Monthly Archives: March 2012

For banning mining in Davao, Duterte gets praise

DAVAO CITY, Philippines – Bayan Muna Rep. Teddy Casiño commended Davao City Mayor Sara Duterte and the city council for declaring the city a no-mining zone, saying this showed their political will in the face of intense lobby from mining companies.

“I commend Mayor Duterte and the city council of Davao for taking this bold step for the environment. Not all local officials have the guts to go against the rich and powerful mining companies. I likewise express support for other local government units now being castigated by mining companies for prohibiting mining operations in their localities,” Casiño said.

Duterte has stood firm in her stand against mining, especially large-scale ones, in her city. “I am not stopping investors to come here in Davao it is just that I am not in favor of mining,” Duterte said.

Casiño, who was here for a visit, is the author of House Bill 4726 which seeks to close areas declared by local government units (LGUs) as No-Mining Zones from mining applications and operations. This seeks to amend the Philippine Mining Act of 1995.

Along with fellow Bayan Muna Rep Neri Colmenares, Casiño also sponsored two resolutions supporting the mining moratoriums declared by the provincial governments of Capiz and Negros Occidental. The House committee on natural resources has approved both resolutions.

“While mining is recognized as one of the main contributors to the country’s gross domestic product, there is a growing resistance to large scale mining in the areas where these operate,” according to Casiño.

Aside from Davao City, communities from different provinces such as Capiz, Marinduque, Palawan, Romblon, Negros Occidental, Eastern Samar, South Cotabato and Zamboanga del Norte have passed local ordinances declaring a ban on mining operations or moratorium on applications, Casiño said.

“The communities in host provinces are the ones directly affected by mining operations and therefore have the right to be heard,” Casiño said.

Mining has taken center stage once again as Malacañang finalizes its draft executive order on the industry. A draft that was earlier leaked to mining companies raised alarm in the industry for being biased against them.

Finance Secretary Cesar Purisima allayed such fears but stressed the government wants a larger revenue share from mining.

Mining corporations see the impending executive order as a “make or break” deal for the industry. –


Responsible Mining

Download file: Responsible Mining by Robert Goodland (March 4, 2012)

Mineral Industry Statistics

Download file: Mineral Industry Statistics (Released 2012 March 6)

No Free Lunch: Mining without the emotions

By: Cielito F. Habito
Philippine Daily Inquirer

What do you make of a debate where both sides accuse each other of lying, even as both sides also quote passages from the Bible to make their respective points? Last Friday’s lively forum on the economic and ecological effects of mining sponsored by the Philippine Chamber of Commerce and Industry, Management Association of the Philippines and Financial Executives Institute of the Philippines highlighted the seemingly unbridgeable divide characterizing the mining debate in this country.

One thing clear to me about this acrimonious debate is that emotions should have no place in the attempt to find its appropriate resolution. Tagging people as “pro-mining” and “anti-mining” doesn’t help; “proponents” and “critics” may be more accurate (and less divisive) labels. Proponents may be inadvertently alienating their potentially most effective allies when those who see problems in the industry are automatically labeled “anti-mining.” This led, for example, to the unfortunate boycott by the Chamber of Mines of a small forum at the School of Government of the Ateneo de Manila University (ASoG) last November, which was little more than an honest exercise to peer-review research papers the school had commissioned on various topics concerning the industry.

Contrary to some impressions, the Chamber had always been invited to that forum. Dean Tony La Viña precisely wanted both sides to critique the draft papers, to rid them of undue bias. He was thus rather pained by what he felt to be unfair accusations against the forum and the school he leads. I saw the exchange of e-mails that led to the boycott and the subsequent half-page ad attacking the forum. It seemed that the Chamber had misunderstood the forum’s purpose, and branded all speakers therein as “anti-mining,” thereby deciding that there was no point in participating. The whole episode saddened me, as I had always seen Dean La Viña as an effective ally of the mining industry with how he constantly sought ways to make it widely acceptable and find win-win solutions.

