Political economy: The fate of the mining reform bill

Extending the waiting period for the mining reform bill until after 2013 elections means the no-new-mining-contracts regime also stays longer

MANILA, Philippines – Local, foreign and other stakeholders in the mining industry are watching closely how the Philippine government is handling this extractive business.

Like issues involving big business and controversial operations, political economy is at play. But unlike previous years, industry players are not confident they have the upper hand in the political debate.

An amendment to the Mining Act is expected to be pursued in Congress after the Aquino government released its new mining policy under Executive Order 79 (E.O. 79) last July, and its implementing rules and regulations (IRR) over two months after.

This piece of legislation is crucial since it’s only when Congress passes it that the no-new-mining-contract regime imposed by the E.O. 79 be lifted. The moratorium on new mining contracts has put the industry at a standstill.

However, the mining bill, which aims to increase government share on mining operations, is not the priority. As far as extracting revenues from controversial industries through legislation, sin tax gets the “urgent” stamp, but mining does not.

The timing also does not favor mining players. Rappler sources in Malacañang and Congress say the mining reform bill may have to wait until after the 2013 elections.

Not a priority

Lawmakers are still waiting for signal from Malacañang on how to proceed with the mining issue. According to the E.O. 79, the mining bill is for “rationalizing existing revenue sharing schemes and mechanisms.”

Increasing revenues from the extractive mining industry – through a hike in excise taxes to a 5% to 7% range from the current 2%, plus including a 5% royalty – has been a frequent call.

But there is no draft of the mining bill from Malacañang yet. Davao City Rep Isidro Ungab, chairman of the House of Representatives committee in charge of tax legislations, told Rappler he will not convene the committee on ways and means until Malacañang submits a draft bill.

The 1987 Constitution provides that all appropriation – including tax measures – can only originate in the House of Representatives.

“At present, it’s still with the executive. They are drafting the executive version of the mining bill. My information is by September 30 they will send it to us. It’s up to them when they can finish it,” Ungab said.

“The reality is, October 1 to 5 is already the filing of certificates of candidacies (COCs). Next year would be campaign period. But as a good soldier, i will do my best to have that done,” Ungab added.

Congress has 3 months left

Mines and Geosciences Bureau (MGB) director Leo Jasareno said a technical working group has been created to draft the bill. Jasareno is part of newly created Mining Industry Coordinating Council (MICC) that is tasked to implement E.O. 79.

“The draft bill is being prioritized by the MICC. But we do not have a specific deadline… We will finish it as soon as possible.,” Jasareno told Rappler.

When confronted about the seeming lack of priority given to the draft bill, Jasareno argued: “You cannot look at it that way. It is unfair to TWG. They need a lot of data. You cannot rush it. Remember it is about financial matters. You need a lot of data.”

Realistically, there are 3 months left for Congress – or until December 2012 – to tackle bills and Congress schedule is full.

Congress is currently tackling the P2.006-trillion government budget for 2013. A number of President Benigno Aquino III’s priority bills – including the controversial Reproductive Health measure – are competing for the remaining time of the current 15th Congress.

“It’s just difficult when the campaign period kicks in,” concedes Ungab.

The December deadline is also generous. The election fever is expected to kick in as soon as candidates file their COCs in October.

In the House of Representatives, bills go back to square one when a new set of representatives are elected every 3 years. The Senate, on the other hand, is a continuing body. Senators serve 6 years per term.

Exclusively a tax bill?

If Malacañang and Congress agree to prioritize the new mining law, it is not impossible to pass it in the current 15th Congress.

But lawmakers interviewed by Rappler say the priority is obviously the Sin Tax measure, which is awaiting passage in the Senate. The sin tax bill has made it through the first hurdle – the House of Representatives – in June. If the bill at its current format is passed, tax collections from sin products (cigarettes and alcohol) can increase national revenues by around P30 billion a year.

The difficulty or ease of passing the mining reform bill will also depend on the draft.

If it’s solely a tax bill, it is going to be easier. It will go direct to the House committee on ways and means.

But if the draft bill includes provisions on the utilization of natural resources, it’s another story. It will have to be debated first in the respective environment committees of both the Senate and the House of Representatives before it reaches the committee on ways and means.

“I still have to see the bill. If it’s controversial and there are some matters that need to be frurther discussed, it will take long. If it’s a simple bill – a simple consolidation – it will be easier,” Ungab said.

“If the Malacañang draft is solely on taxes, I will immediately call a hearing and have it passed here. But if it needs approval of the committee on natural resources, it will take longer,” said Ungab.

REVENUES ONLY. Leo Jasareno, director of the Mines and Geosciences Bureau and member of the mining council that is drafting the mining bill, says only revenue-sharing will be pursued in Congress and not the environmental or other issues in the industry.

Revenue and environment?

Jasareno said the MICC draft will only tackle the revenue-sharing scheme. “We will follow the mandate of the E.O., which is only revenue-sharing,” Jasareno said.

Before the E.O. there are various mining reform bills already pending in the House of Representatives and the Senate even before the release of E.O. 79. In the Lower House, the consolidated version seeks to increase government share from 2% to 10%. The bill in the Senate seeks to increase it to 7%.

But some members of Congress want the new mining law to tackle not only the revenue-sharing scheme but other contentious issues surrounding mining.

Akbayan Rep Kaka Bag-ao is lobbying for the passage of the consolidated mining bill pending in the House committee on natural resources. Aside from increasing government share to 10%, the bill wants to legislate – among others – the prohibition of open-pit mining method and submarine tailings disposal.

Bag-ao said it’s important to legislate other provisions in the Mining E.O. “In order to sustain and expand the gains in this initiative from the executive, Congress should heed the call of civil society organizations and environmental advocates for the reform of the mining laws,” Bag-ao said.

“A new mining legislation will address comprehensively the multi-faceted problems of the mining industry and the environment,” Bag-ao added.

Ateneo School of Government Dean Antonio La Viña agrees with Bag-ao. “I agree that the new law should be comprehensive and not just focus on revenue,” he said.

Jasareno concedes that, in the end, “it is the call of Congress.”

At a standstill

Meanwhile, the mining industry is at a standstill. Over a thousand applications for new mining contracts are stuck in the waiting game. 

An industry player told Rappler that some large-scale mining companies are already anticipating that passing the mining reform bill will take time.

Recently, the Swiss global miner Xstrata Inc. and its local partner Sagittarius Mining Corp. have decided to delay the start of their commercial operations to 2018. They originally planned it for 2016.

They are the contractor for the US$5.9-billion Tampakan copper-gold project in Mindanao, considered to be the largest foreign investment in mining industry and was touted as a vote of confidence on the Philippine government.

Given that mining operations last for decades and under different governments, a stable policy and business climate are crucial. – Rappler.com


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