Like It Is

Is the government serious about fighting poverty, or not?


Close to 1,000 people lost their jobs and an investment of $6 billion, the biggest single investment the Philippines has ever attracted, is on hold and may well disappear. As a result of the endless lack of commitment by this government to support the mining industry, Sagittarius Mines may never get going. The firm and its major shareholder, Glencore Xstrata, have put the Tampakan project on hold as they reevaluate if it’s worth proceeding.

In one of its most ill-considered decisions, the administration of President Aquino—an administration that has generally been making the right decisions, so this one is hard to understand—has practically stopped all new mining operations; and it has decided to ask Congress to review the mining tax regime before allowing new projects.

The President said government only receives a 2-percent tax on the gross revenue of mining firms, or 7 percent if royalties are included. But this is only one of the many taxes and benefits (investment in infrastructure, health and education in the community where mining firms operate, etc.) local communities derive from the industry.

The government says it wants a 50-50 sharing of net mining revenues. But according to a recent International Monetary Fund study, the government already gets more than 50 percent—actually around 60 percent from FTAA (Financial or Technical Agreement) contracts—and this is significantly above the share other mining countries are getting, especially those with whom the Philippines is in competition for dollar investments.

With the mining projects on hold, the loss to the economy will be far, far in excess of whatever supposed additional revenues will be generated from higher taxes. For example, there’s a high possibility that the $6-billion Tampakan mine investment will be withdrawn permanently. Meanwhile, no other projects are being approved. The explorers are leaving, no one is coming in.

Last year foreign direct investment (FDI), the investment that creates jobs, increases national wealth and spurs other multiplier effects for the economy, was $2.8 billion, the lowest by a factor of 3+. Thailand drew in $8.6 billion. The largest recipient, Singapore, got $54 billion. So you’d think the government would be rather strongly determined to do everything it could to attract more FDIs and refrain from any action that would drive them away. (Note that the $6-billion Tampakan FDI is more than twice the total of all FDIs last year; another mining firm, TVI, is expected to shut down as it has been stopped from expanding its mining operations.)

Yet that’s what President Aquino has done through his ill-advised request for Congress to review the tax regime for mining and with Environment Secretary Ramon Paje’s refusal to approve any new or expansion projects.

Fifteen billion pesos, that’s how much it would cost to build the additional classrooms the country needs; P13 billion, that’s how much it would cost to hire around 50,000 new teachers to solve the shortage of teachers in public schools; P75 billion, that’s how much it would cost to rehabilitate 25-30 ailing government hospitals. About P370 billion, that’s how much the Philippines will lose this year and over the next four years because of government’s aversion to mining. That amount would pay for health and education three times over.

Except for a few existing mines, the local sector is practically at a standstill. That’s about 44,000 lost job opportunities in mining for Filipinos and 180,000 lost jobs in other activities mining generates.

The mining tax revisions the government wants will take at least two years to get Congress approval; it could take longer.  After that, it will take a minimum of another two years for any new mine to get started, and five years more before it can start paying taxes. That means a long wait to 2020, well beyond this administration’s term.

For now, only six companies are—or should I say were—ready to begin mining. Their operations are on hold until a new tax law shall have been passed, or until the government comes to its senses and recognizes the harm to the economy this ill-considered tax review is doing and cancels it. No one will invest when they don’t know what tax they’ll pay.

What the government doesn’t seem to realize is that  it has been getting good revenues from large-scale, responsible mining companies. In 2011 exports were $2.7 billion, or some 5.6 percent of GDP. The mining companies have also been contributing to host areas and their neighborhood communities through social development management programs (SDMPs), as mandated by the Philippine Mining Act of 1995. Their total contributions to socio-civic activities since 2005, through SDMPs, have reached P1.3 billion.

But these legitimate mining companies aren’t the only ones who have been doing mining. The Bangko Sentral ng Pilipinas recently reported that as much as 95 percent of mined gold is now smuggled out of the country. So if illegal mining is stopped—not a difficult thing to do if government really wants to—and mined gold is traded legally, we estimate that an additional P3.5 billion (equivalent to about 20 percent of total taxes from mining) could be collected annually at existing tax levels.

But for some reason the government is spending all its time attacking the responsible mining industry sector and doing nothing about the rampant illegal mining in the country.

