6. Security of Resource Supply and the Obsolescing Bargain

Policy responses of governments across the Asia-Pacific Region to the security of supply problem amount to a new form of resource nationalism. Resource nationalist policies transfer resource rents, assets, skills, and technology to the government at the expense of mining companies. In the coming years, governments will be under increasing pressure to introduce policies that nationalise mineral and energy supplies. This will occur as resource (material) intensity increases and reserves decline. My argument is that Vernon’s obsolescing bargain model needs to be modified to take into account the security of supply issues facing host governments around the Asia-Pacific Region. This is a novel interpretation of the way resource nationalism is understood. Consequently, I modify the Vernon’s model to reflect recent policy responses to the potential shortfall in resource supply in the Region. I begin by considering how these policies influence the bargaining power of companies and host governments in mining projects. Vernon’s model is a useful tool for predicting and explaining future resource nationalist policies brought about by the growing gap between mineral and energy production and consumption in the Region. In response to this problem, I suggest that industry clusters may reduce the likelihood of resource nationalism affecting mining projects. This is something that has not, as yet, been trialled as a possible solution to resource nationalism in the region.