On the other hand, the international mining conference held at the Ateneo de Davao University (ADDU) last January was admittedly something else, as it was openly critical of the industry—even “anti-mining” in its stance—from its very inception. While I respect the organizers’ decision to keep it one-sided, I thought the deliberate exclusion of industry proponents was counterproductive. In contrast to the ASoG forum where the Chamber was invited but refused to come, here the Chamber asked to join to be able to present the industry’s perspective, but was flatly rejected. I felt this stance to have undermined the critics’ own cause, as it could alienate rather than win over those whose minds remain open. Nor does it help when we hear reports, true or not, that some members of the Catholic clergy have withheld the sacraments from families deriving employment and livelihood from mining, on the grounds that it is a “sinful” occupation.

A sound discussion on an issue as critical as mining must necessarily be dispassionate and freed from emotions and from impressions and perceptions not grounded on facts. Amid the large volume of claims and assertions on both sides, we need to distill hard facts from mere claims, untruths and half-truths—and there are many flying about, as last Friday’s forum showed. Some basic points are by now well agreed. One, current laws pertaining to the sector have flawed provisions that are inadequate, ambiguous, inconsistent or unfair. To proponents, this has impeded investments; to critics, this has compromised governance and led to undesirable outcomes. Either way, the situation cries out for correction, which the new policy being awaited from government will seek to provide.

Two, poverty has remained prevalent, and in many places had worsened, around mining areas, and the causes of this—which need not be blamed on the industry itself—must be well understood. And they must be addressed by both government and the industry; one working without the other will not work.

Three, environmental damages and risks associated with mining activities have been too disturbing to ignore, and like poverty, must be brought down to socially acceptable levels if impossible to avoid completely. To stop mining activity altogether because there are associated risks of damage and disaster is both unwarranted and unrealistic (though I know some would dispute this). What is essential is to ensure that the level of damage and risk is kept to a level deemed by society to be acceptable. Airline travel thrives despite air pollution from planes and the very real risk of disastrous plane crashes, because the levels of damage and risk are deemed small enough to be acceptable. In mining, the public needs to reach a level of confidence that the risks and damages are small enough to be acceptable; unfortunately, our historical track record makes this extremely difficult. But it is not impossible; technology has advanced, after all, and governance is improving.

Come what may, the much-anticipated EO, when it comes out, is almost certain to have neither side rejoicing. But compromise, not tyranny by the majority or the minority, is the stuff of democracy. Mining is an issue for which extreme positions simply cannot be tenable. Both proponents and critics should be prepared to yield some ground. I thought I saw some of that last Friday, even as speakers appeared at times to be digging in their heels. But we have to set aside the emotions from the discourse and together work for a mining industry that serves the greater good for the greatest number.

* * *



Editorial: Still drooling over mining money

Tuesday, March 6, 2012

THE much anticipated executive order on mining that President Benigno C. Aquino III was expected to issue last month is still biding its time in some Malacanang desk as more consultations are being conducted at least that is what is being claimed.

But we can already speculate on what the draft EO contained, it was against mining. Why would we say that? Because had it been for mining, then it would have already been released as soon as the final draft was made. And had it been for mining, then pro-mining groups would no longer need to drum up the hundreds of billions of dollars the Philippines is hiding beneath its soil and the billions of dollars foreign companies will be investing to get their hands on these underground riches. Had the draft been for mining, then there wouldn’t have been a fuming Manny V. Pangilinan berating Gina Lopez, who is a staunch anti-mining advocate.

But let’s forget about those gold and copper and nickel that foreign companies would just love to get their hands on by digging up what little soil covers our archipelagic, flood-prone, landslide-prone, and just about every disaster-prone country, and click on an interesting entry of the newest website that is creating waves among the news circle, the

“New Bali airport to accommodate 20-M tourists”, the title says, which provides a link to the CNNGo site telling the whole story on how the Ngurah Rai International Airport in Bali, in 2010, was listed as among the 12 ugliest airports in the world by Travel + Leisure.

The Ninoy Aquino International Airport was just as hated. But unlike the Philippines that promised to give the maligned airport a US$2-billion facelift, Ngurah Rai will be made over and expanded.

