February 13th: Philippines Plans Tighter Mining Rules to Protect Environment.
The Philippines is considering measures to tighten mining rules, cut tax breaks and review resource contracts under a policy that would boost state revenue from mining and limit the industry’s impact on the environment.
President Benigno Aquino is proposing the nation introduces competitive bidding for mining rights, widen a ban on mining to more areas, and demand economic valuations before allowing projects, according to a draft executive order obtained by Bloomberg News. The eight-page document, which was sent by Aquino’s office to various ministries for feedback, was confirmed by Finance Secretary Cesar Purisima.
“Mining should be done in a manner that doesn’t destroy the environment, in a way that benefits are properly shared between the companies and the country,” Purisima said in an interview in Manila Feb. 10. “The revenue that the government shares from mining must be increased.”
The Philippines would join at least 11 countries from Australia to Ecuador that Deutsche Bank AG says announced plans to increase taxes or royalties on sales of resources such as gold and coal last year. The proposals reflect Aquino’s struggle to balance a drive to spur investment in the Southeast Asian nation with the need to address environment concerns and ensure Filipinos benefit from the plans.
The new Philippine guidelines would affect companies including Xstrata Plc, whose stalled $5.9 billion project in the nation would be the country’s biggest foreign investment, and OceanaGold Corp., the Australian gold producer with mines in New Zealand and the Philippines that is developing the $185 million Didipio mine in Luzon in the northern Philippines.
Investments in exploration and mining projects in the Philippines totaled $3.8 billion from 2004 to 2010, and the industry generated 9.1 billion pesos of taxes, fees and royalties in 2010, according to the Department of Environment and Natural Resources’ Mines and Geosciences Bureau website. Mineral exports totaled $1.87 billion in 2010.
Aquino’s proposals call for a review of all existing mining contracts to ensure that they are in line with the new policies, “provided however that the review shall not result in the impairment of contracts,” according to the document, which was accompanied by a letter from the Office of the President of the Philippines signed by Aquino’s executive secretary, Paquito Ochoa.
The letter, entitled Memorandum from the Executive Secretary, was addressed to Finance Secretary Purisima, Trade and Industry Secretary Gregory Domingo, as well as the head of the National Economic Development Authority and the secretaries of science and technology and agriculture.
The Philippines had 562 mining lease contracts, permits and agreements with companies including OceanaGold as of Jan. 31, according to the Mines and Geosciences Bureau.
The move toward competitive public bidding for mining rights would depart from the current first come-first served procedure, according to the draft order.
Aquino also proposes boosting government revenue from mining by revoking an income tax holiday for miners and reviewing mining fees, taxes and incentives. He plans to boost downstream processing of minerals and ban direct shipping of raw or unprocessed strategic metallic ores three years after the executive order takes effect, according to the document.
The government is considering raising a current 2 percent excise tax on mining, Neric Acosta, presidential adviser for environmental protection, said in a telephone interview Feb. 10. Areas that will be banned from mining would be expanded to include prime agricultural lands and eco-tourism zones under the new mining policy being proposed, according to the draft.
Resource nationalism, or state demands for higher taxes, royalties or stakes, jumped to being the number-one concern among mining executives in 2011, replacing capital allocation, Ernst & Young said in its annual risk survey published in August.
The Philippines’ $200 billion economy expanded 3.7 percent last year. Aquino is seeking investments for more than 700 billion pesos of projects in mass rails, highways and airports to boost growth to as much as 8 percent annually.
–With assistance from Cecilia Yap in Manila. Editors: Stephanie Phang, Rina Chandran, (Bloomberg).
February 13th: Investors jittery over mining EO.
MANILA, Philippines—The country risks missing out anew on the benefits of the multibillion-dollar mining industry if the government goes ahead and implements new policies seen to favor the antimining lobby, foreign business groups said.
The Joint Foreign Chambers (JFC), along with the Philippine Mining and Exploration Association Inc. (PMEA), has expressed “great” concern over the proposed mining reforms, appealing to the Aquino administration to consider industry inputs and to address the root causes of project delays, among other issues.
Based on copies obtained by the Inquirer, a draft presidential executive order proposes, among other things:
- Replacement of the “first-come, first-served” system in mining applications with competitive public bidding.
- Addition of declared prime agricultural lands and ecotourism zones to areas closed to mining.
- Conduct of the total economic valuation scheme in mining areas before mining applications are approved and mining activities are allowed.
- Review of all existing incentives and mining contracts to see if these are in line with the new mining policies.
• Promotion of downstream processing.
The JFC’s appeal to the government was signed by representatives of the Philippine offices of the American Chamber of Commerce, Australia-New Zealand Chamber of Commerce, Canadian Chamber of Commerce, European Chamber of Commerce, Japanese Chamber of Commerce and Industry, Korean Chamber of Commerce, and the Philippine Association of Multinational Companies regional headquarters.
