responsible mining: moving beyond compliance

Addressing the Challenges of

Industrialization
D R . R A FA E L I TA M . A L D A B A
A S S I S TA N T S E C R E TA R Y, D T I - B O I
MINING CONFERENCE AND EXHIBITION
S E P T E M B E R 6 , 2 0 1 7 S O F I T E L P L A Z A H OT E L
 PH strong growth driven by manufacturing & services

40.0
Quarterly Growth 2009-2017
30.0

20.0

10.0

0.0
09 Q109 Q209 Q309 Q410 Q110 Q210 Q310 Q411 Q111 Q211 Q311 Q412 Q112 Q212 Q312 Q413 Q113 Q213 Q313 Q414 Q114 Q214 Q314 Q415 Q115 Q215 Q315 Q4 2016 2016 2016 2016 2017 2017
-10.0 Q1 Q2 Q3 Q4 Q1 Q2

-20.0

-30.0

AGRI., HUNTING, FORESTRY AND FISHING MANUFACTURING MINING AND QUARRYING

SERVICE SECTOR GROSS DOMESTIC PRODUCT

Amid economic & global uncertainty, PH has grown by 6.3% in the last 7 years (10 to 16)
2016: China 6.7%, Vietnam 6.2% , Philippines 6.8%
Manufacturing resurgence: 7.5% (10 to 16); 7% in 2016
2017 Forecasts: WB 6.9%, IMF 6.8%, ADB 6.5%
PH impressive growth: new growth area, Asias new economic tiger
 Industry Performance
Share to Total GVA (%) Growth Rate (%)
MAJOR SECTOR
2013 2014 2015 2016 2013 2014 2015 2016
Agriculture, Forestry, Fishing 10.5 10.0 9.5 8.8 1.1 1.7 0.1 -1.3
Industry 32.9 33.3 33.4 33.8 9.2 7.8 6.0 8.0
Manufacturing 22.8 23.3 23.2 23.2 10.3 8.3 5.7 7.0
Mining 1.1 1.1 1.1 1.0 1.2 12.1 -1.5 3.2
Construction 5.7 5.7 5.9 6.2 9.6 7.2 9.4 12.6
Services 56.7 56.6 57.1 57.5 6.8 6.2 6.8 7.5
Electricity, Gas, Water 3.3 3.3 3.2 3.3 4.7 3.6 5.5 9.6
Transport, Communication, Storage 7.5 7.5 7.7 7.6 4.8 6.5 8.0 5.9
Trade & Repair of Vehicles 16.6 16.5 16.7 16.8 6.2 5.8 7.1 7.3
Financial Intermediation 7.1 7.2 7.2 7.3 12.6 7.2 6.1 7.7
Real Estate, Business Activity 10.9 11.2 11.3 11.6 8.9 8.7 7.2 9.1
Public Administration 4.2 4.1 3.9 3.9 2.7 4.0 1.2 6.9
Other Services 10.3 10.1 10.3 10.4 4.9 4.0 7.9 7.5
 Employment Structure
Share to Total Employment (%)
MAJOR SECTOR
2011 2012 2013 2014 2015 2016
Agriculture, Forestry and Fishing 33.0 32.2 31.0 30.5 29.2 26.8
Industry 14.9 15.3 15.6 16.0 16.2 17.5
Manufacturing 8.3 8.3 8.3 8.3 8.3 8.3
Mining 0.6 0.7 0.7 0.6 0.6 0.5
Construction 5.6 5.9 6.2 6.7 7.0 8.3
Services 52.1 52.6 53.4 53.5 54.7 55.7
Transport, Communication and Storage 7.5 7.9 8.1 7.9 8.2 8.3
Trade and Repair of Motor Vehicles, Motorcycles 19.9 18.3 18.6 18.8 18.9 19.7
Financial Intermediation 1.2 1.2 1.2 1.3 1.3 1.3
Real Estate, Renting & Business Activity 3.4 3.4 3.6 3.8 4.0 4.4
Public Administration & Defense 5.0 5.2 5.2 5.1 5.4 5.3
Other Services 15.2 16.6 16.7 16.8 17.0 16.8
Manufacturing has large potential for creating more & better jobs
Biggest source of employment: services (trade & repair)
Agriculture follows but its contribution has declined substantially
Regional Analysis: Gross Regional Domestic Product
45.00%

40.00%
GRDP as % of GDP (2015, at constant prices)

NCR
35.00%

30.00%

25.00%

CALABARZON
20.00%

15.00%

CENTRAL LUZON
10.00%
CENTRAL VISAYAS
NORTHERN MINDANAO WESTERN VISAYAS
5.00% DAVAO REGION
SOCCSKSARGEN EASTERN VISAYAS
MIMAROPA CAR BICOL
ARMM
0.00% CAGAYAN VALLEY ILOCOS ZAMBOANGA PENINSULA
CARAGA
-1.00% 1.00% 3.00% 5.00% 7.00% 9.00%
GRDP growth rate (2014-2015, at constant prices)

