Ma’am Monsod on poverty in mining areas

Recycling an old article I wrote in September 2013, I re-read this BWorld article by my former undergrad thesis adviser in UPSE in the 80s, Prof. Winnie Monsod.

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She wrote,

“… the incidence of poverty in the mining sector is much higher than the Philippine average (roughly twice, if memory serves).

A 2004 paper by Scott Pegg of the University of Indianapolis, entitled “Mining and Poverty Reduction: Transforming rhetoric into reality”…. found that not only was per capita GDP growth negative for all three categories during that period, but that the growth rates were inversely associated with the level of dependence on mineral exports — i.e., countries with substantial incomes from mining performance performed less well than countries with less income from mining.

The list of the negative effects of mining (and other extractive industries) continues: countries that become heavily dependent on oil and mineral exports are become more vulnerable to economic shocks (e.g. price volatility), not to mention risk of “intrastate armed conflict,” social risks (price inflation, alcohol abuse, prostitution and child labor). Then there is corruption: Pegg cites the work of Leite and Weidmann (at the IMF) finding that “capital intensive natural resources are a major determinant of corruption.” Further, there is the matter of anti-democratic effects: Ross finds that oil and other minerals impede democracy, but other primary commodities — which generate few or no rents, produce less export income for the state, and employ a larger fraction of the labor force — do not….”

min2The first paragraph is easy to debunk. This table from NEDA’s MTPDP 2011-2016 shows the top 25 poorest provinces in the country. Only 5 of these host big mining firms (at least 4,000 hectares) — Zamboanga del Norte (2 firms), Surigao del Norte (5 firms), Surigao del Sur (3 firms), Mindoro Occ. and Mindoro Or. (2 firms).

In addition, capital intensive large metallic mining firms attract lots of job seekers, both skilled and unskilled. Some would get a job either as direct employees of the mining company or working indirectly in various micro to medium size enterprises around the mining area. Some would not find any job and become marginal and subsistence earning workers around the communities. The latter group is what is referred as “higher incidence of poverty” group of people.

The second paragraph would most likely refer to informal or small scale mining in those countries studied. There are many factors to explain a country’s fast or anemic economic growth. Like the quality and maturity of their institutions that observe the rule of law and penalizes corruption, frequent stealing or plunder. Compare for instance mining rich Indonesia and its neighbor, mining poor Singapore. The level of economic growth and per capita income in the latter is a lot higher than that in the former. The same can be said of mining rich Philippines and its neighbors, mining poor Hong Kong and Taiwan.

The third paragraph is highly suspect as it does not recognize mining rich yet developed economies like Australia and Canada. And the statement has gathered many types of social ills associated with poverty and dragged them as contributed by mining or extractive-dependence. Non-mining rich countries like India, Pakistan and Bangladesh also have”price inflation, alcohol abuse, prostitution and child labor, corruption.”

An paper from the Philippine Senate five years ago showed this table, nationwide averages.

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Source: Alonzo, Emmanuel, Issues Affecting the Mining Industry, Senate STSR Taxbits, July-August 2012.

I think the numbers would approximate current data. Many agricultural farms and enterprises in the Philippines remain non-mechanized and hence, output per worker or farmer is low, whereas large metallic mining is highly-mechanized, output per worker is high.

Allotting some 0.2% to 0.3% of the country’s total land area for active mining is not that big and destructive. A big portion of a mining firm’s concession area is either for future mining or past, mined-out area that has been rehabilitated and hence, covered with forest or some agricultural farms, plus the usual areas for roads, offices, housing, school grounds, hospital, etc.

Government should recognize the value and job creation function of those big mining investments in a few provinces in the country and not just issue regulations that close down some firms without scientific and transparent basis, while allowing the others to operate but the threat of closure in the near future remains hanging on their heads.

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