The Environmental Impact of Macroeconomic Policies On Mining and Quarrying Sector In Palawan Province


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“The Environmental Impact of Macroeconomic Policies on the Mining and Quarrying Sector in Palawan Province”,
Impact of Macroeconomic Adjustment Policies on the Environment (IMAPE) Project funded by the International Development Research Center (IDRC) of Canada pp.1-131,

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The Environmental Impact of Macroeconomic Policies On Mining and Quarrying Sector In Palawan Province

  1. 1. IMAPE Project Impacts of Macroeconomic Adjustment Policies on thePhilippines Environment ProjectIMAPE Research Paper No. 06The Environmental Impact of MacroeconomicPolicies on Mining and Quarrying Sector inPalawan ProvinceDanilo C. Israel, Aida Torres and Adelwisa SandaloJuly 2001This work was carried out with the aid of a grant from the InternationalDevelopment Research Centre, Ottawa, Canada.IMAPE Project. Policy and Development Foundation Inc.Unit 7B Vernida I Condominium, 120 Amorsolo Street, Legaspi Village, Makati 1229,Metro Manila, PhilippinesTelephone: (632) 813-6178 to 79, 816-3263 Fax: (632) 813-6179E-mail:
  2. 2. The Environmental Impact of Macroeconomic Policies on the Mining and Quarrying Sector in Palawan Province by Danilo C. Israel Adelwisa Sandalo and Aida Torres Abstract The main objective of this study was to investigate the direct environmentalimpact of specific macroeconomic policies on the mining and quarrying sector ofPalawan. A corollary objective was to provide a general overview of the mining andquarrying sector in the Philippines and Palawan. Rapid rural appraisal (RRA) methodswere employed in the analysis. The study found that a positive direct effect of financial liberalization was theincrease in the number of banks in Palawan. This gain, however, was tempered by thelow level of use by mining and quarrying firms of banks as source of investment. Sinceit did not influence investment and production levels, the increase in the number of banksand fund availability did not directly influence the rate of mineral extraction andenvironmental degradation in the sector. Foreign exchange liberalization, through devaluation, caused some contraction inthe activities of quarrying firms. This helped reduce the rate of mineral extraction andenvironmental degradation in the sub-sector on a firm basis. However, devaluation alsomade quarrying households poorer, forcing them to depend more on wood for theircooking fuel needs and reducing further their willingness to pay for any form ofenvironmental improvement. Trade liberalization helped reduce the costs of imported inputs of the singlemining firm but did not directly influence the production of mining and quarrying firms,which either had pre-set exports or catered only to the domestic market. Consequently,the policy did not directly influence the rate of mineral extraction and environmentaldegradation by the firms and their willingness to pay for environmental improvement. Investment promotion may has an important role to play if it helps lead to anenvironmentally safe nickel processing facility currently being proposed by the singlemining firm in the province. For its part, tight fiscal policy may have improvedenvironmental management by encouraging private participation in the mining sub-sector. On the negative side, the reduced budgets for monitoring and enforcement mayhave contributed to the significant proliferation of illegal operations in the quarrying sub-sector.
  3. 3. The Environmental Impact of Macroeconomic Policies on the Mining and Quarrying Sector in Palawan Province* by Danilo C. Israel Adelwisa Sandalo and Aida Torres**I. Introduction The Impact of Macroeconomic Adjustment Policies on the Environment (IMAPE)Project has been conducted in the Philippines in light of the recognition that policiesintended to attain economy-wide objectives could have significant effects on the naturalenvironment. Among the major undertakings of the project is the evaluation of theinteractions between policies, firms and households, and the environment in a selectedcase study area. An earlier effort of the IMAPE in the above regard was the conduct of a study onthe environmental impact of macroeconomic policies in Palawan (Israel et al. 1999). Theprovince was specifically investigated because it is a special zone for environmentalprotection in the country. In addition, national and local government units (LGUs) inPalawan in general are relatively well advanced in the application of the GeographicInformation Systems (GIS), a modern technology that is potentially useful for thepurposes of the IMAPE. As a continuation of the abovementioned study, the IMAPE recently conductedanother effort to further investigate the impact of macroeconomic policies on theenvironment in Palawan. This time, the analysis is concentrated on mining and quarryingbecause of the great potential of the sector, both as a source economic growth andenvironmental degradation in the province. Furthermore, whether or not mining andquarrying should be encouraged nationally is a current political and social issue thatcannot be overemphasized.* This research is part of the Impact of Macroeconomic Adjustment Policies on the Environment(IMAPE) Project funded by the International Development Research Center (IDRC) of Canada.** Ph.D. in Resource Economics and consultant of the Policy and Development Foundation, Incorporated(PDFI); Head, Policy Research Division, Palawan Council for Sustainable Development (PCSD); andHead, Technical Services Division, PCSD, respectively. Research assistance was provided by Ms.Merlinda Hilario and Ms. Concepcion Gilongos of the PCSD and Mr. Edralin Bayona of the PDFI.
  4. 4. This paper is the final report of the IMAPE study on the mining and quarryingsector in Palawan. It is jointly prepared by members of the staff of the Policy andDevelopment Foundation, Incorporated (PDFI) and the Palawan Council for SustainableDevelopment (PCSD). It benefited from the indispensable assistance provided by variousprivate and public sector individuals and institutions at the local, provincial, regional andnational levels.II. Objectives and Activities The main objective of the study was to investigate the environmental impact ofvarious macroeconomic policies implemented by the national government over the yearson the mining and quarrying sector of Palawan. Specifically, it looks into the interactionsbetween policies, firms and households in the mining and quarrying sector, and thenatural environment. A corollary objective was to provide a general overview of miningand quarrying in the Philippines and Palawan that may be useful for future undertakingsof the IMAPE as well as related research activities. To attain the abovementioned objectives, the study conducted the following:a) review of the laws covering the mining and quarrying sector at the national and local levels;b) review of the management aspects of the mining and quarrying sector at the national and local levels;c) review of the available literature on mining and quarrying development in the Philippines;d) development of the theoretical framework for evaluating the environmental impact of macroeconomic policies on the mining and quarrying sector in Palawan;e) profiling of the mining and quarrying sector of the Philippines;f) profiling of Palawan, its economy and its mining and quarrying sector;g) conduct of the case study of mining and quarrying firms and households in Palawan; andh) generation of conclusions and recommendations from the study.
  5. 5. III. Review of the Laws Covering the Mining and Quarrying Sector There were various laws passed concerning the mining and quarrying sector in thePhilippines. Commonwealth Act (CA) 137, otherwise known as the Mining Act of 1936,was the earliest. Among others, this law gave priority to Filipinos to explore and utilizemineral lands and resources. Later on, Presidential Decree (PD) 463, or the MineralResources Development Decree of 1974, revised CA 137. The overall aim of thislegislation was to provide for a modernized administration, exploitation and developmentof all mineral lands in the country. In 1984, PD 1899 was passed which established small-scale mining as a newdimension in mineral development. Then, in 1991, Republic Act (RA) 7076, or thePeople’s Small-Scale Mining Act, was promulgated. It aimed to further promote,develop and protect small-scale mining operations so that more employmentopportunities can be created and an equitable sharing of the wealth and natural resourcescan be effected. In 1995, the most recent mining law, RA 7942 or the Philippine Mining Act, waspassed. It aimed to promote the rational exploration, development, utilization andconservation of mineral resources through the active partnership of the government andthe private sector. Among its important features was the provision of financial ortechnical assistance any qualified person or entity that has the capability to undertakelarge-scale mineral exploration. The Philippine Mining Act is unique for some reasons. It is the first law thatspecifically addressed the concerns of indigenous peoples in mining areas. Furthermore,through its Implementing Rules and Regulations (IRR), the law ordered mining firms toestablish the Contingent Liability and Rehabilitation Funds (CLRF) that will guaranteetheir compliance to environmental commitments. Aside from those already mentioned, there are other national laws that affect themining and quarrying sector particularly related to the environment. PD 1151, or thePhilippine Environmental Policy Law, mandated that national agencies andinstrumentalities of the government as well as private individuals, corporations andentities, including those in the mining and quarrying sector, to implement and adopt theEnvironmental Impact Statement (EIS) System. PD 1152, or the Philippine EnvironmentCode, established the environmental management policies and prescribed environmentquality standards to be followed nationally. PD 1586 mandated that no person or entityshall operate in an environmentally critical area without first securing an EnvironmentalCompliance Certificate (ECC) to be issued by the President of the Republic or his dulyassigned representatives. For Palawan, the most important law that relates to the environment is RA 7611,or the Strategic Environmental Plan for Palawan, which was enacted in 1992. Amongothers, this legislation ordered the creation of the PCSD and stipulated the formulationand implementation of the Strategic Environmental Plan (SEP) for the entire province.The SEP was intended to serve as basis for the long-term development of the area in an
  6. 6. environmentally sustainable, socially equitable and economically practicable way(PIADPO n.d.). Among its significant features is the Environmentally Critical AreasNetwork (ECAN) that establishes a graded system of protective management from strictcontrol to very light control over the various ecosystems and environments in theprovince.IV. Review of the Management Aspect of the Mining and Quarrying Sector 4.1 Mining Sub-Sector Nationally, the Department of Environment and Natural Resources (DENR)manages mining in the country. This is the department mandated by law to manage,conserve, protect and develop natural resources in the pursuit of sustainable development.The DENR carries out its mining-related functions through its Mines and GeosciencesBureau (MGB) and Environmental Management Bureau (EMB). The DENR Secretary is the entity authorized to grant permits and enter intomineral agreements in behalf of the government. These permits and agreements includethe Exploration Permit (EP) for exploration activities, Mineral Agreement (MP), which iseither a Mineral Production Sharing Agreement (MPSA), Co-Production Agreement, or aJoint-Venture Agreement, for extraction activities, and the Financial or TechnicalAssistance Agreement (FTAA) for the large-scale exploration, development andutilization of mineral resources. The Secretary also supervises the Regional Directors ofhis department who are responsible for the coordination and implementation of theprograms and activities in the different regions, including the administration of allmineral lands and related resources within their regional jurisdiction. The RegionalDirectors are also the ones responsible for coordinating with the LGUs, Non-governmentOrganizations (NGOs) and other stakeholders in matters relating to mining management. The Director of the MGB is directly in charge of managing all mineral landsresources of the country. He has various powers, including the authority to enforceguidelines and policies concerning the safe and sanitary operations of all miningoperations. He also recommends to the Secretary the granting of permits and mineralagreements to qualified applicants and can cancel mining rights because ofnoncompliance to the important mining and environment-related rules and regulations. At the regional level, the MGB Regional Director has the primary responsibilityof implementing the mining laws, rules and regulations and the programs of his Bureau inhis assigned region. Monitoring and enforcement of mining-related rules and regulationsin the regions is an important task of the Regional Directors. Part of these activities is theconduct of safety inspection of storage facilities and installations and the conduct of on-site validation of the reports submitted by the mining operations to his office and similaractivities.
