Bantay Kita calls on DENR to uphold process of public consultations in application for exploration permit
Bantay Kita, a national coalition advocating for enhanced natural resource governance, appeals to the Department of Environment and Natural Resources (DENR) to uphold process of meaningful public consultations as it lifts the moratorium on applications for exploration permit of metallic and non-metallic minerals through Administrative Order 2018-13.
Exploration will determine an area’s mineral potential. This can guide government in identifying if and how much minerals it is willing to develop.
“Exploration requires consent from local government units and communities. We welcome information that would help stakeholders make evidence-based decisions. We expect that necessary data and documents are disclosed to them so that they can arrive at factual conclusions. We urge that the consent process be genuinely applied, and decisions made by stakeholders be respected,” Bantay Kita Coordinator Tina Pimentel stressed.
Executive Order (EO) 79 S. 2012, Section 4 allows the granting of exploration permits, despite the moratorium on issuance of mineral agreements. It also states the exploration permit grantee shall be given the right of first option to apply for development of minerals in the exploration site.
EO 79 Section 6 provides that “mining rights and mining tenements over areas with known and verified mineral resources and reserves, including those owned by the Government and all expired tenements, shall be undertaken through competitive public bidding.”
“In light of the lifting of the exploration moratorium, we implore the Mines and Geosciences Bureau (MGB) to prepare the guidelines for competitive public bidding, with emphasis on transparency and citizen engagement at the soonest. We also appeal to the DENR to release the results of the mining audit which is said to be the basis for the lifting of the exploration permit moratorium,” Ms. Pimentel concluded.
Bantay Kita, a national coalition that advocates for transparency and accountability, lauds Senator Grace Poe for filling Senate Bill (SB) No. 1883 – an act improving disclosure and transparency of the extractive industries. The bill upholds the right of the people to information on matters of public concern such as the mining, coal, oil and gas industries. It also helps ensure that development and utilization of natural resources provide intergenerational benefits to all Filipinos.
“The purpose of this bill is aligned with Pres. Duterte’s call during the SONA to guarantee that extractives proceeds contribute to all, not just a select few, for today and tomorrow,” said Bantay Kita National Coordinator Tina Pimentel.
SB 1883 institutionalizes the Philippine Extractive Industries Transparency Initiative (PH-EITI) which will ensure the sustainability of the disclosure of relevant and timely data including taxes and fees collected by government, and social and environmental monitoring reports. The bill is a timely complement to the on-going fiscal rationalization that impacts extractive companies.
The PH-EITI shall be operationalized through the Multi-Stakeholder Group, which represents all sectors – from the industry, government, civil society, and indigenous peoples.
“With the disclosure of data, communities will be able to make better and informed decisions. EITI offers a space for citizens to engage in resource management,” Ms. Pimentel added.
The direct and non-direct payments received by the local government units shall be provided and disclosed in a detailed report through the Environment and Natural Resource Data Management Tool (ENRDMT). This tool will assist local governments units in tracking proceeds from national wealth and enable them to plan accordingly. The ENRDMT will enable the public to monitor expenditures made against these proceeds, leading to enhanced public financial management and ability to guarantee that proceeds contribute to sustainable development.
The Bill requires a publicly available register of beneficial owners. Beneficial owners are natural persons who ultimately own or control extractive companies.
“A beneficial ownership registry will lead to increased accountability, help track illicit financial flows, ensure correct tax payments, and enable government to enforce foreign ownership restrictions,” Tina Pimentel stated.
In the Philippines, communities can be involved in developing social and community programs with extractive companies' support, such as the construction of schools, hospitals and roads. Communities are then involved in monitoring the terms of contracts and making sure programs are fully delivered. In order to do this, access to timely, relevant, and comprehensive data and contracts is key. Equally important is understanding what the data means. These components are vital for community participation in natural resource governance.
Read more here: https://eiti.org/blog/improving-community-participation-in-natural-resource-governance
Bantay Kita (BK) supports legislative proposals that seek to rationalize fiscal incentives.
