• 79% of gold mined in PH smuggled to HK: $4.2B or P200B from 2005-2015

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    RIGOBERTO D. TIGLAO

    RIGOBERTO D. TIGLAO

    Mostly during previous BS Aquino regime
    THE mining industry’s claims of its contribution to the economy aren’t all correct, among other reasons, because of one important phenomenon: There has been massive smuggling of gold not only because of a corrupt bureaucracy, but because our borders in Mindanao, a major mining area, are so porous.

    In short, the country’s precious metal gold, is being stolen, and this is possible because we are a weak state, we are unable to stop it. That’s the core problem we face in the mining industry.

    According to data from UN Comtrade, or the United Nations International Trade Statistics Database, Hong Kong reported that $5.3 billion of gold were imported from the Philippines from 2005 to 2015. The Philippines though reported only $1.1 billion exported to the territory in the same period.

    MUCH OF THEIR OUTPUT SMUGGLED TO HONG KONG: Child miners pan for gold in Mt. Diwalwal in Mindanao, innocently using poisonous mercury and cyanide.

    The discrepancy of $4.2 billion, or 79 percent of gold value reported by Hong Kong, approximates what was smuggled out of the Philippines. In peso terms, this amounted to P200 billion. The bulk of this smuggling, or 86 percent, occurred during President Aquino’s term.

    (See technical note below for an explanation on how these figures were derived from the UN data.)

    Gold smuggling surged during Aquino administration. Computed from UN Comtrade Data

    The data show that gold smuggling started only in 2005, but rose to huge amounts during the administration of former President Aquino, when more than two dozen Chinese companies rushed into the gold mining industry in the country. Aquino’s Liberal Party and its 2016 candidate Mar Roxas were known to be close to several miners, and were very supportive of the mining industry.

    During the 2016 election campaign, Roxas used a lot of the helicopters and small planes of Eric Gutierrez, the owner of San Roque Metals (SRMI), one of the largest mining firms in the country. Congressman Edgar Erice, the LP spokesman, was also for a time SRMI’s chairman.

    Because of the huge smuggling, gold had fast become one of Hong Kong’s biggest imports from the Philippines, accounting for 11 percent of its total gold imports from 2011 to 2015.

    A November 2012 investigative piece in the region-wide news site Asian Sentinel entitled “China’s Filipino Gold Rush,” reported:

    “A vast and growing river of gold, much of it illegal, is being mined in the Philippines by Chinese companies and is pouring into Hong Kong before most of it is transshipped into China. Chinese mining companies, many of them operating illegally, have been exporting gold, nickel and other precious minerals out through the island country’s porous coastal ports, where there are no customs officials and plenty of bribable officials to turn their eyes the other way.”

    The British news agency Reuters earlier, in August 2012, in an article entitled “Philippines’ black market is China’s golden connection,” reported: “Traders and officials say it looks like much of the gold is going to Hong Kong, the main conduit for gold flows into China.”

    The Reuters article also pointed out: “Hong Kong’s top source of gold imports from 2005 to 2010 was the Philippines, official data from the Chinese territory shows…Official statistics in the Philippines, reflecting legal exports, show gold exports to Hong Kong in 2010 and 2011 at just around 3 percent of the total volume recorded by Hong Kong authorities.”

    The Reuters and Asian Sentinel reports were ignored by the Aquino government, and no investigation was ordered. The UN Comtrade data show that from $590 million in 2012, smuggled gold even increased to $716 million the next year.

    The Bangko Sentral ng Pilipinas requires that 60 percent of gold export proceeds be sold to it, for the foreign exchange to be part of our international reserves. With $4.2 billion smuggled, and therefore not sold to the BSP, the country lost about $2.5 billion in foregone foreign exchange.

    Maybe even worse, gold sales are imposed a 5 percent withholding tax and a 2 percent excise tax for a total of 7 percent in taxes. With P222 billion smuggled and therefore unreported, government lost P14 billion in foregone taxes.

    The mining industry spokesmen have been claiming that it is small miners, especially those in Mount Diwalwal in Compostela Valley in Mindanao, that have been smuggling the gold.