  7. 7. The EMB is involved in mining since by law, it has the primary responsibility toaccept, process, monitor and evaluate EIS and recommend the rules and regulations forthe Environmental Impact Assessments (EIAs) of all industrial activities, includingmining operations. Furthermore, the agency is required to provide critical technicalassistance for the implementation and monitoring of the EIAs and makerecommendations to the DENR Secretary regarding the issuance of ECCs to miningapplications. At the provincial level, the Provincial Environment and Natural Resources Office(PENRO) and the Community Environment and Natural Resources Office (CENRO) areDENR offices that implement the policies, programs and projects of the department in theprovince and community levels. Working with the Regional Offices of the nationalgovernment and the environmental offices of the LGUs, these agencies assist in theconduct of on-site inspections and monitoring of all mining operations within theirjurisdiction. 4.2 Quarrying Sub-Sector The management of quarrying activities covering more than 5 hectares is underthe DENR through the regional MGB. For operations covering 5 hectares or less, theLGUs are in charge of management. In this case, the Provincial Governor or City Mayorissues the permits for quarrying operations, subject to the recommendation of theProvincial or City Mining Regulatory Board (PMRB/CMRB). For Palawan, only theProvincial Governor can issue quarrying permits. The City of Mayor of Puerto Princesadoes not issue permits because it is still a component, not a chartered, city. 4.3 ECC Requirement In general, mining and quarrying applicants have to get an ECC from the DENRbefore they can start operations. In this particular aspect, the role of PCSD in Palawan iscrucial since mining and quarrying applicants have to get its endorsement before theDENR issues the ECC. By virtue of the Local Government Code (LGC), the provincialgovernment of Palawan, the city government of Puerto Princesa and some of themunicipalities now have Environment and Natural Resources Offices (ENRO) under theiradministrative set-up and control. As part of their functions, these local agencies assist inthe mining and quarrying management in the province, particularly in the review ofpermit applications and the monitoring and enforcement of rules and regulations withintheir jurisdictions.V. Review of the Literature on Mining and Quarrying in the Philippines There were several studies already done about mining in the Philippines althoughonly a few were available about quarrying. Most of the studies on mining were mainlydescriptive and provided only a general overview of the industry. A few of the studiesdiscussed the environmental impacts of mining, either in support or opposition to theindustry.
  8. 8. De Vera (1996) explained the importance of the mining industry to economicdevelopment. He stated that its contributions were significant in terms of production,employment and foreign exchange generation. He also argued that mining supports theprogram of countryside development that aims to draw the population away fromcongested urban areas. De Vera, however, stated that due to several technical, economic,social and environmental factors, some of the biggest mining firms have closed down inrecent years resulting to the significant drop in the production of some importantminerals. In a more optimistic note, Ramos (2000) argued that despite the variousproblems faced by the industry, it still faces a bright future. He cited that while mineralsproduction in the country was dormant, exploration activities were progressivelyexpanding. Tujan and Guzman (1998) reviewed the mining sector and made a strong critique.They stated that like many of the other sectors of the economy, mining is either small-scale and isolated or large-scale but concentrated in the hands of the local rich and theirforeign cohorts. They asserted further that it is export-oriented yet import dependent,thus, condemning the country to backwardness and plunder by foreign corporations andcomprador-landlords. A few works highlighted the negative environmental effects of mining in specificareas (Bennagen 1998, UBC abd UP 1996, Briones 1987; Briones n.d). Theyemphasized that mining is an environmentally destructive and accident-prone economicactivity that needs strict and proper management if it is to appropriately contribute tonational development. Other studies, on the other hand, defended mining in relation tothe environment. Angeles (1995) asserted that the criticisms that mining received werethe results of misinformation and the lack of knowledge on the environmental aspects ofmining. MGB (2001a) further argued that if mining is done in a sustainable andenvironment friendly manner, it can actually enhance instead of degrade the environment. Only two studies dealing on quarrying were available. Martin and Discipulo(1996) explained the importance of the quarrying industry of the Southern TagalogRegion to the growth and development of Metro Manila. Martin (2000) chronicled theexperience of the MGB in addressing the environmental problems caused by quarrying inRizal province. He explained that the agency, in cooperation with the quarryingoperators, LGUs and the various other stakeholders did much to improve environmentalmanagement in quarrying in controversial sites.VI. Theoretical Framework for Evaluating The Environmental Impact The framework for evaluating the environmental impact of macroeconomicpolicies in Palawan was discussed by Israel et al. (1999), based on earlier framework-building works of the IMAPE (Intal 2000, Francisco and Sajise 1992, Quesada 1992,Lamberte et. al. 1991). This theoretical framework was reworked to fit the currentanalysis of the mining and quarrying sector.
  9. 9. In theory, the relationships between macroeconomic policies, mining andquarrying firms and households, and the natural environment can be viewed as follows(Figure 1). Macroeconomic policies affected the environment through differenttransmission channels and mechanisms that exist from the national level down to themicroeconomic level. In return, the state of the environment influences macroeconomicpolicy-making because of the growing acceptance among countries that sustainabledevelopment is the appropriate path to follow. Furthermore, the environment affects theworld and national economies because of the important role it plays in the production ofgoods and services. In the forward flow of relationships, the implemented macroeconomic policiesaffect the national economy through the national output, employment inflation, balanceof payments and other macroeconomic aggregates. A tier below, the policy-inducedchanges in the national economy influence specific sectors in the economy through threetransmission channels: the labor and capital market, goods and services market and theprovision of public goods. Policies influence through these channels by inducingchanges in the prices of capital and labor, prices of product and services and the amountof available public goods. Since the microeconomic units of the sectors, specifically thefirms and the households, participate in the three transmission channels, the changeseventually affect them by way of three transmission mechanisms, particularly the changesin the relative prices, changes in the incomes and the changes in their purchasing power. In the case of mining and quarrying, the behaviors and decision-making of thefirms that have environmental significance are affected by changes in the relative pricesthey face, the incomes they generate and in their purchasing power in several ways. Forinstance, an increase in the incomes and purchasing power of firms as a result ofmacroeconomic policy may increase their willingness to pay for activities forenvironmental improvement. On the other hand, it may encourage the same firms toincrease the rate of mining and the level of mineral depletion and environmentaldegradation. Like the firms, the activities of households that have bearings on theenvironment are affected by changes in the relative prices, incomes and purchasingpower as well. An increase in the incomes and purchasing power of the households, forinstance, may raise their willingness to pay for activities for environmental improvement.Or it may increase their rates of consumption, and, thus, their capacity to potentiallycontribute to environmental degradation. While the interactions between macroeconomic policies, mining and quarryingfirms and households and the environment can be theoretically analyzed, they areactually difficult to empirically estimate. The main reason for this is that the secondarydata on the different economic and environmental variables needed for such analysis aregenerally sketchy or downright non-existent, particularly at the local levels. Primary datagathering can be done to address this constraint but a survey, for instance, can also bevery costly and time-consuming to conduct, especially where respondents have limitedknowledge and understanding of macroeconomic policies and their impacts. A thirdand equally important reason is that even if primary and secondary data and informationcan be had, a quantitative model that can accurately measure all the different
  10. 10. relationships has yet to be developed for local situations. Most modeling efforts atpresent have been concentrated on analyzing the relationships between macroeconomicpolicies and the environment at the national level where secondary data are relativelymore available. A more practical way of empirically studying the interactions between policies,mining and quarrying firms and households and the natural environment then wasneeded. For this study, it was decided that only the direct and observable effects ofmacroeconomic policies were looked into as these can be easily ascertained and validatedamong the firms and households in the field. For the data gathering and actual analysisitself, Rapid Rural Appraisal (RRA) and case study approaches were applied. Thesemethods were considered ideal for the rural nature of the mining and quarrying sector, thetype of research problem at hand and the research conditions and constraints faced by thestudy. Five macroeconomic policies have important bearings on the environment andIntal (2000) made a thorough discussion of the direct and indirect impacts of some ofthese on the entire economy and the environment. Below, the direct interactions betweenthe macroeconomic policies, the mining firms and households and the naturalenvironment are summarized (Figure 2). The first macroeconomic policy is financial liberalization, which was initiated bythe national government through a series of financial reforms (Reyes and Cororaton1996). Briefly, the general intents of this policy are to reduce interest rates and increasethe availability of credit in the economy. Other things the same, easier credit and lowerinterest rates will encourage the firms in the mining and quarrying sector to invest more,resulting to the expansion and growth of the sector. Environmentally, more productionin the sector will lead to more intense mineral extraction and environmental degradationper se. The second policy is foreign exchange liberalization, which was alsoimplemented by the government through a series of reforms. The policy aimed to correctan overvalued currency and abolish various controls related to foreign exchangetransactions. The potential positive and direct effects of these are the inflow of foreigncapital into the mining and quarrying sector and the increased participation of firms in theexport market. A potential negative effect is that the devaluation will raise the level ofprices and dampen growth in the economy. If mining and quarrying are mostly non-tradable, then further contraction results as costs of production go up while demand goesdown. Environmentally and on the negative side, the growth that the inflow of capitaland increased exportation brings will worsen mineral extraction and environmentaldegradation. Furthermore, households made poorer by devaluation will be less willing topay for environmental improvement and more willing to exploit natural resources to meettheir needs. On the positive side, if a non-tradable mining and quarrying sector contracts,overall mineral extraction and environmental degradation may also significantly slowdown.
