China indirectly scuttles FDI in the Philippines, thanks to Aquino

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Ben D. Kritz

Ben D. Kritz

I can’t for the life of me understand why anyone would want to invite President Benigno Aquino 3rd to be the guest speaker at a celebratory occasion. Speaking at the 114th anniversary party for the Manila Bulletin last weekend, the president revealed he is no more able to stick to a New Year’s resolution than anyone else, dropping his earlier vow to “ignore” his media critics and using the occasion to hurl insults at them, calling them “irresponsible” and saying they “trump up the worst news possible,” “raise blood pressure,” and “cause despair.”

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The fine folks over at the Bulletin generally err on the side of tolerance for the current occupant of Malacañang, and I’m sure if they were asked what they thought of Aquino’s comments they would be gracious about the whole thing. But put yourself in the shoes of a Bulletin staffer for a moment, and consider what listening to the president’s harangue must have felt like; whether you like the guy or not, hearing him denigrate your industry in coarse terms better suited to barber shop or palengke gossip has got to be a little discouraging.

If the Bulletin speech was just President Buzzkill being his usual socially maladjusted and insensitive self, it would not be worth more than a passing mention. But his timing was extraordinary; in the same week that he was (for the nth time) bemoaning the lack of unconditional praise from the local media, a major investment began packing up and preparing to leave the Philippines, largely due to his administration’s complete incapability to develop a workable policy, or apparently, even pick up a business paper once in a while and find out what the country’s Enemy Number One has been up to.

Oh, I’m sorry, was that “irresponsible”? Did it “cause despair”? Then what are we to make of a story like this, dutifully reported—once—in the business section Philippine Daily Inquirer with the minimally acceptable amount of detail, but otherwise kept behind the curtain as much as possible:

Back in April, the now-merged commodities and mining firms Glencore and Xstrata reached an agreement with Chinese regulators to approve the merger, which would involve Glencore-Xstrata selling off Xtrata’s $5.2-billion Las Bambas copper mine in Peru; the reason for this was to reduce Glencore-Xstrata’s control of the worldwide copper market. Glencore-Xstrata has about a 7-percent global market share, but more importantly, accounts for between 10 percent and 14 percent of China’s copper imports. That was the cause of concern for the Chinese, who ordinarily do not interfere in big international merger plans; not coming to terms with the Chinese, of course, would mean the loss of Glencore-Xstrata’s biggest market.

Under the terms of the deal, Glencore-Xstrata was given three months (or in other words, until August 2013) to prepare for the sale of the Las Bambas project, and would have until August 2014 to complete the divestiture. If it was unable to meet those targets, it would have to sell off one of three other, longer-term projects: the Tampakan project in Mindanao, a similar open-pit mining project under development in Papua New Guinea, or one in Argentina. As of last August, the company was still struggling to find interested bidders, and so as a precaution, Glencore-Xstrata started working on Plan B, and that is why all the Xstrata workers at the Tampakan site started receiving layoff notices.

To add insult to injury, last month there was a breakthrough in the sale of Las Bambas, which now seems very likely to be taken over for almost face value by a Chinese-led consortium. In spite of that news, Glencore-Xstrata’s Tampakan partner Indophil Resources NL reported last week that Glencore-Xstrata was definitely pulling out, which would remove about $1.48 billion from the $5.9-billion project, effectively killing the biggest foreign investment the Philippines has seen in years.

According to Indophil, whose annoyance with Glencore-Xstrata’s decision is palpable, the latter is pursuing a strategy of retreating from greenfield mines and concentrating on established projects, but that is a bit of business diplomacy at work; given the lucrative but sensitive relationship between Glencore-Xstrata and China, it would be unwise to draw too much attention to the impact of the Chinese antitrust agreement. Of the three projects Glencore-Xstrata could ditch, Tampakan—despite the resistance from the provincial government of South Cotabato, the Church, and environmentalists which have stalled its development—is potentially the most valuable, and the most difficult for Glencore-Xstrata to sell.

The company could have easily covered its bases by giving up one or even both of the other projects, and would have still been money ahead . . . if President Aquino and his band of merry men had not spent the past three years dithering over a new mining policy, one that would have conceivably allowed for acceptable compromises to be reached on environmental protections and benefits to the local communities affected by the Tampakan project.

It is not too much of a stretch to say that while Aquino has spent most of his time worrying about his public image, his inaction on the big, real-life issue of mining—an issue he created himself by unilaterally revoking the Mining Act of 1995 before a replacement policy was even considered, much less prepared—has allowed China to at least indirectly determine the course of foreign investment in the Philippines. So tell us again, Mr. President, and let’s see if you can keep a straight face when you do: Who’s being irresponsible?

benkritz@outlook.com

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1 Comment

  1. What do you expect from Bulletin? They never closed their during martial law while the others rots. Super balimbing is the word Kritz. SUPER BALIMBIBING!