“The project will include a brand new international terminal, while the current terminal will be used solely as a domestic airport. The new terminal will be able accommodate 20 million passengers after the project is complete in 2013,” the report on CNNGo reads (…).

NAIA3 maximum capacity is 13-million passengers a year. The country’s main gateway has a maximum capacity that is but half that Bali can welcome by 2013. More so, Indonesia is doing all this at a mere slice of the Philippines’ facelift budget of US$2-billion. The budget for the Ngurah Rai expansion is US$211 million.

In between the lines, as if nudging to be noticed are not just the monetary discrepancy in facelift and expansion budgets, but also the seriousness by which the Indonesian government is attending to its tourism industry.

While the Philippines and foreign companies lust over the gold, silver, nickel and every other mineral beneath our soils that are now killing the marinelife and beautiful beaches of Surigao, Zamboanga, and even Misamis Oriental, it can only eke out a total of 3,917,454 visitors.

In comparison, Indonesia, which drums up its dive spots and beaches and beautiful cultural villages as their best investment and tourism come-on welcomed 7.65 million and they are getting the prime tourists at that who spend an average of seven days and spending more than a thousand US dollars a visit. That, above the terrorist attacks in their island much like the Philippines.

Indonesia is cashing in big on the beauty of their islands, which sadly is just like what we have here. But unlike in Indonesia who perk up their islands to bring in the money and employment their people need, we and our leaders welcome with open arms and wide smiles those who want to dig up our mountains and choke our seas with their runoffs all because we continue to drool over the billions of dollars that are supposed to be hidden underneath out mountains.

At US$1,000 per seven days per tourist, Indonesia had just earned US$397 billion from tourism in one year without having to flatten a single mountain and poison a single stream.

Published in the Sun.Star Davao newspaper on March 06, 2012.


Stand for the environment

It’s been a pretty intense week. The climax was the mining forum – sponsored by Financial Executives of the Philippines, Management Association of the Philippines and Philippine Chamber of Commerce and Industry.

While I welcomed being able to talk and share what I passionately believed in – it was a real challenge to talk before a largely unfriendly audience. I had presumed that there would be a some individuals there who might perhaps share my passion for this country and the environment.

The entrance fee was P1,500 so the people who could afford this was, of course, the business group. Nevertheless the texts, emails of encouragement and support I got from the multitude convinced me that I did the right thing.

What did set a reaction in me was when Gerry Brimo called me a liar – and an ignorant one at that. Hmmm I really didn’t want to get into any kind of personal fight. I may have overdone that effort by saying, ‘Gerry, I love you,  but the incidence of poverty in the area that you mine is double the national average. (53%)

It is not easy to criticize a person’s company in front of a crowd, show visuals of what his company is doing and the person is just in front of you.

On second thought, maybe I should have just bit the bullet and said what i know to be true – and if feelings are hurt – I really can’t please everyone.

Although I expected it – I did get ticked off when the issue of the (First Philippine Industrial Corp) gas leak (in Bangkal, Makati City) was brought up again. So for the record I would like to state that my family is spending hundreds of millions of pesos and they have committed to address the situation in 3 to 5 years – and that is much more than what the mining companies have done with their hundreds of abandoned mine sites.

Was the raising of this issue already a sign of desperation? Why not stick to the issues?

Because there has been a flurry of communication and some of them not very clear, and even faulty, it is important that I make the main issues clear. So here goes:

1. Bio diversity holds pre-eminent value

Bio diversity is the different flora and fauna that provide our people with fresh air, food. It is life. In the universe of what is important, it holds pre-eminent value.

Our country ranks No. 1 in endemicity per unit area, which means the flora and fauna found here cannot be found anywhere else in the world.

Given that our country is also the number one typhoon-hit country in the planet, it is disturbing that mining priority areas are right on top of bio diversity areas, agricultural areas, water catchment areas.

Bio diversity areas are often also rich in mineral resources. Mining in these areas will damage our bio diversity irreversibly.

