The Philippines used to be one of the top 10 world producers of copper, gold, nickel and chromite in the 1980s, with the mining industry a major economic contributor.
While in the sixties, the sector accounted for 50 percent of the country's total exports, with mining and quarrying accounting for 6 to 10 percent of GDP, last year, the share of total exports had fallen to only 1.7 percent. In 2002 mining only contributed a measly 1.6 percent to GDP.
With an estimated $1 trillion worth of natural resources underground, it is hard to imagine why these figures have dived and investors have stayed away.
While the world-wide decline in commodity prices and rampant corruption during the latter part of the Marcos regime contributed to the heavy outflow of capital, the 1987 Constitution and the application of the partial nationalization laws to the mining sector, where foreign ownership was restricted to 40 percent, were the main culprits behind the lack of foreign interest.
In the early 1990s, President Fidel Ramos tried to liberalize trade and investment policies by introducing a number of measures to encourage foreign investment, amongst which were crucial changes to the mining laws and regulations and the creation of Financial or Technical Assistance Agreements (FTAA) and other permits that could be granted to foreign-owned corporations such as exploration permits, and mineral processing permits.
The legislation was enacted and regulated under the Philippine Mining Act of 1995 and negated some of the most restrictive effects of the 60-40 laws. Yet, for the following years the Mining Act of 1995 was tied up in the Supreme Court preventing serious exploration and development of mineral projects.
Last week, the Supreme Court reversed an earlier ruling and decided that foreign investors could own as much as 100 percent of mining companies operating in the Philippines.
Government officials are now estimating the ruling could attract as much as $6 billion in fresh foreign investment over the next three years, while economists said the mining industry has tremendous potential for wealth creation and could lead economic growth in years to come.
Socioeconomic Planning Secretary Romulo Neri said the landmark decision will "open the window of opportunity towards the ultimate revitalization of the local mining industry and the creation of thousands of new jobs for Filipinos."
Trade and Industry Secretary Cesar Purisima said the Supreme Court ruling lifted "an important barrier to foreign investments" and has "opened the gates for overseas capital to pour into the country's big mining projects."
"With world metal prices at its peak, the abandoned/inactive mines will
again be attractive for operation," Purisima noted.
The prices of metal are currently at their peaks, with copper up this year 78 percent from 2003, gold up 25 percent, silver up 60 percent and nickel up 63 percent.
Mining is among the government's top priority areas of development in the country's Medium-Term Philippine Development Plan 2004-2010. It is seen generating not only up to $6 billion of investments, but also $5-7 billion of annual foreign exchange and at least 240,000 jobs for the next six years.
The National Economic and Development Authority estimates there are some $800 billion to $1 trillion worth of mineral wealth lying hidden in the ground.
A statement from the American Chamber of Commerce of the Philippines indicated the court decision would help the government "create jobs, increase revenues from exports, and bring in needed foreign direct investments," while the Chamber of Mines of the Philippines said the decision will draw support from the entire business community, locally and internationally.
Economists view the mining industry as critical in stabilizing the country's macro-economy. It should help increase tax collection, reduce creditor risk perceptions and improve credit rating, which will reduce the interest foreign creditors charge the country for its loans.
It is also expected to generate a substantial increase in exports and the country's precarious level of foreign exchange reserves and strengthen and stabilize its currency, they said.
Already two large Chinese companies (Jinchuan Nonferrous Metals Corp. and Shanghai Baosteel Group Corp.) are said to be negotiating with Philnico Mining Corp. (formerly the Nonoc Mining and Industrial Corp.) for a possible merger which could result in additional investments worth $1 billion.
Purisima said the two Chinese companies are now conducting a study on the viability of the operations of Philnico Mining.
Jinchuan Nonferrous Metals is the largest mine and refinery company in China that produce nickel, copper and platinum metals, while Shanghai Baosteel is one of the largest steel companies in the world.
The project of Philnico Mining has the potential to generate around $350 million in exports earnings per year at the same time generate employment for some 4,500 direct and indirect employment