EO 79 pulls down mining industry growth in Q3

Aya Lowe
Mining and Quarrying decline 2.2% in Q3 2012

MANILA, Philippines – Remember the negative impact mining players warned about following the issuance of Executive Order 79? The country felt it in the third quarter.

Bucking the uptrend seen by other industries, mining and quarrying contracted by 2.2% in the third quarter of 2012, officials said on Wednesday, November 28.

This decline was a reversal of the 4.1% growth the industry recorded in the same quarter last year, said Jose Ramon Albert, National Statistical Coordination Board (NSCB) secretary general, at the press conference announcing the country’s third-quarter gross domestic product (GDP) growth.

The industry’s contribution to the country’s GDP also saw a contraction of 0.1%, while other sectors recorded positive contributions (manufacturing 3.9%, construction 3.9%, and electricity, gas and water supply 0.3%). This was largely attributed to the huge contraction in gold mining of 14.9%, compared to a high growth of 62.3% in 2011; and the contraction in crude oil, natural gas and condensate (by 16.8% from a growth of 2% last year), the NSCB GDP report said. 

According to the report, the sustained growth of minerals such as stone quarrying, nickel mining, chromium mining and copper mining was unable to cushion the weakness of the above subsectors.

The decline came following Malacañang’s issuance of EO 79, also known as the Aquino administration’s mining policy, which barred the granting of new mining contracts pending the passage of a measure on the revenue sharing between government and mining companies.

The EO also cut mining contracts’ term to 25 years from 50.

Better regulatory environment

Nevertheless, Finance Secretary Cesar Purisima said GDP growth remained the fastest in Southeast Asia, despite the negative contribution of mining.

He said the Philippine economy will get additional boost once the regulatory environment surrounding the mining industry is established.

“It (strong growth) happened despite a 2.2% decline in mining, which shows that mining represents an extra gear for the Philippine economy once the regulatory environment is rationalized,” Purisima said.

Prior to the release of the GDP data, government officials slashed significantly mining investment forecasts for the next 5 years due to the EO.

The Philippines is the 5th most mineral-rich country in the world with an estimated mineral wealth of $840 billion. This however is largely untapped due to strong anti-mining movement in the country and poor infrastructure and security concerns.

The mining sector’s contribution to the Philippine economy and its share in tax revenues are also small.

Between 2008 and 2011, the mining sector contributed only 1% to the country’s GDP. In terms of revenues, out of the country’s total production value of P163.2 billion in 2011, only P10.4 billion went to the national treasury.

Mining tax is low at 2% for metallic and non-metallic minerals. The Aquino administration wants to increase this to shore up revenues. It wants an additional 5% royalty tax for mining permits within mining reservation areas and higher filing fee charges.

There are a total of 1,828 mining applications in the country, which are directly affected by the Aquino government’s EO 79. – Rappler.com

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