The government has backtracked on its plan to issue an executive order detailing new mining regulations in consideration of the “diverse” and “very strong views” on the country’s extractive industry, several highly placed sources said on Friday.
Instead, the government will release a policy statement on the mining sector that would include certain provisions laid out in the proposed executive order, according to the sources who all declined to be identified because they were not authorized to speak on the matter until the Office of the President has issued the policy statement.
According to Malacañang insiders privy to the discussions, the policy statement would cover three important parameters that were part of the canceled EO.
The government was expected to release an EO that would detail new mining rules in February. But the mining sector raised a furor over it, saying it would make the Philippines an unattractive investment destination.
Last week, mining advocates and environment groups went head to head in a conference sponsored by the Management Association of the Philippines, Philippine Chamber of Commerce and Industry and Financial Executives of the Philippines. One of the sources said the conference, which discussed the pros and cons of mining in the Philippines, was “influential” in scrapping the planned EO.
“The government will not issue an EO. It will release a policy statement,” a source said. “We could not just ignore the positions of the stakeholders,” he added.
“As a general statement, it would include how to implement mining rules and reiterate existing laws. It would also recommend additional laws. It is up to the President if he wants to act on the recommendations,” the source said.
Another Malacañang insider who was at the meeting of the economic and climate change Cabinet clusters on Friday said that the policy statement, which is not enforceable as an EO, would reveal “how the government looks at mining.”
EO may follow
Another source privy to the discussions in the meeting stressed that an EO or another directive would follow the policy map. But he said it was still premature to say that the order will be in the form of a presidential order.
The policy pronouncement on mining, another source said, will trigger another round of consultations with the private sector and environment groups. “The government will not rush this,” the source said.
The policy would address stricter environmental compliance rules for mining firms and define what is responsible mining in the Philippine context. “Whatever happens, we will not sacrifice the environment,” the source said.
The policy statement would also harmonize local and national mining regulations to make sure that local mining policies, which govern small-scale mining, follow national standards and regulations. It would also clarify the revenue sharing between the local and national governments.
The policy pronouncement would ensure as well that the government optimizes its earnings from the mining industry following a unanimous agreement that its share from the mining sector’s revenues is too small.
Small contribution to the GDP
The Department of Environment and Natural Resources (DENR) has called for the imposition of a five-percent royalty on mining firms on top of the current two-percent excise tax but the proposal has been put on hold. There were also recommendations to remove certain incentives enjoyed by the mining industry and introduce possible changes to mineral agreements between the government and the mining firms to maximize government earnings.
According to the DENR, the mining industry’s contribution to the government remains small compared to its recent earnings. Environment Secretary Ramon Paje said the government loses P5 billion every year from not collecting royalty fees from mining companies.
Despite the mining industry’s increased earnings in recent years, it’s contribution to the gross domestic product has not followed suit. In his speech at the recent mining conference, Mines and Geosciences Director Leo Jasareno said mining’s contribution to the country’s gross domestic product “has not been able to break the 1.5-percent barrier for a long time now.”
“Mining’s contribution to total exports is also similarly situated,” he said.
Booming industry
Mining is a booming industry in the Philippines after the Arroyo government allowed the entry of foreign firms to operate metallic mines here. At present, there are 31 mining companies in the Philippines. Small-scale miners number between 200,000 -300,000. Permits and mining claims cover 1.14 million hectares or 3.8 percent of the country’s total land area.
There are also eight projects in the pipeline that will significantly contribute to the country’s mineral output in the next two to three years, the DENR said.
The country’s mining sector also saw robust earnings in the past years due to the high prices of precious metals, particularly gold.
For 2011, the metallic mining sector posted a gross production value of P122 billion, a nine-percent increase from 2010’s P112 billion.
No MPSAs anymore
According to a source, there was a proposal to remove the Mineral Production Sharing Agreement (MPSA) in the list of permits, leaving mining firms to apply either for a Financial or Technical Assistance Agreement (FTAA) or engage in a joint venture with the government.
“There will be no MPSAs anymore,” the source said.
An MPSA, according to the Mines and Geosciences Bureau, is an agreement between the government and a mining operator that grants a contractor the exclusive right to conduct mining operations within the contract area. Operators under an MPSA contract pay the government a two-percent excise tax.