Chamber of Mines of the Philippines (COMP) President Benjamin Philip G. Romualdez on Tuesday said some $12 billion (P528 billion) in mining investments are currently on hold due to the “inconsistencies and uncertainties” in the country’s mining policy.
“The $12-billion mining investment in the next three years is not going to happen. I can think of at least eight companies that will hold their investment,” he told reporters during a news conference at the Mining Philippines 2013 Conference and Exhibition at the Sofitel Hotel on Tuesday.
Romualdez reiterated his prediction last year that the Philippines would not be able to meet its $16-billion mining-investment target under the Aquino administration unless the government exercises political will to address the problems in the industry.
The inconsistent and ever-changing policy in mining and the prospect of mining companies being taxed some more are holding back major mining investments, he said.
Romualdez said mining companies are already overtaxed and that imposing higher levies will not only stagnate mining investments, but will literally “kill the industry.”
“The sooner there is clarity, the sooner there is a more stable approach for the mining industry to move forward, the better. If there is no clarity, then I suspect that people writing the check will hold back,” he said.
Romualdez expressed doubt that the country will soon be getting any major mining investment unless the government sends the message clearly and shows the political will—like it did during the impeachment of former Chief Justice Renato Corona.
“We are hopeful that we can work with the government to come up with a reasonable position. I believe, that can be done, if they understand the issues,” he said.
Early this month the operator of the Tampakan Copper-Gold Project in Southern Mindanao announced its decision to scale down operation. This will result in the mass layoff of some 1,000 workers.
The $5.9-billion Tampakan Copper-Gold Project is poten-tially the biggest mining project in Asia. But the project hit a snag when the provincial government of South Cotabato passed an ordinance banning open-pit mining, which is allowed under the Philippine Mining Act of 1995.
Another mining company, Romualdez said, has decided to withdraw potential investments in another big project.
In his opening remarks, Romualdez said one of the burning issues that the industry faces was the incorrect idea about the 2-percent tax that all mining companies must pay the government under the Philippine Mining Act of 1995.
He said the 2-percent mining tax is but one of the components of around 12 mining-related taxes.
“This single tax does not show the complete picture. This single tax out of the 12 or separate taxes that each mining company has to pay under the Mining Act has been taken out of context and used by anti-mining groups irresponsibly to vilify the industry,” he said.
According to Romualdez, the government receives over half of the total value of a mining project, based on the internationally accepted average effective tax rate, a formula that determines the government’s share throughout the entire life cycle of a mining project, from the time the contractor starts to invest funds in the project to the very end of the mine life.
According to Romualdez, mining companies feel that the government has only looked at mining’s earnings from year to year and only sees a rise in profits, which makes it keen to tax the industry more.
“This tack is patently unfair to us, because it fails to consider years when mining companies don’t make money,” he said.
Considering the current volatility clouding the industry worldwide, he said, significant mining projects worldwide are being reviewed, such as the Tampakan Copper-Gold Project.
He said the case of SMI’s Tampakan Copper-Gold Project was an example of why the industry appeals to the government to look at the industry not just year-by-year, but on a long-term reality-based model. Adding to the “uncertainties,” he noted, is the fact that the Mining Act is again being subjected to review.
‘Fair equitable share’
Senate President Franklin Drilon has assured mining companies of ”a fair and equitable share” when the Senate tackles the proposed tax measures for the minerals development sector.
Drilon, in his keynote address at the opening ceremonies of the Mining Philippines 2013 Conference and Exhibition at the Sofitel Hotel in Pasay City on Tuesday, said the Senate will be “a listening Senate” and will consider concerns to be raised both by the people and the mining industry.
“The people must have their fair share of the country’s worth in the form of taxes. Let me underscore fair and equitable. But how fair is fair? Let me assure you that your Senate will be a listening Senate. Your Senate President will listen to all quarters. We will exert every effort to determine what is fair for the industry and what is fair for the people,” he said.
Drilon earlier said the economic opportunities in mining remained untapped, noting that last year’s contribution to gross domestic product (GDP) was a low 0.7 percent.
According to Drilon, the economic opportunities in mining are as abundant as the country’s mineral deposits. But he said the cost of mining should not outweigh its benefit, both to the people and the environment.
He assured mining companies the issues and concerns raised by the mining industry players would be taken into consideration.
However, he urged mining companies to apply best practices, reminding them that mining operations can cause severe environmental damage, which sometimes, is irreversible.
“The environmental and social cost should never outweigh the benefits,” he said. “We support the development of the mining industry but we should take measure so that the social and environmental cost will not outweigh the benefits. It is imperative that we practice transparency, more so, with our participation in the Extractive Industry Transparency Initiative,” he added.
“Areas restricted to mining must be clearly defined so as to avoid misinformation. To ensure that best practices are observed, the grant of mining rights should be limited to those that are compliant with government’s environmental, social and tax regulations.”
Drilon noted the high risks of investors in the industry, stressing fears that economic returns will not be enough to recover the cost, with some mines having a gestation period exceeding 10 to 15 years if a full-exploration program has to be done.
Source: Jonathan L. Mayuga, BusinessMirror, 10 Sep 2013
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