Reforestation does not replicate an ecological system. No amount of planting trees will bring bio diversity back. Our country and the world stands much more to gain by leaving these sites alone.

The business community needs to understand that it is GOOD BUSINESS sense to keep our bio diversity alive. That an economic path – which is just focused on money – is not to going to bring on the well being of our people.

2. Island Eco Systems

This is an interweave of different ecological systems: forests, mountains, coral reefs, mangroves, farmlands – all intertwined in a specific location where rivers and streams lead into the sea.

Any kind of mining in these islands – whether they be large scale or small scale – is grossly irresponsible especially since our country is hit by typhoons every year!

3. Mining has very poor track record

The highest incidence of poverty is in the mining sector. The poorest areas in the country are mining areas: Samar, Surigao, Benguet, Zambaonga.

Even in mining areas where the municipality has upgraded to first class, the incidence of poverty remains high.

For instance, in Caraga, the GDP went up by P40 billion from 2007 to 2009. However, the incidence of poverty went up from 46% to 49% attributed to mining.

We have hundreds of unrehabilitated mine sites. After decades of mining, we do not even have one rehabilitated mine site. So why are we continuing this path?

4. National government earns very little from mining 

It accounts for only 1.3% GDP and 0.36% of employment.

There is a 5-year tax holiday so operations are usually front-loaded during these years.

We have no standard of evaluating what we are giving up. For all the billions of dollars that is poured into the country from mining – how much is NET to the country after we subtract the cost of development?

At the end of the day, if the communities around the mine site remain poor and at risk, why do we continue to do it?

5. Alternatives to mining

This was my “fight” with Manny Pangilinan. When he said that the sites where there is mining are largely mined because not much else can be done there anyway. I so very much disagree!!

There have been and there are beautiful sites that are currently being mined – which should NEVER have been mined.

For example there is mining on top of the rice granary of Palawan. Why was this EVER allowed? There is mining in protected areas.

The reality is, our beautiful, protected areas are REZONED to allow for mining applications, which only makes more glaring the government inability to ensure the common good.

6. Mining Threatens Food Security

That is a FACT because mining threatens Water.

We have documents and lab reports where mining operations have damaged farm lands, and fishery resources and the disadvanted continue to lack in compensation.

7. Mining threatens HEALTH

We have documented cases where children, and adults have suffered due to the mine sites.

In Palawan there are already evidences of rivers containing carcinoogeneic substances documented by Friends of the Earth, Japanese NGO. Data exists that hexavelent chromium levels in Tagupog River near Batarazza exceed the normal. Hexavelent results in cancer, nerve damage and death.

6. There is another way! 

In Dipolog City, the sardines business provides jobs and income to 2,000 people from 14 barangays. This is all put to risk by APPROVED mining in Sergio Osmena since the river that runs through Sergio Osmena is the same river that runs through Dipolog.

Last year the sales from the sardines reached P79 Million! I have projects in Puerto Princesa where poor communites are now able to send their kids to college  after only 2 years of eco tourism and where each family now earns up to P15,000 a month!

The economy of Puerto Princesa is hitting the roof without mining but through tourism and agriculture. Camarines Sur and Bohol are similar economic models that have gone tourism successfully.

Do we have any economic model of mining where the community AROUND is happy and healthy and the enviromment is beautiful and rehabilitated.

As far as I know there is NONE. So why are we doing this?!


We must remember we are not vast continents like Canada and Australia. We are 7,000 islands with abundant natural resources and fragile eco systems. We have to embark on our own economic program, which is pertinent to the resources that we have.

Yes, we are abundant in minerals. But if the extraction of these minerals will put at risk the well-being of our community and our foods security, then the intelligent choice must be made.

I am not saying ALL mining is bad. Yes, it has a role to play in our society. But the current mining situation in the Philippines cannot continue as it is.

Our people are suffering. And that is a fact. That is the Truth. We must be able to institute systems and structures to ensure the Common Good, which, of course, includes the people working at the mine site.

Their needs, their families must also be provided – but they cannot continue to earn their keep at the expense of the thousands of families around – and the generations of Filipinos to come.

