Gov’t share in mining wealth at least 50%

Prof.Solita Monsod, in her Oct. 22 column, overlooked an important development that renders moot her argument that the Philippine government will gain “Zero share from mining wealth.”

In June 2007, The Department of Environment and Natural Resources issued Department Administrative Order (DAO) 2007-12, which guarantees a fixed government share of 50 percent of the net mining revenue from Financial or Technical Assistance Agreement (FTAA) contractors after the recovery period.  The recovery period refers to a time period allowing the contractor to recover its pre-operating expenses.  DAO 2007-12 has thus effectively scrapped DAO 99-56 cited by Monsod, including the latter’s sharing options that were deemed unfair to the government.

That the 50-percent government share in DAO 2007-12 is guaranteed is highlighted in the provision that if the basic government share is less than 50 percent of the net mining revenue, the contractor “shall pay an Additional Government Share,” which is equivalent to “the difference of the 50 percent of the Net Mining Revenue and the Basic Government Share during the Calendar Year.”

To date, there are yet no FTAA contractors that have reached production stage.  Of the six existing FTAAs, three are still in the exploration stage, two are in the feasibility study phase, and one has been canceled.

There are currently 28 operating Mineral Production Sharing Agreement (MPSA) contractors.  In 2010, these companies paid a total of P13.6 billion in taxes, fees and royalties.  In a study conducted by the Chamber of Mines, all these taxes (with excise tax taking a huge percentage) are equivalent to over 62 percent of the mining contractor’s net income. This is because the excise tax and royalties are computed on the gross income, with the contractor left to assume the production cost (which eats up about 50 percent of gross income).

We believe Monsod may have been misinformed or may not have been aware of the existence of DAO 2007-12. We in the Chamber would be glad to sit down with her to provide pertinent information she may need from the industry.

—ROCKY G. DIMACULANGAN,

vice president for communications,

Chamber of Mines of the Philippines