Thursday, April 13, 2006

After flurry of jobs, a barren wasteland

April 7. 2006

After flurry of jobs, a barren wasteland
GOTCHA By Jarius Bondoc
The Philippine Star 04/07/2006

No law has been quizzed so often before the Supreme Court than the Mining Act of 1995. The tribunal after long debates at first ruled it in 2003 as unconstitutional. In Dec. 2004 it reversed itself, saying the Act is valid after all. The following month it dumped the loser's plea for review. And last week, for a record third time, the court upheld its lawfulness.

Will critics finally hold their tongue? Going by two dissent opinions of Justice Antonio Carpio, they may not. Years from now, after big miners have dug up all they can, shipped out their giant bulldozers and deserted the boomtowns, villagers left behind will realize they've been had. Mining conglomerates would have employed them for a decade or so. But, still poor, they will inherit a barren wasteland. No government fund would be on hand to restore the desolation. For, as Carpio points out, the Mining Act blatantly defies the Constitution's mandate for State shares from mining revenues. Instead, it levies miners only the usual taxes that other businesses pay without having to despoil the nation's natural resources.

The 1987 Charter's obligated profit shares is rooted in history. The 1935 and 1973 versions deemed all forest, mines and mineral reserves to "belong" to the State, which may grant exploitation rights. From that rose numerous concessions that gave jobs but denuded mountains. To this day large sections of Leyte-Samar, the Sierra Madres, Cordilleras, Caraballos, and Surigao ranges remain bald from unbridled logging and mining.

Framers of the 1987 statute sought to change all that by declaring in stronger terms that all natural resources are "owned" by the State. For good measure, they added three riders:

> Exploration, development and utilization shall be under full control and supervision of the State.

> The State may directly undertake such activities, or enter into co-production, joint venture or production-sharing agreements with Filipinos or corporations 60-percent owned by them.

> The President may enter into agreements with foreign corporations involving technical or financial assistance for large-scale activities based on real contributions to economic growth and general welfare of the country.

No longer did the 1987 Constitution allow "license, concession or lease" � to prevent a recurrence of the ravages. Instead it demanded full control of exploitation, and profit sharing in case of joint mining, with real economic contributions as objective.

For unexplained reasons, the Mining Act ignored all that. In his first dissent (the second was featured in Gotcha, 15 Mar. 2006), Carpio said five sections of the Mining Act ignore the three conditions and other Charter provisions.

Sec. 39 gives a contractor the option to convert a technical or financial agreement into a mineral agreement any time it finds the site unsuitable for large-scale mining. Sec. 80 limits government share in a production-sharing agreement to the excise tax on mineral sales. Sec. 81 further limits this share in technical and financial agreements to corporate income and dividend tax. Sec. 84 begins the collection of taxes only after the contractor fully recovers pre-operating costs. And Sec. 112 immediately reverts all mineral agreements to the old, discredited mode of "license, concession or lease".

All this amounts to a State waiver of beneficial rights from ownership of mineral resources, Carpio notes. "The Act abdicates the State's duty to control and supervise fully ... (so) it will not contribute to economic growth or general welfare." Taxing only after recovery of pre-operating expenses is prone to abuse, like cost bloating. Government may even encourage such overstatement if only to show glowing figures of foreign investments.

Three other justices dissented from the majority report. That the rest did not listen to their arguments is one of democracy's quirks. Perhaps it had something to do with the justices' work overload: 600 cases each, with only 65 each decided per year yet still more cases pouring in, compared to the US Supreme Court's acceptance of only a hundred cases out of 8,000 filed per year. Or, it could be a system failure: the law passed Congress, was signed by the President, and then upheld by the Tribunal. Losers later admitted focusing too much on environmental beef against mining instead of constitutional breaches that deprive the State of cash for nature's care.

The Mining Act aims to lure foreign investors to create more jobs and stable incomes. But the Carpio papers somehow show that investments are not solely about jobs, which can come anyway in fields other than mining. Investments are also about national future, a matter for leaders to consider.

As it is, the Mining Act is like the Parity Rights Act wangled by the US in exchange for aid for war-ravaged Philippines. To rise from the ashes of aerial bombings and industrial ruin, the Philippine Congress granted Americans equal rights as Filipinos to all businesses, including mining.

The Act can be likened as well to the story of Timor Gap. Australia at first let Indonesia annex East Timor, provided that the two powers jointly redraw the offshore oil-resources map. It changed sides, supporting the Timorese fight for independence, when Suharto later demanded 10-percent cut of Australia's income from drilling in Timor. Australia then got Timor's new government to agree to a mere 2-percent share of continued oil mining in its territory.

Curiously the company on which the Supreme Court mining ruling was based is Australian. While the case was being deliberated, it claimed to be 60-percent Filipino and only 40-percent foreign. Weeks after the decision came out in Dec. 2004, it proclaimed to the Australian stock market that it was 100-percent foreign after all. The Filipinos were exposed as dummies. But not to worry, for the share prices zoomed.

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