WHY OUR MINING LAWS ARE INEFFECTIVE
“MAPping the Future” Column in INQUIRER – 2 January 2012
by Niceto S. Poblador
THE Philippines Mining Act of 1995 (RA 7942) provides the legal basis for the regulation of the mining industry in the country. It is easily one of the most controversial laws on our statutes.
In my opinion, it is also among the most flawed. It is an ill-conceived piece of legislation that is highly unlikely to achieve its intended purpose, which avowedly is “the enhancement of national growth … in a way that effectively safeguards the environment and protect (sic) the rights of affected communities.”
It rests on the dubious premise that the “firm and forceful implementation” of this law will promote the economic benefits and prevent the environmental damage that are usually associated with mining.
Failure of mining
In my earlier piece on the topic of mining (“Why Mining in this Country is Unsustainable,” PDI, 12 December 2011), I gave a number of reasons why I believe that mining fails to contribute to the sustained growth of the community and of society.
I shall now elaborate on some of the points I raised with reference to some of the law’s most questionable provisions.
”Sec. 2. Declaration of Policy. It shall be the responsibility of the State to promote rational exploration, development, utilization and conservation through the combined efforts of government and the private sector in order to enhance national growth in a way that effectively safeguards the environment and protect the rights of affected communities (emphasis supplied).”
To use a card game metaphor, this pretentious vision statement is like shooting the moon. As far as I know, this ideal state has never been achieved anywhere in the world and at anytime in history. To expect that mining can be made productive, safe and equitable in the context of Philippine society today is wistful thinking.
There is little hard science and dependable data to support the absurd claim that the mining industry can be controlled and regulated in a manner that will create long-run economic value for the community and society while at the same time putting in check the social, environmental and economic costs associated with it.
Even assuming for the sake of argument that the various provisions of the law are theoretically and empirically valid, it is cavalier to assume that these can be “firmly and forcefully” implemented. There are two major reasons for this grim observation.
First, it glosses over the very real conflicts of interests between profit-seeking mining companies and the communities where they operate, between government officials and the citizens of the land whom they are supposed to represent, and between the present and future generations of Filipinos. Coming up with a protocol that is acceptable to all is next to impossible for the simple reason that the interest of one group can only be achieved at the expense of those of the others, a situation economists call a “zero-sum game.” A socially and economically acceptable political solution to the mining issue is therefore out of the question.
Unholy Alliance
A more likely scenario is the emergence of an unholy alliance among particular stakeholders intended to further their mutual economic interests against those of others. While Section 2 of the Mining Act talks about “combined efforts between government and the private sector,” this collaboration is most likely to take the form of an insidious plot between unscrupulous public officials and equally unprincipled corporate managers to defraud an unsuspecting public of economic wealth that rightfully belongs to them. These arrangements typically involve one party looking the other way while the other pushes the envelope.
Second, the belief that the decision makers in the business sector and those in government who are entrusted by the law to serve as guardians of our mineral wealth are knowledgeable and enlightened people whose main concern is to serve the public interest is pure nonsense. A flourishing mining industry is patently in the interest of public officials who can count on their appreciative electorates to reward them with their votes. A profitable mining operation is clearly in the interest of mining executives who can count on their appreciate boards of directors for their fat salaries and bonuses. Left out in the cold are future generations of Filipinos whose material well-being will most certainly be adversely affected by mining operations. Nobody takes the cudgels for them except for a handful of well-meaning and enlightened citizens and equally concerned NGOs, all of whom are powerless as they line up against the entrenched bureaucracy and well-endowed business mining firms.
The intelligence and professionalism of those who are actively involved in the mining controversy, be they in the public or private sector or in civil society, can be gleaned from the level to which current debates on this contentious issue has descended, with the pros calling the antis “anti-development” and the antis labeling the pros as “greedy.” From what one can see from current debates, there is a dearth of substantive, dispassionate analysis of the relevant issues.
Sec. 63…all contractors and permittees (sic) shall strictly comply with all the mines (sic) safety rules and regulations as may be promulgated by the Secretary (of the Environment and Natural Resources) concerning the safe and sanitary upkeep of the mining operations and achieve (sic) waste free and efficient mine development.”