  11. 11. The third policy is trade liberalization, which was pursued mainly through theTariff Reform Program (TRP). As a result of this policy, the tariff range for variousimported production inputs was reduced and various import restrictions were reduced oreliminated (Austria and Medalla 1996). The potential negative impact of these reformson the mining and quarrying sector is the reduced production by firms if relativelycheaper imported substitutes for its products are available in the market. The potentialpositive impact is increased production due to higher investment by firms in cheaperimported and more efficient equipment. If most of the products are tradable and tradingpartners also practice trade liberalization, firms may increase exportation resulting to theexpansion of the sector. Environmentally, the decreased production by firms due tointense competition from import substitutes will reduce mineral extraction andenvironmental degradation. If higher investment in imported equipment includes thosefor environmental protection and management, the level of environmental degradation isalso lowered. However, if increased exportation results from trade liberalization, thenworsening mineral extraction and degradation occurs. The fourth policy is investment promotion, which was initiated again through aseries of reforms (Reyes and Cororaton 1996, Austria and Medalla 1996). This policywas intended to increase the flow of invested foreign and domestic funds into theeconomy. Like some of the other policies, the potential positive impacts of investmentpromotion are the increased investment and growth in the mining and quarrying sector.These should promote further resource extraction and environmental degradation in themining and quarrying sector. However, if investment into environmental protection andmanagement accompanies overall investment, then some mitigation of the environmentalproblems may happen. The fifth policy is tight fiscal policy, which was intended to improve thedeteriorating fiscal position of the country (Manasan 1998). This policy was pursuedthrough improved tax generation and reduced government expenditures. Reducedgovernment expenditures for environmental protection and management, particularly inthe area of monitoring and enforcement, may result to increased incidence of violation ofenvironmental rules and regulations, worsening mineral extraction and environmentaldegradation. Higher taxation can significantly increase costs of firms and households andreduce their willingness and ability to spend on environmental protection andmanagement.VII. Profile of the Mining and Quarrying Sector of the Philippines The Gross Value Added (GVA) of the mining and quarrying sector contributedabout 1.56 percent to both the Gross National Product (GNP) and the Gross DomesticProduct (GDP), on average annually, from 1985 to 1998 (Table 1). In money terms,national mineral production amounted to about P24.9 billion, on average annually, overthe same period (Table 2). Of this, approximately 65 percent was metallic productionwhile 35 percent was non-metallic production.
  12. 12. In recent years, nickel was the only metallic mineral significantly mined inPalawan while sand and gravel were the most important quarrying products. Thus, it isinstructive to look into the production performance on these minerals nationally. Inmoney terms, national nickel production was about P484 million, on average annually,from 1985 to 1998 and comprised 3.11 percent of the total metallic mineral production(Table 3). National sand and gravel production was approximately P4 billion and formed39.33 percent of the total non-metallic mineral production, on average yearly, over thesame period (Table 4). In terms of volume, the average national production annually of nickel from 1985to 1999 was 580.25 thousand dry metric tons of beneficiated ore (Table 5). From 1985 to1997, 13.88 thousand metric tons of metal were produced. The estimated nationalreserves of nickel, on average, annually were 1,307 billion metric tons for the 1985 to1996 period. The average annual ratio of the production of beneficiated nickel ore to theestimated nickel reserves was approximately only .09 percent for the 1985 to 1996period. The average annual volume of sand and gravel production was 29.55 millioncubic meters for the 1985 to 1999 period while the estimated annual reserves of sand andgravel was 70.04 million cubic meters from 1993 to 1996 (Table 6). The average annualratio of the production of sand and gravel to total reserves of sand and gravel was 38.92percent for the 1993 to 1996 period. In summary, over the years, the annual contribution of the mining and quarryingsector to the overall economy has been small compared to the other sectors. Thecontribution of nickel to total metallic mining production has been modest also while thatof sand and gravel to total non-metallic mining output has been much more significant.The potentials for the expansion of both nickel mining and sand and gravel quarrying,however, are great given that only a tiny portion of the estimated nickel reserves and lessthan half of the sand and gravel reserves have been exploited by the sector on an annualbasis.VIII. Profile of Palawan, Its Economy and Its Mining and Quarrying Sector 8.1 Profile of the Province of Palawan and Its Economy Palawan is the largest province of the Philippines and among the richest innatural resources. Owing to its relatively preserved environment, it is dubbed as the “lastecological frontier”. For a long time, the development of the province has been slowbecause of its far distance from the national capital region and other population centers.In recent years, economic prospects have improved to some extent as its rich naturalresources got advertised and both the local and foreign entrepreneurs started to come in. Palawan belongs Region IV or the Southern Tagalog region of thePhilippines (Figure 3). It is located in the western part of the archipelago bounded in theeast by the Sulu Sea, in the west by the South China Sea, in the north by the Mindoro
  13. 13. Strait and in the South by the Balabac Strait. Its southernmost tip is only about 97kilometers from Sabah, Malaysia. Palawan is composed of one main island and several surrounding islands(Figure 4). It has a total land area of 14,896 square kilometers and is the largest provincein the country (Table 7). Palawan is a second-class province with one first classmunicipality, the capital City of Puerto Princesa, and 23 other municipalities that areeither third, fourth, fifth or sixth-class. Puerto Princesa is the largest municipality whilethe smallest is Kalayaan Island. The province has a total of 431 barangays. PuertoPrincesa has the most number of barangays while Kalayaan Island only has one barangay. In 1995, Palawan had a total population of 640,486 people (Table 8). It isexpected to grow to 789,417 individuals in 2000. The estimated annual growth rate was3.56 percent from 1903 to 2000. The population density increased from 2.4 persons persquare kilometer in 1903 to 43 persons per square kilometer in 1995. It is expected to beat 52.99 individuals per square kilometer in 2000. A great majority of the population of Palawan lived in the rural areasalthough more and more people, in absolute and percentage terms, resided in the urbanareas in recent (Table 9). Given that mining and quarrying activities were located in therural areas, the sector has the potential to affect the lives of a great number of people inthe province. The biggest contributor to the GDP of Palawan for the 1994 to 1998 period,in current prices an on average annually, was the agriculture, fishery and forestry sector(Tables 10, 11 and 12). In the agriculture, fishery and forestry sector, fishery andagricultural crops were the major contributors; fishery and poultry were the fastestgrowing; while agricultural crops were declining on average annually. In the servicessector, wholesale and retail trade was the most important while finance was the fastestgrowing on average yearly. The most significant industrial activities were manufacturingand mining while construction and manufacturing were the fastest growing on averageannually. It should be noted that the percentage share of the mining and quarrying sectorto the GDP was much larger in Palawan than at the national level (Tables 1 and 11). Thisindicates that mining and quarrying was a relatively more significant sector in theprovince than in the entire country. 8.2 Profile of the Mining and Quarrying Sector of Palawan Based on PCSD computations, of the total output of the mining andquarrying sector in Palawan in current prices, about 26 percent came from nickel mining,5 percent was generated from quarrying, and 69 percent came from oil in 1988 (Table13). By 1994, the output of the sector was 46 percent nickel mining, 3 percent quarryingand 51 percent oil. No computations were available from the agency for later years. Inpercentage terms, the share of nickel mining has increased while those of quarrying andoil have fallen between 1988 and 1994.
