You’d agree that there’s no exaggeration in saying that Regina Lopez’s appointment as secretary of the environment and natural resources department (DENR) if you had heard of and understood that phenomenon political scientists call “regulatory capture.” This is the bigger conceptual box where the more familiar “corruption” is.
The term “regulatory capture,” though, is somewhat vivid, as it refers to the very common situation in developing countries in which regulatory bodies are “captured” by business entities and even individuals to further their own interests, to the extent of bending the laws these bodies are supposed to implement.
I have written several articles on Philippine Long Distance Telephone Co. (PLDT), partly because its violation of the Constitution’s 40 percent limit on foreign ownership in a public utility firm is the definitive example of regulatory capture.
In that case, it is made much worse as it furthers the interest not just of any magnate, but a foreign one, the Indonesian Anthoni Salim, owner of First Pacific Co. Ltd., which controls PLDT.
In this particular case, the Supreme Court ruled in 2011 and 2012 that PLDT was in violation of the 40 percent limit, and even issued a method for calculating how percentage ownership would be determined. However, the Securities and Exchange Commission (SEC), the regulatory body that should have implemented the Court’s decision, ignored the Court’s ruling, and issued its own method of computing foreign ownership, which was diametrically different, and which merely maintained foreign dominance of PLDT. The SEC had been captured by a foreign magnate.
There have been clear cases of regulatory capture of the DENR through the decades by those exploiting our natural resources, and there are major reasons why that government department is so vulnerable.
I’m sure, dear reader, that you have gone to Tagaytay to cool off. A stretch of the Sta. Rosa-Tagaytay road (which starts from Nuvali) has become a furniture-manufacturer row.
The furniture makers there quite obviously aren’t using recycled wood or those from tree farms. I have often seen huge logs, obviously freshly cut, unloaded by huge trailers to these shops. I had once asked a shop if he could get me narra or mahogany for a table I wanted to make. It just takes a few weeks to order the wood, he says, which comes from Isabela.
And we are supposed to be moving closer to a full logging ban in the country, which is a joke in our hinterlands. An unholy alliance between local politicians, the New People’s Army (NPA), and the local police, has been the force that has facilitated logging, transported from the farthest boondocks in the country to the metropolis itself through trucks and vessels, with police patrols and the coast guard looking the other way. How difficult would it be for a DENR team to investigate each of those shops to find out how they source their lumber?
The illegal logging industry isn’t a mom-and-pop operation, with the transport trucks requiring huge investments. How can we expect lowly DENR offices in far-flung areas, where the forests obviously are, to implement our anti-logging laws? How rarely has the DENR headquarters reported that big-time loggers have been caught?
Worse in mining
It is as worse for the mining industry. We have had two major mining disasters over the last 10 years, so bad these were reported globally as among the worst cases of degradation of an environment by mining firms.
First, the Philex Mining mine spill in Benguet in 2012, when some 20 million metric tons of sediments flowed into water channels from the Philex tailings pond in Itogon after its drainage tunnel was breached. Has Philex repaired the damage it had caused the Itogon rivers? Could it ever?
Second, the Marcopper Mining disaster in 1996 in Marinduque, when a fracture in the drainage tunnel of its pit containing leftover mine tailings discharged toxic mine waste into the Makulapnit-Boac river system and caused flash floods in areas along the river.
What should worry us more is this: These mining companies were supposed to be the most professionally run in our mining industry. If they could be that negligent as to let such disasters occur from their operations, how much more risky, and how much more dangerous to our environment would the operations of the slew of new mining firms – a number of which are reportedly owned by Chinese firms using Filipinos as dummies — be?
There are five factors that make regulating the mining industry so difficult and prone to “capture:”
First, the actual sites are in so distant, godforsaken areas and even jungles, “infested” with bandits and the NPA, that DENR personnel have been known to shirk the risk of undertaking on-site inspections.
