Those who want to invest in large scale mining enterprises in the Philippines are holding their breath waiting for the amendment of Republic Act No. 7942 or the Philippine Mining Act of 1995.
Indeed, much has happened in both the global and domestic economies during the last forty years that would require a serious review of -the provisions of this law. As we have seen in the first two articles of this series, the so-called Industrial Revolution 4.0 has significantly increased the demand for the products derived from such mineral ores like copper and nickel.
Such new technologies as Artificial Intelligence (AI), Robotics, Data Analytics and the Internet of Things would not be possible without such hardware as lap tops, smart phones, tablets, telecommunication infrastructures, etc. all of which are voracious users of copper and nickel. In the efforts to fight the negative impacts of climate change, such renewable energy such as solar, wind, and geothermal would not be possible without these mineral products. On the domestic front, an increasing reliance on exports of mineral products cannot be avoided because of the dark prospects facing both our exports of manufactured products as well as of high-value agribusiness products. Mining, as one of the pillars of industrialization, will have to assume a more important role.
That is why there is a need to undertake a study that will review the global and domestic regulatory requirements for a sustainable mining industry and evaluate and recommend improvements in the regulatory process even at the initial process of mining development. This would entail specific review of the prevailing policy regimes, specifically the permitting, licensing and awarding of contracts considering global practices and policies. As a stakeholder of the mining industry myself, being an Independent Director of the mining corporation, Benguet Consolidated, I have decided to join a group of industrial and business economists at the Center for Research and Communication, a think tank of the University of Asia and the Pacific, to undertake a research effort that will entail (a) global benchmarking of best practices and comparing these with the current Philippine standards; (b) complying with environmental, societal and governance (ESG) standards and their impact on investment and financing decisions; (c) identifying gaps between the desired policy environment against the existing one which governs mining investments in pre-exploration, exploration, feasibility study and financing, construction and development stages in terms of but not limited to the regulatory structure and processes.
State regulation of the mining industry is unavoidable because of the very nature of mining which is an extractive industry that impacts not only on the economy but also on governance, local communities and the physical environment. This explains the myriad of regulations set up to ensure that existing and incoming mining projects promote and protect these environmental and stakeholders’ interests. Legislators, however, must be careful to ensure that over-vigilance will not lead to excessive regulatory oversight such that the permitting and approval processes might unduly increase the costs, amplify uncertainty, discourage investors, and stifle the development of the industry. Hence, it is important for all mining stakeholders to work and collaborate so that they can carefully evaluate and harmonize these processes and procedures, not only to comply with pertinent laws and meet the global protocols expected from extractive industries like iron ore, copper and nickel but also to allow reasonable rates of returns on investment.
Data from the Mines and Geosciences Bureau (MGB) showed that the total taxes, fees and royalties that the government collected in Fiscal Year 2022 from the 790 approved and registered projects amounted to P44.8 billion. On the other hand, there were 1,547 applications that were pending as a result of the long and tedious regulatory process in the initial stages of the mineral development (pre-exploration up to construction). These pending applications translate to huge opportunity losses to the economy in terms of jobs, livelihood and wealth and for the government in terms of revenues uncollected (estimated to be about P100 billion).
The research effort that may take one year to complete will entail (a) global benchmarking of best practices and comparing these to current Philippine standards; (b) compliance with environmental, societal and governance (ESG) standards and their impact on investment and financing decisions; (c) identifying gaps between the desired policy environment against the existing one which governs mining investments in pre-exploration, exploration, feasibility study and financing, construction and development stages in terms of but not limited to the regulator structure and processes. The benchmarking and the identification of ESG standards with which mining investors should comply will involve secondary data analysis as well as interviews with investors and financiers and their regulators in the Philippines and benchmark countries, especially Indonesia (one of the largest sources of mineral ores) and China (one of the largest consumers).
The research team will attend relevant meetings with partners (public and private sectors) to help further substantiate the data and research analysis. Stakeholders’ consultations will be held in mineral-rich locations where there is already the presence of active or operating large-scale mining companies, such as Zambales, Palawan, Masbate and Cotabato. Result of benchmarking analysis and initial research work will be presented during the consultation. In fact, the recent Palawan Stakeholders Congress can serve as a model for future consultations.
The study will be conducted in three phases:
Phase 1 will involve a review and evaluation of the Philippine regulatory regime in term of attracting investors in large-scale sustainable metallic mining projects, specifically as regards its strengths (a welcoming investment environment in sustainable mining with low entry barriers); limitations (high entry barriers) ; and gaps (uncertainty and ambiguity faced by investors in sustainable mining). Surveys will be conducted among the various stakeholders of the mining industry, i.e. investors, existing operators, regulators, host communities and civil society. The survey will be administered in one area outside the National Capital Region and another within NCR. The same set will be the respondents for the stakeholders’ engagement. The team will also consult with private associations and select regulatory agencies to further substantiate and/or validate the insights generated from the survey and stakeholders’ consultations.
As a result of the review and evaluation stage, followed by the consultation with the stakeholders, the research team will come out with recommendations for policy improvements and reforms or new policies to capitalize on the strengths, address the weaknesses, and remove uncertainty, in reference to the National Mining Act, the Extractive Industries Transparency Initiative (EITI) and DENR Administrative Order 2010-21. These recommendations will be presented in at least two policy briefings to be given to concerned National Government Agencies, members of Congress, the business sector and civil society stakeholders.
Phase 2 will consist mainly of activities advocating for policy reforms based on the findings of the study. This will involve various activities that will include but not limited to the conducting of localized and stakeholder-specific mining conferences, information drives, education and communication programs. The tax regime analysis and its impact on investment decisions will be covered under this phase. Phase 3 will provide recommendations on the basis of Phase 1 and Phase 2. These recommendations may find their way either through amendments to the Mining Act of 1995 or implemented as executive orders or department administrative orders.
For comments, my email address is [email protected]