    Sources, however, explained that such small miners—mostly poor and illiterate—sell their gold to traders, who then turn these over to Chinese-affiliated firms which have the connections to ship these to Hong Kong. A significant part of the smuggled gold is shipped to Hong Kong through our ports, but undervalued, with the connivance of corrupt customs officials.

    The mammoth smuggling of gold together with Duterte’s clampdown, through his determined environment and natural resources secretary Gina Lopez, on erring mining firms is worrying.

    The stakes are so huge that there are now billions of reasons for removing Duterte as early as possible, by hook or by crook.

    Technical note
    The estimates on gold smuggling in this column are based on data from the UN Comtrade, specifically those on the trade in gold between the Philippines and Hong Kong (international product code 7108).

    UN Comtrade provides two sets of data. The first set has the value of gold imports from the Philippines, as reported by Hong Kong authorities. The second set of data has the value of gold exports to Hong Kong as reported independently by our government. Imports by mainland China of gold from the Philippines have been insignificant.

    To compare the two sets of data, economists use various formulas, the simplest of which involves reducing the import value by 10 percent to account for the cost of freight, insurance and other shipment costs. The difference between the reported value of Hong Kong’s gold imports, less freight and insurance and other costs, and the Philippine reports of its exports to Hong Kong represents the estimates of smuggled, i.e., unreported gold. While certainly not 100-percent accurate, because of time lags in reporting, economists use this method to approximate the scale of smuggling between the two countries.

    E-mail: tiglao.manilatimes@gmail.com
    FB: Bobi Tiglao and Rigoberto Tiglao
    Archives: rigobertotiglao.com

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    24 Comments

    1. The Central bank should be buying gold with USD, and holding it as a reserve instead of holding so many dollars. The USA has printed over 6 trillion new dollars in the last decade, as a fiat currency it is backed by nothing. While the dollar may continue to increase for a short time eventually it has to collapse,since foreign governments are no longer buying treasuries, and the middle east will soon start trading oil in other currencies instead of just dollars. The Philippines has the fourth largest reserves of minerals in the world, and properly mined and managed she could become one of the riches countries on earth.The policies of the current administration do not favor real development of these resources which is a shame.

    2. Baltazar A. Rafales on

      “The stakes are so huge that there are now billions of reasons for removing Duterte as early as possible, by hook or by crook.”

      “Coincidence #2?”

      [a] “José María Canlás Sison spouse is Julie de Lima. Through his wife Julie de Lima, Sison is the uncle of Leila de Lima, now a Senator, and the former secretary of Philippine Department of Justice under the Administration of President Benigno S. Aquino III.”

      [b] “Former Senator Jovito Salonga accused Sison and Benigno Aquino Jr. of orchestrating the 1971 Plaza Miranda bombing during the Liberal Party Convention to force Marcos to suspend the writ of habeas corpus and sign Proclamation Number 1081 initiating the advent of Martial Law in the Philippines.

      This accusation comes from former CPP members such as Victor Corpuz and others. The Philippine National Police (PNP) filed a criminal case against Sison for the Plaza Miranda bombing, but the charges were dismissed for lack of evidence, with the dismissal order citing the complainant’s filing criminal charges based on speculation.”

    3. L A is right, if you want the gold to stay in the country, the government should not impost any taxes or very minimal amount of tax only. Price of gold and transactions are always guided by international trading prices. Impose a very low tax and you cut away the profitability of any smuggler and gold will stay home.

    4. Treat gold smuggling as economic sabotage hence should fall under TREASON and punishable by death.
      It should include the smuggler and his accomplices. Another thing, the govt should install a body to monitor gold treasures recovered by all including those by JIcA. iT IS a common knowledge that this jap agency funds a project where golds are buried.

    5. Secretary Gina Lopez …Patriotic…moving mountains for the next generation….larger than life…we are proud to have her as the Secretary of DENR…
      Perfect choice Mr. President…..

    6. The only to plug the loophole is for the government to decree that gokd can be traded freely in the local market and that producers does not necessarily need to sell their gold to the central bank. If the BSP wants to buy the gold from local producers, they should not impose deductions or taxes and buy them at competitive prices. Hence, they can mandate their agent banks to purchase the gold at the branch level.

      • Agree with you 100%. But BSP should have local buyers from the people panning for gold. Mindanao will be another California. Let the locals continue the panning along the river. That’s their livelihood. Enjoy the panning for gold while it last. The Hg and the cyanide pollution occurs during the refining process. More power to the locals in seeking fortune.

