Economic contributions
Our operations can provide a strong base for the economic growth of communities, regions and countries. We focus on ensuring our presence brings sustainable socio-economic benefits to the places where we work.
Our direct economic contribution is made up of the value we add by paying wages, employee benefits, taxes and royalties and our returns to capital (dividend and interest payments and the money we retained for future investment) along with the payments we make to our suppliers.
However, our true economic contribution is far greater once the multiplier effects of our presence in an area are considered. These include the indirect effects of people spending their wages, governments distributing tax and royalty revenues, and neighbouring communities using the infrastructure developed for our operations.
- Direct economic contribution
- Indirect economic contribution
- Community contributions
A company's indirect economic contribution is not easy to measure accurately. It depends on regional factors such as the size, structure and location of the company.
In 2008 we commissioned a study to evaluate the economic impact of our Australian presence. This study determined that the impact of our presence was 2-2.8 times greater than our direct economic contribution in Australia.
The example below illustrates how the economic multiplier effect works. In this example for every US$1 million spent by the company, US$2.5 million of economic activity is generated.
| Direct economic contribution | Indirect economic contribution | Economic multiplier |
|---|---|---|
|
• Our wage and employee benefit payments |
• Our employees and our suppliers' employees spending their wages locally |
|
| US$1 million | US$1.5 million | 2.5 |
The towns of Weipa and Napranum, around our bauxite operation in Cape York, Australia, are good examples of how a growing local economy attracts increased government spending. As Weipa's bauxite operations expanded the local population and local salaries also rose. This led to increased local service delivery and contracting opportunities. A number of local indigenous businesses emerged including tourist operations, earthmoving and cultural heritage management.
The increasing population required enhanced medical services. A new medical precinct, including a hospital, was identified as a key need for the growing community. Rio Tinto committed A$2 million, traditional owners contributed land for the site, and the state and federal governments contributed over A$20 million towards the new hospital. The hospital is an enduring benefit for the local community regardless of changes in the business environment.
