THERE are mixed messages coming from the Philippines, all of which impact the mining industry and mining investment – positively or negatively. In these difficult global times for mining, it is important that the Aquino Government achieves a sustainable balance so that mining proceeds, investment increases, Filipino people benefit and the environment is not compromised. Easier said than done, but the government has to date shown a commitment to work towards this balance, which stands it in good stead in the quest to effectively manage all competing interests.

Let’s start with the positives. Firstly, the Philippines had the fastest growing economy among Asian countries for the first quarter of 2013. The National Statistical Coordination Board stated that the country’s GDP grew 7.8% in the quarter, faster than China (7.7%), Indonesia (6%), Thailand (5.3%) and Vietnam (4.9%). It attributed much of the increase to the strong performance of the manufacturing and construction sectors.

The Philippines has bucked a regional trend of slowing growth amid recession in Europe and a slow recovery in the US. The industry sector, comprising mining, manufacturing and construction, grew 10.9%, higher than the 5.3% and 8.9% recorded in the first and last quarter of 2012, however the mining and quarrying industry contracted by 17% in the quarter, compared to 1.7 and 2.8% increases in the first and last quarter of 2012.

This needs to be addressed by the government because the archipelago is rich in copper, gold, silver and chromium, and produces more than 10% of the world’s nickel, but minerals make up only 8% of its exports. It is important that mining play a bigger role to ensure continuing GDP growth and projects like Tampakan, should it proceed, could transform the industry as it contains massive copper and gold resources.

Another positive is that the Philippines has been upgraded to investment grade by Standard and Poors from BBB- to BB+ and this is expected to cheapen financing of mining development projects. Red Mountain Mining’s managing director Jon Dugdale says, “We view the upgrade to investment grade, coupled with the intention of the government to fast track mining permit approvals under the Executive Order 79 policy, as very positive developments.”

Like many mining companies and industry representative groups, the Chamber of Mines of the Philippines has welcomed the move to lift the moratorium on accepting applications for Exploration Permits and Financial or Technical Assistance Agreements. It states, “It is indicative that government has laid the groundwork required under Executive Order 79 to promote the rational exploration, development, and utilization of the country’s mineral resources.” Ending the moratorium, it says, “also shows that government is responding to the mining industry’s call for a stable policy and investment environment needed by investors.”

Flying in the face of this, come plans to pursue legislation that will impose higher taxes on mining players. The high prices of mineral commodities in recent years have made policy makers think available revenues can be captured from the industry. A Technical Working Group on Economic Concerns has been floating several options on getting a certain percentage tax on gross revenues and a certain tax on net revenues to ensure government gets a higher revenue stream and an equitable share of proceeds from minerals. These intentions may sound fair but the government must ensure there is balance and must also remember that these are uncertain economic times for mining, which means there should be incentives for explorers, miners and investors, not disincentives.

Evidence of the impact such moves have on investment can be seen from last year’s decree established a Mining Industry Coordinating Council to oversee the sector and the banning of mining from 78 areas considered sensitive ecosystems, crucial to farming or tourism or unsuitable for other reasons. After the decree and in anticipation of the new law, foreign investment in resources plummeted. Never that high to begin with, the Philippines now attracts less than $500 million worth of annual mining investment. The preliminary 2012 figure was down from nearly $1 billion in 2010 and $625 million in 2011. Another negative is the continuing threat posed by the destructive activities of anti-mining groups and rebels, and the government needs to step in to protect valuable mining investments as this is a major deterrent to potential investors.

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Sylwia Pryzbyla, Editor

Sylwia Pryzbyla
Editor, ASIA Miner and Australian Editor, E&MJ
[email protected]

Sylwia Pryzbyla has more than two decades of experience in media and publishing industries.

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