  14. 14. While nickel is the only significant metallic mineral output of Palawan, theprovince has deposits of several other mineral resources, including copper, mercury, iron,manganese and chromite (PIADPO 1999). Chromite and mercury were mined in the pastbut due to decreasing world prices, the activities stopped. Palawan also has various non-metallic resources other than sand and gravel, such as silica sand, limestone, coal and oil.Silica sand is presently exploited while limestone and coal have not encountered majorquarrying yet. A significant amount of oil and natural gas have been found in the westcoast of Palawan and is in the process of exploitation. For this purpose, the U.S. $4.5billion Malampaya Deep Water Gas-to-Power project was established. This project wasplanned to generate natural gas that will provide 2,700 megawatts of power for a periodof 20 years starting January 2002 and reduce foreign fuel dependence by 30 percent. Inaddition, it was expected to generate substantial long-term revenues of about U.S.$10billion to the Philippine Government over its lifetime. The development of the projectstarted in 1998 and is continuing. In terms of the environment, a controversial issue related to mining inPalawan was the case of the Palawan Quicksilver Mining Inc. (PQMI) that operated from1953 to 1976. This firm deposited mercury laden mining wastes into Honda Bay locatedclose to Puerto Princesa. Benoit et al. (1994) cited the high concentrations of mercurywere found in wastes and sediments originally coming from the mine. Later, Williams etal. (1996), however, contradicted the earlier finding and argued that the concentrationswere not as high and dangerous as reported. Whichever is the case, the incident showedto the people of the province that mining has potentially significant impacts on them andthe environment. It was due to the great concern for the conservation of the naturalresources and environment of Palawan that the SEP was enacted. Among the measuresof this plan was the subdivision of the area into various zones of development andenvironmental protection. The GIS-generated ECAN map of Palawan (Figure 5 and List1) shows that that while the province and various municipalities have substantial areasopen for economic development activities, including mining and quarrying, it also hassignificant hectarage where these are either strictly disallowed or highly restricted. Themain intent of this zoning approach is to attain a more sustainable form of developmentwhere economic progress is made more compatible with environmental protection andmanagement.IX. Case Studies of the Mining and Quarrying Sector Case studies were undertaken both the mining and quarrying sub-sectors ofPalawan. For mining, nickel mining was chosen since it was the only major miningactivity. For quarrying, sand and gravel quarrying was selected since these were the mostimportant quarrying products.
  15. 15. There is only one firm into nickel mining in Palawan, the Rio Tuba NickelMining Corporation (RTNMC). This firm and the households it affected were covered inthe mining case study. The quarrying firms and the affected households in PuertoPrincesa and Aborlan were covered in the quarrying case study. Due to budgetconstraints, only the two municipalities were included. They were selected becausequarrying activities there were the most intense in the province. 9.1 Methods As earlier mentioned, RRA techniques were used because of specificreasons. In addition to these, the techniques were suited for gathering data andinformation about rural life in a short span of time. They were also highly applicable in amultidisciplinary fashion that fits the nature and composition of the study team. Thetechniques included secondary data analysis, direct observation and semi-structuredinterviews. For the mining case study, senior officers of the RTNMC at the site and atthe head office in Makati City were interviewed to generate various primary data andinformation. These were enhanced by secondary data taken from the firm andinstitutional sources. Aside from the officers of the firm, the households affected bymining were also interviewed to generate various data and information. The householdswere selected at random and available time and resources limited the coverage. Therewere 33 households covered, of which 21 were located close to the rivers affected bymining, 5 resided beside the main road used by the mining firm for transport and 2 livedin the coastal area where the mouth of the affected rivers were located. For the quarrying case study, firms and households living close toquarrying sites in Puerto Princesa and Aborlan were interviewed to get primary data andinformation. These data were enhanced by information from the institutional sources.As in the mining case study, the quarrying firms and households were selected at randomand the numbers covered were limited to the available time and resources at hand. Therewere 19 quarrying firms interviewed, 9 from Puerto Princesa and 10 from Aborlan.There were 74 households covered, 48 from Puerto Princesa and 26 from Aborlan. Ofthe households interviewed, 60 lived downstream of the rivers affected by quarrying, 7resided upstream and 7 lived in the coastal areas close to the mouth of the affected rivers.The quarried rivers where the households were located were the Bacungan river, Tanabagriver, Maoyon river and Iratag river in Puerto Princesa and the Iraan river and Aborlanriver in Aborlan (see Table 29). To augment primary data from the mining and quarrying firms andhouseholds, interviews with key government and private sector informants were furtherconducted. All in all, the specific primary data and information collected were the socio-economic and demographic data for profiling, environmentally-related data for theassessment of the environmental impact of mining and quarrying, and themacroeconomic policy-related data to evaluate the environmental impact ofmacroeconomic policies on the mining and quarrying sector.
  16. 16. As expected, the mining and quarrying firm and household respondentswere not very knowledgeable and conversant about the various macroeconomic policiesand their potential impacts on their activities and the environment. Thus, many of theinterview questions were asked in an open-ended and indirect manner to generate asmuch data and information as possible. Some of the questions raised were not answeredeither because individual respondents had no answers for them or were hesitant toprovide answers. The study team conducted the actual interviews on October-November2000. 9.2 Case Study on Mining Profile of The Rio Tuba Nickel Mining Corporation The RTNMC is located in the barangay of Rio Tuba in the municipality ofBataraza in the southern tip of Palawan. The firm has a total land area of mining claim of5,265 hectares, of which 353 hectares are currently operated (RTNMC 2000). Batarazahas 23 barangays and Rio Tuba is located in its middle portion (Figure 6). Rio Tuba hadthe largest population of the barangays of the municipality in 1995 (Figure 7). It had anestimated population of 6,000 individuals, of which more than 700 are employees of themining firm. The nickel deposit in Rio Tuba was discovered in 1969. Mineconstruction and development of the RTNMC commenced in 1975 and two years later,the first shipment was made to Japan. The operation does not process its ore but sends itdirectly to its foreign buyers. Since the start up to the present, an estimated total of 11million wet metric tons (WMT) of beneficiated nickel silicate ore has already beenproduced and shipped out of the country by the company. From 1977 to the third quarter of 2000, the average annual shipment ofRTNMC was at 491,585 WMT and growing at an annual rate of 1.85 percent (Table 14).The noticeably lower shipments in 1998 and 1999 were attributed to the La Nina thatbrought in a higher than average rainfall in the area. The weather phenomenon made itmore difficult for the company to meet the moisture content of the ore required. Data onnickel production, in value terms, indicates that on average annually, from 1985 to 1997,the nickel production of Palawan comprised approximately 76 percent of the total annualnational production (Table 15). This made the province of Palawan and the RTNMC themost important nickel producer of the entire country specifically in terms of productionvolume. Profile of Households Affected by Mining The profile of the household respondents for the mining case studyindicates that most were the father of the family although a good number were mothers(Table 16). Some of them were community officials but most were ordinary citizens. Afew of the respondents worked in the mining company but most did not. Most were
  17. 17. educated only below the high school and college levels but all had at least an elementaryeducation. The profile of the households show that most originated from outsidePalawan. The average annual household income level among the households was low.Comparing with income figures in Israel et al. (1999), this household income in miningwas lower that the average household income in Palawan, Southern Tagalog and thePhilippines. Most of these mining households also belonged to the lower incomebrackets than the higher income brackets. In retrospect, since mining households heads had at least some level ofeducation, they were expected to have at least some knowledge and awareness of theenvironmental and other problems created by the mining firm in their area. The low levelof the incomes of the mining affected households may have a bearing on their willingnessto pay for environmental improvement and their dependence on natural resources forsurvival. RTNMC and the Environment The ECAN map of Bataraza showing the barangay subdivisions ispresented in Figure 8. As is the case of Palawan as a whole, Bataraza and Rio Tuba havesubstantial areas where environmentally critical economic activities were either strictlydisallowed or highly controlled. The ECAN map of the municipality of Batarazashowing the mine claim and currently operated mine area of the RTNMC is presented inFigure 9 while a blown-up ECAN map of the mine area is presented in Figure 10. Asshown, the mining claim covered mainly controlled use zones and restricted use zones.Thus, part of the mining claim was located in restricted use zones where either only non-consumptive activities or controlled forest extraction, not necessarily mining, are allowedby the SEP. The currently operated area, however, clearly included only multiple usezones, traditional use zones and controlled use zones where mining activities are allowed. There were various environmentally related issues concerning theoperation of the RTNMC. One of these was air pollution. As in many other miningareas, the main road used by the firm for ore transport was unpaved. Because of this,passing vehicles produced significant amounts of dust particularly during the summermonths. Inside the mine site, substantial dust and air pollution were also produced whenthe ore dug from the ground was crushed to smaller sizes. Health-wise, the inhabitantsof Rio Tuba were at risk because of the dust, including the employees of the mining firm. As in other mining areas also, pollution, siltation and sedimentation ofdownstream water bodies and areas were consequences of the RTNMC operations. Themine site was located close to two rivers, The Ocayan River and the Rio Tuba River, andthe coast. Although the mine established 5 siltation ponds to divert, store and treateffluents, the danger of polluted runoffs flowing into the rivers during the rainy seasonremains. These runoffs add to the natural silt and sediments carried down from theupstream area. The net effect is the reduced viability of the nearby rivers and the coast
  18. 18. for fisheries and other activities that are economically and recreationally important to theinhabitants living in the downstream areas and the coast. Soil erosion and deforestation were other environmental problems alsoexisting in the RTNMC operations. The mine was an open-pit operation and substantialscraping of the land cover has occurred over time. This led to soil erosion, deforestationand the destruction of the topography and aesthetic value of the mining area. The scopeof these problems could be significant enough to also cause problems to affectedinhabitants and even society as a whole. In order to validate the extent of the environmental problems caused bythe RTNMC, the study team visited the mining site. The interviewed key personnelmentioned that indeed, dust have been significant in the main road used by the mine, afact that was validated through personal observation by the study team. The interviewedpersonnel mentioned that the problem has been alleviated by the constant spraying ofwater and the installation of humps to control vehicle speed. They also asserted thatinside the plant, chutes and dust collector boxes in the screening and crushing plant areawere also installed, as well as windbreaker. A tour around the mining area showed thatthe equipment were in place. To control pollution, siltation, sedimentation and soil erosion, theinterviewed personnel mentioned that the firm conducted various activities. Theseincluded slope stabilization, slope engineering, boulder toe dressing, and the constructionof silt collector sump, proper drainage, dikes and siltation ponds. They also asserted thatthe firm was aggressively addressing the problem of deforestation through reforestation.Of the total current mining area of 353 hectares, 114 hectares were rehabilitated andextensively planted with various types of trees. Through a tour of the relevant facilitiesand sites, the study team found that reforestation was indeed done by the RTNMC in themining area. It also observed that the other activities and equipment mentioned by theinterviewed personnel for the control of siltation, sedimentation, soil erosion and relatedproblems were in place. There were no technical records that can help ascertain the extent of airpollution caused by the RTNMC but the interviewed personnel mentioned that their testsshowed that the pollution levels meet the standards. For water pollution, the firm submitsa monthly report on the water quality analysis of collected samples, in compliance to therequirements of the DENR and as embodied in the ECC. Effluent was being tested todetermine how the concentration levels of chromium, lead, nickel, cobalt and iron fromthe siltation ponds, rivers, coastal area and other selected sampling sites. The resultedwere then compared with the standard set by the DENR. A summary of these reports fora 15-month period between April 998 to September 2000 was made available by theinterviewed personnel to the study team. For chromium, the maximum allowableconcentration was 0.2 milligrams per liter set by the DENR. Based on the availablereports for 15 months, the concentration levels exceeded the standard at certain periodsfor only two of the sampling points (Table 17). The study team was informed that in thetwo sampling points, the heavy rains lasted for several days during the sampling and this
