What Philippines’ Mining Ban Means For Investors
By Shuli Ren
As part of the Going Green campaign, the Philippines government has ordered the closure of 23 mines, while also suspending operations at another 5 mines. The latest mining ban accounts for about half of the Philippines’ nickel output.
According to Credit Suisse, this mining ban could shave 0.2% of the Phillipines’ economic growth and hurt foreign investors’ sentiments. Analyst Micahel Wan wrote:
We estimate real GDP growth could decline by around 0.2 pp, while employment could decline by around the same magnitude (0.3%). For context, this compares with the current unemployment rate of around 5%, which is already at a two-decade low.
We could see bigger impact to exports and local government finances: We note that the production cuts will likely have a more significant impact on:
(1) exports; and
(2) local government fiscal balances.
We estimate that the mining closures and suspensions could reduce exports by around 2%, weighing on the current account over the rest of 2017… Mining revenues also contribute to local government revenues, accounting for around 3% of local government fiscal surpluses as of 2011, the latest data available from the IMF.
While the first-round economic impact to the Philippines from the mining ban may be manageable, we fear that these mine closures could send a negative message to foreign direct investors and manufacturers about the ease of doing business in the Philippines over the longer term.
The Philiipines’ largest miners tumbled on Monday after resuming trading. Global Ferronickel Holdings (FNI.Philippines) tumbled 11% while Marcventures Holdings (MARC.Philippines) slipped 6%. Year-to-date, the iShares MSCI Philippines ETF (EPHE) gained 6.1%.
Source: Barron's Asia
http://blogs.barrons.com/asiastocks/201 ... investors/