Extracting maximum benefit

One of the reasons why people talk positively about the Philippines’ economic prospects is the untapped potential in the mining sector. Stick a spade far enough into the ground and you might just find gold, silver, rare earth metals or other valuable minerals. Unfortunately, identifying where these minerals are has proved a lot easier than getting them out of the ground. However, the Philippines has just taken a step which I think in time will be seen as important in changing this.

I’ve written previously about the UK’s Presidency of the G8 this year and Prime Minister David Cameron’s Golden Thread of issues which can help spur development and prosperity. One element in the thread is transparency. And transparency is what can spur investment in the mining sector.

Last week the Philippines was accepted as a candidate country to join the Extractive Industries Transparency Initiative, or EITI for short. The purpose of EITI, as David Cameron explained recently, is to remove the “veil of secrecy” which surrounds the extractive industries, covering both the mining and oil and gas sectors. 

The “EITI Standard” means that extractive companies publish details of what they pay to the government in taxes and royalties.  The government in turn produces its own report of what it has received from the companies and an independent audit then takes place to verify and explain any discrepancies. The beauty of the idea is its simplicity. Too often a lack of transparency, openness and proper rules have enabled governments and firms to mismanage mineral wealth, divert it for dubious ends, or not re-invest it in local economies.  This has to stop. Transparency is the answer. It builds confidence and reduces scope for corruption.

Natural resource exploitation offers a major opportunity for prosperity. While history tells us there are risks, including of environmental degradation, corruption, weakened governance and the so-called “natural resource curse”, these can be overcome. They should not hold back progress and prosperity. Responsible mining is about utilising the country’s resource endowment, without compromising on governance.

When President Aquino signed Executive Order 79 last July, he committed the Philippines to joining EITI and has been true to his word. Presidential Adviser on Climate Change Secretary Bebet Gozun has been working tirelessly with civil society and the Department of Budget and Management to put in place the infrastructure and human capital necessary for EITI to function effectively. My Embassy, along with colleagues from AusAid and the World Bank, have been partners in this work.

And a lot of work is ongoing. There is now a Multi Stakeholders Group (MSG) consisting of members from government, civil society and business.  They will work together to design and deliver the Philippines’ own EITI action plan and ensure it is thoroughly road-tested.  They will get support and advice from the EITI Secretariat which is very experienced in helping candidate countries achieve the necessary standards. The system works well in other countries. It can be just as effective here.  

Becoming a candidate is only the first step of the journey. There is much work ahead to train local communities and put in place the building blocks to make the Philippines fully EITI compliant. Becoming a fully fledged EITI member within the next two years is the next big aim. But the ultimate test will be whether this allows more of the nation’s mineral wealth to be utilised to help reduce poverty and increase jobs and growth.

(Stephen Lillie is the British Ambassador to the Philippines)