Part One
THE shift to a federal form of government offers a ray of hope to the minerals-development sector, with big players optimistic of changing the games under a different—and quirky, for some—scenario.
There are two laws that regulate mining in the Philippines: Republic Act (RA) 7942, or the Philippine Mining Act of 1995, which regulates large-scale mining; and RA 7076, or the People’s Small-Scale Mining Act, which regulates small-scale mining.
The former, signed by then-President Fidel V. Ramos in 1995, aims to attract more foreign investment “by defining the agreements for mineral exploitation, and provide the requirements for acquiring mining rights,” according to Roberto B. Raymundo of the De La Salle University (DLSU) School of Economics.
In the paper he presented at the DLSU Research Congress in 2014, Raymundo explained the law allows 100-percent foreign ownership of mining
projects through Financial or
Technical Assistance Agreements (FTAAs). To encourage mining the law also gives several incentives such as a four-year income-tax holiday, tax and duty-free capital equipment imports, value-added tax exemptions, income-tax deductions (when operations are posting losses) and accelerated depreciation.
Raymundo also said the law “strengthens the role of local government units in mining projects, both as beneficiaries and as active participants in mineral resource management, consistent with the provisions of the constitution and government policies on local autonomy and empowerment.”
Under a new government, mining operations currently pass through the proverbial eye of the needle with an environmental advocate at the helm of the Department of Environment and Natural Resources (DENR).
Unclear future
DENR officials told the BusinessMirror that a change in the form of government offers an uncertain future. Leo L. Jasareno, DENR senior undersecretary for Mining, said mineral resource management would depend on the law that would create federal states.
“Hindi pa natin alam [We still don’t know what would happen to the law].” Jasareno said. “It all depends on Congress,” he added.
DENR Undersecretary Luis Jacinto, the concurrent chief of the Mines and Geosciences Bureau (MGB), agreed.
“It will depend on the form that [government] will take. There will be set of rules,” Jacinto said. “Makikita doon kung ano ang [The set of rules would show the] key role ng federal states as far as the country’s minerals-resource management is concerned.”
He added that the rules would also determine how governance would not be only of the mining
sector, but also of the country’s
natural resources. According to Jacinto, the Lower House has not crafter a working paper yet on how to govern the mining sector under a federal form of government.
“It all depends on what will Congress come up with,” he said. “Right now, we have no clear picture of federalism’s impact on mining.”
Local condition
THE application of RA 7942 was marked by several hiccups marked the application of the country’s mining act, according to Raymundo.
The law was met by protests by non-governmental organizations (NGOs) and indigenous peoples’ communities. Lawsuits were filed that, according to Raymundo, arose from the conflicting national and local government laws.
The noise spooked investments and risked the attainment of the law’s purpose.
He added that, “Because of the continued protest over alleged violations of mining companies, their destruction of the environment and the displacement of indigenous people and communities, local governments of 14 provinces had promulgated ordinances banning open pit mining.
“The amount of investments flowing into the mining sector [has] not been sufficient in order to fully tap the immense potential mineral reserves of the country,” Raymundo said. “One of the primary reasons for the low level of investments being generated by the sector is the risk and uncertainty created by the flawed provisions of the Philippine Mining Act of 1995 and its overlaps with other laws, such as the Local Government Code of 1991.”
Better days
ALREADY shaken by pronouncements of new DENR chief Regina Paz L. Lopez , mining companies remain hopeful of better days ahead under federalism.
The Chamber of Mines of the Philippines (Comp), which represents large-scale mining companies through its Executive Vice President Nelia Halcon, says while the federal form of government will not take shape overnight, it will be good for everyone to consider the system. Halcon added that the Comp believes federalism is expected to enhance the development of the rural areas and provinces.
“A federal economic center in the regions that will oversee the development of provinces based on their priorities and economic advantage will be a welcome development and, hopefully, will also put all local government officials on their toes since no LGU [local government unit] would want to be placed at the bottom line of development,” Halcon said.
However, Comp believes that federalism will not necessarily improve minerals production.
“This will depend on the implementation of the system of processing permits and licenses. Streamlining the process is a must,” she said.
Halcon, however, said she and Comp are confident that LGUs would toe the line in seeing to it that no illegal-mining operations will be allowed under their “transparent” governance.
Devolution to LGUs?
HALCON said Comp believes under federalism, the DENR’s mandate would not necessarily be diminished. She expressed hope that devolution of functions and responsibilities will be clear “so that it would be easier for the mining industry to work with LGUs since their operations are in the provinces.
“We presume that the DENR will work hand in hand with LGUs and while LGUs have their own levels of needs and policies, they will think about the good of the country or the marcolevel benefits,” she added.
For its part, the Comp said the industry could harness the technical capabilities of government agencies, which can help capacitate LGUs.
She said discussions about mineral resource development could open the minds of everyone that mining could be undertaken in a responsible manner and the need to explore areas to delineate the nation’s wealth is paramount for developing a country, like
the Philippines.
Halcon said the perspective of the industry to link its Social Development Management Program (SDMP) with the development plan of LGUs would further enhance the province or region’s economic base, thereby providing the catalyst for economic growth.
“The development of industries, no matter how big or small, can promote the development of industrial centers of growth in the region and can reverse migration to the cities,” she added.
Solving hiccups
According to Halcon, federalism can address conflicts in the implementation of laws governing environmental protection measures, as well as in share in mining profit. She said these conflicts could either be avoided or ultimately resolved.
Among these conflicts is the ban on open pit mining, an extraction method allowed by law.
However, such method is banned in several provinces, like South Cotabato. The province is one of the areas covered by the $5.9-billion Tampakan Copper-Gold Project.
Other conflicts include the nontransmitttal or late transmittal of the rightful share of LGUs on mining taxes and the expansion of “no-go zones” in mining without clear justification.
Halcon said Comp believes under federalism, rules and regulations on these issues could be made clearer, and responsibilities and accountabilities are pinpointed.
Elected officials in the provinces who do not implement laws will need to think twice about their governance framework under federalism, she added.
Lopez had already suspended at least nine mining operations for failing to meet environmental standards and violating mining and environmental laws.
An ongoing mining audit, with very rigid criteria giving more weight to social, environmental and lately biodiversity considerations on top of the physical or technical aspect of mining regulation makes all mining operation prone to closure under Lopez’s watch. To be continued
With additional reporting by Dennis D. Estopace
Image credits: AP