Truth and the Common Good. If the government bases its policy on this, we are good. It cannot and must not be based on the desire to make all parties happy.

Our commitment to the people must be non-negotiable. It must hold sway over political,  or business interests. Investments will continue to come in if institutions know that our government is steadfast on doing what is right by our people.

It is impossible to please everyone. But we must please our God – and the Greater Majority.

I truly hope that the mining policy of this administration – which has pledged to hold people’s welfare above all else, which has pledged to be unrelenting against corruption – will be manifestative of the spirit on which this administration is based. –


Mining is a social justice issue

The mineral wealth of our country, as the mining industry reminds us, is “staggering” – about $840 billion. Its potential to contribute to our country’s development cannot be discounted. While mining has never been a driver of our development, not even during the mining boom of the seventies, we are here to find out if there is a way to realize that potential. And I thank the organizers of this Conference for taking this step toward that objective.

The real question before us today is: Should mining be allowed in the Philippines?

I believe that we should be open to that proposition provided 4 minimum conditions are met: (1) the environmental, social and economic costs are accounted for in evaluating mining projects; (2) the country gets a full and fair share of the value of the extracted resources, (3) and this is addressed to the government, the institutional capabilities of the government to evaluate and regulate mining activities are put in place; and (4) again addressed to the government, since mining uses up non-renewable natural capital, the money from mining are specifically used to create new capital such as more developed human resources and infrastructure, particularly in the rural areas.

In this regard, I refer you to the paper of Prof Ronald Mendoza of the AIM Policy Center and his proposal for a “middle ground” that involves the establishment of an “inclusive growth” trust fund.

With respect to downstream plants and the total banning of ore exports, I did not include these because the mining industry may have a point on the practicality and long-term feasibility of these conditions – hence the need for more consultations.

I submit that mining is a social justice issue. And we cannot discuss it except in the context of our country’s dismal performance in addressing mass poverty and the gross inequalities of income, wealth and political power that persist more than 25 years after the glowing promise of EDSA of a just society.


We are all familiar with the data.

Over 24 million Filipinos are poor, i.e. “poor” meaning per capita income of less than P46/day and about 9.4 million of them are “food poor,” i.e  those who live on P32/day, not even enough to meet the minimum 2,000 calories a day. Over 28 years, our real per capita income rose only 20% while per capita incomes of our neighbors increased – like Malaysia (400%), Thailand (500%) and China (1100%) – in the process eradicating absolute poverty.

Even more compelling – the inequality of income has not changed since Edsa. The top 1% of the families numbering 185,000 have an income equal to the income of the bottom 30% of the families numbering 5.5 million. There are many more such data but this is not the forum for them.

I just wanted to make the point that history has not been very kind to our poor. And we know this must change.

The increasing inequality of income, wealth and political power is, of course, happening worldwide. In our particular case, the root of the problem is the development paradigm followed by every administration – that rising waters raise all boats – that sustained economic growth driven by investments will eliminate poverty. But conclusive empirical data tell us that sustained high growth is not possible unless we also address the problem of inequality. And that means not only  income reform – quality education, universal health care and livelihood – but also asset reform, which is primarily about land and natural resources and a substantive redistribution of their benefits and costs. As you know, the four asset reform programs are agrarian reform, urban land reform and housing, ancestral domain and fisheries.

That is why it is unfortunate that two major stakeholders on the issue of mining were not invited to speak today – the National Commission on Indigenous Peoples and the Department of Agriculture.

Environmental, social and economic costs and benefits

Mining activities are usually located in rural and mountainous areas and can affect farmlands, rivers and shorelines, where the poorest of the poor are located, namely, the farmers, indigenous peoples and municipal fishermen.

The fact is that mining cannot be conducted without affecting the land, water, and air surrounding the site, as well as the various natural resources found in them. Mining involves the extraction of minerals, but may also involve the use or destruction of non-mineral resources, such as fresh water, timber, and wildlife. This may also result in health problems, displacement of people, social divisiveness, even the need to provide PNP and AFP protection to mining companies. Then there are the disasters that can happen from the cutting of trees, from siltation and erosion, and accidents from mining structures. All these translate into public costs.