BK believes that provision of fiscal incentives can be an effective tool to encourage investments towards particular economic activities. When applied wisely, it can contribute to equitable development, linkages and jobs creation, increase value added, economic diversification, and technology and knowledge transfer. Conversely, scrapping incentives accorded to activities that do not meet to the country’s investment objectives can contribute to a fairer share for the Philippines. Moreover, it can allow for activities more aligned with the country’s priorities to thrive.
BK underscores that fiscal incentives rationalization should be anchored on the country’s long-term strategy. We highlight that non-fiscal costs and benefits resulting from economic activities should be integrated in the decision-making process. Bantay Kita also deems that other fiscal instruments like corporate income tax (CIT) should be carefully considered in combination with incentives to further enhance the country’s long-term strategy.
In the case of mining, Bantay Kita considers incentives at the point of extraction unnecessary. The Philippines is one of the richest countries in the world in terms of minerals to land ratio. In a 2013 and 2016 survey, the Philippines ranked in the top 10 in terms of mineral potential out of 112 countries (Taylor & Green, 2017). The abundance of minerals should be sufficient to attract investors. Minerals are finite; prudent use of this resource while maximizing benefits and minimizing losses is crucial.
Based on the 2016 Philippine Extractive Industries Transparency Initiative (EITI) Report, BK estimates forgone revenues from Income Tax Holidays (ITH) granted to large scale metallic mines was P4.9B. Government proceeds in the same period from the said subsector was P11.1B. The CIT was the biggest contributor at P5.7B or about 50%. This was followed by royalties from mineral reservations at about P2B. In Bhutan, companies primarily engaged in mineral extraction, basic ore dressing, or crushing are ineligible for Income Tax Holidays (ITH).
Bantay Kita supports the lowering of the Corporate Income Tax, with the exemption of the mining sector. Below are several examples of countries that have a lower standard CIT relative to rates on mining companies:
We therefore urge Congress to maintain the CIT for mining companies.
In the current fiscal regime, only mining companies operating in declared mineral reservations pay 5% as mineral royalties. To date, there are four provinces identified as mineral reservations: (1) Zambales in Central Luzon, (2) Surigao del Norte, (3) Surigao del Sur, and (4) Dinagat Islands in the CARAGA Region. Per 2016 Ph-EITI Report, only 12 of the 30 mining companies (39%) operate in mineral reservations.
Bantay Kita proposes imposing 5% mineral royalty payments on all mining operations based on market value of gross output. This can further maximize the country’s gains from mineral resources. Extracting minerals is a one-time opportunity to improve people’s lives. Using actual figures from the 2016 PH-EITI Report, the increase in excise tax from 2% to 4%, and imposition of 5% royalty on all mining operations will have provided the government additional P4.3B. Other countries have begun to follow this trend. Tanzania imposed an increase in metallic mineral royalties from 4% to 6% in July 2017. The Democratic Republic of Congo (DRC) did the same. The DRC increased mineral royalties from 2% to 3.5% for non-ferrous and base metals in March 2018.
In terms of GDP, mining contributed 1.1%. The share of large scale metallic mining to the Philippine economy is low. However, there are other opportunities to increase the country’s take from mineral extraction. We appeal that policymakers deliberate on imposing windfall gains tax to capture a fair share from the extraction of our minerals, similar to the Democratic Republic of Congo policy. The DRC set a “super profit tax” or windfall gains tax of 50%.
Moreover, governance reforms are necessary for fiscal reforms to be effective. We urge that tax rates and fiscal incentives be reviewed in the context of clear, measurable, and transparent criteria. We emphasize that monitoring the outcomes of fiscal incentives and tax rationalization in the achievement of set goals is paramount. For the extractive industries, the utilization of the Extractive Industries Transparency Initiative (EITI) as the platform for review may be considered. The Philippine EITI (PH-EITI) Report may be expanded to extensively discuss social and environmental costs and benefits. Moreover, we opine that the PH-EITI’s scope may also be extended to reflect economic linkages.
 Bantay Kita (BK) is a coalition of over 80 organizations nationwide that advocate for fiscal and governance reforms in the oil, gas, am mining sectors so that the country gets its fair share. Bantay Kita is a Publish What You Pay affiliate, a member of the Philippine EITI Multi-stakeholder group, and a commitment holder in the Philippine Open Government Partnership.
 EITI reports the fiscal terms and amounts paid by mining, oil and gas companies. It also reflects the economic gains from the industry.