Geographically, contribution to GDP is highly concentrated in a few regions

NCR, CALABARZON, & Central Luzon account for 63 % of GDP
Poverty-stricken regions in Mindanao have the lowest contribution (ARMM 0.66%, CARAGA
1.3%)
 Mining Performance Across Regions
30.00%

25.00%
Mining as % of GRDP (2015, at constant prices)

CARAGA
MIMAROPA 20.00%

15.00%

10.00%
SOCCSKSARGEN
WESTERN VISAYAS
CAGAYAN VALLEY
5.00% ILOCOS
CALABARZON
CENTRAL LUZON BICOL
CAR DAVAO REGION
ARMM
0.00%
-50.00% -30.00% -10.00% 10.00% 30.00% 50.00% 70.00%
CENTRAL VISAYAS NORTHERN MINDANAO EASTERN VISAYAS
ZAMBOANGA PENINSULA
-5.00%
Mining growth rate (2014-2015, at constant prices)

Mining activities are highly concentrated in MIMAROPA and CARAGA (58% total share)
CARAGA: P39B (gold, nickel) minerals; MIMAROPA: P17B (nickel)
Poverty incidence & Unemployment
Region Poverty Incidence (15) Unemployment (Q217)
PHILIPPINES 21.6 5.7
NCR 3.9 7.2 Poverty incidence remains
CAR 19.7 4.1 high in ARMM, CARAGA,
I - Ilocos Region 13.1 10.4 Eastern Visayas,
II - Cagayan Valley 15.8 3.2 Soccsksargen, Northern
III - Central Luzon 11.2 6.7
Mindanao, Bicol, &
IVA - CALABARZON 9.1 7.1
Zamboanga
IVB - MIMAROPA 24.4 4.7
Unemployment is high in
V - Bicol Region 36.0 4.1
VI W.Visayas 22.4 5.8 regions where poverty
VII C. Visayas 27.6 5.4 incidence is low
VIII E.Visayas 38.7 3.8 Unemployment rates are
IX Zamboanga 33.9 2.5 highest in NCR, Ilocos
X N. Mindanao 36.6 5.4 Region, Central Luzon, &
XI - Davao Region 22.0 4.9 CALABARZON
XII - SOCCSKSARGEN 37.3 4.3
CARAGA 39.1 4.7
ARMM 53.7 2.6
Industrialization Challenges
Area Major Constraints
Regulation Complex/costly business procedures
Policy consistency, transparency, predictability
60-40% foreign equity rule
Infrastructure High cost of power, domestic shipping
Lack of ports, airports, road infrastructure
SME Access to finance, technology, support for start-ups, product standards,
marketing, network links
HRD Lack of skilled workers, limited standards & certifications, quality of
teachers
Innovation Industry-academe linkages, R&D facilities
Supply/value chain Weak linkages among manufacturing, agriculture, & services

Manufacturing Required Components: Materials, Skills, Energy, Capital, Digital

technology
Industry 4.0: driving force is technology, impact on PH
industries & economy

o Opportunities &
challenges
o Future skills needed
o Human capital
development critical &
focus on STEM
o Innovation-led
technologies to
improve productivity,
transform regional
economies, address
poverty
 Industrial Strategy
Integrating industries, Closing value/supply chain gaps
Overall Goal: create globally competitive & innovative
Jobs,
industries
Competitiv
eness o Growth oriented action to upgrade industries, move up
the value chain
Free Trade o Remove obstacles to growth attract more
Agree-
ments investments
Inclusive o Deepen participation in regional production
growth networks/global value chains

Role of Government: Enabler & facilitator to address

GVC-focused coordination failures
FOSTERS INNOVATION & o Address the most binding constraints preventing
industries from growing
ENTREPRENEURSHIP
o Create proper environment for private sector
Cluster-based industrial development
strategy
Manufacturing Roadmap
Vision: globally competitive industries with strong forward & backward linkages
Phase III 2022-2025

Phase II 2018-2021 -move to high tech

Phase I 2014-2017
-Rebuild existing capacity,
strengthen emerging
industries maintain
competitiveness of
comparative advantage
industries
activities;
-Shift to high value added -Participate as
activities, manufacturing hubs in
-investments in upstream regional & global
industries, move up value production networks for
chain auto, electronics,
-Link & integrate machinery, garments, food
industries, SMEs & large
firms, Innovation
ecosystem; R&D
To Make Manufacturing An Engine Of Growth