  19. 19. agitated the siltation ponds resulting to the detection of more traces of chromium in thewater. To address the problem, the firm diluted the effluent to the allowable level as itflowed along the spillway before discharging to the Rio Tuba River. Overall, the datashowed that the concentration of chromium due to the RTNMC operations met theallowable limit in most sampling points. For lead, the maximum allowable concentration set by the DENR was 0.3milligrams per liter. Except for tests done in August 1998 in two sampling points, thelead levels in the water samples due to the RTNMC were all below the standard (Table18). For nickel, cobalt and iron, the department, set the maximum allowableconcentration at 1.0 milligrams per liter. Results for these metals showed thatconcentration levels were generally below the limit (Tables 19, 20 and 21). However,traces of iron beyond the allowable limit however, were observed during the October andDecember 1998 monitoring period for two sampling points. Overall then, the operationof the RTNMC met the standard for the concentration levels for various pollutants set bythe government. The interviewed personnel and other informants explained that asmandated by the IRR of the new mining law, the RTNMC has set up funds (Table 22) forits Environmental Protection and Enhancement Program (EPEP). Specifically, it pays fora Contingent Liability and Rehabilitation Fund (CLRF) that includes a Mine Waste andTailings Fee (MWTF) and Mine Rehabilitation Fund (MRF). The MRF is furthercomposed of the Rehabilitation Cash Fun (RCF) for rehabilitation and similar purposesand the Monitoring Trust Fund (MTF) to finance environmental monitoring. In addition,the firm was recently mandated to set up the Environmental Trust Fund (ETF) that servesas guarantee for environment-related damages. The interviewed firm personnel and other informants further explainedthat the RTNMC was among the first mining firms in the country to have a MultipartiteMonitoring Team (MMT) that monitors its compliance to its environmental commitmentsas stipulated in its ECC. The MMT for the firm was comprised of representatives fromthe different regional MGB, LGUs, NGOs and RTNMC. It started its work in 1998 andhas produced quarterly reports detailing its findings and recommendations related to theenvironmental performance of the firm. The MGB-Region IV has been compiling the RTNMC MMT quarterlyreports (e.g. MGB 2001b). Key informants at this office mentioned that the reportsshowed that the firm has been complying with its environmental commitments. Thispositive observation was strongly supported by another key informant who is serving as acurrent member of the MMT. A look at the reports by the study team, however, showedthat in general they do not contain categorical statements as to the overall performance ofthe firm in relation to compliance to its environmental commitments but contains findingsand recommendations for specific activities only. To further validate the environmental effects of RTNMC operations,similar information were gathered from the affected households (Table 23). The average
  20. 20. distance of the household residence from the mining site was 5 kilometers. The studyteam was informed that this was close by rural standards. Although only a minority ofthe households lived by the main road used for mining activities, many of them indicatedthat they were affected by the air pollution caused by mining vehicles passing through theroad. Of those affected, all asserted that they experienced sickness in the form ofrespiratory and skin problems. Some households mentioned that the mining companyaddressed the problem of air pollution by sprinkling water, but only on an irregular basis. Most of the households reported that the mining operations causedpollution, siltation and sedimentation in the water bodies. However, a much fewernumber cited that they were directly affected by the problem. Of these, a few mentionedthat it caused sickness among humans and death among fish among fish and animals.Many households reported that the water affected by mining was used for irrigation andthis caused the siltation of ricelands. Some households also said that because of mining,coastal waters were polluted which resulted to low fish catch and a silted coast. Severalmentioned that RTNMC constructed dikes and diversion canals to address the pollutionof water bodies. A few cited that mining also caused the soil erosion in riverbanks thatwas mitigated by the construction of diversion canals. Some mentioned thatdeforestation was a problem and the mining company addressed this problem throughreforestation. From the above discussions, it was apparent that although the RTNMC hasbeen conducting some activities for environmental improvement, the households affectedperceived that the problems continued to exist and that in some instances, these causedhealth and economic problems on their part. There was an implied suggestion that thefirm should do more, particularly related to the air pollution in the main road used by thefirm and the pollution, siltation and sedimentation in the water bodies downstream of themine. Macroeconomic Policies, Mining Firm and Households and the Environment A key firm official in Makati City was interviewed about the potentialimpact of various macroeconomic policies on the operation of the RTNMC, includingthose that have environmental implications. The key official mentioned that in general,the RTNMC does not borrow money from banks and other institutional sources to investinto its mining operations. He also believed that the prevailing interest rates have beenstable in recent years, except during the economic crisis. He pointed out, however, thatthis was not a factor in the decision of the firm to invest more, including in areas relatedto environmental protection and improvement. The key official cited that RTNMC exports all of its beneficiated ore outputto Japan. Therefore, on the one hand, the firm benefited from the devaluation as itsproceeds increased in peso terms. On the other hand, the same devaluation raised theirexpenses on oil, spare parts and other imported inputs and this had a dampening impacton earnings. Overall, since most of the production inputs of the firm were locally
  21. 21. sourced and only about 20 percent at most was imported, the devaluation on the netbenefited the firm by raising its earnings. The key official mentioned that like otherfirms involved in exportation, the abolition of controls related to foreign exchangetransactions benefited the firm since it decreased government control over the handling ofdollar proceeds of exporters. The key official said that in recent years, RTNMC has been selling its oreto only one buyer and because of this, production is contracted based on the demand ofthe buyer. This means that the level of production and exportation by the firm is notaffected by the devaluation and the elimination of controls on foreign exchangetransactions. The key official also mentioned that the firm makes its investment inmachinery and equipment, including those that are environment-related, based onrequirement and not on market price. Therefore, even when they are imported, such asthe laboratory equipment for environmental monitoring, the devaluation and theelimination of controls did not affect the decision of the firm to buy the equipment. Forthe same reasons, he said that the reduction in tariffs and import restrictions has notaffected the RTNMC in its decisions related to levels of production and export. It alsohas not affected the decision to purchase imported equipment, including those intendedfor environmental protection and management. The key official explained that the RTNMC is now proposing to thegovernment the establishment within its mining site of a processing facility for low-gradenickel ore. This facility will be about 80 percent owned by Japanese investors and theother 20 percent by the local investors. He opined that the policy of investmentpromotion by the government as manifested by the granting of various incentives throughthe new mining law could have a positive impact on the decision of both the foreign andlocal investors involved of investing in the processing facility. He also mentioned thatunder the law, their company has benefited from certain incentives offered by thegovernment, including the reduction of excise taxes from 5 percent to about 2 percent andincome tax holidays. The incentives, however, have been balanced by the stricterfinancial requirements set by the government for environmental protection andmanagement, particularly the setting up of the CLRF. The key official mentioned that the RTNMC realized that because oftightening public resources, the national and local governments were not in the positionto fully meet the basic social services in their area. To assist the government, the firmestablished various infrastructure and facilities that were open for use by miningemployees and the general public. These included a 20-bed hospital, school forkindergarten, elementary and high school, farm to market roads, dry and wet market,church and mosque and many other facilities (RTNMC 2000). He added, however, thattheir investment in facilities related to environmental improvement is programmed basedon requirements and not on the inability of the government to provide for said facilities. The key official mentioned that the level of monitoring and enforcementby the government did not appear to have waned due to the tight fiscal policy. Heasserted that there has been good synergy between the government and the RTNMC in
  22. 22. activities related to environmental monitoring, particularly through activities related tothe MMT. This encouraged the firm not to violate environmental rules and regulationsand instead follow them as much as possible. This also motivated the firm to agree to putup the specific funds for aggressively addressing the environmental problems in the minesite. The data and information generated from the households affected by themining operations of the RTNMC also provided interesting insights about the interactionsbetween macroeconomic policies, the households and the environment. All householdsdid not save in banks while a few borrowed from them (Table 24). Those who borrowedmentioned that the interest rate either increased or remained the same in recent years.The study team learned that there was no bank in Rio Tuba and Bataraza although therewere a few in Brookes Point, a municipality located kilometers away. Key informantsmentioned that this could be a factor influencing the households to have a low level ofuse of banks as source of funds. Practically all of the households did not earn dollar currency.Furthermore, most of the household respondents mentioned that the peso devaluationmade their lives worse by raising the prices of commodities and transport. The increasein the price of energy, however, did not force households to use wood as substitute forfuel oil. According to key households informants, if there was an environmental effectof the devaluation among households, it was negative. They mentioned that the highercost of living made the households even poorer and less willing to spend anything forenvironmental protection and management. The households simply hoped that theRTNMC, which caused the environmental problems in their area, is responsible enoughto do something positive about them. Some households cited that the inflow of imported consumers goods intheir localities benefited them in the form of increased availability and lower prices ofthese commodities. On the other hand, key household informants mentioned that whilethis increased availability and lower prices improved their purchasing power, they haveno impact on the willingness of households to pay for environmental protection as theywere already very poor in the first place. All households did not receive any kind of financial investment from thegovernment and thus had no investment made as result of financial incentives. Keyinformants argued that the households were too poor to indulge in any major financialinvestment. It was difficult to get information from the households on their violation ofenvironmental rules and regulations. Some said that the government was notsignificantly involved in the environmental management in their areas but this did notencourage them to violate rules and regulations. Key informants mentioned that thehouseholds in general paid little taxes and were not were affected by increased taxationby the government. Their willingness to spend for environmental protection andmanagement was not influenced by taxation as well.