Mining can, in the future, provide the country enormous wealth—if the President actively supports it.

* The IMF uses a formula called the Average Effective Tax Rate or AETR: measuring the total share of the net value of a mining project over its life.

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Tags: column , mining industry , Peter Wallace , Philippines , Poverty

  • http://www.yahoo.com JOSE RIZAL

    Obviously, they’re serious in making the poor a good “excuse” for the retention of the PORK and PORK BARREL SYSTEM.

  • sacrebleau

    The good news is, the longer the mined resources stay underground the more expensive they become.

    • ProPinoy999

      and nobody benefits

      • sacrebleau

        It’s for the future generation. Keep the resources underground, this generation is a write off.

      • ProPinoy999

        why keep em underground when we can utilize them now?

      • sacrebleau

        I don’t know why. All I’m doing is pointing out the positive side of keeping the resources underground. Not all options have a positive side.

      • ProPinoy999

        Dig the resources NOW. Use the taxes to be generated to build schools and hospitals. Educate the youth. Build a healthy workforce. Construct more roads. Expand the metro train system. Widen the coverage of CCT. generations and generations will benefit. Why delay the benefits mining provides?

      • sacrebleau

        Go ahead dude, dig the fxxking mine! Geeez. . . . . . .

      • Oscuro

        really? With these current batch of politicians?

      • Roger Wilcockson

        Amazing how some of the other people posting on this page would also like to have the same schools, hospitals, roads etc but haven’t yet worked out that you need to carry out mining to extract the materials used to construct them and manufacture the hospital equipment etc – no wonder so many educated Filipinos emigrate overseas for a better life

      • sacrebleau

        Mining is something that foreign companies should not dictate. There should be due diligence; make sure that the Philippines not get the short end of the stick.

      • Roger Wilcockson

        There already is due diligence by foreign mining companies. As for making sure the Philippines does not get the short end of the stick that will not happen until Filipinos exercise due diligence themselves and stop electing movie stars and sports personalities who have limited educational attainment

      • Roger Wilcockson

        better bury your computer back underground if you have that backward way of thinking – have you forgotten that you are only able to post comments on this website because you are using the end product of mining?

      • sacrebleau

        Technology of the future will be far more sophisticated and energy efficient, for that the world will need raw materials. China owns large quantities of “rare earth” but they also want to claim others’. Illegal Chinese miners have been mining “rare earth” minerals in our country.
        First things first. Do our housekeeping. The priorities are:

        1. Corruption and wastage
        2. Revenue collection
        3. The right legislation needed to allow foreign companies to mine in the Philippines.

      • Roger Wilcockson

        Forget priority ordering, implement things in parallel or it will take too long – foreign companies stop trusting governments when they keep changing legislation which has a major impact on the viability of their business operation

      • sacrebleau

        Our Constitution is over-protective with regards to our natural resources. That has to be amended.

        We need foreign investment, but we don’t want to be gang- r a p e d. Legislation will lay down the rules.

      • Roger Wilcockson

        there are many many countries that allow 100% foreign ownership and they ain’t been “gang-raped” because of it. Naive and baseless assumptions are why the Philippines is being left behind. The constitution should never have included any item on foreign ownership – it should always have been part of a separate specific law – far easier to quickly fine tune.

      • sacrebleau

        You could do it at your own risk or wait for amendments – that is the status. I don’t have to tell you that if it goes south, you will wipe out your investment. Once you experience the NPA demanding taxes from you then you will think about gov’t commitment that comes with legislation.

      • Roger Wilcockson

        I have no need to do anything at my own risk – you seem to be making an uneducated assumption that I intend to invest. I seem to recall the underlying issue is about whether the Philippines wants to progress or not by allowing foreign companies to actually majority control the businesses that they fund and establish in the Philippines to create employment for Filipinos. I would like to see progress caused by Foreign investment simply because my adopted Filipino children and their children will benefit from it. If as a nation you cannot get rid of a few common thieves who hide behind fake communism to steal from you, then how are you ever going to make progress. I have actually met several of these so-called communists, they even listened to some of my ideas on how life could be improved for Filipino, and liked them – sadly they could not work out that a lot of the ideas involved a capitalist approach and not a communist approach.

