“PROFOUNDLY disturbing,” is how the Joint Foreign Chambers and other business groups have described the draft executive order on mining that is being pushed by Malacañang.
In a letter to President Aquino, the JFC said the still-unnumbered EO, titled “Institutionalizing and implementing reforms in the Philippine mining sector, providing policies and guidelines therefor, and for other purposes,” would significantly alter and damage the mining investment climate in the Philippines.
“The draft EO, as presented, is profoundly disturbing in that it creates great uncertainty for established and potential investors in the Philippines. It proposes to review all existing contracts, and renegotiate or impose an increased government tax or royalty share, and potentially closes out granted contracts completely,” the letter, signed by the heads of the seven foreign business groups comprising the JFC, said.
The JFC said the draft EO has the potential of becoming the death knell for the Philippine mining industry.
While recognizing that its knowledge of the EO is only based on published media reports, the group said the EO would put at a disadvantage existing companies that have made large investments in exploration and feasibility. Also, JFC said the draft carries “highly disturbing retrospective legislative implications and inferred sovereign risk.”
Earlier, the Chamber of Mines of the Philippines and other business chambers also urged Malacañang not to push through with the EO.
The JFC said the EO would be another “policy turnaround” following the 2004 Supreme Court validation of the highly regarded 1995 Mining Act and various government incentives that the government is using to actively encourage foreign direct investments (FDI) in mining via major conferences and representations in North America, Africa, China, Australia, Japan and other nations or regions.
As a direct result of Philippine encouragement and representation, the group said many companies have made multimillion-dollar mining investments in the Philippines.
All these, the group said, will be put to waste, particularly since any new policy that is retrospective in nature will generate investment uncertainty not only in mining but also in all FDI.
“It also unnecessarily damages sovereign credibility on the global stage, and in some cases violates the Foreign Investment Protection Agreements [FIPAs] signed by the Philippines with many countries. Such uncertainty would have a major and lasting impact on the Philippines’s 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,” it added.
The group said Malacañang is probably of the wrong impression that the Philippines’s share in mining revenue is small compared to the liabilities. This, it said, is true only in unregulated small-scale mining and not with large-scale, responsible mining.
The mineral production sharing agreement and financial or technical assistance agreement (FTAA) contracts, the group said, compare favorably with those of advanced mining jurisdictions such as Australia, Chile and Canada.
“The FTAA component is a world-class mechanism. It provides at least a 50-percent share to the government in circumstances where little or no government capital outlay is required and where the explorer or investor carries the cost and financial risk of exploration, discovery and potential development. The world-class Tampakan Copper-Gold Project alone, for example, could provide an extra 1 percent to national GDP once given the go-ahead,” JFC said.
While acknowledging that reviewing policies in all areas is part of good governance, the JFC urged the government to embrace a broad range of views in reviewing mining policy at this time, and emerge with a position that encourages a blend of FDI and responsible mining that will reward both the investor and the people of the Philippines.
“The JFC understands and encourages the government’s desire to improve its economic standing, and understands the government’s desire to optimize its tax take. In doing so, the JFC urges the government to work more closely, co-operatively and systematically with industry to determine a fair and competitive financial sharing arrangement that is globally competitive and does not deter investment. In this context, there should be a mutually-beneficial way forward,” it said.
With this, the JFC asked President Aquino to allow the group’s mining representatives meet with the policy-recommending team of the executive secretary to discuss the matter.
