JFC: Noy EO on mining may deter investments

Provisions in President Aquino’s recently released Executive Order (EO) that seeks to increase taxes on the mining sector and extend a ban on new permits may deter investors, the country’s biggest foreign trade group said.

The Joint Foreign Chambers (JFC) in a statement said EO 79 that fleshes out mining policy, details of which were released Monday, is aimed at boosting revenues from the sector while increasing environmental safeguards, his aides have said.

The JFC, which represents major foreign business groups including the American Chamber of Commerce and the Japanese Chamber of Commerce, said the moratorium on new mining agreements created uncertainty among prospective investors in the mining sector.

The statement said companies would not engage in exploration activities unless they had a firm mining agreement and knew how much they would be taxed.

“No mining company can be expected to spend extremely large amounts of money on exploration without certainty, the grant of a mining title and without first knowing the fiscal regime,” the statement said.

Australia-New Zealand chamber president Ian Porter said investors would await passage of the new taxes on mining before entering the sector.

“We hope that is done very quickly so investors will make a decision whether to enter the Philippines,” he said.

The Makati Business Club, a pro-Aquino business organization, also expressed concern that the moratorium could be in place for a long time while Congress debated the issue.

The club called on Aquino and Congress to quickly pass the bill, “in order to avoid slowdowns to investment inflows that are crucial to the country’s aim for inclusive economic growth.”

A key provision of Aquino’s order is a proposal to hike taxes to five percent of mining companies’ gross earnings from the existing two percent, a move that requires approval from a Congress dominated by Aquino allies.

Officials had said they were hopeful it would be passed this year, though they could not give guarantees.

The government estimates the Philippines has at least $840 billion in gold, copper, nickel and other deposits but this has largely been largely untapped, due to anti-mining campaigns, poor infrastructure and security concerns.

In its statement, the JFC said its interest is on securing a favorable investment environment in which foreign as well as local investors are encouraged to establish and build business ventures in the Philippines.

“While renegotiation of existing contracts remains open within the new EO, the JFC notes that renegotiation would only occur through mutually acceptable agreement between the government and the contractor. The JFC is of the view that retrospective or retroactive rulings or legislation by any government is detrimental to both domestic and foreign investment,” it said.

The JFC added the new mining policy should be implemented in line with the Philippines’ obligations under highly-regarded and well-considered Foreign Investment Protection Agreements (FIPAs).

It expressed concerns about section 4 of the EO which states that “while the government will continue to grant and issue exploration permits, it will decouple such agreements from the granting of mineral deals which government said will not be entered into until a legislation rationalizing revenue sharing takes effect.”

It said the decoupling acts as a deterrent to investment.

The EO states that those with exploration permits will have the first option to develop, should an economic deposit be discovered.

The JFC also revealed that the government had invited the International Monetary Fund (IMF) to “analyze and make recommendations on the fiscal regime for mining in the Philippines. The JFC met with the IMF team, and notes with pleasure the commitment of the Secretary of Finance to publicly release the IMF’s findings.”

Bayan Muna Rep. Teddy Casiño, meanwhile, said renewed moves for Charter Change to water down provisions on land ownership and foreign investments is sure to favour foreign mining firms to the detriment of mining communities and local players.

“While Executive Order 79 provides mere band aid solutions to the problems of the mining industry, Cha-cha will aggravate and worsen it by allowing foreigners to further exploit mineral resources that is supposed to be reserved for Filipinos and used for our own industries,” the solon said.

“The economic premise of those proposing to take out constitutional restrictions on ownership and investment is proposals and unsupported by any real research. In fact, many of the economic miracles they cite are countries that also have restrictive or protectionist provisions,” he said.

He stressed that proposal to give aliens 100 percent ownership to land, public utilities, and natural resources is a recipe for disaster given the festering problem of landlessness In the Philippines.

“Even the supposed economically booming countries do not allow the same extent of liberalization. Thailand requires 51 percent Thai ownership of its public utilities such as electricity and energy; Australia requires 65 percent Australian ownership of its telecommunication; Brazil requires 49 percent Brazilian ownership of its lands,” he said.

“In fact aliens are totally prohibited from owning land in China. Meanwhile, Nepal, Mongolia and Cambodia which allow unrestricted foreign ownership remain poor,” he stressed.

“Also the proposed opening of the country to foreigners raises serious security issues. Will China be allowed to maintain beach heads in Palawan and Batangas if it buys coastal lands in these provinces? Will China be allowed to buy Meralco and other public utilities and hold us hostage if the Spratlys and Panatag Shoal issue is not resolved?” the lawmaker asked.

Casiño said Congress should not be distracted by “unecessary issues that are not urgent like Cha-cha and instead focus on passing measures that would improve the lives of ordinary Filipinos, like measures to reduce the cost of electricity and other utilities as well as measures to support small and medium enterprise.” –Charlie V. Manalo, Daily Tribune