      • sacrebleau

        You are out of focus, you are carrying on about mining but in fact it’s the Philippine Constitution that is blocking the way of mining. Until that is fixed, I don’t think any respectable mining company will dare do business there without something short of a sovereign guarantee.

        Charter change is the issue.

    • Roger Wilcockson

      …….. to extract. Shortsighted thinking gets you nowhere

      • sacrebleau

        Au contraire Mr. Wilcockson, it depends on which side of the fence you are sitting on. For the Philippines, it would be shortsighted to give in to the temptation of following Australia’s mining boom, which by the way is already on the slide.

        The bottom line is: Sell now or sell later, the objective is to get premium $.

      • Roger Wilcockson

        As any contrarian would point out to you ….. “or sell now to fund faster economic progress of your country or later and stay for longer at the bottom of the tree!” I Most Filipinos would prefer to sit on progress side of the fence.

        By the way, the australian mining boom is not on the slide. It is merely adjusting to short term demand cycles and will no doubt continue in the long term. Have you not considered that the Philippines potentially can take great advantage of the current Australian situation because mineral extraction cost will be lower – you are being a bit presumptive about shortsightedness.

      • sacrebleau

        The slump in australia’s mining industry has had a tremendous effect on employment, hard to imagine that the industry could recalibrate itself back to as high as its last spike. The Hancock family has always been into mining, and they’ve always been in the fortune 500, the last cyclical boom made Gina Reinhart the richest person in Au.

        Back to my original statement: The Philippines cannot lose if the resources remain underground. The corruption problem could spill out to the mining industry and squander whatever chances the Philippines has in climbing from the bottom of the tree.

      • Roger Wilcockson

        The Chinese have invested for their future and the carbon tax is about to abolished. The unemployment that you talk about has very little to do with actual mining activities, it is instead related to the construction phases for a number of projects ending – that was always going to happen so it does not indicate the end of a boom – it just reflects a change from construction phase to operational mining phase. Same applies to the gas projects – I guess you do not know these things happen.

        Back to your original statement: there you go again, the curse of the Philippines, always looking for a “can’t do” excuse, while the rest of the world races ahead using “can do” mentality!

      • sacrebleau

        No, I will not pretend to know the phases that the mining industry goes through. Your explanation makes a lot of sense.

        Now to your “can do” mentality: You know the rest of the world but I don’t think you know the Philippines. In my opinion, you can get “to know” Thailand or any of those countries in the region, but it would be very difficult to “know” the Philippines.

        Most of the problems there are solved either emotionally or by religion. Suffice it to say that problems never get solved logically.

        I’m not bashing my motherland, just giving you an insight.

      • Roger Wilcockson

        I have been married to the Philippines for more than twenty years – and do “know” the Philippines (and it certainly isn’t very difficult to get to know), but also because I have worked in many other countries as well as the Philippines, I am capable of realising how easy it could be for the Philippines to start progressing the same way as other countries already have done. FYI I have even shamed local government officials into doing things the right way for the general benefit of our local community using logic and fact to break down artificial obstacles to progress/change. Other people have achieved the same results using same method, so to say that problems never get solved logically is not correct. There is nothing wrong with constructively bashing your motherland, if it needs bashing for the common good. Foreigners bash their own countries all the time – that is how they continually get change for the better and make progress.

      • sacrebleau

        You are probably one of those guys who knows everything. I was born and partially educated in the Philippines, I have been almost everywhere, speak several languages, speak fluent pilipino – I thought that would help, but it seems you know more than me.

        Take the current pork barrel issue for example, why on earth would any filipino want to oust the President right now – as per some comments in this news forum suggest? It is easy to see that it is not mining that undermines progress in that part of the world. There is a wily faction that knows the emotional and illogical weakness of the filipinos and is exploiting that to the hilt. The majority are susceptible to this kind of exploitation and are easily worked up to a fever pitch.

        As first and foremost a filipino, I also know that a lot of foreigners in the Philippines think they know everything about the place but they don’t – I find the same in Thailand. It is easier to understand any culture in asia if you’re asian, you have to take my word on that. There are contrasting cultural nuances between western culture and filipino/asian culture. In the western culture, what you see is what you get.

