By international standards, the Philippines is under-explored. During recent years, the discovery of the Boyongan, Didipio, Tampakan, Victoria and Far South East deposits has significantly reinforced the appetite of exploration companies to find new "world-class" ore-bodies in the Philippines.

Assuming that currently known gold and copper projects were developed and excluding the huge potential of new ore-bodies being found, the following macro and micro economic contributions could be made to the Philippine economy.

The revenue generated would almost certainly establish the minerals industry as the largest export sector and earner of foreign exchange in the Philippines.

Tax Revenue

These projects would generate significant Taxation revenue not only for the Philippine National Government, but also and importantly the Provincial, Municipal and Barangay LGU's where these projects are located. The estimated annual Tax collections would be 21 Billion pesos with the LGU share being in excess of 12 Billion pesos.

The additional Provincial and Municipal income generated by the development of these new projects would, on average, more than double the total amounts currently collected.

Employment

Although the minerals industry does not directly employ large numbers of people, the multiplier effect from mineral development is quite significant. In the USA, where downstream processing and manufacturing is now quite developed, the multiplier factor is 21. 1.2 million Americans owe their living to minerals. Given the more labor intensive nature of Philippine industry in general, the multiplier effect may be as high as 40.

Mineral projects generate direct employment in less developed rural areas alleviating migration strain on the cities.

Regional and Infrastructure Development

Historically in many parts of the world the minerals industry has been the drive of development of remote areas. Mineral development brings with it significant infrastructure, roads, power, services, housing, hospitals and schools.

Mineral development makes a significant contribution to rural development.

What are the problems that confront the Philippine Mining Industry?

Level of Government Support

Presidential visits and Trade missions have invited companies to invest in the country but when potential investors arrive they find there is not the clear level of support that is found in other countries. Both the 1987 Constitution and in the Mining Act espouse for the first time the concept of partnership between the government and the contractor in the form of the FTAA, MPSA, Joint Venture and Co-production Agreements. However, in the implementation of the Mining Act to date, the government has not manifested clearly its role as partner in a project. It continues to behave purely as a regulator with no apparent appreciation for the negative consequences to the coffers of the government if a project does not materialize.

There is not a strong clear message of Government support. The signing of the National Minerals Policy by the President will alleviate this perception. Also, the Government must realize that under the agreements it enters into with mining contractors, it has responsibilities as a partner in the project.

Local Government Unit Acceptance

Community acceptance is a problem and a stronger lead is required from the government to support investors who are meeting and often exceeding the legal requirements. This is an industry that can significantly alleviate poverty in rural areas. Misinformation, spread by anti-mining groups, has encouraged some LGU's to prevent exploration contrary to the Mining Law and the Local Government Code. This is obviously not in the National interest. It is important that any Nation knows what its mineral resources are and how to best utilize them in a responsible and sustainable manner.

The industry needs a strong National Government leadership to participate with LGUs in assisting investors to meet requirements and present balanced views.
Environmental Conservatism.

Today, the Philippines has "world-class" Environmental Protection Legislation that detects and prevents poor practices. Multi-party monitoring by the community, government and NGOs ensures transparency of all operations. Morning mining, using world's best practices, ensures that only clean water leaves the property. Rehabilitation Guarantee Funds, ensure that the land is returned to useful land-use such as agriculture, forestry, development, etc.

Despite this, past poor practices including small-scale mining continue to haunt new investors who propose modern responsible mining methods.

The industry needs to showcase new "world best practices" mines. The government must strategically support remaining development proposals as examples of future practices.

Clear Title and Access to Ground

One of the fundamental principles of all mining and mineral exploration companies is that the investor must have clear title to the mineral rights in the area in which they are investing. The title to the mineral rights has to be secure, clean, simple, transparent, and capable of being completed in a reasonable timeframe. The current requirements of area clearances and consents involving many government and non-government agencies cause companies considerable difficulties and delays. The frequency of disputes and the prolonged period for their resolution is a definite disincentive.

These prolonged delays have been the reason for many companies leaving the Philippines and area a major deterrent in the growth of the industry.

The fiscal regime for foreign mining companies

A major deterrent to foreign investors has been the 60/40 Filipino foreign ratio requirement of the Constitution. However, the Constitution does allow 100% foreign equity under the Financial or Technical Assistance Agreement (FTAA). The FTAA fiscal regime has only recently been finalized but it has not been favorably received by the industry. Although some aspects of the incentives area competitive, the overall fiscal incentives need to be more attractive to encourage investors back. The FTAA must take more favorable consideration of the investor, who is supplying all the finance and taking all the risk. It is clear that the FTAA is not working, as evidenced by only two being signed (in previous favorable form) in the past five years and the foreign company being prepared to sign one in its present form.

An acceptable agreement is needed that must allow for an equitable sharing between the Philippine government and the investing company.

Supreme Court Challenge to the Mining Act

Republic Act No. 7942, otherwise known as the Philippine Mining Act of 1995 and the accompanying implementing Rules and Regulations is a modern Act, the equal of any in the world. However, since 1996 there has been a Supreme Court Challenge based on the 1997 Mining Act being unconstitutional. This challenge and the long delay in deciding the case has given uncertainty to investors and proved a major deterrent to investment.

Investors will not make these high-risk investments with the current uncertainty.

Protection of Due Process

Despite meeting and exceeding all mandated laws and regulations required for project development, investors often confront questionable delaying tactics used by determined anti-development groups. For example, the current unresolved Comelec issue involving the use of "peoples initiative" to nullify an agreement forged with local community by a mining company has significance for the whole country. These types of invalid issues continue to be entertained by various agencies, causing added costs, delays and uncertainties.

International investors remain worried that additional non-due-process requirements continue to be promoted causing uncertainty.

Concerns have been expressed that Mineral Development is at the expense of the environment and local communities. This is NOT the case. Like many in society the industry has recognized the errors of the past and has worked very hard to ensure that modern practice is responsible, sustainable, and acceptable to the local communities. Investors area very aware that their projects will not proceed if they do not have the support of the local communities. This policy is further supported by the very stringent requirements of the Philippine Mining Act and the Implementing Rules and Regulations, which not only cover operating procedures but also environmental and community enhancement provisions.

The modern Mineral Resources Industry is sustainable, responsible and accepts its responsibility to enhance the environment and the local communities.

Recommendations

The most important step is to renew investor confidence in the Philippine mineral industry. The best way to do this is by a public declaration from the Government strongly supporting sustainable and responsible mineral development so a positive message is given to the international industry.

1. Request the current Administration to issue a strong message stating that it supports a Sustainable, Responsible Mineral Industry in the Philippines and welcomes foreign investment. This could be done by endorsing at the Presidential level the National Minerals Policy. This would give a strong message to investors that they are welcome in the Philippines and empower the DENR/MGB to resolve any problem with LGUs and NGOs.

2. Adopt all current advanced mineral development projects as Flagship status to fast-track the establishment of showcase modern "worlds best practice" mines.

3. Review the fiscal regime under which foreign companies can develop and mine mineral deposits in the Philippines. Develop a regime that encourages investment and mandates that all agencies accept the terms and assist in their delivery.

4. Mandate, empower and resource the MGB to set up a speedy efficient title processing system.

5. Seek early resolution of the current Supreme Court Challenge to the Mining Act.

6. Protect investors from issues that contravene due process.

(SGD) SHAMEEM QURASH
President
Philippine Association of Multinational Companies Regional Headquarters, Inc.