That is why mining is often cited as an example of what Paul Krugman calls activities that privatize benefits and socialize costs. This is the social justice issue on mining.

As for the argument that minerals are meant to serve humanity and are the raw materials for the modern conveniences we use everyday, the point is that, in cases where mining is allowed, the minerals should be priced at full cost, including environmental, social and economic costs. Otherwise, our poor who mainly bear these costs would be subsidizing the consumerism of the rich, both domestic and foreign.

We cannot find the answers to the plight of the poor unless we listen to the poor. In this regard, you might want to read 3 public documents – the National Rural Congress II of the CBCP in 2007, the Climate Change National Consultations of 2009 and the Summit on Poverty, Inequality and Social Reform conducted last October to December 2011.

Why climate change? Because the new normal arising from climate change requires a watershed approach to mitigation, adaptation and disaster management and watersheds are where the forests and minerals are mostly located. In these conferences, one of the deepest concerns of the poor are the environmental, social and economic costs of mining.

The benefits and costs of mining

What we want to know are the real contributions of mining to GDP, exports, employment, government revenues, investments, industrialization, poverty alleviation, etc.

Here are some statistics:

  • Ave. contribution to GDP

2000-2009 = .91%

2010 = 1.30%

  • Ave share to total employment

2000-2009 =  0.376%

2010 =  0.5% = 197,000

  • Ave contribution of metallic mining to total exports

2000-2009 = 2.96%

2010 =  3.7%

  • Ave. share of mining investments to total investments = 2.5%
  • Total government taxes, fees and royalties

1997-2010 = P64.2 B

  • Total production value of mining companies

1997-2010 = P842 B

On industrialization: Per former NEDA Secretary Cielito Habito: Based on national I-O tables: Backward linkages of mining = .46 (less than half of other industries); Forward Linkages is a low .82. These mean that mining is not considered enough of a value-adding activity.

  • On poverty alleviation: Mining has the highest poverty incidence of any sector in the country 48.7%. The only sector where poverty incidence increased between 1988-2009. High poverty incidence in many mining areas i.e. CARAGA (47.5%), Zamboanga Peninsula (42.75%), Bicol region (44.92%), the national average being 26%. At the municipality of Bataraza in Palawan where Rio Tuba has been operating for 30 years, the poverty incidence (53%) is double the national rate. The mining industry is correct in pointing out that the statistics do not establish causality. But the data at least shows an association between mining and poverty that raises questions  on the claim that mining improves the quality of life in its communities.

 Investment and export proceeds

The mining industry’s absolute figures on gross investment inflows and export proceeds are impressive, but they are only one-half the picture.

Mining companies are allowed to recover and repatriate all pre-operating and development costs up to 4-5 years after start of operations. Thus, the inflows and outflows on investment may even out during that period.

On export proceeds, mining operations usually front load production during the first five years, arguably to exploit market opportunities, but this also happens to coincide with their tax holidays. Profit remittances can, thus, be considerable.

Government revenues

The DENR says that there is a discrepancy between potential excise taxes from mining and actual collections (P7.8 billion from 2000-2009). The LSM sector claims that their payments in 2008-2009 equaled the collectible amount and that the uncollected excise taxes are attributable solely to small-scale miners and quarrying. That may be true. But it is interesting that if one takes a longer view, from 1997-2007, there is no such correlation. Actual collections for 6 of the 11 years are lower than the collectibles from LSM ranging from 4%-36%.

It is unfortunate, that the small-scale mining sector was not invited to speak at this conference so it can defend itself and justify its role in the development of the mining industry. After all, the production value of SSM from 1997-2010 was the same as that of LSM at about P300 billion.


The mining industry claims that 1 direct job in mining creates 5 more jobs in the rest of the economy – a multiple of 5.  NEDA denies that it has any such data. However, a study by Madeleine B. Dumaua based on the 2000 Input-Output tables of the economy shows that:

A peso change in the final demand for the mining/quarrying generates P1.70 pesos worth of additional output for the economy;

On employment, every one million of additional investment in mining/quarrying generates additional employment of 2.2, not 5.

