philipines foreign investment

Philippine Overview: What’s Going Down Above Down Under

By Jon Nones
28 May 2005 at 02:52 PM EDT


Better find some higher ground or buy a boat because the Philippine government has officially opened the floodgates to foreign mining companies, and here comes the overflow.

In December 2004, the Philippines Supreme Court reversed an earlier decision and declared the Mining Act of 1995 constitutional, thus allowing 100% foreign ownership in three out of four major mining tenements.



And already, the Department of Environmental and Natural Resources (DENR) has reported foreign investment commitments worth $1.9 billion, with three mining projects already underway worth $229 million.

Further incentives by the government include:

· Tax exemptions in the form of Income Tax Holiday (ITH);

· Exemption from taxes and duties on imported spare parts;

· Exemption from wharfage dues, and export tax, duty, impost fees;

· Tax credit on supplies;

· Deductions from taxable income for labor expense and infrastructure works;

· Incentives for pollution control devices;

· Income tax carry forward of losses;

· Income tax accelerated depreciation on fixed assets;

· Investment repatriation, earnings remittance, freedom from expropriation and requisition of investment and confidentiality of information.



Additional fiscal and non-fiscal incentives may be granted under the Omnibus Investment Code of 1987.

With the introduction of the Mineral Action Plan, the government has significantly streamlined the permitting system.

According to Secretary Michael T. Defensor, the DENR reduced the permitting process covering Exploration Permits (EP) by 57%, the Mineral Production Sharing Agreements (MPSA) by 54% and the certification of the National Commission on Indigenous Peoples (NCIP) by 27%.



The DENR also cut 120 days off of the approval time for the Environmental Compliance Certificate (EEC).

The Philippines should already have a booming mining industry, but due to political turmoil, nationalistic policies and legal uncertainty, the country’s resources have been sterilized for ages.

Sitting on the Pacific “Ring of Fire,” the country may possibly have the fifth largest reserves of gold and copper in the world. In 2002, DENR estimated the country’s gold reserves at 967,180,197 million tonnes while copper was put at 5,301,507,657 million tonnes. And just seven metallic mines were operational in 2002.

Despite 9 million hectares of potential mining land, only about 126,000 hectares are now covered by mining permits.



Moreover, mines in operation only total a tenement area of 23,106 hectares.

As a result of this liberalisation of the mining industry, the country could earn as much as $639 million a year from gold, copper, zinc, nickel and other minerals.

This comes at a crucial time for a struggling economy where minerals currently make up a measly 1.7% of exports, where in 1980, mining accounted for over 20% of exports.

However, on the coattails of such an influential Supreme Court ruling, along came the expected opposition. Certain non-government organisations are irate.

On May 13, the Northern Luzon bloc of Catholic bishops issued a statement urging their faithful followers to oppose large-scale mining in their communities.

Perhaps as a result, on May 16, approximately 5,000 protestors gathered at the capital city of Koronadal and caravanned to Tampakan town, announcing their calls to stop mining activities.

The opposition contends that this solution to the country's short-term economic woes will only cause severe long-term ecologic damage, citing the accident of Marcopper in 1996.

The reality is that as devastating and unnecessary Marcopper was, it should be seen for the isolated problem it is. Tens of billions of tonnes of rock have been mined in the region since then without major incident. It is a performance achievement that is unmatched in virtually any other industry.

In any case, foreign mining companies have not been dissuaded from investing.

The Philippines Chamber of Mines reported that at least 20 companies are in various stages of mining or planning, which will reportedly create at least 100,000 new jobs.

Coral Bay Nickel Corp., a subsidiary of Sumitomo Metal Mining Co. [TSE:5713], and Rio Tuba Nickel Mining Corp. have invested $180 million in its Palawan Nickel Project, and is expected to employ about 1,250 total workers throughout mining operations.

Lafayette Phils., Inc. [ASX:LAF] has committed $42 million in its Rapu-Rapu Polymetallic Project and plans to employ more than 1,000 workers during operations.

TVI Pacific Phils. [TSX:TVI] has contributed $7 million to its Canatuan Gold Expansion Project, which will employ roughly 500 workers.