  23. 23. Overall, the households mentioned that they were economically worse offnow than five to 10 years ago. All also said that they have not spend on environmentalimprovement in their areas. 9.3 Case Study on Quarrying Profile of Quarrying in Palawan River quarrying is the most prevalent quarrying practice in Palawan. Therivers of the mainland alone have estimated reserves of sand and gravel materials ofabout 5.36 million cubic meters. The exploitation of these reserves was granted tovarious construction firms, business enterprises and private individuals. From 1990 to1999, the average annual production of sand and gravel in the province was 35,902 cubicmeters while the average annual reserves were about 5.6 million cubic meters (Table 25).This means that only a minimal portion of the sand and gravel reserves in the provincewas actually exploited. The provincial production of sand and gravel also comprisedonly a very insignificant .13 percent of the average annual national production (Table26). The production data, however, reflected an increasing production over the years.Key informants said that an important reason for this was that in recent years, sand andgravel and concrete materials became substitutes for lumber in construction when the logban was implemented. Another reason was that the construction of roads, bridges,buildings and other forms of public infrastructure greatly intensified in recent years. Anexample of this is the ongoing concreting of the national highway from the capital city tothe northern portion of the province. Briefly, river quarrying in Palawan is generally operated as follows. First aloader extracts the sand and gravel and other filling materials from the riverbed. Thematerials are then stockpiled by the loader in the riverbank or loaded into a dump truckand transported to the stockyard or construction site. As in other areas, in Palawan, thesand and gravel were sold by the operator through its own outlets, used in its ownconstruction activities such as the building of structures and roads, or used in theconstruction activities of other firms. If the sand and gravel were not directly used inconstruction, they were utilized in the production of building materials such as hollowblocks and concrete electrical posts. Quarrying operators in Palawan can be classified into three types: (a)operating permittees; (b) non-permittee operators who paid the royalty fee to exploitquarry sites of non-operating permittees; and (c) buyers who collected aggregates fromdifferent quarry areas and pay for said materials. There were two types of permits, thecommercial permit and industrial permit. The usual volume applied and approved forextraction under a commercial permit was 500 cubic meters annually. An industrialpermit allowed a volume that ranged from the 2,500 cubic meters to as much as 10,000cubic meters. The number of sand and gravel permittees increased in recent years andPuerto Princesa and Aborlan had the most number (Table 27). This rising number ofoperations in the entire province was consistent with the increasing production in recentyears.
  24. 24. There were various fees and expenses paid by the quarrying operatorsduring the application of the permit (Table 28). Key informants mentioned that some ofthese fees and the length of time to process the applications discouraged applicants to fileand application and instead just operate without a permit. When a firm operates, variousfees have to paid as well. These included road right of way of about P80.00 to P100.00per 6 cubic meter load truck, road maintenance of about P200.00 to P100.00 per cubicmeter of aggregates, barangay fee of about P20.00 per truck. If one operated by paying aroyalty fee, this ranged from P300.00 to P1000.00 per truck or was based on a 50:50sharing arrangement between the permittee holder and the actual non-permittee operator. The maps of the city showing the barangays and their populations arepresented in Figures 11 and 12. The ECAN map that also shows the location and namesof owners of the quarrying applications with commercial and industrial permits ispresented in Figure 13. The maps of Aborlan showing the barangays and theirpopulations are presented in Figures 14 and 15. The ECAN map that also shows thelocation and names of owners of the actual quarrying operations with commercial permitsis presented Figure 16. The ECAN maps for both Puerto Princesa and Aborlan indicatethat the sand and gravel quarrying operations were located in multiple use zones andother areas where they are generally allowed under the SEP. Also, all the commercialpermittees in the two areas had one-hectare operations while the industrial permittee inPuerto Princesa had a five-hectare operation. It can be noted further that the actualquarrying operations with permits numbered less than those granted permits (see Table27). This was because some permittees may have opted not to actually exploit theirquarries. While in theory the quarrying operations in Palawan were conducted inallowed areas, in reality this was not the case. According to key informants, quarryingoperations in the province were infested with illegal operators that either have no permitsat all or do not renew expired permits. These illegal operators were estimated tocomprise one-third of the sub-sector in terms of number and two-thirds in terms ofproduction volume. They violated rules by quarrying not just in riverbeds but also inriverbanks, hauling more volume than what was allowed in a given site, and extendingtheir quarrying operations into sites not allowed by the SEP. Key informants mentionedthat from time to time, illegal operators were caught and their equipment impounded.However, they were allowed to retrieve their equipment for a measly fee and notanymore brought to court and prosecuted. Of the rivers quarried in Puerto Princesa andAborlan, most were quarried intensively and a majority had a high concentration ofillegal mining operations (Table 29). Profile of Quarrying Firms and Households All of the quarrying operations interviewed were Filipino-owned and allexcept one were sole-proprietorships (Table 30). The average number of years ofoperations was 4 years in Puerto Princesa and 2 years in Aborlan. Most of quarriescovered a hectare or less and so were below the allowed five hectares. The average
  25. 25. number of employees was 3 to 4 individuals that included the operator of the loader,driver of the truck and helper(s). Specific data on the compensation of workers in thequarrying were difficult to generate from the respondents but many of them mentionedthat they were paid better than the average worker in their fields. This was becausequarrying operators were said to pay incentives and other bonuses to their workers.Many of the operations were fully mechanized but a few were both mechanized andmanually operated. Key informants said that approximately 40 percent of the quarryingoperations were vertically integrated where the quarrying operator also owned retailoutlets for the quarrying products and/or a construction company that utilizes theproducts. Most of the operations had a permit to operate but one in Aborlan had nopermit. All had commercial permits and none had an industrial permit. Several of thequarrying operations were intermittent but others continuously operated the whole yearround. The average annual income of the operations was lower in Aborlan than in PuertoPrincesa. The levels of income generated in the interviews were probably undervaluedbecause of the fear of the respondents that their answers will be utilized for tax purposes.Key informants mentioned that the estimated average net income required for quarryingoperations in the province to continue operating was about P200,000.00 a year. Ingeneral, the quarrying operations can be considered small-scale as reflected by theaverage area of the quarry, the number of years of operation, length of years ofoperations, and average income of operators. For the households affected by quarrying, the interview respondents wereeither the father or mother of the family (Table 31). A few respondents in PuertoPrincesa were community officials but most in both areas were ordinary citizens.Practically all respondents were not involved in quarrying operations so it was hoped thatthis will make them talk more openly about the quarrying operations. Most of therespondents were educated below the college level but all have attained some education.Thus, as in the case of the mining households, they were expected to have someawareness of the environmental problems caused by quarrying in their areas. Thehouseholds came from different ethnic backgrounds indicating more diversity comparedto mining households. The average annual household income was even lower than thosefor mining households. Again, most of the households belonged to the lower incomebrackets than higher income brackets. Quarrying and the Environment Most of the quarrying operations interviewed acquired an ECC but one inAborlan did not comply with this requirement (Table 32). Only a few of the operationshad a staff assigned to attend to environmental concerns. All of the firm respondentsmentioned that their quarrying vehicles did not cause any significant air and noisepollution in the roads used for transport. A few mentioned that they did something tominimize any air pollution they caused, through the calibration and maintenance ofvehicle engines and water sprinkling. Only a few accepted that their operations resultedto pollution, siltation and sedimentation downstream in the river where their quarries