      • Roger Wilcockson

        You make far too many naive assumptions, the worst one being that it is easier to understand an asian if you are asian – that is just plain rascist nonsense – likewise your assumption that in western culture what you see is what you get is also complete bunkum – which explains why you mistakenly think a westerner (especially one who is married to an indigenous asian and with asian children) cannot understand an asian. Many westerners have also had asian classmates/friends since they were very young. Now then, instead of claiming that I seem to know everything, think back to how I explained the loss of employment in Australia and then think about how easy it would have been for you to first do a little research on the internet and find out exactly what I told you. Even when I do not know something I try and find out and do not presume or assume. We think outside the “box”, and do not allow ourselves to be narrow minded or blinded by others. Of course some posters will always want to oust the president irrespective of pork barrel – not everyone voted for him – no different to what would happen in any other country (asian or otherwise).

      • sacrebleau

        Search on the internet? Your resource is google? Lol! Weak as pi$$ mate, you won’t even find the Australian Building Code in google, unless you pay through your nose. That shows what kind of generic info you get from using google as a resource. All the while I thought you had inside info.

        I am in Australia right now, business, will be here for a while.
        Also, one of my friends owns a manpower agency and he’s just about done sending home workers in the mining industry with temp visa to work in oz.

        You had asian classmates? Again, weak as pi$$. If you can walk along Sampaloc Manila without creating a stir, blend in , speak the language fluently and hang out with the locals – you will be surprised what people are really like without the facade.

        We all make assumptions, don’t think that you’re exempted.

      • mumbaki ak

        Internet!!! what an a$$hole. proudly touting knowledge gained from the internet. I say he is naive.

  • Oscuro

    Mr. Peter Wallace, Well you can maybe blame the government for being greedy. Certainly this corruption scandal is proof of it. But among the forces that do not want mining to happen are the Church, the communities and largely the bleeding heart leftists we have be it communists or just plain social activists. They too largely influence government decisions.

    I was wondering why that didn’t factor in your report. You should ask me why do these people would want mining stopped. Well, you may be a moral company, you may be a environmentally conscious company and socially responsible.

    But tens of companies before you have not been as generous or responsible. There is a deep suspicion with mining companies. We have a saying, “ningas cogon”, it’s when you start something and don’t tend to finish it. It seems that all mining companies quickly adapt this thoroughly negative Filipino trait.

    • Roger Wilcockson

      “negative Filipino trait” – that kind of sums up the general reason for barriers to FID, and why other ASEAN countries are racing ahead of the Philippines. Time to move forward and change that way of thinking, and that means telling the lefties that they have achieved nothing positive over the past 40+ years and have nothing to offer, and telling the colonial church to stop telling people how to run their lives – incidentally, the dictatorial mentality colonial catholic church owes much of its Vatican ill gotten wealth to the taxes that it received from gold and silver mining in countries like Mexico – that church does not hold the moral high ground to interfere in mining issues, unless of course it gives that ill gotten wealth rightfully back to the Mexicans.

      • Oscuro

        Yes and I do knowledge that “trait”. Say what you will about the Catholic Church, I’m sure they deserve every word, but the fact is, it’s not just the church that participates in anti-mining activities.

        The mistrust against mining firms are based on past experiences by many communities that have suffered under the shadow of it. As I’ve said “you may be a moral company, you may be a environmentally conscious company and socially responsible.”—-However, the burden is on you to prove that, and so far many mining firms have not.

        AND….the government is greedy and corrupt. Black sand mining has operated without permits for years and had it not been for the friction with China those activities wouldn’t have come to light but as you can see…..corrupt as our government officials are, mining firms contribute to that corruption as well.

        I’m not against mining, except open pit mining, that’s really bad….I’m not against extracting oil, gas or fartts on Agusan Marsh…..as long as it can be done without disturbing/destroying what’s left of our natural environment.

        Take for example a certain mine near Ipil, Zamboanga whom we hear the rumors about who owns the mine……and I was there to gather information on the sentiments of the communities surrounding it and because I was used to do that activity, I thought that it might probably belong to someone high up the government. Information I provide usually…well I think you know where that is going. See these involvement with government and mining firms plus insufficient legislation and even worse, lack of enforcement from relevant agencies….. Our government isn’t mature enough to handle it.

        We can’t trust the government to do its job.
        We can’t trust the mining firms either.

