An Assessment of the Philippine Mining Industry; Issues and Challenges that Lie Ahead
2014 was an uneventful year for the mining industry. Despite the country’s much-vaunted mineral potential and sizable investor interest in mining in the Philippines, the DENR and MGB have continued to withhold action on pending applications for MPSAs and FTAAs pursuant to the President’s directive under EO No. 79. And despite the lifting of the moratorium on the issuance of exploration permits in March 2013, only one (1) new exploration permit (EP) was issued by the MGB, with 17 EP renewals.
Since 2011, government has not actively pursued investments in minerals development, opting instead to focus on reviewing the current fiscal regime for mining. In 2012, mining was excluded from the government’s Investment Priorities Plan (IPP) and all incentives, save for those under the Mining Act and the National Internal Revenue Code, have been removed. The policy change was premised on the notion that government was “getting a mere pittance” as its share in mining revenues while the country bears the cost of the environmental degradation brought about by mining activities.
But industry data readily debunk these assumptions. Under its current fiscal regime, mining companies—MPSAs operating with no fiscal incentives—already give government a substantial share in a project’s net cash flows, averaged over its entire mine life. More importantly, mining companies have set up social development and environmental protection funds to ensure the development of host communities, the rehabilitation of mined-out areas and the compensation of affected communities in the case of mine accidents. (Footnote: In 2012, MGB reported that companies spent over Php673 million for their environmental protection and enhancement programs, and an additional Php498 million for social development and management programs.)
Nonetheless, the Cabinet-level Mining Industry Coordinating Council (MICC) has gone on to propose draft legislation with an inordinately high tax rate that would make the country uncompetitive for foreign investments.
The MICC has also proposed to expand the areas closed to mining applications.
As a result, the Philippine mining industry is now in deep freeze. No new mining agreements have been approved and worse, even projects with approved ECCs and DMPFs have not moved forward. Only 3 small mining projects were expected to start operations in 2014:
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