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Transparent mining emerges

The government and the mining sector are taking a significant step to make mining competitive and transparent by adopting global standards for the extractive industry.

The Philippines is set to publish the first country report on the Extractive Industry Transparency Initiative and is on track to achieving compliant status by next year. EITI is a global standard for transparency in the extractive industry that involves the reconciliation of company payments with government receipts by an independent administrator and disclosure of information to the public. The process is managed by the government with the active involvement of partners from industry and wider society.

Under EITI, all companies engaged in a country’s extractive industry should report what they have paid to the government, and then the government reports what it has received.

In April 2013, the Philippines submitted an application for candidature to the EITI International Board. The country was accepted as an EITI candidate the following month.

“When President Aquino issued EO 79, the EITI Board must have read the move as an unequivocal statement of the government’s intention to implement EITI,” said Environment Secretary Ramon Paje.

EO 79 seeks to balance important concerns on mining development in reinforcing environmental protection measures, promoting responsible mining, providing a more equitable revenue-sharing scheme and providing coordinative mechanisms among stakeholders including local government units.

According to the New York-based policy institute, the Philippine government had made “meaningful progress toward improved resource governance.”

Paje said the government should work harder to achieve EITI compliant status by fulfilling three basic requirements, including the preparation of EITI report, disclosure and dissemination, and review and validation.

The government said once implemented, EITI would ensure a greater transparency on how natural resources were governed.  The reports from the companies and the government are compared by an independent auditor and make up what is called the country’s “EITI report.”

 There are currently 23 EITI-compliant countries in the world and 16 EITI candidate countries, or those that are working to reach compliant status.

Initiated in 2002 by former British Prime Minister Tony Blair at the World Summit on Sustainable Development in Johannesburg, South Africa, EITI is recognized  as a useful tool for resource-rich countries such as the Philippines to better manage natural resources and ensure the extractive industries make positive contributions to the improvement of economies of host communities during the development process.

“The operationalization of the EITI is in full swing, with the Multistakeholder Group duly established and the Philippine candidacy to the EITI duly submitted,” Paje said.

An article published on the Second Issue of the Philippine Resources Mining, Petroleum and Energy Journal last year, the Pacific Strategies and Assessments cited several advantages once the Philippines became EITI compliant.

PSA said under the EITI framework, transparency of local government revenue shares could increase the social acceptability and temper the opposition to the mining operations.

“The EITI framework could also force the Philippine government to more closely scrutinize small-scale and illegal miners. Small-scale and illegal miners are often involved in smuggling and selling ore in the black market to evade tax payments,” PSA said.

PSA also noted that under the EITI regulations, the government would announce annual revenue targets for small-scale mining.

“Anomalies in these targets could prompt investigations by the EITI that can lead to expulsion from the group,” PSA said.

While there may be a lot of benefits in the EITI implementation, PSA said implementation would also have a lot of obstacles.

“Although the promise of transparency looks good because the activities of both the private companies and the government would come under closer scrutiny, implementation of the EITI standards is not as easy as it seems,” PSA said.

PSA said that, for instance, critics of the EITI claim that the policies were “loosely enforced by member-countries.”

Citing Nigeria as an example, PSA said the country required companies to retroactively report their payments to the government for the preceding five years.  Nigeria implemented the EITI standard in 2005.

“This resulted in an $800-million discrepancy between what was reported as paid and what the government said it received. The Philippines may face the same problem should it choose to implement retroactive audits,” PSA said.

The Philippine government said one obstacle in the full operationalization of the EITI was the prohibition of the public disclosure of certain tax payments.

“One obstacle to the implementation of the EITI is the legislation prohibiting the public disclosure of certain tax payments, which is being addressed through the execution of waivers by the mining companies,” Paje said.

Paje said a total of 35 metallic mining companies already  signed the waivers.

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