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| Index > Investor Information > The Philippines > The Mineral Sector |
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According to Philippine Government estimates, the Philippines is endowed with the fifth richest mineral resources in the world. For the most part, these resources remain to be fully tapped. Some US$840 billion (PHP47 trillion) worth of mineral wealth is believed to lie hidden in Philippine ground. This figure is 10 times the country's annual GDP and 15 times its total foreign debt.
Mining is reported to have a multiplier effect of six times. At a potential value added of PHP300 billion (US$5.3 billion) annually, mining can add an incremental economic activity of PHP1.8 trillion ($32.1 billion) or 36 percent of GDP.
Geological structures favouring mineral resources cover nine million hectares or about 30 percent of the country's total land area. At present, less than half a million hectares are under exploration or development. This means that 8.5 million hectares or 94.4 percent of mineralised areas have yet to be developed.
The country is believed to have substantial mineral deposits that include copper, gold, nickel, chromite, limestone and semi precious stones that can be found in the Sierra Madre mountain range in Luzon and in the Mindanao region. In Mindanao, the area from Davao to Butuan is believed to be the richest mineralised area of the country.
Among other areas believed to be rich with gold and copper deposits are Mt. Diwalwal in Compostela Valley in Central Mindanao, Benguet in Northern Luzon and Rapu Rapu island in Bicol. The provinces of Mindoro, Benguet, Zambales, Nueva Vizcaya, Cebu and Leyte also have rich mineral deposits.
In the 1980s, the country was one of the world's five largest mineral exporters, with annual export revenue of US$1.2 billion. The contribution of the mining sector-which still provides direct employment to 112,000 individuals (as of 2003) - has dwindled from a high of 25 percent of total foreign exchange earnings in the 1980s to a mere 1.5 percent in 2003 due to the closure, suspension and scaling down of major mining operations.
The number of active mines in the country has fallen from 58 in 1981 to 27 in 1997 and down to 12 (two large scale mines-Lepanto gold mine and Philex Copper Mine-and 10 medium scale mines) in 2004.
According to the Chamber of Mines, the Philippines could increase its mineral exports from the present $500 million annually to $2.5 billion if the government fully implemented RA 7942.
Improved prices of metals on the world market have pushed up the total value of mineral production. The MGB said the increased demand of China for metals and the volatile political situation in the Middle East, particularly in Iraq, may have triggered the substantial increase in the prices of gold, silver, copper and nickel in the international market.
Amidst the ongoing fiscal and budgetary problems facing the country, the government looks at the mining sector as one of the brighter spots in its development of new revenue collection streams. The Philippine Mineral Exploration Association (PMEA), of which I am President, has estimated that the development of known gold and copper deposits could raise new tax revenues of PHP21 billion (US$382 million) annually.
Another estimate quoted by the Philippine Minerals Development Institute Foundation, Inc. shows that "for the life of the mine, income tax receipts from the mine's foreign exchange earnings would on average amount to US$951 million and excise taxes of US$120 million."
"Government's downstream income would amount to US$246 million from taxes in salaries and wages alone. Opening and operating one world class mine would entail direct foreign investment amounting to a staggering US$740 Million" (PMDIF, 2003).
These amounts can help eradicate the country's fiscal problem and help to alleviate poverty.
At the exploration or development phase alone, the country already feels the positive impact of local and indirect taxes, direct and indirect employment, social infrastructures, environmental improvements and technological developments. Communities adjacent to the site being developed are also expected to directly feel the welfare enhancing impact of new roads, schools, social consultation processes, and an invigorated business environment. This is because the Philippine Mining Act of 1995 mandates mining firms entering an FTAA agreement with the government to allot or make significant contributions to development of the surrounding communities as well as measures to protect the environment.
With the road now clear for the development of a world class Philippines minerals industry, the country is offered a new growth paradigm.
No longer does the Philippines have to follow the Asian export-manufacturing growth model; rather it should be seeking to become a resource-based (minerals and agriculture) supplier to Asia and to the world.
Efforts to jump-start the Philippine mining industry are well underway. Government policies are now directed to removing the stumbling blocks to investment into this sector.
The government has identified some 23 promising mining projects capable of generating $6.2 billion investments and $6.8 billion revenues for a six-year period. Mining is one of the 10 priority areas identified in the economic plan, which offers a more competitive incentives package.
The government's Minerals Action Plan (MAP), which seeks to institute policy and economic reforms to revitalize the mining sector, predicted that once the reforms are in place, mining investments could go as high as US$4.36 billion, with annual potential revenues of US$2.32 billion and direct employment generation of as much as 19,000 workers from identified high-profit mining projects within the next 10 years and with flow-on effects into the local communities that could alleviate poverty in much of the countryside.
At the present time only 1.4 percent of the land area of the Philippines (around 30 million Ha) is covered by mining permits and the government has estimated that a further 9 million Ha is available to provide potential sites for the extraction of metallic minerals. A further 5 million Ha is available for non-metallic minerals.
Despite attractive mineral prospectivity, the Philippines has had great difficulty in realizing its potential in recent years due to a wide range of reasons including court challenges, waste management issues, permitting and other bureaucratic delays, foreign ownership issues, and a lukewarm level of support from government.
The industry, with support from government and community, has worked hard to reinstate the mining industry as a major contributor to national growth and poverty alleviation.
There is still much to do to realize the industry's potential, but the wheels of progress are indeed in motion. A clear trend is emerging in which government, the community, the local industry and foreign investors are working together.
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