Tough act in mining

Environment and Natural Resources Secretary Roy Cimatu, being the good soldier that he is, will surely follow what his commander in chief says.

After the President issued some harsh statements against the mining industry during his last State of the Nation Address, Cimatu must now have a good grasp of how he must play his cards, realizing that the mining industry is not a pushover after seeing how Congress could throw out Gina Lopez, Duterte’s first hand-picked choice.

Being DENR secretary these days is more like a balancing act to keep the strong stakeholders of the industry, including his boss, happy. But that’s going to be a tough act.

The winds have clearly changed in the Philippine mining industry – at least in the next five years or so, marking the remaining term of the current president.

Since time immemorial, interested and existing mining operators in the country had been lobbying for the industry’s liberalization. They eventually found a strong ally in government, Gloria Macapagal-Arroyo, who believed that a strong mining industry in the Philippines would be beneficial to its future prosperity.

Quick fix

Arroyo was, in fact, interested in mining as a quick fix to the many problems that the country faced, including budget deficits, decreasing tax collections, ballooning debt, and other economic problems brought about by financial crises.

As the world’s fifth most mineralized country in the world, and being home to the world’s largest copper-gold deposit, the Mines and Geosciences Bureau had estimated the country’s untapped mineral wealth at about $840 billion as of 2012.

With the Arroyo government’s Mineral Action Plan issued in 2004, an estimated $6- to $7-billion in potential investments, $800 million in export earnings, $490 million in tax revenues, and jobs for 200,000 Filipinos was expected.

But creeping environmental activism, globally and locally, against mining in general is challenging the real value of such earnings and jobs, especially in the wake of widespread stories of poisoned rivers, lakes and waterways, raped lands, and polluted air.

Losing end

Duterte, who has earned a reputation for forcing his way through many national issues even if this meant going through extrajudicial routes, believes that the country is at the losing end of the liberalized mining regime the Arroyo government espoused.

He may be right if one considers that in 2016, the mining industry’s contribution to the country’s gross domestic product (GDP) was a mere 0.6 percent, while the contribution of minerals and mineral products to the country’s total exports was at four percent, and for non-metallic mineral manufacturers at 0.3 percent.

Additionally, current local mining laws provide for tax of a low two percent for metallic and nonmetallic minerals. There had been attempts to reform the mining law during the Aquino administration with a view to increase the government’s revenue take, but nothing much came of this.

Expect the planned reform to happen with the mining industry under the Duterte government. Under Aquino, a bill had been filed to raise taxes to either 10 percent of gross revenues, or 45- to 55-percent on adjusted mining revenues, plus a percentage of windfall profit, whichever is higher.

Duterte could bat for even more, including stiffer penalties for deviation or non-compliance of environmental laws. Or even come up with even harsher fines that could make mining investments not commensurate with the risks. He had, after all, never kept secret his discomfort with mining firms.

Moving forward

After former DENR secretary Gina Lopez unceremoniously closed 21 mines early this year without firm basis (insufficient or inadequate rehabilitation of mine areas, absence of tree-cutting permits, construction of alternate haul roads), a fresh debate on mining’s relevance in the country’s future has resumed.

Many have come up with papers that suggest the way forward. Of course, some of the more militant members of the Church and environment advocates are inspired by the “success” that Lopez’s closure order had accomplished, even if temporarily, and continue to bat for a total closure of the mining industry.

Others, though, want to find solutions that offer win-win paradigms. One such is Dr. Caloy Arcilla from the UP Institute of Geological Sciences, who believes in working within the system for a responsible mining industry and make it a worthwhile contributor to the country’s economy.

Setting up an independent EMB

In his policy paper titled “Mining in the Philippines: Problems and suggested solutions,” among the outstanding recommendations is the separation of the Environmental Management Bureau (EMB) from the Mines and Geosciences Bureau.

He says “an independent EMB analogous to the Commission on Audit strengthens the protection for the environment: if a project is found, ab initio, not to be environmentally responsible, then it cannot advance even with a very positive NPV.”

Striking a balance

Additionally, Arcilla tackles the issue of revenue sharing, something that has not been a mutually beneficial arrangement concurrently between the government and mining companies.

Since this is a complex undertaking, with different mining companies using distinct business models, there is a need to for an “exhaustive study that considers the complexities and strikes a balance in imposing taxes is needed — too many taxes will kill the industry, whereas too little gives windfalls.”

Corollary, Arcilla recommends increasing the local government units’ revenue share, and allowing mining companies to pay the LGUs directly. “Revenues from excise taxes should be shifted substantially towards the LGUs (more than 50 percent) and away from national government,” he wrote.

Partially in support of Duterte’s views, Arcilla asks for further research on directly exporting ores – although on selected minerals like scandium. This way, we maximize the minerals of our country.

Secretary Cimatu could pick up a few good pointers if he has any intention to resolve the current impasse, and of being more than just a good soldier.

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