  26. 26. were located. A significant number of respondents mentioned that they mitigated theenvironmental problems they caused in the river by quarrying at the riverbed only or byre-routing and re-channeling the water flow. Only a few of the firm respondents mentioned that they caused significantsoil erosion and asserted that any erosion that occurred was mitigated through the re-routing and re-channeling of the water flow in the river. Most operations did notconstruct the roads leading to the quarry sites since these were already existent beforethey operated in their areas. To validate the information coming from the quarrying firms,environment-related data and information were gathered from the households. All of thehouseholds lived less than a kilometer from the quarrying site (Table 33). Most of thehouseholds in Puerto Princesa and many in Aborlan also lived close to the roads leadingto the quarry site. A significant number of the household respondents indicated that thedust caused by quarrying vehicles passing through the roads affected them and causedproblems in the form of respiratory and skin illnesses. Some also reported that thequarrying firms did nothing to address the problem although others said otherwise. Ofthose who said that firms did something, the reported action taken was water sprinklingbut only irregularly. Most of the household respondents reported that the quarrying operationsin their area caused pollution, siltation and sedimentation in the rivers. They said thatbecause of these, the water in the rivers could not be used for everyday activities andsometimes even flooding occurs. Only a few respondents said that the pollution of therivers caused sickness to humans and mortality to fish and animals. Some mentioned thatthe river water affected by quarrying was used for irrigation and this has caused thesiltation of ricelands. Some further reported that because of quarrying, coastal waterswere polluted and silted. Most respondents said that the quarrying firms did nothing toalleviate the pollution, siltation and sedimentation of the rivers their operations haveaffected. A few said that firms actually did something to address the problem, inparticular, by deepening the riverbeds and installing boulders along the riverbanks. Somerespondents cited that quarrying also caused the soil erosion in riverbanks while a fewmentioned that operations did something about this by constructing siltation ponds anddiversion canals. As in the case of mining, there was disagreement between the firms andhouseholds on the extent of the environmental problems caused by quarrying and thedegree of the activities done by the firms to abate them. The households suggested thatfirms should do more to address the environmental hazards which have been themsignificant health and economic problems. The ocular inspection revealed that indeed,the extent of the problems caused by quarrying, particularly pollution, siltation andsedimentation, in some quarrying areas was significant. Up to the present, there has been no water quality monitoring done by anynational or provincial agency in the rivers affected by quarrying in Palawan that could
  27. 27. have validated the contentions of either the firms or households. These could havehelped confirm the extent of the water pollution caused by quarrying activities. ThePCSD has promised to initiate this year a monitoring effort in at least two rivers in PuertoPrincesa and results will be made available to the IMAPE as soon as they are ready. Keyinformants mentioned that an MMT for quarrying has already been set up but is still notoperational at the moment. Putting this team into action is considered by the concernedLGUs and the PCSD. Macroeconomic Policies, Quarrying Firms and Households and the Environment Quarrying firms were asked questions related to the potential impact ofvarious macroeconomic policies on their operations, including those that haveenvironmental implications. The number of banks in Puerto Princesa and Aborlanincreased in recent years (Table 34). However, only a few of the quarrying firmsborrowed money from banks to invest or finance its operations (Table 35). Those whoborrowed said that the interest increased or stayed the same in the last three years. Somementioned that the interest rate level discouraged them from expanding operations and/orspending on environment-related activities. Many of the quarrying firm respondents mentioned that they were affectedby the devaluation in the form of reduced demand and increased operating costs. Severalsaid that the devaluation discouraged them from expanding operations but none said itaffected their decision to spend on environment-related activities. All of the firms alsodid not maintain dollar accounts for their operations through which they could havebenefited from the devaluation. All the firm respondents mentioned that they did not export any of theirproducts and did not import their equipment. They also thought that trade liberalizationhad no direct effect in their decision to produce or spend on environment-relatedactivities. Key informants also said that there were no imported substitutes to thequarrying products and so, this aspect of trade liberalization could not have directlyaffected the operations of quarrying firms as well. All of the firm respondents mentioned that they did not receive anyfinancial incentive from the government. All also thought that the investment promotionthrust had no effect on their decisions on investment and production in general and ontheir activities related to the environment in particular. All the firm respondentssuggested that both the local and national governments were actively involvement in theenvironmental management in their areas. All also mentioned that the tight fiscal policydid not influence their decisions related to production and spending on environmentrelated activities. Key informants, however, mentioned that in terms of monitoring andenforcement, the LGUs were weak and this led to the growth of illegal quarryingactivities and the further exploitation of mineral resources and environmental degradationin quarrying areas. They mentioned that the weak presence of government in thequarrying sub-sector also encouraged firms to violate environmental rules and regulations
  28. 28. and spend little efforts on environmental protection and management than what theyought to do. Overall, only one of the respondents said that the operations of his firmexpanded in the last three years. The various reasons forward include high interest rates,too many requirements and low demand. Key firm informants also mentioned thatcorruption in government, particularly in the processing of permit renewals and paymentof fees, played a major role in the decision of firms not to expand their quarryingoperations. It is interesting to note that while the individual firms professed that theiroperations did not expand, the overall production of sand and gravel operations in theprovince significantly increased in recent years (Tables 25 and 26). Key informantsopined that the increased production could have come from the illegal operations or dueto the increasing number of both legal and illegal operators. Furthermore, informantsbelieved that some of the respondents did not admit that they expanded operations fortheir fear that it may be utilized for tax purposes. For the households affected by quarrying, practically all did not save inbanks while only a few borrowed from banks (Table 36). Those who borrowedmentioned that the interest rate either increased or remained the same. All of thequarrying households did not earn dollar currency. Most said that the peso devaluationmade them worse off by raising the price of commodities and transport. Moreimportantly, most of the households said they used wood as fuel substitute. Keyinformants mentioned that the use of wood for fuel has been a popular practice inPalawan because of the deteriorating economic situation of the people and the increasedemployment of charcoal in restaurants and other establishments catering to the tourismsector. A few of the households mentioned that the inflow of importedconsumers goods in their areas benefited them in the form of increased availability andlower prices of these commodities. According to some informants, this is an importantpositive effect of trade liberalization for households in general. Key informants,however, opined that this has no discernible impact on the willingness of households topay for environmental protection and management since they are still poor even withthese changes. All households said that they made no investments due to any incentivesoffered by the government. A majority mentioned that the government was activelyinvolved in the environmental management in their areas. However, Key informantsargued that monitoring and enforcement by the government was actually weak and thisencouraged households to violate rules and regulations, such as in the case of illegalcutting of trees for firewood. Key informants also mentioned that the households ingeneral paid no or little taxes and were not affected by increased taxation by thegovernment. As in the case of mining, only a minority of the households said that they
  29. 29. were better off now than five to 10 years ago and none mentioned that they have spendon activities related to environmental protection and management in their particular areas.X. Summary and Conclusions To summarize, the study generated the following general findings related to theenvironment in the mining and quarrying sector in Palawan. First, there was a significantdivergence of opinion between mining and quarrying firms on one side and the affectedhouseholds on the other side on the environmental effects of mining and quarryingactivities. The firms argued that the problems were less serious than thought to be andthat significant efforts have been done already to address them. In contrast, thehouseholds asserted that the problems were very disturbing and that more have to be doneby the firms to mitigate them. The differences in the opinion between firms andhousehold were expected and reflected the great divide separating various stakeholders inthe environmental debate. While it was beyond the scope of the study to serve as arbiter in the mining andquarrying sector, the study team found technical evidence that showed that the single firmin the mining sub-sector in Palawan has been meeting at least some of the environmentalstandards set by the government. Furthermore, the existence of an operating MMT forthe firm is a strong sign that its environmental commitments will be seriously pursued inthe future. For quarrying, the team found that no similar technical evidence and MMTswere in place. As to the impacts of macroeconomic policies on the mining and quarrying sectorof Palawan, important caveats first must be mentioned before conclusions are made. Theresults generated by the study should be taken as preliminary and validated further. Inparticular, since the study only looked into the direct effects of policies and disregardedthe indirect effects and overall effects, a more detailed and comprehensive futureevaluation could lead to different conclusions. Furthermore, the results here only reflecton the mining and quarrying in Palawan and not that of the entire country. The provincedoes not represent other areas where mining and quarrying are practiced more intensivelyand macroeconomic policies may have more profound impacts on the differentmicroeconomic units in the sector. The results indicate that a direct and positive impact of financial liberalizationwas the increase in the number of banks in the province that cater to the investment andfinancial needs of local businesses and households. This advantage, however, wasminimized by the fact that mining and quarrying firms and households in general did notuse the banking system to source their investment and financial needs. Hence, financialliberalization for the time being did not result to increased investment and production inthe mining and quarrying sector in the province. By the same reasoning, it has nosignificant influence on the rate of mineral extraction and environmental degradation inthe sector.
