Finland takes top spot for investment attractiveness: Fraser Institute

The following is an edited release by the Fraser Institute on the publication of its 2017 Annual Survey of Mining and Exploration Companies by Ashley Stedman and Kenneth P. Green. For more information, visit www.fraserinstitute.org.

This survey is an attempt to assess how mineral endowments and public policy factors such as taxation and regulatory uncertainty affect exploration investment. The survey was circulated electronically to 2,700 individuals between Aug. 22 and Nov. 10, 2017. Survey responses have been tallied to rank provinces, states and countries according to the extent that public policy factors encourage or discourage mining investment.

We received 360 responses for the survey, providing enough data to evaluate 91 jurisdictions. By way of comparison, 104 jurisdictions were evaluated in 2016, 109 in 2015, 122 in 2014 and 112 in 2013. The number of jurisdictions that can be included in the study tends to wax and wane as the mining sector grows or shrinks due to commodity prices and sectoral factors.

Investment Attractiveness Index

An overall Investment Attractiveness Index combines the Best Practices Mineral Potential Index, which rates regions based on their geologic attractiveness, and the Policy Perception Index, a composite index that measures the effects of government policy on attitudes toward exploration investment.

While it is useful to measure the attractiveness of a jurisdiction based on policy factors such as onerous regulations, taxation levels, the quality of infrastructure and the other policy-related questions that respondents answered, the Policy Perception Index alone does not recognize the fact that investment decisions are often sizably based on the pure mineral potential of a jurisdiction. Indeed, as discussed below, respondents consistently indicate that 40% of their investment decision is determined by policy factors.

The Top 10

The top jurisdiction in the world for investment based on the Investment Attractiveness Index is Finland, which moved up from fifth place in 2016. Saskatchewan experienced a slight drop in its score in 2017, so dropped into second place after ranking first the year before. Nevada moved up from fourth in 2016 to third in 2017. The Republic of Ireland ranked fourth this year, and Western Australia dropped from third in 2016 to fifth in 2017. Rounding out the top 10 are Quebec, Ontario, Chile, Arizona and Alaska.

The bottom

When considering both policy and mineral potential in the Investment Attractiveness Index, Guatemala ranks as the least attractive jurisdiction in the world for investment. This year, Guatemala replaced the Argentine province of Jujuy as the least attractive jurisdiction in the world. Also in the bottom 10 (beginning with the lowest rated) are Kenya, Mendoza, Chubut, Mozambique, Bolivia, Venezuela, Romania, China and Nicaragua.

Policy Perception Index

While geologic and economic considerations are important factors in mineral exploration, a region’s policy climate is also an important investment consideration. The Policy Perception Index (PPI) is a composite index that measures the overall policy attractiveness of the 91 jurisdictions in the survey. The index is composed of survey responses to policy factors that affect investment decisions. Policy factors examined include: uncertainty concerning the administration of current regulations, environmental regulations, regulatory duplication, the legal system and taxation regime; and uncertainty concerning protected areas and disputed land claims, infrastructure, socioeconomic and community development conditions, trade barriers, political stability, labour regulations, quality of the geological database, security, and labour and skills availability.

Top 10 PPI

For the fifth year in a row, the Republic of Ireland had the highest PPI score of 100. Ireland was followed by Finland in second, which moved up from fourth the year before. Along with Ireland and Finland the top-10 ranked jurisdictions are Saskatchewan, Sweden, Nevada, Northern Ireland, Michigan, Wyoming, Quebec, and Newfoundland and Labrador.

The bottom PPI

The 10 least attractive investment jurisdictions based on the PPI rankings are (from the lowest rated) Venezuela, Chubut, Zimbabwe, Guatemala, Democratic Republic of the Congo, China, Philippines, Indonesia, Bolivia and Ecuador, all of which were on the same list last year, except Guatemala, DRC, China and Bolivia.