Mining our way to development

Dindo Manhit, President of the Stratbase ADR Institute

Breakaway development for the Philippines has been elusive. While signs of progress continue to manifest in our society, nationwide development has been hampered by an unstable outlook on how we can harness and manage our natural resources. But we can, in fact, utilize the richness of our natural endowments in a way that can catapult us into a more strategic position, one that would trigger sustained economic growth and regional prosperity.

The 2015 study “Advancing Sound Resource Management as a Requisite for Sustainable Development,” by Dr. Carlos Primo David, tackled the issue of resource management. “We are the center of global biodiversity,” wrote David. “The country also boasts of scientific attractions more than capable of sustaining a vibrant tourism industry. And yet government seems to think that ecological protection occurs on a different plane as resource development. The real task then is determining how to strike a balance between the two.”

As the fifth most mineralized country in the world, the Philippines offers manifold potentials for the mining industry. The country’s untapped mineral wealth, estimated to be worth at least a trillion dollars, could propel industrialization on several fronts. However, a policy wall stands between these underground minerals and the continuous inflow of revenues and investments. There is an urgent need to remove the legal and regulatory barriers that have stagnated the mining industry.

Specifically, Executive Order No. 79, issued in 2012 by then President Benigno Aquino III, and Department Administrative Order No. 2017-10 (banning open-pit mining) are legal and regulatory impediments that need to be rethought and amended. These bad policies continue to penalize legitimate mining companies that comply with the law, pay taxes and virtually assume what should be the government’s role of building public infrastructure and providing public services.

In December 2017, the Chamber of Mines of the Philippines became the first Southeast Asian mining association to adopt the TSM (Towards Sustainable Mining) standard, and the fourth outside of Canada after Botswana, Argentina and Finland. This industry-led initiative sets the highest standard of responsible mining, with guiding principles and protocols to monitor the performance of mining operations. The TSM standard employs tools designed to improve the environmental and social performance of mining companies, including engagement with civil society and enhanced transparency and accountability.

However, all the merits responsible mining companies have are upstaged by the environmentally destructive and unsafe operations of thousands of illegal mines. The proliferation of these illicit

operations endangers lives, and the government is robbed of billions of dollars a year in tax revenues due to smuggling and nonpayment of taxes.

Meanwhile, as EO 79 prevents the approval of new mineral agreements subject to the passage of legislation that rationalizes existing revenue sharing schemes and mechanisms, House Bill No. 8400 seeks to rationalize and institute a single fiscal regime applicable to all mineral agreements.

Though the mining excise tax has been doubled by the Tax Reform for Acceleration and Inclusion (TRAIN) Law, this bill further increases mining taxes, making them higher than the current mineral production sharing agreement and even higher than what most other countries have with well-developed mining industries. Should HB 8400 materialize into law, it will be an unhappy but acceptable compromise that should pave the way for the lifting of EO 79.

Our huge mineral potential has remained underground and useless for far too long. The government must act on unleashing the progress potential of the mining industry by creating a stable and globally competitive regulatory environment, the same way developed countries have harnessed their minerals as a strategic resource for prosperity.

A vibrant mining industry will spark a surge of decentralized development, lifting millions of Filipinos out of poverty in the most remote and undeveloped municipalities, from the shores of northern Luzon to the southern end of Mindanao.

 

 

 

This article was originally published in Philippine Daily Inquirer.

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