Torpedo

It is precisely the nightmare that haunts investors considering putting in billions of dollars in the Philippine economy. The Bloomberg newsflash read: “Mining ban looming in the Philippines.”

That is not just a shaft driven into the heart of the investment community. It is a torpedo unleashed on our country’s economic future.

Investor confidence in the reliability of our policies has been, at the very least, shaky. A long string of judicial rulings nullifying contracts and reversing policies have successfully kept investor confidence in our economy consistently low. That is the reason why our economy receives only a miniscule fraction of investment flows in this dynamic part of the world.

Today, the most important sector of our economy attractive to international investments is mining. Billions of dollars in investments are forthcoming to this sector. The mining industry alone could account for about a fifth of our economic growth in the near term, helping greatly in bringing down poverty levels.

The reason for that is that the Philippines ranks among the top ten countries in the world in terms of mineral deposits. We have trillions of dollars worth of accessible mineral deposits that may safely be extracted using the best technology now available at minimal cost to our environmental integrity.

In 1995, we passed a Mining Act that is probably the best in the world, culling from the benchmark features of similar legislation in Canada, Australia and Europe. It required best practices in the mining industry and contained provisions that required complete restoration of the environment in the course of mining activities.

That Act was expected to provide a clear and reliable framework for an industry that brings maximum benefits while minimizing ecological costs. It encouraged the entry of capital and the best technologies to ensure the twin goals of efficient extraction and environmental protection.

But the Mining Act of 1995 has been met with opposition by a small number of environmental fundamentalists who have little knowledge of the industry and even less appreciation of its importance for our economic salvation. The small band opposing the Mining Act, including a group of clergymen, has thrown every conceivable hindrance to the law and every conceivable maneuver to tax investor confidence in what should have been the sunrise sector of our economy, the cutting edge of our economic recovery.

Soon after the Mining Act was passed after thorough debate, a group of lawyers filed a constitutional case against it at the Supreme Court. The law was trapped in the judicial grind for nearly a decade. During that time, we could have made enough out of the mining industry to pay down our foreign debt.

The Supreme Court’s final ruling about the constitutionality of the Mining Act did not end efforts to hinder it — or at least keep a cloud of uncertainty over the nation’s mining policy. A group of left-leaning legislators filed, in the last Congress, an “alternative” mining bill that represents the worst we could ever do with our great mineral potential.

The “alternative” mining bill called for all existing mining permits to be “reviewed” by some sort of “minerals council”. A unanimous vote is required to renew the permits. No other mechanism could ever be designed to ensure both policy uncertainty and a wide door for corruption.

The “alternative” bill favors “small-scale” miners over large ones. This will guarantee that modern technology will not be used and bare-hands mining which causes the greatest environmental damage because it relies on mercury will proliferate. This is the equivalent of banning commercial forestry and allowing kaingin to run amuck.

Mining is inherently capital intensive. Otherwise it will be harmful. Both the capital and the know-how are in the hands of large mining corporations. The “alternative” mining proposal calls for the enforcement of a 40% cap on foreign participation in mining. With no Filipino corporation capable of meeting the 60% counterpart requirement, we might as well say goodbye to modern mining techniques.

The “alternative” mining law calls for an income sharing formula that basically ensures investors negligible returns on their large capital outlay. This is compelling disincentive to investments by anybody. The bill might as well ban mining investments outright.

The “alternative” mining bill calls for a “moratorium” on exploration permits. The consequence of that is: we will never know where the deposits are. If we cannot verify deposits, who will invest?

This idiotic bill filed in Congress will probably never become law — unless it is adopted as an administration measure. This is the specter that haunts the sleep of the investment community.

The Bloomberg report mentioned above is based on a talk by the new DENR secretary before the CBCP. The CBCP, as we know, is prejudiced against mining per se. In this country, we have the unique spectacle of bishops taking collective positions on matters of state policy.

By the CBCP’s own report of the talk delivered by the DENR secretary, the latter was supposed to have described the Mining Act of 1995 as “inherently flawed” and seemed amenable to its amendment or even replacement. Billions of dollars of investments are now suddenly on hold because Secretary Paje’s remarks seem to indicate a departure from President Noynoy’s affirmation of the Mining Act during the campaign.

Secretary Paje should better qualify what he really meant. The President should make clear his administration’s position on mining policy at the soonest. Otherwise a deep freeze on investments could happen.

When it does, there will be grave consequences on our economic fate. Growth and poverty alleviation might as well be stricken off from the national agenda. –Alex Magno (The Philippine Star)