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Statistically Speaking by Dr. Romulo A. Virola1
Making a Difference: the surge of Mining and Quarrying 2 
The Gross Domestic Product (GDP) of the Philippines accelerated with a growth of 7.5 percent for the 2nd quarter of 2007. As usual, a lot of cynicisms surrounded and hounded the announcement of the growth figures. All projections were exceeded by the official growth rate released by the NSCB. But before raising and twitching your eyebrows about the reported growth, why don’t we take a closer look at one of the hidden aces of our economy during the past quarter? The Mining and Quarrying (MAQ) sector.
Some of you might say, “Why bother looking into it? It’s just a small part of the total economy!” Yeah, you’re right in saying that it’s just a small part; in fact its share to total GDP is really the smallest3. But hey, this small industry posted the fastest growth among the 11 sectors during the quarter at 33.3 percent4. Correspondingly, its contribution to the growth of the economy jumped from 0.1 percentage point in 2006 to 0.66 percentage point in 2007. Well, that’s already quite a feat! It comes very close to AFF’s 0.67-percentage point contribution to the growth of the economy!
So what are the drivers of this 33.3 percent growth of MAQ?
Table 1 shows that during the 2nd quarter of 2007, the top 3 contributors to the growth of the mining and quarrying industry were: Other Non-Metallic; Crude Oil, Natural Gas & Condensate; and Nickel Mining. Other Non-Metallic, which is mainly composed of Coal mining, grew by 60.5 percent during the quarter, almost triple the 15.9 percent growth registered during the same period in 2006! The said sub-sector contributed 22.3 percentage points to the total 33.3 percent growth in MAQ. Such favorable outcome resulted from the increase in the demand for coal, both in the local and international market. Yes, you’ve read it right! Our major coal producer is now trying to penetrate the export market. Trial shipments of coal to countries like China and India during the quarter proved that despite the inherent low quality of our local coal, it could be effectively used as a blending coal for higher quality and expensive coal5.
Likewise, Crude Oil, Natural Gas & Condensate sub-sector6 came in strong during the quarter, rebounding to 23.7 percent growth from a contraction of 11.1 percent a year ago, as demand for natural gas from electricity generating sector strengthened. As a result, the sub-sector contributed 7.0 percentage points to the total MAQ growth. The robust growth in the production of these indigenous energy resources is welcome news – an achievement in line with the government’s thrust of promoting energy independence through enhanced energy development7.
Another strong performer is Nickel Mining, which grew by 99.2 percent in the 2nd quarter and was able to put in 4.9-percentage points to the growth of MAQ. This can be attributed to the increasing demand for nickel as raw material to the stainless steel making industry, especially in China. Well, I can say that the “invisible” hand is at work as the industry responds to China’s seemingly insatiable demand. In recent years, particularly in 2006, Nickel mining had been a consistent positive contributor8 to the growth of MAQ (though of course there were instances, say in the last 2 quarters of 2006, when its robust growth was not enough to offset the negative growths in the other sub-sectors) as some of our existing nickel mining companies are expanding their operations and new nickel mining companies are entering the market.
Other positive contributors to the growth of MAQ were: Other Metallic Mining, which posted a robust growth of 286.7 percent; Stone Quarrying, Clay & Sandpits, with 11.4 percent growth during the quarter; and Copper Mining, which rebounded to 28.4 percent. In both the Other Metallic and Copper Mining, the growth resulted from the combined effects of the increase in the production of existing mining companies as well as the entry of new mining companies in each sub-sector. On the other hand, the growth in Stone Quarrying, Clay & Sandpits can be attributed to the increase in the construction activities that were undertaken during the quarter9
Has Mining and Quarrying always been small but “terrible”?
It is very important to note that the robust growth in MAQ did not happen overnight. The MAQ sector experienced its share of bad days, particularly during the 90’s when the sector experienced high incidence of mine closures/abandonment, mine-related environmental accidents and anti-mining activisms. But in order to overcome these and to bring back the so-called “golden-era” of the Philippine mining industry during the 70’s and 80’s, the government took decisive action. To be able to resuscitate the sector, interventions were made, the most recent of which is the passing of the Mining Revitalization Act of 2004, which allows foreign investors to utilize the economy’s mineral resources while ensuring that they adhere to the guiding principles for responsible mining.
Development of a single large-scale mining operation is not chipipay; we are talking here about millions of dollars in investment, something that is well beyond the reach of many Pinoy investors. Since the Mining Revitalization Act was implemented, a total of PhP 8,266.5 million of approved foreign direct investments (FDI) has been generated10 in 2004-2006. Some of those approved investments have been realized and are now into production as companies like the Lafayette-run mine in Rapu-Rapu, Albay and Atlas-run mine in Palawan started their commercial operations in 2006 and 2007. Such operations are expected to generate thousands of employment for our countrymen; projected employment on the approved FDI was expected to increase from 708 jobs in Q4 2005 to 3,455 jobs in Q4 2006, or a 388.0 percent growth11.
Now, what can we expect from MAQ in the near future?
Much can be expected from our top contributors to growth. For Other Non-Metallic Mining, our major coal producer was able to sign up short-term export supply contracts of up to 1million Metric tons until the 1st Half of 200812. Meanwhile, the new entrants to the mining industry are starting to conduct their full blast operations. With these positive developments, prospects for MAQ remain upbeat. And MAQ can again pick up the expected slack in agriculture during the third quarter.
