Peace in Mindanao can Revolutionize Mining in the Philippines

By Liam Hanlon

View from a mine in Baguio City, Philippines. Source: Frisno’s flickr photostream, used under a creative commons license.

The Philippines has a tumultuous relationship with its mining sector. Mining provides foreign investment, boosts GDP, and creates jobs that stimulate local economies, but also has a long track record of environmental catastrophes, violent conflict, and confrontations with local communities.

The recent peace deal in Mindanao, however, provides a chance to change the character of mining in the Philippines. It presents an opportunity to both protect communities and the environment, as well as increase foreign investments on mining projects.

Mindanao contains more than one third of the untapped mineral reserves in the Philippines, which includes copper, gold, nickel, iron, chromite and manganese. This lucrative investment opportunity has grabbed the attention of mammoth US and Australian mining companies, such as Australia’s Indophil Resources and U.S.-based St. Augustine Gold & Copper. Security improvements arising from the MILF peace deal will advance rule of law and reduce the chance of rebel attacks on mining projects.

The deal also presents Philippines president Benigno Aquino with a public platform to launch his mining policy reform, embodied in Executive Order 79.  This establishes environmental safeguards, increases government revenues on mining projects to 5 percent, and streamlines national and local protocols on permits. Although it has been blocked at the Implementing Rules and Regulation stage, Aquino has vowed a moratorium on new projects until reform is passed.

The Philippines also entered into the Extractive Industries Transparency Initiative, a global initiative that sets standards and best practices for member countries, which will provide international legitimacy for his reform efforts.

Traditionally, Manila has sold mining rights to local and foreign companies as a means of overcoming poverty. Aquino and previous administrations pursued aggressive mining polices, and corporate mining permits have multiplied under Aquino. The mining sector’s value is expected to increase by more than $4.5 billion by 2016. Aquino toured Australia and New Zealand in early October, elaborating on the multitude of mining ventures available to foreign investors.

That said, difficulties remain. In August, the Philippines-based Philex Mining corp. failed to contain a leak at its Padcal Mine in Benguet, which led to wastewater and contaminants flowing into the nearby Balog Creak and the Agno River.  The company was forced to shut down its operations, and may be fined more than $8 million by the Department of Environment and Natural Resources

Foreign companies are also feeling the pressure. Local government, compelled by constituent communities who want to limit foreign mining projects, often override or block mining permits awarded by Manila. Local leaders are also unable to reign in armed rebel groups. The Communist People’s Army, one of the insurgent groups in the south, launched over 600 attacks on mining, logging and plantation companies between January 2011 and July 2012.

The developments in Mindanao contain all the ingredients needed for substantial change in the mining industry. The MILF peace deal has improved conditions for investment and opened up new opportunities, while Aquino’s reform agenda has the potential to genuinely transform mining practices.

Multinationals will play a vital role in this equation. Companies should support Aquino’s reform efforts, which will not only promote community development and environmental protection, but also guarantee long-term, sustainable mining projects that will generate gainful returns. And most important, international attention is focused on Mindanao, ensuring that the world will be watching.

Mr. Liam Hanlon is a researcher with the CSIS Chair for Southeast Asia Studies.

 

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