turning over some $8bn per year as of 2007, the electronic industry comes in at nearly 8 times that size, at $65bn. While this remains a fraction of the global industry, constituting only 3.5 percent, this should be no comfort for a nation that is adding 2 million cell phone users a month. As India grows so too will its collusion in a supply chain that is directly fuelling internal conflicts in the Democratic Republic of Congo, putting workers into forced labour conditions tantamount to slavery, and destroying the surrounding ecosystem.

Employing lessons of the past

Given the failures both at home and abroad in stopping the flow of conflict diamonds the government must seek new and innovative ways to join the international effort to stop the flow of conflict Coltan. India possesses a number of potential tools for improving its foreign affairs policies in this field and should first look westwards at the recently implemented Dodd-Frank Act in the United States. Though the Act has sparked a firestorm of controversy – its critics accusing it of asphyxiating the clean mineral trade in the DRC and thus devastating the livelihood of innumerable artisanal miners – India should use it as a prototype for the type of legislation that the country needs in order to engage with its mineral trade.

India should also work with its foreign partners as well as international private sector actors to work towards determining whether or not the minerals they are using are coming from conflict zones. Thwarting smaller actors that would seek to bypass any sort of regulation, as India has witnessed in its fight against conflict diamonds, will be no easy task. The government should consider incentivising its manufacturers to trade in clean diamonds, possibly through economic means such as tax breaks, subsidies, or guaranteed contracts. Corporate Social Responsibility policy instruments of this kind have been widely adopted in the West but are by no means new to India either. Recently the government passed the Companies Bill, an overhaul of India’s antiquated private sector governance, with a mandate that companies having a net worth of Rs 500 crore or turnover of Rs 1000 crore must spend 2 percent of their net profit on CSR activities. The Bill serves as an excellent precedent for the kind of measures India would have the power to adopt in looking to engage with the private sector in the conflict mineral trade. With proper enforcement and monitoring incentivising instruments could help many Indian businesses to work with multi-national corporations without having to deal in cheap stones from conflict areas.

Though India is well within its means to take the first steps in ending the conflict mineral trade, working with partner nations will prove invaluable. Many western countries such as the United States, Canada, and Belgium have taken an interest in the subject and would be powerful allies in incentivising companies that use Coltan to take action. That a global problem requires a global response is nothing new to India but the issue remains a unique opportunity for the country to repair the legitimacy it lost, and continues to lose, from its failures in engaging with the conflict diamond trade.

A founding member of the Kimberly Process, India has watched the organisation falter over the last decade and is well placed to build on the lessons of those failures were it to help construct a new international organisation. Combined with efforts that serve artisanal miners and those who are mining minerals cleanly in countries whose trade is tainted by violence there may still be hope for a certification scheme. Regardless of method, however, it is clear that only a concerted international effort will be able to properly implement changes to a global supply chain that is witness to conflict in the DRC and increasing violence in countries such as Venezuela and Colombia. For India, at a time when the institutional architecture of the world is shifting to include the so-called BRICS nations, there is an opportunity for the country to build a governance structure that can not only help end the trade in blood minerals but also protect its long-term business interests and indicate its legitimacy as a responsible state.

Photo: Kim Alanis


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