Finally, a mining policy for the fabulously metals-and-minerals-rich Philippines that makes sense – one that this time allows the Filipino people to properly benefit from these gifts from God; one that has the potential to develop and expand the country’s industrial base, boost its exports sector and create millions of jobs in the process. If this policy is ever fully rolled out it will put the pedal to the metal for Philippine manufacturing and leave its fellow members of the Association of Southeast Asian Nations in its wake.
The beneficiaries this time won’t be the Spaniards who kicked off commercial mining interest in the archipelago, though not too successfully, in a lust for gold that had seen them ravage much of their South American colonies and bring about the destruction of the Inca civilization; nor Imperialist Japan which mined the regions for metals that could be fashioned into weapons of war; not the giant multinationals who’ve leeched the ore from the earth to fuel overseas manufacturing plants.
What we’re getting a glimpse of is the possible nascence of a mining policy that this time stops the plunder and can maximise the value of that ore for the land and the people it was intended and take care of the Philippines precious environment at the same time.
A very brief history. Extracting metals from the Philippine soil started in a foreign sense when the Viceroyalty of New Spain’s nose for gold led it to the gold fields of Benguet province in what’s now the Cordillera Administrative Region of Luzon. It wasn’t until the American’s took over the store, however, that commercial mining in the archipelago properly got underway.
Benguet Gold Mines – later, Benguet Consolidated Mining Inc; today Benguet Corporation – opened in 1903. Over the next 70 years it opened further gold sites and branched out into mining chromite and copper. (Photo: Sculpture at Balatoc Mines, Itogon, Benguet, a once-active gold mine transformed by Benguet Corporation into a tourist attraction).
In 1905 there were 89 mining operations in the Philippines; by the following year there were 544. In 2016, there were around 1,500 new mining applications resting with the government’s Mines and Geosciences Bureau – the regulatory agency of the Department of Environment and Natural Resources (DENR).
The problem that successive governments have had with its mining sector is that they’ve never been able to capitalise on the vast latent wealth of these resources – estimated to be worth in the region of US$850 billion. We’ll give you that in pesos; its PHP43,089,074,841 – or, PHP43.08 trillion and change.
Philippine gold, copper, nickel and chromite reserves are among the largest in the world. And yet in 2016, the gross production value realised by Philippine mines was just US$2 billion (PHP101.24 billion at today’s rates). Even more derisory was mining’s contribution to gross domestic product, kicking in a meager 0.7%. Meanwhile, mineral exports accounted for just 5.6% of total exports while – tellingly – exports of Philippine-made mineral products helped overall shipments by a paltry 0.3%.
In 2014, then president, Benigno “Noynoy” Aquino, pushed for a mining reform bill which sought to implement more equitable revenue-sharing between the public and private sectors and levy more onerous taxation on the industry. That never got done; Aquino’s term was over before Congress got round to it. Nothing new there, of course, final congresses of an administration routinely leave a shed load of unfinished business.
But the idea was good. For one thing it addressed the issue of tax revenue – a contentious issue that’s never been satisfactorily resolved. The gross tax rate for mines is 2% – however, mining companies are also subject to a number of other taxies, levies and fees. Under the revenue-sharing provisions of the mining reform bill, though, the public purse could acquire either 10% of a mining company’s gross revenue, or between 45% and 55% of adjusted net mining revenues plus a percentage of windfall profits, whichever’s higher.
The other problem in this area has been successive governments’ hopeless tax-collection systems and the squabbling between central government and local government units over profits and tax revenues.
But this is also an idea that has a very good chance of being revived if we’re reading correctly into what President Rodrigo Duterte had to say about mining in his State of the Nation Address (SONA) on Monday.
Here’s what he said: “Ours is a rich country. Wealth that this country is endowed with [is] a gift from God to be utilised for the [people’s] welfare and the common good. I do not believe that this gift was given to us to be merely viewed or appreciated, but to be extracted from the earth and utilised to make life worth living”.