    7. This argument completely ignores the most important factor in the picture: the price of gold. The price of gold went from a range of $800-100/gram in 2008-2009 to a range of $1600-2000/gram in 2012-2013. If course the value of smuggled gold went up, first because the value of the same amount of gold nearly doubled, and also because the higher prices drew more small scale miners (and more smugglers) into the industry. I know Mr. Tiglao has an incentive to make everything about politics and Aquino, but in this case the key factor was completely outside Philippine Government control: no President sets the world price of gold.

      • RIGOBERTO D. TIGLAO on

        Convert the values to ounces and you will still have a surge in unreported gold shipments. Gold prices dropped 29 percent in 2013 but there was still a surge in smuggling. Not gold prices but connivance of Aquino government with mining firms, most probably the many Chinese firms that entered during that regime is the best explanation.

    8. Nassan Ang Guinto on

      China and D30: That’s what friends are for – Gold mining would continue and gold smuggling would prosper.

      • I guess you don’t understand the article. The smuggling of gold happened from 2005 till 2015. DU30 became President in July 2016.

    9. grabe kaya pala lahat ginagawa para mapatalsik si duterte dahil ang daming tinamaan sa pagbabago.

    10. Nice expose’ Mr Tiglao. Better if you could suggest a way to ensure the small time panners would sell their gold to the local market and possibly be the whistle blower against the smugglers. Our porous borders can only be partly sealed in the distant future by making Mindanao our own Hongkong. That is, gold in Mindanao is to be pegged close to international market price.

      • Banyagang Makabayan on

        So that’s where the Money and wealth of the Nation goes! Sir Bobi Tiglao’s colleague Yen Makabenta wrote 4 days ago that our mineral reserve value could reach U$ 1.4 Trillion according to foreign business chambers and accordingly MGB our archipelago is second in gold, top five in copper and ranked top five in the world for overall mineral reserves.

        Sir Bobi’s expose answered my question “Why up to now we’re still categorized as a third world country?” and it was so disgusting that people in the Government mandated to protect our mining resources themselves are the clear thieves of such huge amount of wealth which our whole county should have benefited.

        The DENR Secretary Gina Lopez is a must for the Commission on Appointment because it appears she had hit two birds in a single shot, gold and other precious metal smugglers and the damage of mining to our environment.

        This rampant and massive smuggling is rather most important problem the our Senate should investigate rather than those nonsense Flip Flops press releases our Senators of the Republic were interested at this February regular season of call for another EDSA edition.

    11. The Great Defiant on

      so what shall we do it with it?
      ask the senate again to investigate?
      what a news…
      what a waste…
      all politics…
      all corruptions…
      nothing for the people…
      nothing for this country…

      “REVOLUTION”!!!

      • kalma…kalma lang! DENR must collaborate with DTI’s 2016-2020 eCommerce Plan for an Alternative New Breed, this time > 100 million globally-connected “Pinoy Miners” exploiting Household GOLD. check Dr. Steve W. Price short video >>> https://youtu.be/CT7ZWpREoZM

    12. Thank you Mr. Tiglao…this article explains why many crocs in Congress are blocking the appointment of Gina Lopez..and most especially now the reason for the increasing noise against Pres. Duterte. Thank you for this info…we the people who love the Philippines would now block their selfish and corrupt motives.

    13. when they’re courting people to vote them during election campaign aquino speaks “di po kami magnanakaw”

    14. OH MY….. i just cant imagine abnoy and maroja had the guts to lure and deceive the country at the expense of innocent, poor pinoys.

    15. We should emulate China by decreeing that all gold and silver production should be sold to the government at market prices. Any violation should be treated as a capital crime. These precious metals are our best hedge against any economic uncertainty, and there is already a lot of that today.

      • For any violation? a Capital crime? So you mean capital punishment? In China they make the family of those executed pay for their own bullet, then harvest the vital organs afterwards. That’s worth emulating?

        If you insist on that, xPNoy and his gang of (untouchable) mining plunderers should be first in line for public execution, but as usual I bet it will be the small time miners risking their lives in the tunnels that will suffer the full force of laws prohibiting the illicit trading of precious metals.