Achieving Compliance Despite the Shifting Political Tides
By Tina Pimintel, Bantay Kita
The Philippines has been working on its Extractives Industries Transparency Initiative (EITI) commitments for a long time, and has succeeded in spite of shifting political situations. How has it managed this complex issue?
Find out here.
The Philippines is one of the most mineralized countries in the world. In a 2013 and 2016 survey, the Philippines ranked in the top 10 in terms of mineral potential out of 112 countries (Taylor & Green, 2017).
Mainstream paradigm acknowledges that mining contributes to economic growth and social development. But oftentimes, mining is also associated with environmental degradation, worsening inequality, conflict, corruption, displacement, and health issues.
In the Philippines, the legal framework that governs minerals management is the Mining law of 1995. The law recognizes the economic potential of mining while adhering to sustainable development principles.
A Shift in Tides
On June 30, 2010 Benigno Aquino III was inaugurated President of the Philippines. He ran on an anti-corruption platform during the campaign.
The international community took notice, and invited the Philippines as one of the eight founding conveners of the Open Government Partnership when it was launched in September 2011. The Open Government Partnership (OGP), being a multilateral initiative that promotes principles of transparency, citizen empowerment, and anti-corruption, was a good fit for the goals of the Aquino administration.
Early in his term, President Aquino issued Executive Order No. 79 (2012) providing more concrete directives on responsible mining and environmental protection. The Executive Order also committed to the Philippines’ participation in the Extractive Industries Transparency Initiative (EITI). EITI is a global standard of transparency where mining, oil, and gas companies report how much they pay government and for government to state how much it receives from them. A multi stakeholder group (MSG) governs the EITI. A Secretariat supports and coordinates the effort. The same E.O. also established the Mining Industry Coordinating Council (MICC). The MICC is an interagency body responsible for facilitating dialogue with stakeholders and reviewing mining related laws and conduct of auction, among others.
Former Davao City Mayor Rodrigo Duterte clinched the Presidential elections and assumed office on June 30, 2016. One of his first actions was the release of an Executive Order 2, in July 2016. E.O.2 operationalizes the public’s right to information involving public interest. While this E.O. is limited to offices under the executive branch, the E.O. is viewed as an important pillar in providing the right to information to its citizen’s.
Staying the Course despite Turbulent Waters
President Duterte made pronouncements on promoting responsible mining as a key industry for the nation’s economic growth. He appointed staunch environmentalist Gina Lopez as Secretary of the Department of Environment and Natural Resources (DENR). Carlos Dominguez, a businessman with prior ties to the mineral industry, was named Chief of the Department of Finance (DOF).
In mid-2016, Sec. Lopez ordered an audit of existing mining operations, as recommended by Pres. Duterte. On February 2017, as a result of the audit, five mining operations were suspended and twenty-three were closed. This caused a falling out between DENR and the mining industry. There was concern that companies would no longer volunteer to participate in EITI. This would be detrimental to transparency efforts that provide a strong foundation for policy reforms towards improved minerals management. To allay this possibility, DENR issued an Administrative Order (DAO) 17-07 on March 2017, compelling all mining companies to participate in Ph-EITI..
Sec. Lopez’s pronouncements also caused a stir within the executive branch. DOF Secretary Dominguez, co-chair of the Mining Industry Coordinating Council (MICC) called for a review of the DENR orders. According to the DOF, this move was upon Pres. Duterte’s directive.
The public squabble was divisive. It had strained the cabinet and put PH-EITI efforts temporarily on hold.
The PH-EITI (EITI) Secretariat is lodged at the DOF. The change in administration put the Secretariat in an insecure situation in terms of directive, staffing and funding. The Secretariat received clear support from the DOF to fulfill its mandate only in October 2016.
Attainment of EITI compliance has been a PH-OGP National Action Plan (NAP) commitment since 2013. Despite the shifting political tides, PH-EITI has been steadfast in its work. On October 2017, its efforts were recognized as the only country that had made satisfactory progress against the 2016 EITI Standards.