  30. 30. A direct and positive result of foreign exchange liberalization was the financialwindfall to the lone mining firm due to the increased peso value of its exported productthat the devaluation brought about. The abolition of controls in foreign exchangetransactions also benefited the firm as an exporter and dollar earner. The firm, however,had pre-set production and exports based on the demand of the single foreign buyer of itsoutput which were unaffected by devaluation. While the devaluation provided significantfinancial windfall, it did not motive the mining firm to increase its purchase ofenvironment-related equipment since this was also based on programmed requirementsand needs. The devaluation raised the cost of production of the quarrying firms who servedonly the domestic market and did not earn foreign currency. It also caused thecontraction of some quarrying firms and this may have reduced the rate of extraction andhelped the environment. The devaluation, however, increased the cost of living ofhouseholds and forced some quarrying households to depend more on wood for their fuelneeds to the detriment of the environment. It may also have made both quarrying firmsand households who are already poor even less willing to spend for environmentalimprovement. Trade liberalization positively impacted the mining firm by lowering the cost ofsome of its production inputs. But for both mining and quarrying firms, again, this wasnot a factor in their decisions related to production and the purchase of environment-related equipment. Some households were benefited by the inflow of importedconsumers goods in the form of increased availability and lower prices of thesecommodities and this was an important direct positive impact of trade policy. In terms ofthe environment, however, these gains did not make households any more willingenvironmental protection and management since they are still poor even with thechanges. Investment promotion directly benefited the mining firm through the availed tax-based incentives and could have helped motivate investors to think of getting into nickelprocessing. Thus, the policy has an environmental role to play if it can help lead to anenvironmentally safe nickel processing facility in the future. The quarrying firms andhouseholds in general did not receive any form of incentives so this policy may have nodirect bearing in terms of the willingness to pay for environmental improvement amongthese groups. Tight fiscal policy may have benefited environmental protection and managementin the mining sub-sector as the mining firm has fill in the gap by setting up the necessaryfunds for the purpose. The existence of the CLRF helps ensure that the environmentalcommitments of the company will be strongly pursued. The setting up of the MMT withfunding from the MTF also makes effective monitoring possible even with limitedresources coming from the government. The case of quarrying was different. The lowerresources for monitoring and enforcement that tight fiscal policy has resulted to may havecontributed to a significant extent to the proliferation of illegal quarrying in the province.
  31. 31. To conclude, macroeconomic policies have some important positive impacts onthe mining and quarrying sector and the environment in Palawan. To some extent, theseimpacts have been tempered by the inability of the firms and households to takeadvantage of the positive changes that the policies brought about. Policies broughtnegative impacts on the sector and the environment as well. The devaluation, inparticular, increased the cost of operations of firms and the cost of living of householdsmaking them less willing to spend on environmental improvement and more dependenton natural resources for survival.X. Recommendations For the mining and quarrying sector in general, much remains to be done toimprove the environmental conditions in the mining and quarrying sites. Yet, in recentyears, the budgets of national agencies doing the work on the environment in general andon the mining and quarrying sector in particular have decreased. For instance, the annualbudget of the DENR has been falling since 1997, particularly that for operations (Table37). Except for 1998, the budget of the MGB Region IV overall and for operations haslikewise decreased (Table 38). At the local level, the budgets of environmental agenciesin the province have been fluctuating (Table 39). The increased provision of governmentfunds and their judicious use for environmental management in the mining and quarryingsector of Palawan is much needed. In order to effectively monitor the environmental conditions in the mining andquarry sites, pertinent government agencies have to do the following: a) establish thephysical, economic, social and environmental data base in all mining and quarrying areasand watersheds; b) process these data and produce related maps using the GIStechnology; and c) periodically update the data to monitor changes over time. Themining and quarrying firms may do part of these activities in collaboration with theagencies. At present, these activities are not done in quarrying so at the least, the PCSDshould start its planned efforts for water quality monitoring in a few o the intenselyquarried rivers. Monitoring is an important area of work in mining and quarrying whereimprovement is clearly needed. The MMT for the mining firm should be strengthenedand continuously supported to ensure success. On the part of quarrying, the creation andoperation of MMTs for specific quarrying firms or areas should now be done. An MMTfor individual quarrying firms may be expensive to finance so perhaps firms located inthe same rivers can be banded together for monitoring under a single MMT. A fundsimilar to the MTF in mining should be set up to ensure continued funding for monitoringin the quarrying sub-sector.
  32. 32. To improve on the mining situation in particular, the local and nationalgovernments should strictly screen mining applicants in Palawan, including the nickelprocessing project proposed by RTNMC. The screening, however, should be in a fairand judicious manner so that worthwhile mining projects that fit into the SEP can beaccommodated. It is to the best interest of the country that the natural environment ofPalawan is well protected but not too zealously so that viable economic developmentprojects and activities that can still continue provide employment and incomes to thepopulation. Illegal quarrying operations are a major source of environmental problems inPalawan. The problem is difficult to address because it is multi-faceted with differentactors on both sides of the fence. One thing certain is that illegal quarrying must becontained if the environment is to be protected. An obvious approach is to impose higherfines and penalties to violators. Key informants mentioned that currently, those who arecaught violating the terms and conditions of their permits are rarely brought to court.Another reason for the proliferation of illegal operations is the difficulty in securing apermit, particularly related to the length of time one has to get it. There is a lot ofduplication in the processes used by local and national agencies for processingapplications. A thorough study should be done to reduce this duplication. For instance, away of shortening the processing of permit applications is to streamline the requirementsof the LGUs, DENR and PCSD. Still another reason for the existence of illegal operations is the high investmentneeded in securing the permit, both in terms of the legitimate and illegitimate costsinvolved. The so-called “grease money” in particular has become an integral part of thewhole application process that discourages permit applicants. If this cost is reduced,quarrying proponents may be encouraged to apply for a permit. Solving corruption,which is endemic in society, is clearly better said than done. For a start, the government,together with the business sector and civil society, can institute a values formationprogram not just for the mining and quarrying sector but the entire population. Thisprogram should fit well with the moral recovery pronouncements of the newly installednational administration In quarrying, the environmental problems can be minimized if monitoring andenforcement is made more efficient through the involvement of local communities. Atpresent, some residents adjacent to the quarry areas have been vigilant in monitoring theactivities of the operators. For instance, they check the volume of aggregates taken out toensure that it does not exceed the allowable limit. They also ensure that the extractionmethods employed do not cause undue harm to the environment, particularly the riverbedand the surrounding area. This type of participation should be promoted andinstitutionalised by the LGUs for effective monitoring and enforcement at the groundlevel. Lastly, the negative effects of devaluation and economic crisis on the plight ofhouseholds in the mining and quarrying sector should be given particular attention by thegovernment. Rural upland households are among the poorest of the poor and the
  33. 33. unwelcome impacts of policies bear on them much more than in other sectors. Theintensifying resource extraction that poverty forces on households reinforces thisargument. The national government should plan and implement some effectively safetynets and poverty alleviating projects to mitigate the negative impact of macroeconomicpolicies on mining and quarrying households and in so doing reduce the pressure on theenvironment. ReferencesAngeles, N. B. (1995). “Mining Operations: Economic Impacts, Laws and Management,” Mines and Geosciences Bureau, Region XI, 6 p.Austria, M. S. and E. M. Medalla (1996). “A Study of the Trade and Investment Policies of Developing Countries: The Case of the Philippines,” Discussion Paper Series No. 96-03, Philippine Institute for Development Studies, 165 p.Bennagen, M. E. C. (1998). “Estimation of Environmental Damages from Mining Pollution: The Marinduque Island Mining Accident,” Economy and Environment Program for Southeast Asia Report, 45 p.Benoit, G., J. M. Schwantes, G. S. Jacinto and M. R. Goud-Collins (1994). “Preliminary Study of the Redistribution and Transformation of HgS from Cinnibar Mine Tailings Deposited in Honda Bay, Palawan, Philippines.” In Marine Pollution Bulletin, 12, 754-9.Briones, N. D. (1987). “Mining Pollution: The Case of the Baguio Mining District, the Philippines,” In Environmental Management, Volume 11, Number 3, pp. 335-44._________________ (n.d.). “Resource Use and Environmental Conflicts: The AGP Open-Pit Mine, Itogon, Benguet,” Institute of Environmental Science and Management, University of the Philippines at Los Banos, College, Laguna, 48 p.Congress of the Philippines (1997-2000). “General Appropriations Act.”De Vera, B. M. (1996). “Philippine Mining: Past, Present and Future Trends,” Mines and Geosciences Bureau, Draft, 13 p.Francisco, H. A. and A. S. Sajise (1992). “Micro Impacts of Macroeconomic Adjustment Policies in the Natural Resources and Environment Sector,” Working Paper Series No. 92-14, Philippine Institute for Development Studies, 106 p.