Social Contract
Once formally proclaimed and accepted by all concerned, these set of rules and regulations effectively becomes a social contract that commits all players in mining activities to adhere to certain prescribed acts and modes of behavior, and to avoid those that are prohibited. However, just like all contracts, this one is incomplete. There are so many situations and conditions that the framers of the law could have easily overlooked. These omissions provide ample opportunities to the various players to pursue their respective interests, regardless of the cost to society. Getting around the law is also made possible and more likely by the difficulty of outsiders in gaining access to relevant technical and operational data. Consequently, complete compliance with the provisions of the law is all but impossible, especially so if enforcement is less than enthusiastic.
” Sec. 69 …every contractor shall undertake an environmental protection and enhancement program which shall include … plans relative to … rehabilitation, regeneration, revegetation (sic) and reforestation of mineralized areas, slope stabilization of mined out trailings (sic) … and socioeconomic development.”
” Sec. 70…an environmental clearance certificate shall be required based on an environmental impact assessment and procedures … required … to maintain ecological balance. …in prior consultation with local government units, non government and peoples’ organizations and all other concerned sectors.”
In the absence of extensive research and exhaustive scientific analysis using highly advanced methodologies and sophistical computer software, it is impossible to determine whether and to what extent specific policy decisions or strategic moves will affect “ecological balance” (whatever that means!) or “socioeconomic development.” So complex and so indeterminate are the relevant sets of interconnected variables that to expect that the “firm and forceful” implementation of the law will bring desirable results for society now and for all times is sheer folly!
” Sec. 71… a mine rehabilitation fund shall be created, based on the contractor’s approved work program, and shall be deposited as a trust fund in a government depository bank.
“Insult To Intelligence.”
This provision of the law is an insult to anyone’s intelligence. One cannot expect mining companies to set aside a sufficient amount of funds to ensure that the area they have ravaged will be returned to its original state, much less to be as economically productive as on the day the first earthmover rumbled into the mining site. Any token amount deposited in a government bank – if done at all!- will serve the purpose of compliance with the law. There is absolutely no incentive to invest a centavo more!
A favorite strategy for covering up the damage – literally – is by replanting new trees in the mined over area. While these initiatives are commendable, they barely scratch the surface of what arguably is one of the most serious developmental and environmental problems facing the country today.
(The article reflects the personal opinion of the author and does not reflect the official stand of the Management Association of the Philippines. The author is a knowledge management consultant. Feedback at map@globelines.com.ph. For previous articles, please visit <map.org.ph>)
Part II
WHY MINING IN THIS COUNTRY IS UNSUSTAINABLE
“MAPping the Future” Column in INQUIRER – 12 December 2011
by Niceto S. Poblador
Supporters of mining in this country argue their case by underscoring the industry’s potential contribution to development. To be sure, many well-meaning public figures and organizations that champion mining as a developmental strategy, including the Management Association of the Philippines (sponsor of this column), qualify their stand by insisting that mining operations should, in addition, be “sustainable.” The mining industry itself (and government agencies that are responsible for its regulation) usually prefix its official position on this contentious issue with the same magical words, “developmental” and “sustainable.” So do individual mining establishments in their effort to burnish their images as upright corporate citizens.
My own position on this issue is that under present legal and institutional conditions, mining in the Philippines can neither be developmental nor sustainable.
There is one thing about mining, however, that we can all agree on: that it has tremendous potential for creating economic value, and under current global market conditions, it is a very profitable business.
The questions I pose are twofold: (1) How is the economic value created by mining operations distributed among the various stakeholders in the industry? In particular, how much of this added economic value goes to the citizens of the country who, after all, own our natural wealth?, (2) How are the costs associated with this activity shared among them? I shall look in turn at these two sides of the mining coin.
For our present purpose, I shall focus on the two major stakeholders in mining operations: the community – and in the larger context, the whole of society – in which this activity is being undertaken; and the owners of the mining establishments. (The other stakeholders in mining operations include their employees, their customers, their suppliers and their financiers, all of which, understandably, want the firms to be successful – i.e., to be profitable.)
