‘Mining’ our own business

The launch of TV5’s new documentary series titled “Yaman ng Bayan” highlights the fact that God has blessed this nation with abundant wealth — from the beautiful and talented Filipinos down to natural resources as seen from impressive beaches, majestic mountains, fantastic flora and fauna and mineral resources. But more than showcasing the beauty of our assets, the show encourages people to ponder why, despite its inherent riches, this country continues to be underdeveloped and poor. Although the more popular (and easier) route would have been to exploit the so-called “poverty porn” or blame corruption and “political dynastism,” the docu series elevates the discussion by imparting knowledge and raising public awareness on what we as a nation can be if our natural wealth and resources are properly harnessed.

No question the Philippines has impressed the world for being the fastest growing economy in Southeast Asia and posting a 7.2 percent growth in 2013 – yet this has not been sufficient to make a significant dent on the widespread poverty and unemployment. At the Arangkada Philippines forum held at the Shangri-La Makati last Wednesday, the Joint Foreign Chambers noted that the Philippines continues to lag behind its neighbors in attracting foreign direct investments — a key driver in generating employment. 

According to a World Bank economist, the Philippines needs to create 14.6 million more jobs for the currently unemployed/underemployed aside from the increasing number of graduates joining the ranks of job seekers every year. And while sectors like tourism, manufacturing and business process outsourcing have shown a significant increase, we need to boost other industries and sectors to cascade the benefits of the economic boom to the lowest levels. One of the seven big industry winner sectors that has been identified by Arangkada Philippines as a key growth driver that can help the country generate $75 billion in foreign investments, $1 trillion in revenues for the government and 10 million jobs within this decade is the mining sector.

Our country sits on untapped mineral wealth estimated at $1 trillion — and yet we have been unable to attract more investments and optimize the potential of the mining industry. This is so unfortunate considering the Philippines has the potential to become a powerhouse in the global scene with the country ranked third in the world for gold, fourth in copper, fifth in nickel and sixth in chromite reserves. As participants in the recent Philippines-Australia Ministerial Meeting stated in a position paper on minerals resource development, the Philippines has a greater natural endowment of minerals than Australia — a country where the mining sector represents 10 percent of the GDP while the mining-related economy represents 9 percent of the GDP.

After all our big talk about attracting investors, many of them are hesitant to touch the country with a 10-foot pole as far as investments in mining are concerned because of the uncertainty and instability that clouds the industry. For one, the government imposed a moratorium on any new mining contracts (including renewals and expansions) in 2012, coupled with the continuing delay in the issuance of a new and definitive mining policy.

A ticklish issue is the Mining Industry Coordinating Council’s draft bill scheduled for filing in Congress prescribing a new revenue sharing scheme that imposes a 10 percent excise tax based on gross sales (and at prevailing international market prices) — much to the dismay of industry players who find the proposal too onerous and unattractive to potential investors. What also rankles is that there has not been any public consultation on the matter since May 2013. Unlike other industries, mining is risky and capital intensive, with investors ponying up huge amounts for infrastructure and facing the possibility of the exploration failing to yield deposits, explains Chamber of Mines VP Ronald Recidoro.

The proposed new fiscal regime is a consequence of the wrong perception that the mining industry only gives a pittance in taxes. On the contrary, large-scale mining companies pay almost 40 percent in taxes to government — from excise taxes, income taxes, value added tax, customs duties, royalties and various local taxes — not to mention the expenses they incur for their Social Development and Management Programs (SDMP) for the benefit of the host community and its environs.  If truth be told, responsible mining companies are giving over and above the amounts required by government through SDMP and other projects for host communities and indigenous people.

Actually the low BIR yield is because only reputable and responsible companies have been paying the right taxes — while illegal and small-scale miners get away with rampant gold smuggling and evade tax payments because their businesses are not monitored — depriving the government of billions in tax revenues. The 18.6 billion total taxes from the industry in 2012 primarily came from the large-scale mining companies numbering about 10 — in contrast to the estimated 200,000 small-scale and illegal miners who don’t pay taxes and smuggle the gold out to China and Hong Kong.

Australia has offered to help the Philippines develop the vast potential of the mining industry by sharing their country’s experience and technological expertise in harnessing our resources in a responsible manner which could generate thousands of direct jobs and additional employment opportunities from downstream industries. Latest data from the Mines and Geosciences Bureau discloses that the mining and quarrying industries employed over 250,000 people — and this number can go much higher if only government acts decisively on the long-delayed mining policy. We need to utilize the country’s immense resources for the greater good rather than letting opportunities go to waste. Let’s not hesitate in “mining our own business.” 

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