Bantay Kita’s Efforts to Navigate the Shifting Tides
Bantay Kita (BK) is a national civil society coalition that pushes for transparency and accountability in the extractive industries. Our work is anchored on research, capacity building, and advocacy. We navigate the shifting tides through constructive multi-stakeholder engagement. BK is a PH-EITI MSG representative and a commitment holder in the PH-OGP for EITI compliance.
In the Philippines, the OGP Action Plan is co-created by civil society and government through island-wide consultations. BK actively participated in this process. EITI had been a commitment since the 2013 OGP action plan. BK worked to help ensure that the EITI maintained its position.
To do so, we widely disseminated the invitations to the OGP island-wide consultations to members and networks of BK. We worked in collaboration with the PH-EITI Secretariat and concerned government entities to align efforts.
Bantay Kita conducts regular outreach, awareness-raising, and capacity-building activities that also contribute to the effort. We illustrate how extractives impact a community’s social, economic and environmental context.
In August of this past year, the 2017-2019 OGP National Action Plan (NAP) was approved. We have since then been implementing our commitments.
The main challenge we encountered in the development the of the NAP was competing concerns. Each group, be it government or civil society, had its own issue. Each issue was put forward. Representatives had an opportunity to explain their program– to show how it met the OGP objectives, to illustrate that it had both government and civil society support, and to assert why it merited to be considered. EITI is not easy to sell. It is technical and to many, boring. People feel more connected to other concerns like enhancing participatory audit, improving public service delivery, and increasing local government competitiveness.
Charting the Waters
Once the commitment was accepted, the real work began. Charting the waters is more challenging due to several issues. First is the existing legal framework for transparency. Policies that are created by executive order or department order do not carry the same weight as a law. Its application is limited, and penalties are weak compared to a law. The Data Privacy has a law, the PH-EITI and FOI have executive orders. Compelling mining companies to participate in EITI is a Department Order. The call for public disclosure in FOI is contradicted by the long list of exceptions, and provisions of the Data Privacy law.
Clear criteria of “public interest” is absent. This leaves a lot of room for discretion in determining what falls under “public interest.”
The mining law allows for multi-stakeholder monitoring of contract implementation, specifically environmental impacts of mining operations. However, there is no credible selection process of civil society representatives in the said body. There is also no room for citizen engagement in the planning stage.
Though strides have been made for increased disclosure on extractives data through the EITI reports and the contracts portal, more needs to be done. There is still a lack of access to timely, complete, reliable, and accurate data on auxiliary rights awarded to mining companies, and environment monitoring reports to name a few. By having access to these documents, communities have the bases for monitoring. Being unaware of such rights granted to mining companies often becomes a source of conflict in operating areas. Issues of land grabbing and displacement, and illegal logging abound in mining concession areas.
There is also the perennial challenge of the lack of resources and the will power to champion the reform that had been accepted. This boils down to the question of prioritization and commitment.
Selecting the Appropriate Vessel
Bantay Kita sees OGP as an appropriate vessel to seek allies for reforms within the OGP national and international family (EITI, FOI); a venue to collaborate; an opportunity to push for interlinking advocacies and to build trust among CSOs and between civil society and government.
Particular to BK’s advocacy, we will continue to use OGP as an avenue to drive for the harmonization and clarification of guidelines on information in favor of disclosure. In the short term define “public interest” to fully operationalize the Executive Order on FOI. In the long-term, to legislate the FOI bill. Institutionalize governance reforms (EITI) and mainstream it in the subnational level; set timelines and monitoring government compliance for the enhancement of processes, and online platforms that are in line with the open data policy (accessible, timely, complete, usable, comparable), as well as disclosures; provide more opportunities for citizen engagement in the whole extractives value chain; clear criteria for providing permits and licenses; focus on demand-driven data by developing a more user-centered approach on determining what is relevant to stakeholder; develop redress and grievance mechanisms; and continue the facilitative and consultative work. Underlying all this, is the guarantee that basic rights to freely and confidently, express, assemble, and associate are present.
 http://www.denr.gov.ph/about-us/mission-vision.html The DENR is responsible for conserving, managing and developing the country’s environment and natural resources, including mineral resources.
Bantay Kita strongly condemns the tagging of indigenous peoples rights defenders as terrorists. We stand in solidarity with our fellow advocates in asserting our rights to express and assemble.
