Weak regime

Global economic and investment analyst Oxford Business Group (OBG) painted a very positive picture of the Philippine economy in its latest update, hailing the country for overcoming external challenges to notch up growth. The report said the country’s expansion “sets it apart from some other Southeast Asian markets, where stock exchanges and currencies have fallen largely due to uncertainty over the US Federal Reserve’s asset purchase program.”

OBG stressed the key role played by domestic demand (boosted no doubt by consumer confidence that remains high) in supporting the economy, highlighting infrastructure projects as instrumental in sustaining domestic growth. The report also noted the focus of the Aquino administration in boosting agriculture and tourism – which is understandable considering that these are indeed dynamic sectors that can go a long way in sustaining economic growth especially with the proposed synergy via “agri-tourism” in rural areas.

It’s rather unfortunate, however, that the government continues to miss out on the potential contribution of the mining sector despite the fact that we have one of the richest mineral deposits in the world. There is a lot of interest from investors but until and unless government comes up with a definitive policy, the country will continue to miss out on billions of dollars worth of investments, observers noted. Some $12 billion worth of investments are currently on hold, with mining industry officials already warning that government will not be able to meet the $16 billion target by 2016.

A major bone of contention is the current fiscal regime which has been described as “not globally competitive.” For one thing, two different sets of taxation schemes are imposed on mining companies depending on their contract with the government, namely the FTAA (Financial Technical Assistance Agreement) and the MPSA (Mineral Production Sharing Agreement). But whether FTAA or MPSA, taxes are equally high according to an International Monetary Report that pegged the government’s share at more than 50 percent. That does not even take into consideration the 12 different taxes imposed on mining companies – making it difficult to attract foreign investors.

According to the International Finance Corp., an investment unit of the World Bank, the mining sector can be a “strong catalyst” for the economy because it can help fund infrastructure projects to push the Philippines forward past a consumption-driven economy. The IFC Philippine resident representative said the Philippines can become a progressive mining country like Australia or Canada with proper management and transparency, meaning people know where taxes from the mining industry are going – primarily to the communities where mining companies operate. Not many people also know that big companies such as Philex Mining Corp. are spending a big portion of their operating expenses in projects that benefit not only the host communities, but also the nearby areas – from education to health to housing and livelihood programs and projects.

According to a mining executive, the current fiscal regimes are complex, which is why the industry is urging the adoption of just one fiscal regime for the purpose of simplicity and transparency. Whether the tax is 40 percent or 50 percent, the important thing here is that there is only one fiscal regime, an industry observer commented, so that foreign investors know what to expect.

Minerals Council of Australia CEO Mitch Hooke (shown in photo flanked by Australian Ambassador to the Philippines Bill Tweddell and Philex Mining SVP Mike Toledo) also noted the doubling of global demand for minerals commodities over the next 15 to 20 years – making it imperative to differentiate between responsible miners and illegal miners who are also driving away big ticket projects (not to mention the fact that these small-scale illegal miners do not pay taxes).

One of those that has been opposing mining in the Philippines is the Catholic Church – which many say is rather “strange” since it seems Pope Francis himself is not against mining per se judging from his message to mining executives who took part in the recent “Day of Reflection” on environment and social issues organized by the Pontifical Council for Justice and Peace led by Cardinal Peter Turkson of Ghana.

Pope Francis noted the importance of the “Day of Reflection” since it is the first time that senior mining executives have come together “to reflect on their human and environmental responsibilities.” In other words, they “wish to make a serious examination of conscience on what must be done so that their industry may offer a positive constant contribution to integral human development.” Vatican Secretary of State Cardinal Tarcisio Bertone also highlighted that “the great challenge of business leaders is to create a harmony of interests involving investors, managers, workers, their families, the future of their children, the preservation of the environment on both a regional and international scale, and a contribution to world peace.”

Spy tidbit

Our friend Albert Garcia is inviting all golfers to join BRAFE Golf-Golfing for Education on Oct. 7 at the Malarayat Golf and Country Club in Lipa City, Batangas to help raise funds to send intelligent, deserving students to university. BRAFE Golf is in memory of the late Brother Rafael S. Donato of La Salle who became the first Filipino director of De La Salle Lipa and the first Filipino president of La Salle Green Hills. For inquiries, contact (02) 5246549 or 09212600228, or visit their FB account or website www.brafegolf.com.

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