Bernardo M. Villegas
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Rebalancing Strategy
published: Mar 31, 2017



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Mining As Catalyst Of Industrialization

           The last four years under the present Administration have seen an unfortunate hiatus for the mining industry, which could have been a major catalyst of industrialization.  Advisers close to the President have clouded his vision about the major contribution that the mining industry has made to sustainable development in many countries all over the world, such as Canada, Chile, and Australia.  Myopic views about the tax contribution of the mining sector as well as unfounded fears of a repeat of previous environmental disasters have discouraged both domestic and foreign investors in their desire to partner with the State in making our abundant mineral resources productive for the purpose of inclusive growth.  The Philippine Constitution is very clear about inviting the private sector to help the State in deriving the greatest economic benefits from the natural resources with which the country has been richly endowed.

           In a recent mining conference, I spoke on the topic “Building an Industrialized Economy.”  I started by defining the term “industry” more accurately.  Anyone who has studied even the most basic course in economics would know that industry is only one-fourth manufacturing. I stress this point because many of our leaders, both in the public and private sectors,  have for many years been unduly infatuated with “manufacturing,” equating it with everything that is good in economic development.  A collateral damage that resulted from this obsession was the loathing for agriculture that some of our thinkers developed, equating that most important sector with “drawing water and hewing wood.”  Even assuming, however, that a country has to industrialize to achieve inclusive growth, we must emphasize that there are four components of “industry”:  mining, manufacturing, construction and public utilities.  A territory like Hong Kong or Singapore can be highly industrialized if they have sizeable sectors in construction and public utilities (telecom, water, electricity) even if manufacturing contributes little to GDP.  At the other extreme, a country can still be very backward even if has a lot of factories just processing imported materials in a territory that has insufficient construction and public utilities.

          Given this more complete definition of industry, mining can be a major catalyst for industrialization.  It is impossible to extract mineral ores from the earth without a previous massive stage of construction activities of building roads, power and water facilities and other infrastructures that are indispensable to the mining operations.   As can be observed in any advanced mining operation as in Philex, Benguet or Atlas, a whole area that used to be wilderness or a prime example of the derogatory word “boondocks” can be transformed into a highly “industrialized” area with some of the most modern roads, power plants and other public utilities that are put up by private investors who are the partners of the State in making nature’s mineral ores productive.  We can add to these necessary physical infrastructures the social investments in schools, hospitals, housing, places for public worship, etc. that are common in mining sites.  All these are often given short shrift by Finance officials who have a narrow focus on the taxes paid by these mining industries.  This is a perfect example of being penny wise but pound foolish.

          I am glad that I was joined in my panel by Dr. Carlo Primo David, U.P. Professor of Geology and Convenor of the Philippine Business Environmental Stewardship.  As a physical scientist, he made it very clear that the world of science has made advances since the time of the first industrial revolution in England and even since the time of the environmental disaster of Marinduque so that mining operations can be completely compatible with the protection of the environment.  There are enough examples from all over the world that responsible mining is possible and that there are private investors in mining whose first “corporate social responsibility” is to protect the environment with all the technology available today.  Applications of the findings of chemistry, biology (especially biotechnology) and agronomy can actually render mining sites greener and more environmentally friendly than before the start of mining operations.  There can be sustainable forests and commercial plantations of such crops as rubber, palm oil, coffee and cacao that could be developed in tandem with mining operations by responsible mining enterprises.

          Thinking out of the box, Dr. David made a very creative suggestion to transform mining sites into veritable industrial zones.  Mining areas can give way to industrial tree plantations as well as commercial plantations of such high-value crops as coffee, cacao, palm oil and other tree crops.  With all the improved infrastructures and public utilities, some of the surrounding areas can be converted to industrial zones housing manufacturing enterprises that can employ members of the families of the miners.  These industrial zones can be presented to Director General Lilia de Lima of the Philippine Economic Zone Authority (PEZA) for tax and other incentives because of the social benefits that they can confer on the populations of the remote places in which mining is normally conducted.  The advantage of starting industrial zones, almost at the same time as the mining operations, is that over the long run, when the ores are depleted and the mines have to be closed, there is already an automatic solution to the economic vacuum that will be created with the disappearance of mining activities. 

          It is too late to convince the officials concerned in the present Administration about all these benefits of mining.  I just hope that the next President (whether it is Vice President Binay, Senator Grace Poe, Senator Ferdinand Marcos Jr. or any other aspirant for the top executive position) will have better advisers than President Noynoy about the benefits of the mining industry, which has unfortunately been maltreated under this present dispensation.  For comments, my email address is bernardo.villegas@uap.asia.