That stands in stark contrast to what we heard from Gina Lopez whose confirmation as DENR secretary was rejected by the Commission on Appointments in May. Her single-handed attempted destruction of the potentially highly valuable mining sector threatened to bury this wealth for all time. The vision of a new industrial heartland, booming product exports and a jobs bonanza totally evaded her. She was into creating some sort of hippy theme park with “blue lagoons and enchanted rivers” serviced by a hospitality staff made up of re-programmed miners. Her unilateral closure orders issued to 23 mines in February literally decimated the Philippine mining sector.
For Lopez, caring for the environment and exploiting the country’s mineral resources were mutually exclusive. She never contemplated doing both. For her this was never about managing mineral resources, it was always an eco-war. Everyone’s aware of the damage which irresponsible and poorly regulated mining has done to the environment in parts of the Philippines; but most people are also aware that they’re literally sitting on a gold mine that could boost the economy and improve people’s lives.
Duterte in his SONA emphasised the need to care for the environment. “In the extraction and utilisation of these resources, extreme care must be exercised [so] that we do not recklessly and needlessly harm the environment. Responsible, regulated and sustainable development is what we advocate and require,” he said.
And rightly so; it would be madness to exploit one resource at the cost of another – though, in effect, that’s what Lopez was doing. And it’s also right that environmental protection should be the prime concern. Indeed, Duterte said that this policy is “non-negotiable” – the wellbeing of the watersheds, the forests and all water resources is paramount. After all, these are areas where eco-tourism can take off – in fact, government revenue from mining under a more sensible profit-sharing and taxation scheme could be directed to this sector.
But it’s what Duterte said next that’s most instructive and gives the best clue to the government’s present thinking on mining. Here’s what he said: “It is not enough that we mine this wealth. What is more important is that we convert the raw materials thereof into finished products for international and local purposes. That way, it will not only be the few who are the rich but also the poor who are many who will benefit there from”.
In other words, the plan would be to produce goods in the Philippines and earn the value added, rather than just sell the ore overseas. In short, local products made from local resources by a local workforce – rather than local ores shipped abroad to feed the manufacturing sectors of other countries who sell their products back to the Filipino public. To us that looks like a win, win, win.
Duterte continued: “Therefore, I call on our industrialists, investors [and] commercial barons to put up factories and manufacturing establishments right here in the Philippines to process our raw materials into finished products. At this point in my administration, if possible, we shall put a stop to the extraction and exportation of our mineral resources to foreign nations for processing abroad and importing them back to the Philippines in the form of consumer goods at prices twice or thrice the value of the original raw materials foreign corporations pay for them”.
That, anywhere else, is called good business sense. It’s also called common sense – a rare commodity indeed when politicians are involved, which helps explain why it’s taken so long for a policy like that to be put into practice.
For example, the Philippines is the world’s largest nickel-ore miner – it unearthed 554,000 metric tons of the stuff in 2015 – yet how much does it spend annually on importing nickel products from bath taps to batteries; cutlery to mobile phones? It could be making those items and selling them into the domestic market or shipping them to markets overseas. That’s not brain surgery, but anyone who can’t see the glaring economic benefits of that might need some.
One thing that’s certainly needed is an improvement in government-miner relations; something that’s always been bitter-sweet and the most part bitter. In a future partnership perhaps they could become joint stewards of the environment while they share the commercial wealth of the earth.
There’s nothing to suggest that the mining industry would be opposed to this. Over recent years, they’ve shown some willing. Between 2011 and 2015, the mining sector reforested 47,000 hectares of land under the National Greening Program; last year, it provided PHP13.1 billion for its own Social Development and Management Programs, and a further PHP19.1 billion to implement approved projects under its Environmental Protection and Enhancement Programs.
Hopefully, this marks the start of a new chapter in Philippine mining. Metal ores are believed to be present right across the 30 million hectares of the archipelago with metal deposits of around 22 billion metric tons. On top of that there’s an estimated 19.3 billion metric tons of non-metal minerals.
In the light of all that – given the need to increase the country’s industrial base; the need for greater government income to fund and continue funding new infrastructure; the need for job creation that will halt the reliance on remittances from Overseas Filipino Workers, forced from the country in the absence of work prospects at home; the need to boost the manufacturing sector – to let all those God-given resources go to waste would be a crime.