The  average multiplier of 2.2 jobs includes SSM which requires virtually no capital investment and capital-intensive LSM, like Tampacan, that will generate 10,000 temporary jobs and 2,000 permanent jobs with a $5.9 billion investment (about P120 million per permanent job). The mineral extractive industry is considered worldwide as a low job generating activity.

These data put in question the expansive claim by the Chamber that the projected LSM $15 billion investments will generate 70,000 direct jobs that will result in 350,000 other jobs, leading to 2,050,000 jobs by 2018 with 10.25 million Filipinos as “direct beneficiaries of mining.”  A recalculation would look more like  576,000 Filipino beneficiaries.

The share of government in mining revenues

The Chamber is objecting to the proposed royalty of 5% on mining revenues on the ground that it would drive investors to other countries with more favorable financial regimes. The industry in November 2011 appealed to the government not to increase the royalties because the “current fiscal regime…. may be the only thing that’s keeping the industry afloat.”

At the same time, the stock market is at new highs and the newspapers banner unprecedented mining profits in some companies.

RA 7942, Sec. 80:

“The total government share in a mineral production sharing agreement shall be the (2%) excise tax on mineral products as provided in Republic Act No. 7729, amending Section 151(a) of the National Internal Revenue Code, as amended.”

An excise tax is a tax on the use or consumption of certain products, or a tax on an activity. In the case of mining, no value is given to our minerals.

Some comparisons by the MGB of the fiscal regimes of selected countries (China, India, Indonesia, Mongolia, Myanmar, Papua New Guinea, Peru, Chile) show that the fiscal regime in the Philippines is quite competitive with, if not more favorable than, those of other countries.

Moreover LSM are given generous tax incentives, to wit:

(1)  income tax holidays of 5 years (including excise taxes)

(2)  deduction of 50 percent of labor expenditure from taxable income

(3)  tax and duty exemptions on imported capital equipment and spare parts

(4)  exemptions from wharfage fees, and additional incentives for enterprises that locate in less developed areas

(5)  the privilege to deduct 100 percent of expenditures on infrastructure from taxable income, over a period of 10 years

(6)  during the exploration period are not liable for income taxes. When they begin commercial operations, they are entitled to register with the Board of Investments for a five–year income tax holiday

(7)  exemption of pollution control devices from real property and other taxes

(8)  income-tax carry forward of net-operating losses incurred in the first 10 years, which may be deducted from taxable income over a five-year period;

(9)  accelerated depreciation of assets—at twice the normal rate

(10) option to deduct the cost of all exploration and development expenditures from taxable income over a four-year period from commencement of commercial operations

In the case of FTAA (financial and technical assistance agreements)

(11) they are allowed to recover all their tax and operating expenses before they begin to pay either the basic or the additional shares of government, such as:

(a) contractor’s income tax; (b) customs duties and fees on imported capital equipment; (c) value-added tax on imported goods and services; (d) withholding tax from interest payments on foreign loans; (e) withholding tax on dividends to foreign stockholders; (f) documentary stamp taxes; (g) capital gains tax; (h) excise tax on minerals; (i) royalties for mineral reservations and to indigenous peoples , if applicable; (j) local business tax; (k) real property tax; (l) community tax; (m) occupation fees; (n) registration and permit fees; and (o) all other national and local taxes, royalties and fees as of effective date of the FTAA.

To summarize the issue on the revenue sharing: Not only are our minerals not given any value,  our government pays the contractors to extract them through fiscal incentives. What do we get in return?

(a) Very little by way of taxes, fees and royalties, and practically none at all during the tax holiday period

(b) Very little by way of job generation

(c) Probably little net foreign exchange inflows

(d) Very little contribution to GDP

(e) Very little industrialization linkages

(f) Questionable poverty alleviation results

Of course, there is always the potential. But there may be another side to the relatively low benefits from mining – there is not much to lose should the government refuse to give in to the demands of mining that would compromise the environment. Timely alternative development strategies may, in fact, result in a net gain.

