Mining and the Regional Economies

That these investments are targeted to specific provinces just demonstrates the obvious fact that extractive industries, by nature, are local industries — the increase and decrease in production is geographically concentrated. Unlike, say, food manufacturing, the products of MAQ sectors is usually consumed entirely elsewhere, and not where it was mined.

It is thus important for our purposes to look at how the regional MAQ sectors evolved — in absolute terms, vis-à-vis the national MAQ sector, relative to each other, and relative to the regional economies. From here, we can have a sense on whether or not the MAQ sector really forms an integral part of certain regional economies, like CARAGA or MIMAROPA.

Looking at the regional evolution of the MAQ GVA, we will notice that prior to 2001, the Cordillera Administrative Region (CAR) holds the top rank among regions in terms of mining production. This was already so when it was created in 1987 (notice that it took a huge part of the Ilocos MAQ production). As we hinted earlier, this makes sense — since Benguet has been a traditional mining hotspot in recent Philippine history. Davao region is also a known mining hotspot, given that it has Mt. Diwalwal in Compostela Valley — which is said to hold the largest gold deposits in the country.

But what explains the sudden boom in MIMAROPA and CARAGA? We are not sure yet (as we have no access to regional-subsector data), but our earlier data shows that this coincides with the surge in Crude Oil production due to Malampaya (in MIMAROPA) and Nickel in Surigao del Norte (in CARAGA). One can hypothesize that much of MIMAROPA’s supposedly mining activity is on Crude Oil; for CARAGA, it is probably Nickel. We can thus better contextualize Prof. Arcilla’s claim of mining’s importance in the MIMAROPA with this data: at least for MIMAROPA, DENR’s latest actions did not target crude oil.

This brings us to Prof. Arcilla’s claim on the importance of MAQ on specific regional economies. We then look at the MAQ GVA as share of the total Gross Regional Domestic Product (GRDP) across the years — and not just 2015. Here, we see that things were never static — the dependence on mining of certain regions was never intrinsic to them.

For instance, consider the decline in the MAQ share of CAR’s GRDP — from a peak of almost 30%, a mere generation (30 years) have reduced it to less than 5%. In fact, EO 79 alone was responsible for arresting the recovery of CAR’s share during Arroyo’s term, halving the figure in just one year. This shows that a local economy can transition from being extractive industry heavy to a more mixed one, and regulatory policies don’t necessarily have a debilitating effect — even as it drastically change the regional economic structure.

At this point, we can safely ignore MIMAROPA’s rise for now — assuming that much of its MAQ production is actually crude oil (there might also be substantial production in Romblon). Let us focus instead on CARAGA. Our earlier hypothesis was that a huge part of Nickel production was actually jumpstarted by Chinese investments just before Arroyo’s NBN-ZTE scandal, thus the spike in 2005.

But what is interesting is that it took CARAGA only a year to raise its MAQ share from 9.6% to 22.4%. And then it only took the region two years to reduce its share back to 8%! This shows us that we really shouldn’t fetishize MAQ share of GRDP as a figure — it can and it has drastically changed from year to year, and it really doesn’t point out how important mining is to the regional economy. In any case, we also have demonstrated that it is possible for a regional economy to transition away from MAQ, as in the case of CAR, and to a lesser extent, Davao.

Besides, we have to take note of the accounting procedure — while GRDP points to regional production, it does not give us a clue on regional income. We know that many local mining companies are usually foreign owned, which means that while their production is counted as production within the region, the profits (which constitutes a large share of the revenue) are usually repatriated back to home countries.

One nice fact before we proceed, there was once substantial mining in Central Visayas rivaling that of Ilocos’ (which then included CAR). This can be a point of further investigation.

How about the share of the local MAQ sector to the national MAQ production? The next chart gives us that:

As we can see, MIMAROPA’s rise really resembles the Crude Oil rise in the earlier charts (notice also how Region IV was split into two in 2001, and well it coincides with the sudden boom of MAQ in MIMAROPA). Right now, it dominates the national MAQ sector, but that wasn’t always the case. Central Visayas share also shrunk during the post-EDSA I, pre-EDSA II period.

Davao region’s share shrunk precipitously since Arroyo took over, largely replaced by CARAGA. In the recent years, this may have been due to then Mayor Rodigo Duterte’s declaration of moratorium. The cancellation of tax exemption of small-scale miner’s cooperatives sale to the Bangko Sentral ng Pilipinas (BSP) might have also forced some miners to go to black market, thus escaping national accounting.

Cagayan, on the other hand, seems to be growing fast, and Ilocos (sans CAR) seems to be steadily growing its local MAQ share to national MAQ. The alleged proliferation of illegal black sand mining in those two regions may have helped increase mining production, though it has not been without severe environmental consequences.