It appears all but certain at this point that one of the messes President BS Aquino 3rd will leave to his successor is his amateurish attempt to retool the nation’s mining policy.
The rather miserable outcome of similar efforts in Thailand ought to be a lesson about what happens when government moves too slowly with the wrong priorities.
Sweeping aside the existing Mining Act of 1995—which took ten years to finally clear all the legal hurdles—in 2011 with the announcement of a new executive order on mining (EO79), Aquino stopped any further mining development in the Philippines. And his capricious action, which was exquisitely timed to catch ore prices just as they were beginning a steep decline, dampened legitimate existing operations. It took until the third quarter of 2012 for the draft version of EO79—which was universally perceived as having been written by a third-grader who had overdosed on cough syrup—to be turned into something legible and minimally useful as a basis for a new mining law, but that follow-up work has been stalled in the Legislature ever since, and is no longer even on the list of things Congress intends to try to handle before the government turnover next year.
The result of all this is an atrophied mining industry; existing operations continue, but no one can plan any sort of expansion or upgrades until the state of regulatory limbo is resolved. The only ones who are benefiting from the sudden loss of oversight are the small-scale operations, mostly controlled by shady interests (many connected to the military), which incidentally also partly explains the recent surge of violence against indigenous communities in some parts of the country.
Much of this may sound familiar to industry watchers in neighboring Thailand, so much so that they might wonder if our meddlesome President simply copied their government’s playbook. In the early 1980s, Thailand conducted a comprehensive aerial survey of the country, and discovered that the gold mining potential of some regions could be worth billions. The prospect of attracting foreign investment and funding development in rural areas sparked a short-lived gold rush, legally enabled by a hastily crafted mining act in 1987.
That law, however, had some serious flaws. In particular, it provided little in the way of environmental protection, and local communities were suffering the consequences. Thus, during one of Thailand’s many ‘interim’ military governments—that of General Surayud Chulanont, who was the country’s OIC from 2006 to 2008—a review of the law was ordered. That worked just as well as Aquino’s EO79 brainfart in improving and advancing the mining sector, which is to say, not at all; illegal mining, although it has never existed at the scale it does in the more mineral-rich Philippines, continued unabated, and only established operations—which belonged to just two well-connected companies, Tungkum Mining, which folded up in 2012, and Akara Mining, which is 48-percent owned by Australia’s Kingsgate Consolidated, could continue to do business. Akara got the last four mining permits issued by the government in 2008, and none had been issued since. Currently, there are 121 applications for exploration permits pending but on hold before the government, 107 of which are from Akara.
The main reason, apart from the absence of a new mining law—it is now on its third draft, but the government canceled public hearings on it in September, fearing that large numbers of protesters would show up, and has not yet rescheduled them—is that Akara is being investigated by Thailand’s National Anti-Corruption Commission for bribery, allegations that the company naturally strenuously denies.
That investigation could completely derail mining for good in Thailand. In much the same way as Aquino styled his EO 79 to the existing mining industry—in other words, its provisions are largely based on what the government estimates it can exploit from what is already being done—Thailand’s draft law was written with Akara in mind. Although mining critics in either country have a valid point when they charge that government’s regulatory perspective is too accommodating to established insiders, it is to some extent unavoidable; creating a mining policy that chases away existing business is not likely to attract many new investors. Akara has already had an initial public offering application rejected in Thailand (that happened before the bribery investigation was started), and a negative outcome to the NACC’s inquest could cause Kingsgate to pull the plug on its Thailand operations entirely, even though they have been moderately profitable.
The biggest takeaway from the Thai story, a lesson the Aquino government certainly hasn’t absorbed, and the next government might not if they’re not paying attention, is that delay is likely fatal. If the country intends to have any sort of productive mining sector at all, it must move quickly. That is because planning assumptions—particularly in an environment where extreme volatility in commodity prices now seems to be the norm—are soon outdated, and the lack of a firm regulatory framework only serves to entrench all the bad things (like the unchecked spread of corrupt and dangerous small-scale operations) a mining policy seeks to prevent.
A note of acknowledgement: Much of the background information on Thailand’s mining issue was provided by an interesting article written by Nanchanok Wongsamuth in the Sunday, Dec. 6 issue of The Bangkok Post.