Governance and Market Failures in Mining: Lessons from the Marcopper Mine Disaster in Marinduque, Philippines

Abstract

The Philippines sits atop vast mineral deposits estimated to be worth around PhP 47 trillion. Yet in the Philippines has a mixed track record as far as its impact on human and economic development. This paper tries to draw lessons from the Marcopper Mine in Marinduque, Philippines, using a framework — what we call a mining and inclusive growth causality — to begin to think through how extractive industries can contribute to inclusive growth. Essentially, there is a chain of inputs and events that — when properly executed by various stakeholders — could lead to very strong economic and human development outcomes not just for the communities directly affected by the mine, but also the country as a whole. Too often, this chain is easily broken by both governance and market failures. Addressing these failures through such means as proper consultative mechanisms, transparent and professionally managed wealth funds, and accountability arrangements for key stakeholders (including companies, government agencies, and key regulators) could all contribute to a properly functioning production that sees natural resource wealth transformed into development outcomes.