Mining is not the enemy, poverty is

Salutation

PMSEA president Louie Sarmiento; PSEM chairman Felizardo Gacad; MGB Director Leo Jasareno; Ambassador Delia Albert; PMSEA directors and board of judges; mga kapatid na minero – magandang gabi po sa inyong lahat.

Every time I join a mining convention, I really don’t know what to expect.

Baka boring – kasi maraming bato.

Hindi naman siguro. In fact, maraming nagkakagusto sa mga minero.  Kasi  down to earth sila.

How about this pick-up line: Mga minero, takot daw sa babae.  Bakit?  Kasi baka daw gold digger.

Introduction

Seriously, I’m happy to be here with fellow miners, because more than anything, this is a rare day of brotherhood for our industry. Congratulations to PMSEA on its 61st annual meeting.

This year’s theme revolves around “Responsible Mining and Nation Building”.

Your theme implicitly raises this important question for all of us: How can we persuade the publics we serve, including the government, that mining – responsible mining – is aligned with nation building; that apart from mining’s traditional role of producing profits to shareholders, improvement of people’s lives is integral to our business; that development of our mineral resources, and the protection of our environment, are indivisibly connected. Your theme represents the most formidable challenge confronting Philippine mining today.

Dapat mapatunayan natin na ang pusong minero ay pusong Pinoy.

Baguio, the Cordilleras – the stewards of our land

The city of Baguio provides a suitable setting for this conference.  It is, after all, the Cradle of Philippine Mining.

Benguet and the Cordilleras – the ancient home of proud Ibalois and Kankanaeys – is land rich with mineral resources. The Spaniards saw this as early as 1572, attracted by the cool mountains and fertile valleys of Benguet – and of course, its gold. The first roads the Americans built were as much to pave the way for mining – Kennon Road, carved from the Bued River canyon in 1904, is a proud witness – as to establish a summer city.

Two weeks ago, Baguio bade farewell to its favorite and most illustrious son.

Sen. Juan Flavier was not only a Baguio boy — he was also a child of mining. His first years were spent in the Balatoc mines in Benguet. His autobiography described fond memories of playing around crushing machines, growing up in a humble cottage within the Balatoc compound, bathing in its rivers – which were nurtured by the great green mountains of Benguet.

Juan Flavier called himself an igorot.  No coincidence, that he worked hard for the indigenous People’s Rights Act, which empowered I/P communities all over the country.

Today, we work closely with indigenous peoples, and indigenous peoples work with us. Together we watch over our blessed land, and share the dream of our people for a prosperous nation.

Euls Austin is Kankanaey. We’re proud to have him as our Philex president.

Mining and nation building

As I said earlier, this question persistently put to us has now become more critical to our industry – how can we make mining work for our people?

We’re all sitting several kilometers away from mineral reserves which won’t have any value for our people for as long as they stay below ground. For them to be useful to us, we need to get these minerals above ground.

If we choose not to participate in the global supply chain for minerals by discouraging mining or worse, shutting down our mines – which can happen if our tax regime turns unfavorable – our need for mining products will not stop.  We would be importing the same minerals we refuse to mine.  We would then be paying the Indonesians, the Malaysians, the Australians – everybody else – for their riches. We’d be giving them not only their profit, but also the cost of protecting their environment. This makes no sense at all – why pay somebody else to do the job we ourselves can, and should, do?

Let me be clear: We are not blind to other potential uses of our land – such as tourism and agriculture. I’m all for developing tourism.  And i believe in the future of agriculture, in feeding our people first. Our group are now serious investors in sugar and coconuts.

But if we continue to stifle mining, the criticism that it promises much and delivers little will be self-fulfilling. Yet when we look elsewhere, mining has been a significant driver of economic development. Mining in Australia contributes $142 billion each year; in Canada, $37.5 billion; in the US, $1.9 trillion, in Brazil, $24 billion.

The fact is that we’re far from capturing the implied value of our reserves. Out of about nine million hectares regarded to be geologically prospective for minerals, we’re told that only 1.5 percent or 135,000 hectares have actual mining permits. We should therefore not be surprised that the contribution of our industry to GDP has stagnated at around one percent.

The challenge is precisely to grow mining so that it creates more value and benefits for our people. We can’t have forward linkages simply because our mines are too small to make downstream smelters and refineries commercially feasible.

Finally, size could give us a stronger voice with government and our people.  In the 60’s and 70’s,  mining companies were pre-eminent in our national life:  first, as major companies in the stock exchange; second, as a substantial foreign exchange earner. Our task is to regain that pre-eminent position, so that we too can help promote our interests.

Addressing the problems of mining

So I ask:  What major matters should we address?  There are three.

First, the capacity and competence of regulation needs to be improved, particularly in equipment, quantity, and quality of regulatory staff. This may not be readily aparent, but helping our regulator helps the industry. We should support government raise its supervisory capabilities through funding of scholarships and training here and abroad, and the hiring of requisite personnel. We should encourage government to separate the function of regulation under DENR, from the function of promotion under MGB. At the moment, this lack of delineation puts us in some regulatory uncertainty, and finds no advocate for us within government.

Second, we should endorse a revised taxation scheme which can provide government with a more appropriate share of the benefits derived from the resources it owns. But let me tell you this. A business like ours is extremely risky – no influence on the price we sell our minerals, and little say on the yield we extract from our ore. Taxing revenues alters the risk/reward balance in mining.  And it is inequitable. I submit that taxing our pre-tax income is the more sensible and fair arrangement. Profit sharing is standard in the oil and gas industry in most parts of the world. Profit sharing already exists in our FTAA regime.

The industry’s view is that the draft MICC tax bill raises the average effective tax rate on mining by approximately 80 percent – a level considered higher than most other mining countries. Using a five-year average (2009 to 2013), we calculate that Philex taxes will increase by 72 percent under the MICC bill. We all know that investments are negatively correlated with taxation; if the intended effect of this proposed tax scheme is to raise investments in mining, precisely the opposite would likely happen.

As well, these higher taxes must be placed in the context of an industry facing more difficult times ahead – declining metal prices; lower demand due to faltering economies in china and india, europe and latin america; continuing anti-mining sentiment. Our industry must be resilient to stay in shape or keep afloat, despite efforts to bend, staple or mutilate it.

Finally, the benefits from mining between host LGUs and the National Government should be shared more equitably. The share of  these tax benefits accruing to the LGU should be remitted directly to them for the benefit of the local community.

Conclusion

Let me now close by repeating what I’ve said before – mining is not the enemy. Poverty is. The lack of the most basic necessities, the lack of opportunities, the lack of choices – these pernicious deficits have plagued our people for far too long, in far too many places. Yet the supreme irony is that, in the midst of all this poverty, lie one of the world’s richest natural resources, a gift of providence endowed to our people.

Poverty’s stark realities go beyond the poetry of blue skies and tangerine sunsets, as some of our detractors advocate. I doubt whether the poor families in Baseco, or Payatas, or Mandaluyong fret about whether their air is clean or their water is pure. They must worry about their next meal, the shirt on their back, their next job.

In the end, it all comes down to a very basic choice. The Australians, Indonesians, Canadians, Brazilians have made their choice. If they can do it and succeed, why can’t we?

Last year, Pope Francis put on a hard hat as he visited a coal mine in Italy. There, the Holy Father declared, “Where there is no work, there is no dignity”. This was greeted by shouts from the coal miners of “Lavore! Lavore! – Work! Work!”

Congratulations to PMSEA and to all our miners – for the life and work and purpose you offer our people. Yes, the Filipino miner can.

Bangon mga kapatid na minero!  Mabuhay ang PMSE!