Surprise growth from mining industry

According to IDEA's latest Economic Trends, Mining and Quarrying, which the government has identified to be one of the major growth areas for 2006 and is expected to present a "new wave of prosperity" to the country after Information Technology, survived the year 2005 on its favor. Early in the previous year, the Supreme Court has judged with finality the constitutionality of the Mining Act of 1995, ending the long battle concerning the rights of foreign investors to wholly own mining firms in the country, among others.

With that, the government is doubly focusing on the industry to ensure its full revitalization, identifying 23 priority mining projects and expects these to go on-stream until 2010. The legislative developments in the mining industry has likewise sparked renewed interest in the part of foreign investors, and about $2.5 billion worth of investments are expected to enter the country.

Likewise, per same report, the growth of the mining industry in 2005, from 2.7% in 2004 to 9.7% in 2005, can be traced to the improved production of Nickel and Crude Oil for the most parts of the year. The increase in the global prices for minerals such as copper and gold also assisted the growth of the mining industry. Local production of crude oil was a welcome alternative to consumers in the face of the continued hike in oil prices, which reached its peak during the months of September and October. Among the four quarters of the year, the last three months of 2005 recorded the highest growth of 24.8%, the highest since the second quarter of 2003, when the industry's Gross Value Added hit 26.8%. The surprising growth can be attributed to the performance of the Other Non-Metallics sector, which is mainly comprised of Coal. Production had been pushed by improving coal prices in the market, the demand from heavy-energy users such as China, as well as the fact that coal has been tapped as an alternative energy source due to the increasing costs associated with crude oil and natural gas.

Furthermore, according to Dr. Cayetano W. Paderanga Jr., chairman of IDEA Inc. and a professor from the UP School of Economics, the potential of the mining industry may not be fully utilized to its maximum capability for as long as the laws governing it induce confusion among investors. One must remember that there are three major laws directly affecting the industry - The Mining Act of 1995, the Indigenous Peoples Rights Act and the People's Small-scale Mining Act of 1991 - and which do not, at times, run in complement with one another. Together with the revitalization efforts of the government, there is a need to iron out the differences among these three laws, or perhaps to come up with a single legal mandate, if the Philippines is to push economic growth with the mining industry at its forefront.

Editor's Note: Mr. Ed F. Limtingco, is the VisMin Manager of CIBI Information, Inc., a business information and receivables management company. He can be reached at 0917-7220521 or at [email protected]