Mining can help widen PH economic base, says CMP

Addressing criticisms that the mining industry contributes little to the economy, a top official of the Chamber of Mines of the Philippines said the sector pumped capital investments into the economy that helped curb poverty.

Nelia C. Halcon, executive vice president of the Chamber of Mines of the Philippines, said via e-mail that responsible mining could widen the country’s economic base and be able to maximize mining’s “tremendous potential to reduce poverty.” This was in reaction to a government report that said “mining contributes little to the economy.

Investor interest surged when the government shifted its policy from mere tolerance to mining investment promotion.

“The period before the Beijing Olympics was significant for the industry because China imported from the Philippines almost all of its nickel and iron requirements at extremely high prices,” Halcon said.

The mining industry’s share in the country’s gross domestic product, or GDP (a measure of economic growth), almost doubled from 1.2 percent in 2005 to 2.26 percent in 2010, Halcon said.

“Mineral exports made a twofold increase in two years, from $1.8 billion in 2005 to $2.5 billion in 2008 on the back of a bullish market,” she said.

Exports hit $1.9 billion in 2010 due to the impacts of the global financial crisis and the decline in nickel prices. To this, Halcon said more investments would be generated if more mining projects were pursued.

Halcon noted that mining could not be expected to contribute more than 8 percent to 10 percent of GDP simply because the product was raw or semi-processed and processing was not yet viable for Philippines-based miners.

Also, she said the number of operating mines declined in the 1990s to the early 2000. Thus, from the 20 percent contribution to export earnings recorded in the 1980s, export receipts went down to only 2 percent in 2003 with, at most, seven metallic mines operating—down from 45 operating mines during the ’70s and ’80s.

“Cumulative investments from 2005 to 2010 reached $3.69 billion. Perhaps, when major projects in gold, nickel and copper are pursued, the contribution of the industry could easily increase to about 5 percent of GDP,” Halcon said.

She noted, however, that the virtually unregulated small-scale mining sector and the many deterrents to mining (uncertainty on the Mining Act of 1995 being resolved only in 2005, contrasting national and local government mining policies, and so on) were holding back developments in the sector.

The contribution of gold mining should have benefited the government more if small-scale miners, which account for more than 60 percent of the country’s total gold production, pay at least the excise tax of 2 percent of the gross value of gold sold to the Bangko Sentral ng Pilipinas.

“In 2010, the government lost almost P1 billion in revenue from this mineral commodity because of the big loophole in tax payments from gold-producing small-scale miners. This virtually unregulated sector works in unsafe condition, unmindful of their negative impacts on the environment because of the mercury they use to extract gold. Indeed, we should not sacrifice sustainability and our children’s future with unsafe and irresponsible mining operations,” Halcon said.