Guarded Optimism on Mining

President Benigno Aquino III’s recent statements on mining are grounds for optimism.  A few weeks ago, the President issued Executive Order No. 79 on Mining that embodies a list of goals, including increasing returns from mining activities and joining the Extractive Industry Transparency Initiative (EITI).

Then in his third State of the Nation Address , Aquino stated:

We likewise engaged stakeholders in a level-headed discussion in crafting our Executive Order on mining. The idea behind our consensus we reached: that we be able to utilize our natural resources to uplift the living conditions of the Filipinos not just of today, also of the following generations. We will not reap the rewards of this industry if the cost is the destruction of nature.

Together, these policy statements are a marked departure from previous administrations that unconditionally rolled out the welcome carpet for investors at great cost to our country and people.

The proposed changes are crucial, and they are part of what should be a broader and thorough agenda to reform the weak and incoherent institutions and policies that currently afflict the mining sector.The Philippines still has to define the mineral management framework of the country that is most attuned to sustainable development (as distinguished from the narrower concept of economic growth).  As things stand, mining continues to be regarded as an engine of economic growth.  But this engine destroys the environment and communities living on mineral lands. Thus, a choice has to be made between protecting the environment and promoting mining as an engine of growth.

In both the Executive Order and the State of the Nation Address (SONA), President Aquino mentioned the need to promote intergenerational equity of our natural resources.  He suggested that Congress ensure that the fiscal and environmental issues in mining are addressed through legislation. In identifying the optimal amount of tax on mining, one has to consider that, more than encouraging investments, the optimal mining tax should discourage negative externalities like environmental damage, displacement of communities, conflict and human rights violations.  After all, taxation is a tool to shape the behavior of the industry.

Transparency and accountability in the mining industry should also go beyond membership in the EITI.  It should permeate all levels of the industry value chain.

Transparency and accountability should begin by strengthening the right of communities and the local governments in the area to decide on whether to extract or not to extract the mineral resources in their communities.  Our national laws are flexible enough to allow local governments to regulate the use of certain types of mining.

The President’s promising reforms about mining policy, as expressed in his EO and the SONA, can be further strengthened by expanding ownership of the reforms to include the broad civil society. The EO is silent about the role of civil society in  mining policy. Strong civil society involvement in governance and regulation is one of the main pillars of transparency and accountability in the extractive industry all over the world.  The government should work with civil society organizations in monitoring and holding mining companies accountable.

The Aquino Government should strengthen the policy on accountability.  It should develop mechanisms that ensure that the proceeds from mineral extraction are of intergenerational benefit to the Filipino people.  Trust funds should be created to contribute to the wise management of mining resources.  The portion of mining revenue that the government will utilize should be invested in human capital (education and health) and industries that will complement mining, like agriculture and tourism.  After all, non-renewable resources cannot be a sustainable engine of development. Healthy, skilled and educated Filipinos are our most valuable resources for achieving prosperity.

President Aquino’s policy statements inspire hope that the government has veered away from the business-as-usual approach to mining that is neither transparent nor accountable.  But bold statements need to be supported by concrete proposals.  President Aquino can demonstrate his commitment to transparency, accountability, environmental protection and human rights by supporting the proposed Philippine Minerals Resources Act of 2012 that embodies his goals.  We are hoping Congress will respond to the challenge.  But it is likewise clear that to see these ideas through, the role of the Executive is the most decisive not only to secure the legislative reforms but also to put in place and implement a comprehensive and coherent institutional framework to govern the mining industry.

Cielo Magno is the executive director of Bantay Kita, an organization that advocates transparency and accountability in the extractive industries.  She is concurrent fellow of Action for Economic Reforms (www.aer.ph).

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