Second, it has been the mining firms’ predilection to get political lords to become their patrons and defenders, both on the local level (the mayors and governors) and the national level;
President Rodrigo Duterte himself during the election campaign period accused presidential candidate Manuel Roxas 2nd of coddling a mining company that, he said, has been penalized for overextraction. SR Metals’ part owner, Eric Gutierrez, was said to have been a major contributor to Roxas’ campaign kitty, and had given him free use of all his eight private jets during the campaign. Gutierrez’s associate in SR Metals is the spokesman of the Liberal Party, Caloocan politician Eric Erice. Gutierrez obviously has not only been Roxas’ crony in the elections, but also probably that of the Aquino admnistration. Congressman Manuel Zamora, a well-known political power-broker who financed Joseph Estrada’s run for the presidency, controls Nickel Asia, one of the biggest nickel producers in Asia. Even cabinet members of past administrations have become “consultants” or even secret stockholders of mining firms.
Strong propaganda machinery
Third, the mining industry has developed, over the decades, a strong propaganda machinery for propagating the myth that the Philippine mining industry is essential to the nation’s growth. Part of this machinery could be the Philippine Star, which is controlled by the Indonesian tycoon, Salim, through his top executive, Manuel Pangilinan. The president of the Chamber of Mines is Philip Romualdez, husband of Alexandra Prieto, whose family owns the Philippine Daily Inquirer. Neoliberal champions like the Foundation for Economic Freedom and business consultant Peter Wallace have been noisy champions of the mining industry. A vicious propaganda campaign has, in fact, already been launched against Sec. Lopez.
Fourth, every time stricter mining regulations are about to be put in place, the mining industry raises the bugaboo that foreign investors will be spooked and that their fears could engulf foreign investors in general.
With the mining industry having established their heyday during Marcos’ time, and as a shadowy means for their owners to make money, mining firms were over-represented on the stock exchange. Whenever mining regulations were tightened, the shares of stocks in mining firms (even those that are just shell firms) fell, with the industry’s propagandists threatening a stock market meltdown if the regulations were implemented.
Fifth, as in many of our regulatory bodies, members of their staff are so easily co-opted by the corporations they are supposed to regulate. The staff of the Bureau of Mines and Geosciences have only two options to crawl out of the quagmire of low-paying government jobs: as OFWs, albeit highly-paid geologists, or highly paid technical staff of mining firms.
It is such an absurdity for mining propagandists to be claiming all the time that almost everything we use everyday, from our appliances to cellphones, are made from materials mined out of the earth, and therefore, we should love the industry.
Nobody is disputing that. What we are saying is that, let’s just get our metals and minerals — as we have really been doing — from nations (such as Australia) that have strong regulatory bodies that protect their environment, or even from poorer nations (such as those in Africa) who direly need the foreign exchange from the mining industry – that, at least until we can be confident that the DENR is and can no longer be captured by mining interests
We were among the world’s biggest producers and exporters of gold and nickel in the 1950s and ‘60s. What good did that do to us, or even to the site of most of those mines, Benguet for instance, which is one of the poorest provinces in our country?
Check out where the big mining firms have been operating for a decade now — among them Composela Valley, Surigao del Norte and Sur, Dinagat Islands, Camarines Sur — and you will find the poorest provinces.
It is because of such situations that our mining industry now cries out for a Lopez to head its regulatory body. Lopez’s life story is proof enough that she is a traitor to her class — the ruling elite — and that she definitely can’t be bribed by the mining moguls. I can’t think of anybody else who has the passion and independence from the material world who can free the DENR from capture.
Audit of mining firms
One very good move Lopez announced she would undertake was an audit of all mining firms. Although perhaps what she had in mind was an audit that would include their record in complying with regulations, and maybe of extracting what they were supposed to mine, the audit should also determine if these firms are complying with the constitutional requirement that foreigners’ can own only 40 percent of their capital.
I have heard a lot of rumors that many of the new mining firms are actually owned by Chinese, Taiwanese and Canadian investors.
But apart from such shadowy firms, starting with one of the biggest such operators, Philex Mining, it would turn out not a few mining firms may have been in violation of the country’s constitutional limits. This is, if one applies the landmark decision of the Supreme Court in 2014 (Narra Vs Redmond, G.R. No. 195580, April 21, 2014) that mining firms’ layering schemes merely conceal the actual level of foreign ownership, which exceeds the 40 percent limit.
As has been its habit, the SEC simply ignored the Supreme Court’s ruling and has not issued new rules on how foreign ownership levels should be computed based on the Court’s decision. I’ll discuss this topic on Wednesday.