The benefits of mining

In this fourth of a series of mining columns, I discuss the economics of mining. For this discussion, I rely again on the policy brief — Is there a future for mining in the Philippines?”— and on a paper that my colleague economist Esmyra Javier wrote for the Ateneo School of Government entitled “Hard Choices: A Resource and Environmental Economics Approach to Mining in the Philippines”.

Mining operations bring jobs and infuse money into the local economy, and the mining sector contributes to economic growth in general. Even so, is any positive number in terms of job generation and economic growth always a good thing? How much incentive does the government give to the mining sector, which should be deducted from the net benefits to the country and local people? How much more (or less) can the government get if it considers alternative uses of the land? In other words, are Filipinos (as a people) really better off with mining, and is the government getting the best deal for its people? These are tough questions to answer due to the lack of data and a framework to analyze benefits as a whole. But there are known facts that can help in this analysis.

For example, we have an estimate of the contribution of mining sector to employment generation. According to the Mines and Geosciences Bureau (MGB), the mining (and quarrying) sector’s contribution to national total employment has always been below 1 percent (1%). Recent data has shown that it has been 0.5% since 2008 until 2010. So far, for the first half of 2011, contribution has been reported as 0.6% (in contrast to agriculture at 33% in 2011). All over the world, extractive mining is known as a low- employment generating activity. The Tampakan project, in South Cotabato, with expected investments of $5.9 billion, will provide only 2,000 permanent jobs.

At the macro level, according to government figures, the contribution of mining to GDP has remained in the single digits. As of 2010, it only contributed 1.0%, compared to the agricultural sector’s contribution of 12% in 2010. As for its contribution to total exports, export of minerals and mineral products has averaged 4.5% in the last four years and reporting 4.3% for the first half of 2011. Total exports of non-metallic minerals’ share are even lower, hovering around 0.4% for the past 4 years compared to agriculture at 8% for 2011. The manufacturing and service sector has always been the main driver of economic growth for the country comprising of over 50% of GDP.

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