Policy chaos

This has to take the cake: a number of potential mining investors in our country are contemplating moving to Afghanistan. They find the risks associated with the Taliban insurgency more manageable than the risks posed by policy chaos here.

We are talking here of billions of dollars of potential investments in our mining sector. Recently, trillions of dollars worth of minerals have been determined to be lying under the hills around Kabul and the rest of that heretofore forsaken country.

Potential investors in our mining sector, holding billions of dollars ready, have been edgy because of the conflicting policy signals. When they are edgy, their vast potential investments become iffy.

In a vain attempt to calm investor anxieties, the DTI a few days ago said something, well, stupid.

The agency tasked with pulling investments into our economy offered to identify areas where mining investors will not have any problems with residents, local governments, the church and the eco-fascists who oppose any and all mining regardless of opportunity costs accruing to our people. The DTI at least understands that mining investments have been stymied by the CBCP’s encompassing anti-mining stand and the propensity of leftist groups to field agitators and community organizers to get in the way of mining operations.

The NPA, when it cannot fill its coffers with extorted money, has demonstrated a great appetite for burning down heavy equipment. When it could extort, the self-styled guerrillas tolerate anything. But what they do is intolerable.

What the DTI does not seem to understand is that it is not the political climate in a locality that determines the viability of a mining investment. Mining investments are determined by the location and quantity of mineral deposits.

The mining industry relies on centralized, systematic and complex operations. They put in big money in investments and require many decades to recover sunk costs. They need policy predictability. They cannot be lured into our economy by offering to guide them in a cat-and-mouse game with ecological fundamentalists.

Ecological fundamentalists, we know, can be a lot less reasonable than even the Taliban. That might be the reason exasperated investors are actually thinking about relocating to Afghanistan. There is nothing in the Islamic fundamentalist creed that even considers mining as a necessary human activity.

A few weeks ago, “acting” DENR secretary Ramon Paje was invited to speak before the CBCP. Pandering to his audience, Paje announced his support for “reviewing the current mining law” and “improving the 15 year-old law.” His utterances were happily reported out by the CBCP. Investor panic immediately ensued.

Bloomberg, the principal news source of businessmen around the globe, read that to mean that a mining ban was forthcoming in the Philippines. A joint statement was promptly put out by the foreign chambers of commerce, expressing their disappointment over the discouraging and disturbing position taken by the DENR “acting” secretary.

Paje ought to have thought out his utterances more carefully. Rather than seeking to win cheap brownie points with dogmatic bishops, he should have tried to help crystallize national policy. He should have studied the disturbing context already forming when he made his statement.

A group of congressmen identified with the administration, along with their left-wing party-list allies, have pushed to third reading what they call an “alternative mining bill.” That bill is so economically unenlightened it will surely kill our mining sector and cause more damage to the environment.

The “alternative mining bill” seeks to outlaw large-scale mining and allow only small scale mining. That is the equivalent of banning commercial forestry and allowing kaingin to run rampant.

Mining can only be done properly on a large scale, deploying large amounts of capital to use the best technology available, manage chemical waste disposal using scientific methods and restoring the environment after mining is done consistent with the requirements of the 1995 Mining Law. Small scale mining, by contrast, will be difficult to regulate, employ crude technologies and dump waste into our already endangered river systems. Proper mining necessarily rests on the economies of scale: big capital, big technology and big deposits.

We know from our experience will small-scale mining in Diwalwal that this will not work. The informal groups, including rebels, turned up the ground, smuggled gold out of the country, did not pay government the revenue due it and wasted a lot of the precious metal by using technically deficient methods of processing gold from ore. Hundreds of millions of dollars worth of gold were thrown out to the rivers along with the deadly mercury.

 In addition to that idiotic “alternative” bill, the Aquino administration inadvertently sent the wrong signals to the investment community by appointing Marvic Leonen chief negotiator with the MILF. Leonen is persona non grata to the mining industry. He filed the constitutional case against the 1995 Mining Law — the best such piece of legislation in the whole world. That case kept the law trapped in the judicial grind for almost a decade. The opportunity costs of that entrapment runs into billions of dollars in revenues, perhaps a trillion — certainly enough to pay down our outstanding public debt.

 There is much to be done to repair the damaging impression of policy chaos regarding our mining policy. To begin with, an economic manager with larger grasp of the issues and with greater gravitas than Paje needs to be urgently put in place. The man has simply lost the confidence of the business community.

Maybe the President himself, if he is up to it, might clarify what our real mining policy is to dispel all uncertainty. Or else the mining moguls will evacuate to Afghanistan.