Coordination
mechanism
Horizontal Vertical
measures measures

30% value Close supply chain gaps

Promotion added
Expand domestic market &
Power, smuggling, logistics, 7-8% growth exports
infrastructure
HRD & skills trainings
Improve regulation, reduce
SME development
cost of doing business
Innovation & green growth
Competitive exchange rate

open trade regime, sustainable macro policies, sound tax policies & administration, efficient bureaucracy, secure
property rights, institutions
Strategic Actions
Close Supply/Value Chain Gaps
Sector Action
Copper Institutional mechanism to fully integrate the industry
Furniture Supply hubs for raw & natural materials
Tool & die Access to raw materials, equipment, & software

Paper Fiber raw material base, develop massive tree plantations, commercial agro
forestry with virgin wood pulp production
Iron & steel Full integration of industry upstream-mining, reliable supply of iron ore & coal
 PH Mining Industry
Production value in million pesos
Products Revealed Comparative 30,000
1. Copper mining
Advantage Measures
25,000 2. Gold mining
Iron ore & concent 1.22
3. Chromium mining
Copper ore & conc 1.64 20,000

4. Nickel mining
Nickel ore & conc 33.0 15,000
5. Other metallic mining
Chromium ore & co 1.3
10,000
6. Crude oil, Natural Gas
Precious ores & con 20.77 & Condensate

7. Stone quarrying, clay

Limestone materials 2.15 5,000
and sandpits

8. Other non-metallic
Coal ex anthracite 5.83 0 mining
2010 2011 2012 2013 2014 2015 2016
Petroleum gases 3.98

PH: 5th most mineral-rich in the world 256 establishments as of 2014

for gold, copper, nickel, & chromite Nickel (P20.9B) & crude oil, natural gas
Mineral potentials: US$1.4 Trillion (P21.8B) are the important mineral
(ANZCham 2012) products in 2016
Binding constraints to growth
Davao Mining Industry Roadmap

Area Barriers/Constraints
Small-scale mining Lack of refinery & advance processing facilities
Lack of infrastructure (roads, health sanitation/basic social services)
Lack of energy supply & high energy cost
Lack of R&D, lack of technical staff

Policy & Unstable, uncertain, inconsistent policies (regional, national, local)

Governance Difficulties in entering mineralized areas (bureaucratic processing &
approval, permits from indigenous people, DENR, DAR, etc)
Weak implementation of environmental policies & regulations for
small-scale mining
Davao Mining Industry Roadmap
Vision: shared understanding on responsible mining, transform the mineral industry as
catalyst for sustainable development

Phase III 2023-2030

Phase II 2017-2022 -Become net exporter of

Phase I 2014-2016 processed mineral
-Attain viable mineral products
-Rationalize small scale production
mining operations -Improve socio economic
-Fast track approval conditions of host
issuance of mining communities
permits
 Copper Industry: Missing Linkages
SMELTING FOUNDRY
Cathodes & section of cathodes Hardware products, Connectors,
Other electrical conductor, etc
MINING
Copper ore X
X BRASS MILL
Pipes & tubes
MILL PLANT Pipe & tube fittings, etc
ORE MILL Billets, bars, rods, profile
concentrate Ingots, slabs, pigs WIRE MILL
Alloys of copper Std wire, ropes, cable
Hollow of profile
Wires of refined copper
X Winding wire, Co-axial cable,
Communication cable, magnet wire,
Copper plates, sheets, strips others
Copper foil, Copper powder,
Copper flakes
Others MISC. MFRS.
Wiring sets, Copper alloy, Fertilizer,
Vision: full integration from mining to manufacturing by Chemicals
2030
Copper Industry Roadmap
Opportunities Vertical Constraints Horizontal Recommendations
- new, higher - Copper rod casting - lack of effective -Upstream: government to
value copper missing link for a fully- regulation, weak promote development of a
applications integrated institution, few world class mines by
which can be downstream copper -policy uncertainty strictly enforcing mining rules
produced industry -High cost & -Promote investments in wire
competitively - Limited copper reliability of power rod & other downstream
- Wire rod concentrate supply -High domestic copper industries
facility to - Lack of integration freight costs & port -Coordination of activities to
integrate between copper charges integrate the industry
industry mining & smelting -Smuggling
- Technology issue -Tariff distortion
Roadmap Towards Linking Together Mining & Manufacturing

Mining & manufacturing nexus

Mining industry supports 45% of the worlds economic activities
Davao Mining Industry Cluster Roadmap
Closing supply chain gaps
Iron & Steel Roadmap: upstream
Copper Roadmap: full integration
Sustainable development, responsible mining framework: integrate economic
activity with environmental integrity, social concerns, & effective government
regulations
 We cannot leapfrog industrialization, we need to
upgrade, transform, & link our industries not only for
inclusive & sustainable growth but in preparation for
Industry 4.0.