The Philippine Government through the Department of Justice has drawn up a list of over 600 “terrorists” based on the Section 17 of the Human Security Act of 2007. The list includes indigenous rights defenders like Beverly Longid, current member of Cordillera Peoples Alliance (CPA) Advisory Council member, and Windel Bolinget, CPA Chairperson and National Co-convener of KATRIBU national alliance of indigenous peoples, among others.
Bantay Kita, a national coalition of over 80 organizations pursuing natural resource governance reforms, has worked in partnership or in parallel with CPA and KATRIBU. We have coordinated on minerals governance initiatives in the Cordillera, as mines operate within the IP’s ancestral domains. We assert these individuals are rights activists, not terrorists. Indiscriminately tagging advocates as “terrorists” impedes their work and further disenfranchises the communities that they serve. It maligns their reputation, but moreover, puts them, their families, and those they associate with in danger.
We are deeply troubled that the on-going government efforts creates an environment of fear to express and associate. These are basic tenets of freedom engrained in our Constitution. The fear further constricts the already narrow civic space.
Bantay Kita demands that the Government uphold the fundamental freedoms and guarantee safe spaces to express, organize and affiliate.
Bantay Kita, a governance and fiscal reform coalition, lauds Senator Joel Villanueva for filing Senate Resolution No. 612 directing the Committee on Public Information to conduct an inquiry on beneficial owners of mining, oil, gas, and coal companies. By doing so, it could be determined if companies abide by foreign ownership restrictions. A similar issue was raised about Rappler, an online news network, for allegedly violating the equity restrictions imposed by the Constitution on mass media ownership.
According to Bantay Kita Coordinator Tina Pimentel, “The Resolution is timely since the Philippines, as a participating country in the Extractive Industries Transparency Initiative (EITI), is required to establish a Public Beneficial Ownership Registry for extractive entities by 2020.”
EITI is a global standard of openness in mining, coal, oil and gas. The Initiative asserts that improved governance will ensure that proceeds from resource extraction will contribute to economic growth and social development. The Philippines expressed its commitment to join the EITI in 2012 through Executive Order 79.
According to Senate Resolution 612, the proposed Public Beneficial Ownership Registry will not only identify individuals who ultimately control extractive companies but will also disclose their nationalities. This will help determine if entities abide by prescribed ownership restrictions. The said Registry will also aid in increasing trust and accountability, improving investment climate, and preventing corruption, among others.
“As government looks for ways to increase taxes to support initiatives like the Build, Build, Build program, ownership disclosure will make it easier to track tax evaders. This can potentially make tax administration easier and raise collection.” Pimentel added.
The Secretary of Finance has issued Revenue Regulations (RR) No. 1-2018 dated 5 January 2018 to provide for the Revised Tax Rates on Mineral Products pursuant to the provisions of the Tax Reform for Acceleration and Inclusion (TRAIN) Law for the purpose of amending RR No. 13-94 which governs the imposition of excise tax on minerals and mineral products.
The revised tax rates are as follows:
Coal produced under Coal Operating Contracts entered into by the government pursuant to Presidential Decree No. 972 as well as those exempted from the excise tax on mineral products shall be subject to the applicable rates above beginning 1 January 2018.
For indigenous petroleum, “first taxable sale, barter, exchange or similar transaction” refers to the transfer of indigenous petroleum in its original state to a first taxable transferee.
“Gross output” is generally interpreted as the actual market value of minerals or mineral products, or of bullion from each mine or mineral lands operated as a separate entity without any deduction from mining, milling, refining, (including all expenses incurred to prepare the said minerals or mineral products in a marketable state), as well as transporting, handling, marketing, or any other expenses.
You may access the full version of the Regulation through the website of the Bureau of Internal Revenue. Click here to read.
Bantay Kita strongly condemns the death of seven (7) members of the Indigenous Peoples T’boli-Munobo S’daf Claimant Organization (TAMASCO) during an anti-insurgency military operation in Barangay Ned, Lake Sebu, South Cotabato, Mindnanao, on December 3, 2017. TAMASCO tribal chieftain Datu Victor Danyan, his two sons Tantan, Jr. and Artemio, and son-in-law Dodoy were among the casualties.