      • Roger Wilcockson

        your post suggests that you are probably an activist whose objective is to convince communities to say no to open pit mining companies. now then, the mine project you refer to – easy to find on the internet – so for the benefit of anyone reading, the issue is essentially between a mining company and some small scale miners – so which do you prefer? irresponsible seriously environmentally destructive and unsafe working practice small scale miners or a foreign mining company that has to operate in a much safer and as environmentally friendly way as possible to avoid damning criticism for operating destructively overseas from the people of its own country (and in the modern big wide world that does happen). Like it or not you ain’t gonna get rid of both types of mining from that area – so the smart solution is the safe working and least environmentally destructive one – and like it or not wherever there are mining resources in the Philippines they will mined, even if only by uncontrollable unsafe and seriously environmentally destructive small scale miners. Any educated person who reads some of the articles on the internet written by activists will spot glaringly obvious one sided arguments – in one article I read, an activist (without any evidence whatsoever) was trying to claim that the big foreign mining company was poisoning a creek and children were getting rashes because of it. Later in the same article the activist said that in the past up to 12,000 small scale miners operated in the same area. Given the very well known environmentally poisoning methods used by such a large number of small scale miners, I find quite astonishing that the activist was incapable of realising that the creek had most probably been poisoned a very long time ago by all those small scale miners and not necessarily by the foreign mining company. So these people are quite probably being poisoned because of their own small scale mining activities. The problem with activists is that they only want to tell the side of story that suits their personal cause and which gives them power and influence over lesser educated people, and they are afraid to tell these people the possible reality that their own previous unsafe small scale mining practices may be the cause of their illness. The activist also tried to support his cause with a photo of a child with what could merely have been “nappy rash” or be caused by living in insanitary conditions given that there was no medical evidence presented to support any allegation of poisoning by the foreign mining company. But where was that same activist when no doubt many children died during the previous small scale mining activities? It is relatively easy for an activist to twist the mind of a very superstitious lesser educated person, but an activist will not be able to deceive an educated person without presenting both sides of a story and considering all the possible arguments and reasons – both for and against.

      • Oscuro

        Nice try of accusing me of being an (leftist, loony) activist. I’m FAR from it. I guess because you find that I’m against mining that you do not bother to understand further what I tried to say so I must quote myself.

        “I’m not against mining, except open pit mining, that’s really bad….I’m not against extracting oil, gas or fartts on Agusan Marsh…..as long as it can be done without disturbing/destroying what’s left of our natural environment.”

        “Open pit mining” – I’m generally talking about metals mining. Stuff like aggregates & lime is something else….perhaps even coal since that is vital to the economy. Economic benefits however should not outweigh environmental factors. The thing you’re trying to emphasize to me is that because I’m against mining, therefore I’m against progress. There are other ways to make money.

        Platinum Group of Mining Corporation mined in Surigao del Norte destroyed the river nearby their operation with laterites.

        I should repeat again my initial concern regarding this:

        “Our government isn’t mature enough to handle it. (environmentally and economically, taxation-wise)

        We can’t trust the government to do its job.
        We can’t trust the mining firms either.”

        As long as we can’t trust out government to safeguard the general interest of the people, I don’t think large scale mining should happen for now.

        You know how much I distrust certain elements of the government including wealthy oligarchs for whom a number of you (mining corporations) must partner with? Remember my information gathering mission. ….I know it was used to pinpoint certain people and groups because the information and the people had no military value.

      • Roger Wilcockson

        Why oh why do you try to mislead everyone with nonsense. One simple google search for “Platinum Group Surigao del Norte river” is all anyone needs to do to find out that not only is your claim made up, but that the reality is that Platinum Group dredged a river that was silted up before they started mining and now the river is very healthy and beneficial to the local community!! They have also spent millions on other environmental projects for local community benefit.

      • Oscuro

        “Our government isn’t mature enough to handle it. (environmentally and economically, taxation-wise)

        We can’t trust the government to do its job.
        We can’t trust the mining firms either.”

        As long as we can’t trust out government to safeguard the general interest of the people, I don’t think large scale mining should happen for now.


        So you are telling me that all the mining firms in the country are truly responsible and have not done any environmental damage.

        That most of the environmental damage was and is purely on account of small scale illegal mining?

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