Mining and inclusive growth

When we talk of gross domestic productivity (GDP) growth these days, the discussions are almost always tempered by the attendant criticism that, despite resplendent growth, what growth we experienced was non-inclusive. What exactly does that mean?

Inclusive economic growth is an economic concept best understood when we consider its antithesis.

The opposite of inclusive is exclusive. Think simply of “include” versus “exclude”. Inclusive growth “includes” the larger population. Exclusive growth “excludes” or rejects and simply affects a select few.

When growth is inclusive, one of the most important implications is that there are equitable economic opportunities afforded a greater number. This explains the criticisms where other economic indices are cited, such as the involuntary hunger index, the self-rated poverty index and the nearly petrified unemployment index.

This also explains the festering Gini coefficient that remains petrified, despite high-growth GDP. The Gini coefficient is a measure of the income inequality. Relative to our Asian neighbors, our indices show the Philippines with the highest inequality register in the region, compared with Indonesia and even our supposed economic twin, Thailand.

The higher the Gini coefficient, the higher the inequality. Similarly, income inequality is the extent to which incomes are distributed evenly or unevenly. Scanning the Philippines, where the income inequality averages 0.757, the ranges goes from low inequality at 0.549 to high income inequality at 0.799.

With respect to the mining industry, despite the high index for the country as a whole, the region-specific data on income inequality actuality bodes well for the mining sector. Despite the relative poverty where mines are located, it is in these that income inequalities are less. In fact, the mining communities in Palawan province recorded the lowest income inequality; the same for northern Luzon and western Mindanao.

While it is possible that these areas might also be some of our poorest in terms of regional GDP (RGDP)  statistics do not support that contention. The Cordilleras have the second-highest per capita RGDP after the National Capital Region (NCR). All regions in Mindanao, save for the Muslim areas, have a per capita RGDP that far outstrips that of the eastern Visayas.

When we lay out the income inequality data, we see that the wealthiest quantile commands in excess of 50 percent of total family incomes, compared with the poorest with less than 5 percent. Such data have undeniable economic impacts ranging from higher incidences of crime and low or inadequate welfare to unmeasurable social inclusion or exclusion factor. Notably, where the index is lowest, where the mining companies are the de facto government, crime and social exclusion are likewise lower.

Let us dig deeper with broader perspectives.

Examples from the global experience show us what economic potentials we might have where mining becomes a critical instrument of inclusive growth.

In South Africa, where approximately 150,000 are directly employed in gold mining, a comparable number are employed indirectly. Both the directly and indirectly employed have multiplier effects on the greater economy. In Tanzania, for instance, where 15,000 people are directly employed, as much as 50,000 provide direct and indirect services.

Given the remoteness of mining communities in the Philippines, the multiplier effects are further enhanced. Note the realities. In Mindanao, the National Economic Research and Business Action Center says, mining acts as a “generator of business possibilities and employment opportunities.”

Studies show that, in one mine alone, the project could create 8,000 jobs during the construction phase and over 2,000 during its operational phases.

Among the directly related was an additional 2,000 jobs from ancillary industries. All these lie within the formal mining activity and have yet to factor in the indirectly related.

Simply factor in an economic multiplier, like agro-agra businesses, to support the communities and the potential for mining as one of the most important engines for inclusive growth, outstrips the potentials of industries that do not create the kind of communities mining does.