These two stakeholders have different and often conflicting economic goals. Communities and the country’s citizenry are motivated by their collective desire for sustained economic and social upliftment (i.e., development), while mining firms are driven mainly by immediate returns on investment.
These two stakeholders also have divergent time perspectives. The community has a much longer one, extending over many generations well into the future, while business firms have a much shorter time perspective which usually depends on their revenue and production cycles.
So disparate are the economic interests and time frames of these two groups of stakeholders that it is impossible to find a common solution to the “mining problem” that is satisfactory to both. The community and society would want to realize as much development from mining operations while putting in check the accompanying social costs. In the same vein, mining firms would want to realize as much revenues at the lowest possible operational costs. In a word, both seek to maximize their net economic gains from mining operations. All too often, however, the economic benefits accruing to the mining industry are realized at the expense of some economic sacrifice on the part of society, mainly in terms of reduced future productivity.
The major sticking point in the mining issue arises from the fact that each stakeholder has a different view of the costs that they have to bear in pursuing their economic objectives. When a mining firm befouls the atmosphere, pollutes water supplies, contaminates the soil, and disturbs the delicate geological balance in the area within and around the mining site, the corresponding costs in terms of lower long-run economic productivity from the mining area are borne not by the firm but by the community. Unless these so-called external costs are factored into the private cost-benefit calculations of the firm, mining activities will be extended beyond levels that are consistent with the long-run interests of society. From a social viewpoint, mining operations are sub-optimal and therefore unsustainable.
Individual mining projects are also unsustainable from the viewpoint of the mining concessions themselves. At some point in time, the mineral ore that is being mined is completely exhausted, or extraction costs become prohibitive and their operations cease to be viable. The company disinvests from its current operation and moves on to other sites in the country or elsewhere on the globe, and the community in question is left holding the bag. (To stress my point, I invite the reader to take a short drive from Baguio to the town of Itogon in Banguet, or to visit the town of Paracale in the Camarines Norte, or Narra in Palawan, or come to Baguio City itself and to see for him/herself the extent of the “development” that mining has contributed to these communities!)
This is where government as conserver of the national patrimony comes in. It can enact and implement laws that force mining firms not only to preserve the environment but also to replace in one form or another the economic resources that they have extracted from nature – say, by building new schools or by developing the community’s water distribution system – in order to insure that the mining areas entrusted to them remain as economically productive when they leave as when they first came in. The main reason that this ideal situation remains to be a pipe dream is the very flawed law that is supposed to preserve the economic value of our mineral resources, R.A 7942, or the Philippine Mining Act of 1995, which effectively legitimizes the many acts of economic malfeasance perpetrated by mining firms in the country. (More on this in another column, given the opportunity.)
There is yet another reason, however, one that economists call the “incentive problem,” and to which I now turn.
In the context of our present discussion, the problem arises from the fact that the warm bodies that make the decisions in mining companies and in government pursue their own personal interests in making their choices, interests that invariably conflict with those of the individuals who employ them – the stockholders in the case of mining corporations, and the citizens of the land in the case of society.
As a rule, the managers of mining companies are evaluated and rewarded for their efforts in generating profits for their employers. They therefore have the financial incentives to understate, ignore, conceal or avoid certain costs that have no direct bearing on income, including those that cause environmental damage or safety hazards to the community. They can do this with impunity because they alone are privy to relevant engineering and technical information that are stored in their data bases and encrypted in technical reports, data that could be potentially damaging to the corporation should these fall into the “wrong” hands.
For their part, elected and appointive officials at all levels of government are motivated by their re-electability, or promotability (in addition, of course, to their usual financial interests). Promoting “development” is therefore in their personal interests, even if this will compromise the economic interests of future generations of Filipinos.
Mining is a messy business, figuratively and literally speaking, and to say that it is good for the country is self-deluding!
(The article reflects the personal opinion of the author and does not reflect the official stand of the Management Association of the Philippines. The author is a knowledge management consultant. Feedback at map@globelines.com.ph. For previous articles, please visit <map.org.ph>).
Blantyre