Known to the National Commission for Indigenous Peoples, local government, and the Philippine Army as a staunch advocate the tribe’s land rights Datu Victor had been engaging in government processes and multi-stakeholder platforms since late 1990s. As TAMASCO chieftain, he had made known his tribe’s staunch opposition to the coffee plantation operated by Silvicultural Industries (SII), a subsidiary of David M Consunji, Inc. (DMCI). SII had been awarded Integrated Forest Management Agreement (IFMA) 22 which would have expired in December 2016. IFMA 22 covers about 11,000 hectares.
TAMASCO’s ancestral domain encompasses land in South Cotabato and Sultan Kudarat, two provinces that share a political boarder. TAMASCO claims another agreement (IFMA 22-2007) which integrates and effectively extends IFMA 22, did not seek Free Prior and Informed Consent (FPIC) from the tribe. FPIC is a crucial step that allows the IPs to decide to allow or prevent the implementation of a project within their ancestral domain. Both IFMAs pertain to areas in Sultan Kudarat. IFMA 18-2007 was awarded to M&S Company, another DMCI subsidiary. It should be noted that of the approximately 29,000 hectares granted under IFMA in Sultan Kudarat, over 25,000 hectares has been conferred to DMCI subsidiaries.
Through recent negotiations with government, TAMASCO alleges that it had been given the right to carve out 300 hectares of its ancestral domain from the prevailing IFMA. This had yet to be implemented. Meanwhile another DMCI subsidiary, DMC-Construction Equipment Resources Inc. (DMC-CERI) had been awarded a Coal Operating Contract (COC) in the area. To date, San Miguel Energy Corporation has a pending application that would also impact the TAMASCO ancestral domain.
Through, multi-stakeholder engagements and available government platforms and processes, TAMASCO had openly opposed these projects in their desire to have control over their ancestral domain.
Bantay Kita is deeply concerned that killings of advocates like Datu Victor Danyan are legitimized by military operations under the blanket of martial law prevailing in Mindanao. We demand for a fact-finding mission to uncover the truth and work towards ensuring that civic space is not threatened by such atrocities.
Bantay Kita demands that the Government uphold the fundamental freedoms and provide safe spaces to express, organize and affiliate.
Bantay Kita commends the bicameral members for increasing the excise tax on mining companies from 2% to 4% in the Tax Reform Acceleration and Inclusion (TRAIN) Bill. But the coalition of natural resource governance advocates asserts, it is still not sufficient.
“This is a good start, but it is still low. In addition, we urge legislators to consider collecting royalties from all mining operations, not only those that operate within mineral reservation areas.” Bantay Kita National Coordinator Tina Pimentel expressed.
Bantay Kita recommends imposing 5% mineral royalty payments for all mining operations based on market value of gross output. The current fiscal regime imposes 5% royalty payments only to mining operations situated in mineral reservations. To date, only four provinces have been declared by government as mineral reservations: (1) Zambales in Central Luzon, (2) Surigao del Norte, (3) Surigao del Sur, and (4) Dinagat Islands in the CARAGA Region. About 40% of large scale metallic mines operate within mineral reservations.
Ms. Pimentel further asserts, “All mining operations in areas within the Philippine jurisdiction should be subject to royalty payments in order for the country to increase its benefits from resource extraction. Minerals are finite and once extracted, we only have one opportunity to benefit from it. Based on the 2016 PH-EITI Report, Php 2 billion was collected from large scale metallic mines as royalty from mineral reservation areas. Had all mining companies been levied this tax, we would have collected an estimated P4.5Billion from large scale metallic mining operations.”
Bantay Kita is also advocating for the imposition of windfall gains tax and scraping of all unnecessary incentives accorded to mining companies. Windfall gains tax gives the government an opportunity to earn more when mineral prices are on the rise. Fiscal incentives are considered forgone government revenues. Bantay Kita estimates that from income tax holidays accorded to large scale metallic mines alone, the government has lost an estimated Php 5 billion in revenues for 2014.
Bantay Kita also urges the legislators to maintain the corporate income tax rate imposed on mining companies, given that their contribution to the country’s GDP remains insignificant.
Bantay Kita is hopeful that other mining fiscal reforms be included in the next comprehensive tax reform package.