Table 1: Mining and Quarrying (MAQ)
| SubSector | GVA @ Constant ('000PhP) | Growth Rate | Contribution to Growth | |||
| Q2 2006 | Q2 2007 | Q2 2006 | Q2 2007 | Q2 2006 | Q2 2007 | |
| Copper | 55,303 | 71,017 | (7.4) | 28.4 | (0.1) | 0.3 |
| Gold | 1,384,802 | 1,228,921 | (3.5) | (11.3) | (0.8) | (2.5) |
| Chromite | 7,363 | 5,337 | 31.4 | (27.5) | 0.0 | (0.0) |
| Nickel | 307,004 | 611,456 | 136.2 | 99.2 | 3.0 | 4.9 |
| Other Metallic | 18,026 | 69,699 | 73.5 | 286.7 | 0.1 | 0.8 |
| Crude Oil, Natural Gas & Condensate | 1,831,303 | 2,264,893 | (11.1) | 23.7 | (3.8) | 7.0 |
| Stone Quarrying, Clay & Sandpits | 295,229 | 329,024 | (4.7) | 11.4 | (0.2) | 0.5 |
| Other Non-Metallic | 2,271,335 | 3,645,442 | 15.9 | 60.5 | 5.2 | 22.3 |
| TOTAL MAQ | &6,170,365 | &8,225,788 | 3.3 | 33.3 | 3.3 | 33.3 |
Source: Economic Statistics Office, National Statistical Coordination Board, as of Aug 2007
Table 2: Contribution To Growth In Maq By Industry Group
1st Quarter 2006 To 2nd Quarter 2007
At Constant 1985 Prices
| INDUSTRY | 2006 | 2007 | ||||
| Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | |
| 1. Copper mining | (0.29) | (0.07) | (0.20) | &0.06 | 0.83 | 0.25 |
| 2. Gold mining | 5.51 | (0.84) | (10.48) | (1.44) | 1.62 | (2.53) |
| 3. Chromium mining | 0.05 | 0.03 | 0.05 | 0.05 | (0.02) | (0.03) |
| 4. Nickel mining | 0.61 | 2.97 | 5.27 | 2.59 | 1.57 | 4.93 |
| 5. Other metallic mining | 0.09 | 0.13 | (0.03) | 0.00 | 0.37 | 0.84 |
| 6. Crude oil | (0.60) | (3.84) | (0.26) | (6.14) | 6.05 | 7.03 |
| 7. Stone quarrying, clay and sandpits | (4.54) | (0.24) | 1.25 | 0.66 | 1.14 | 0.55 |
| 8. Other non-metallic | 1.01 | 5.21 | (0.69) | (20.89) | 1.66 | 22.27 |
| GROSS VALUE ADDED IN MINING AND QUARRYING | 1.85 | 3.34 | (5.10) | (25.10) | 13.22 | 33.31 |
Source: Economic Statistics Office, National Statistical Coordination Board, as of Aug 2007
Reactions and views are welcome thru email to the author at mcs.alfonso@nscb.gov.ph
______________________
1 Secretary General of the National Statistical Coordination Board (NSCB) and Chairman of the Statistical Research and Training Center (SRTC). He holds a Ph. D. in Statistics from the University of Michigan in Ann Arbor, USA and has taught mathematics and statistics at the University of the Philippines. He is also a past president of the Philippine Statistical Association.
2 This article was written by Maria Concordia S. Alfonso (mcs.alfonso@nscb.gov.ph), Statistical Coordination Officer I of the Production Accounts Division (PAD) of the NSCB and sector specialist for Mining and Quarrying.
3 Among the 11 sub-sectors of the economy, MAQ is the smallest, with a share of 2.1 percent to total Q2 2007 GDP.
4 The NSCB computes the growth of MAQ by using actual production reports of different mining companies that are being submitted to different agencies such as Mines and Geosciences Bureau (MGB), Department of Energy (DOE) and National Statistics Office (NSO). The NSCB also uses other relevant indicators that are obtained from other data sources such as financial statements.
5 Financial Statement: Semirara Mining Corporation, For the Quarter Ending June 30, 2007. See www.pse.gov.ph for the full report
6 In the National Accounts of the Philippines (NAP) publication of NSCB, the said sub-sector is named as “Crude Oil” only. It should be noted that this should be properly referred to as “Crude Oil, Natural Gas & Condensate”. Natural Gas contributes 59.0 percent to the total sub-sector, while Condensate accounts for about 40.0 percent. The remaining 1.0 percent is attributed to Crude Oil.
7 The Philippine Energy Plan 2005 Update (PEP 2005 Update) emphasizes the call for the development of the country’s indigenous energy resources by increasing the use of alternative and fossil fuels.
8 See Table 2: Contribution to Growth in MAQ by Industry Group
9 Stone Quarrying, Clay & sandpits include commodities such as sand and gravel. These commodities are used in construction activities. Construction rose by 21.0 percent during the quarter.
10 See NSCB publication, Foreign Direct Investments: 4th Quarter 2006
11 See NSCB publication, Foreign Direct Investments: 4th Quarter 2006. Unfortunately, the FDI information system is not yet able to monitor actual employment generated.
12 Financial Statement: Semirara Mining Corporation, For the Quarter Ending June 30, 2007. See www.pse.gov.ph for the full report
Posted 10 September 2007.
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