It is very easy to say that our country could benefit from its natural resources and huge revenues from mining could help improve people’s lives in a pandemic.
But this has yet to be proven in the Philippines, where promises of mining bonanzas have often turned into cautionary tales of environmental catastrophes.
President Duterte recently signed Executive Order (EO) 130, lifting an almost decade-old moratorium on the processing of new mining projects.
The Chamber of Mines of the Philippines (COMP) immediately welcomed the new EO: “A major roadblock to the huge potential of the Philippine mining industry to contribute to socioeconomic growth has been removed. We welcome the lifting of the moratorium on new mining projects—in place for nearly nine years—in this time of great national difficulty as a result of the Covid-19 pandemic.”
With the moratorium lifted, the Mines and Geosciences Bureau (MGB) is looking to grant 100 new mining deals that could net P21 billion in the next five years, besides generating 42,000 new jobs in the mining sector.
The mining sector can be a huge boost to economic growth if managed properly. The Philippines is reportedly blessed with $2 trillion of mineral wealth. Because of its huge reserves of natural resources, in particular non-renewable rich mineral deposits and even oil and gas deposits like those found around the waters of Palawan (much coveted by other countries like China), sustainable mining could indeed be one of the top recipients of foreign investments and a main job generator.
But so far only a small cabal has reaped the financial benefits of mining. The rich revenue streams from extractive activities have had no significant impact on the country’s economic development.
Although the Philippines is among the world’s top producers of copper and gold and the leading supplier of nickel ore to China (the world’s biggest metals producer and user), the mining sector makes a relatively small contribution to the national economy—only 0.6 percent share to total GDP, per latest official data.
Mass poverty afflicts many mining communities. For instance, Surigao del Sur and Surigao del Norte are two provinces richly endowed with metallic minerals, such as copper, gold, chromite, cobalt, nickel and lead zinc. They also have an abundance of nonmetallic minerals, like limestone, coal and feldspar, clay diamotite/bentomite and coarse or fine aggregates.
Along with Dinagat Islands, which used to be part of Surigao but now an independent province, Surigao del Sur and Surigao del Norte have hosted mining operations for decades. And yet mining has failed to significantly improve the lives of many Surigaonons.
Often, the people who fail to reap the benefits from their natural resources are the ones left with degraded environments – straining their ability to meet their own basic needs, if not endangering their lives altogether.
We have heard many stories about how the tailings from mines would seep into the soil and kill microorganisms that help crops grow; or how brown water would ooze from mines and reach coral reefs, covering them in sediment and eventually destroying them. How water for irrigating farms has been contaminated, forests denuded, rivers and seas polluted because of mining operations. How people suffered from floods, landslides and health problems, forced at times to leave their homes.
In 2017, President Duterte signed the Tax Reform for Acceleration and Inclusive (TRAIN) Act. Section 48 of the law doubled the excise tax rate on minerals, mineral products, and quarry resources from 2 to 4 percent. But even with this increase and the corporate and royalty taxes mining companies pay, the government can do a much better job of harnessing more mining revenues for development purposes.
It’s time to heed the suggestion by mining engineer Graciano Calanog Jr., who noted, in an article in this page last February, the crucial difference between a country like the Philippines that exports all (26 MMT in 2018) its low-priced raw nickel ores – all to China – and Indonesia, which has 11 processing plants for the raw metals (27 MMT) and exports the high-priced ferronickel. He suggested that lawmakers include a requirement for setting up nickel processing plants (ferro-nickel smelters, etc.) among the policy tweaks in crafting a better fiscal regime for mining, beyond simply relying on royalty fees.
While the Philippines and Indonesia’s 2018 nickel production don’t vary much, the price they fetch is worlds apart, because we send all raw ores to China while they export ferro-nickel. Ferro-nickel is priced at 90 percent of the official price of the London Metal Exchange (LME) while raw nickel ore is generally priced at only 10 percent (or even lower, depending on the grade) of the official LME nickel price, or a price advantage of 9x for Indonesia’s ferro-nickel.
In other countries government’s share in mining profits is anywhere from 50 to 60 percent; imagine how much more revenue can be raised if this government were to do as Indonesia did while tweaking the fiscal regime.
Meanwhile, it must also ensure local communities get their fair share from mineral resources, as well as address long-standing concerns on environmental pollution and compensation for people displaced by mining operations. But costs and compensation cannot all be measured in monetary terms, especially when lives and livelihoods are lost and environmental damage is irreversible.