Institutional capacity of government to evaluate and regulate mining

One cannot blame the mining industry for always trying to get the best deal for its shareholders. But it is the responsibility of government to protect the interests of the country.

However, the government admits in the Philippine Development Plan 2011-2016, that it does not have the capability to make that kind of assessment:

(a) Page 310 of the PDP: “…currently, there is no standard resource and environment valuation. There is a need to have a cost-benefit analysis and standard parameters that will consider all relevant values (including non-market values)”

(b) “government capacity for resource management is wanting”

(c)  “enforcement of environmental laws and policies is inadequate…Relevant environmental laws, specifically those regulating the utilization of natural resources, i.e. NIPAS, etc. are poorly implemented.”

The question begs to be asked – how can the government approve any mining application or allow any mining operation in the absence of these institutional safeguards?

The proposal is to adopt TEV (Total Economic Valuation) and WAVES (Wealth Accounting and Valuation of Ecosystem Services) which is an integration of TEV and natural capital accounting. WAVES is an initiative of the World Bank which is supportive of “responsible mining.” It complements the Extractive Industry Transparency Initiative (EITI) – a priority advocacy of the Chamber of Mines.

The exercise is not “catatonic” because “significant advances have been made in defining and conceptualizing protected areas valuation.” There are at least 60 instances, at least 3 in the Philippines, where TEV has been done. There are enough research work and examples to arrive at a less than perfect, but nonetheless usable, formula.

WAVES is a comprehensive wealth management approach to long-term sustainable development that includes all assets – manufactured capital, natural capital, human and social capital. The methodological framework is the UN’s System of Environmental and Economic Accounting (SEEA) developed over the past 20 years.

This is a good time to adopt these analytical tools since the Philippines is one of 6-10 countries where WAVES is being piloted by the World Bank. Why the Chamber of Mines seems to object to their explicit application to mining projects in the new policies is frankly hard to understand.

We need these tools. For example, there is an apparent oversight in the Mining Law or its IRR – because the so-called final rehabilitation fund for phased out mines applies only to the capital costs of rehabilitation – like land restoration and reforestation. There is no perpetual accountability or trust  funds for the maintenance of structures like tailings dams or the disasters that could happen years later from dam breakages. These risks should be borne by the mining companies and not by our taxpayers, which seems to be the case today. This is not responsible mining. If my understanding of the rules is wrong, I will be happy to be corrected.

Until the new policies are fully in place, the government should strictly apply the precautionary principle to pending issues. The principle is public policy under RA 9729 (Climate Change Act of 2009), and was enunciated by the Supreme Court  in issuing the Writ of Kalikasan:

Part V. Rule 20, “Sec. 1 When there is a lack of full scientific certainty in establishing a causal link between human activity and environmental effect, the court shall apply the precautionary principle in resolving the case before it. The constitutional right of the people to a balanced and healthful ecology shall be given the benefit of the doubt.”

This safeguard is needed. The present mining system is simply no longer workable because it is onerous to the country and is open to corruption and to decisions that are vulnerable to future questionings, and we need a little more time to put things right.

In closing, may I say that the mining industry is correct that our fragmented views on mining heightens the uncertainty of mining investors, although this may have the reverse effect on other investors, as in tourism. The mining industry should thus welcome the initiative of the government to put in place a new set of rules that can promote solidarity with consultations. If the rules turn out to be too tough on mining, at least the decision to invest will have less uncertainties and its parameters will be clear. On the other hand, the government and other stakeholders should be fully aware of their consequences on mining investments  and the need for a fair and proper disengagement process, if necessary,  as well as the urgency of implementing alternatives to mining.

In times like this, it is good to remember the words of Albert Camus when he received the Nobel Peace Prize – we should put ourselves at the service not of those who make history but of those who suffer it. –

This is the speech delivered by Mr Christian Monsod at the “Conference on Mining’s Impact on Philippine Economy and Ecology” held Friday, March 2, at the Interncontinental Hotel in Makati City.


Killer Dam 2