Both the JFC and PMEA expressed support for the government’s aim to raise the bar in mining and to increase its tax take. They noted, however, that the discrepancy between benefits and liabilities was more pronounced in small-scale and unregulated mining, and not in the highly regulated large-scale mining industry.
The PMEA, in a letter to Executive Secretary Paquito Ochoa Jr., said it had provided further inputs through a detailed response through the Chamber of Mines.
Letter to Mr. Aquino.
The JFC, in its letter to President Aquino, requested a meeting between its mining representatives and Ochoa’s policy team to discuss their differing views.
The PMEA said it was concerned the proposed reforms would not address project delays due to a permit process that “is prone to land grabbers and claim jumpers.” It also expressed surprise at proposals to include additional taxes and the removal of investment incentives for large-scale operations.
“This has sent a strong message to the investment community that the Philippine mining industry is closed for business until further notice,” said PMEA president Johan Raadsma. “Future investments would become uncertain of possible drastic changes if rules of engagement, such as the revocation of the income tax holiday, were to be initiated.”
The JFC said the draft order as presented “proposes to review all existing contracts and renegotiate or impose an increased government tax or royalty share, and potentially close out granted contracts completely.”
The foreign businessmen also pointed out that the draft executive order carried “retrospective legislative implications” and “inferred sovereign risk.”
The groups cautioned that retrospective policies generated investment uncertainty not only in mining, but also in all foreign direct investments.
“It also unnecessarily damages sovereign credibility on the global stage, and in some cases violates the foreign investment protection agreements signed by the Philippines with many countries. Such uncertainty would have a major and lasting impact on the Philippines’ ability to attract responsible investors—particularly as it would come at a time when global and regional competition to attract foreign investment is so competitive,” the JFC said.
‘No cause for alarm’
Environment Secretary Ramon Paje, however, assured mining investors there was no cause for alarm.
Paje headed the group that proposed the reforms in the as yet unsigned executive order, titled “Institutionalizing and Implementing Reforms in the Philippine Mining Sector, Providing Policies and Guidelines Therefor, and for Other Purposes.”
In a phone interview on Saturday, Paje said: “There is nothing in there that is not already in existing contracts. We are using existing guidelines.”
“We are just optimizing the provisions to upgrade the environmental standards in the industry, resolve the issue of small-scale mining, harmonize national and local regulations on mining and optimize government revenue from mining,” he said.
By: Riza T. Olchondra, Philippine Daily Inquirer.
February 13th: Draft order imperils mining.
The Chamber of Mines of the Philippines has urged Malacañang to reconsider a draft executive order to ensure a ‘balanced mining policy for the best interest of the country and our people.’
In a position paper “Institutionalizing and Implementing Reforms in the Philippine Mining Sector, Providing Polices and Guidelines Therefore, and for Other Purposes,” the chamber recommended the reactivation of the Minerals Development Council and the Mining Investment Security Task Force to bolster security of mining investments.
The CMP said the two agencies were successful in overseeing the development needs of the mining sector, as well as the implementation of security protocols in remote provinces, including those classified as “hotspots” or conflict areas.
Industry players and stakeholders earlier said the still unnumbered directive might do more harm than good.
They said the EO might even spell a “virtual death sentence” for the industry considering that some salient provisions were deemed prejudicial to the security of mining investments.
The chamber said large-scale mining peaked in the ‘70s, accounting for about 21 percent of total exports. But the sector ground to a halt due to the oil crisis during the decade, and continued to struggle in the middle of the ‘80s up to the ‘90s, compelling the government to enact the Mining Act of 1995 to revive the industry.
In 2010, the mining sector rebounded to post 5.6 percent or $2 billion of the country’s total exports still way below ‘70s figures.
“If allowed to grow, the industry expects investments amounting to $14 billion up to $20 billion in the next five years,” the chamber said.
Mining posted a 21.8 percent growth in 2010, the highest among all sectors of the economy, contributing P13.83 billion in excise taxes, fees and royalties.
The sector targets over $13 billion in fresh investments from 2011 to 2018 and produce about 410,000 jobs.
The chamber noted that while mining had a big impact in improving the lives of the people in the countryside in terms of economic and infrastructure development, its effect on the eco-system is “relatively small and does not conflict with agriculture, eco-tourism, and other productive industries.”
To deal with environmental issues and ensure a fair share for the government in mining revenues, the position paper recommended that jurisdiction over small-scale mining be given back to the Department of Environment and Natural Resources, and that small miners be subjected to the same standards and regulations being imposed on the large-scale mining operators.
By Dexter A. See, Manila Standard Today.