"I hope this is resolved with urgency."
"I hope this is resolved with urgency."
Last Friday, the House Committee on Appropriations started its series of deliberations for the government’s proposed P4.506-trillion national budget for 2021. According to the briefing of Finance Secretary Carlos Dominguez, the first seven months of this year suffered a total revenue fall of 6.8 percent compared to the same period in 2019.
“Emerging” tax revenue for 2020 is projected to drop to P2.5 trillion from P3.1 trillion in 2019. With government expenditures estimated to reach P4.3 trillion, there will be a deficit of about P1.8 trillion to be incurred by the end of this year. This would only slightly improve in the next few years—that is, assuming no more extreme lockdowns will stop economic activity.
To bridge the anticipated budget gap, Secretary. Dominguez stated that the government will leverage its good credit rating to borrow the funds needed and to support priority expenditures to boost the pace of recovery from this economic recession. Gross financing for 2020 will reach over P3 trillion, tapering off to P2.3 trillion by 2022.
He stressed the urgency of three priority economic recovery bills: the Corporate Recovery and Tax Incentives for Enterprises Act, (CREATE) bill, Financial Institutions Strategic Transfer (FIST) bill, and the Government Financial Institutions Unified Initiatives to Distressed Enterprises for Economic Recovery (GUIDE) bill.
In addition to these recovery bills, what I would say is the most strategically important pending tax measure that the Finance Secretary said he will be pushing is the new mining tax regime that has hurdled the House committee on Ways and Means since November 2019. This was likewise approved by the Committee on Appropriations in January this year. This bill has undergone long debates between industry and government and is seen as a viable compromise. It would not only increase the government’s share in mining revenues; it would also but be a significant step toward a more competitive and stable policy environment to open up the untapped trillion dollar economic potential of our mineral development industry.
A new mining revenue tax regime is a requisite of the problematic Executive Order 79 imposed since 2012 to institute reforms to ensure environmental protection and responsible mining. However, one of the damaging provisions of this order stopped the issuance of new mining permits. This effectively froze what should now be one of the country’s major economic machines.
Mining critics are quick to quip that there is no urgency to harvest our endowed mineral wealth and that mining companies who have violated environmental regulations should not be allowed to operate. There is really no debate when it comes to minimizing the environmental impact of mining or any industry for that matter. What I find so foolish is the caricature bias of anti-mining groups who demonize the legitimate and highly regulated mining industry as the biggest threat to the country’s environment. This propaganda has created an unfair and harmful misunderstanding of an industry that in truth, is indispensable to the world’s technological advancements.
So, what did we lose in the eight-year impasse since EO 79?
Still stuck in this regulatory limbo is the $5.9-billion project to develop the Tampakan copper-gold deposit in South Cotabato. This is known to be one of the largest undeveloped deposits in the world with 2.94 billion tons of ore with 0.6-percent copper and some 18 million ounces of gold. Had the original timelines been allowed to proceed, the project could be producing some 375,000 tons of copper and 36,000 ounces of gold per annum. Based on prevailing gold prices of $1,940 per ounce, that’s about $70 million or some P3.3 billion just for the gold production of one mine.
Philex Mining’s Silangan project in Surigao del Norte is estimated to yield 4.94 billion pounds of copper and 9 million ounces of gold, with pre-COVID 19 prices valued at P752 billion and P605 billion, respectively.
Other multi-billion-dollar investments in the same predicament include Nadecor’s Kingking project in Davao del Norte, Davao Oriental’s Asiaticus project, Lepanto Mining’s FSE project in Benguet, and Masbate’s Philsaga Mining contract, among others. From a 2016 list of only 11 pending mining projects, the total capital investments would have been USD 23 billion. Interesting to note is that according to data from the American Chamber of Commerce of the Philippines, our total Foreign Direct Investments in 2017 was only $10 billion. This does not include revenue from production.
This is an enormous policy blunder that I hope our policy makers will resolve with urgency. A less confrontational and more collaborative approach to environmental concerns would have realized the full operation of 11 mining projects bringing in over $23 billion in investments. The multiplier effects of the economic linkages, the millions of jobs, and the infrastructure development that these projects should now be supporting in the undeveloped areas where its desperately needed would have been an even bigger GDP story.