Articles

......................................................................................................................

Political Economy

Shooting Ourselves in the Foot

By Calixto V. Chikiamco

We have a history of shooting ourselves in the foot, and by God, we have done it again. Mercifully, it's not too late, and if there's such a thing as retrieving the bullet from the foot, we can still do it.

I'm not referring to the canvassing going on in Congress, but to the January 27, 2004, Supreme Court decision declaring some parts of Republic Act 7942, or the Mining Act as unconstitutional. Specifically, the Supreme Court ruled as unconstitutional Financial and Technical Assistance

Agreements (FTAA). Under the Mining Act, FTAAs allow 100-percent foreign corporations to enter into a financial or technical assistance agreement with the government to undertake large-scale exploration, development and utilization of natural resources.

The Supreme Court, however, said that "the management or operation of mining activities by foreign contractors, which is the primary feature of service contracts, was precisely the evil that the drafters of the 1987Constitution sought to eradicate." The Court ruled that the assistance that can be rendered by foreign mining corporations should be confined to financial or technical only, and not to operation and management.

We leave it up to the lawyers to argue that the framers of the 1987Constitution did not seek to bar foreigners from the operation and management of large-scale mining, petroleum and other natural resources, nor to confine them to technical or financial assistance only. What isn't disputable is that the Court decision, unless reconsidered and reversed, is a huge blow to the mining industry, and is appropriately enough, a shot in the foot of our economy.

The decision is like shooting ourselves in the foot because it prevents the government from what could be a solution to eradicating the present "evils" of low revenue collection, low competitiveness and rural poverty. It sends a bad signal that foreigners are unwelcome in developing our mining industry, except as minority investors or as creditors.

Let's face it: no Philippine corporation has the huge capital or technical capabilities to develop large-scale mining in the country. Yet the mining industry is one industry where the Philippines can shine because it's one of the few countries in the world blessed with bountiful minerals like copper, nickel and gold. In other words, the country has a built-in, God-given comparative advantage in the mining industry because a low-cost, low-wage country like China with few mineral resources can never compete with us. Indeed, exporting minerals is one way of balancing trade with China because China's appetite for minerals is so strong. However, we seem to be content leaving our minerals in the ground while the demand for them is so high. Thanks to the recent Court decision, these minerals may remain there forever.

Developing the mining industry is also another way of painlessly generating revenues. The tax revenues from the development of a few large-scale mining projects will yield billions of pesos in revenue tooth national and local governments. It's therefore ironic that without the option of taxing mining, our financially hard-up government is talking about taxing texting. But from a social and economic sense, taxing texting is more painful and costly because it taxes speech and social intercourse.

Developing mining is also one way of reducing unemployment and poverty in the countryside. Aside from the high wages that the mining company pays to rural workers, it imparts valuable skills and knowledge to the communities where the mining company operates. Atlas Mining, until it fell into hard times, used to fund and operate one of the best schools in the country for its employees. Were it not for the miners of Benguet Mining, fewer would have been rescued in the 1990 earthquake that devastated Baguio.

The argument that mining destroys the environment no longer holds. Most large foreign mining corporations operate environment-friendly operations, or else they would have been shut down by their respective governments. Besides, unlike in the bad old Marcopper days, the government now requires mining corporations to comply with strict environmental standards.

But it's not only mining companies that will be affected by the January 27 decision of the Supreme Court. According to the lawyers I have talked to, the Court decision opens the door for anyone to question the constitutionality of the service contracts that foreign oil companies entered into with the government over the exploitation of the Malampaya gas fields. Even foreign cement companies like Lafarge will find that a constitutional cloud is hanging over their development and processing of limestone quarries.

The decision is one more powerful argument to change the 1987 Constitution. The 1987 Constitution keeps our people poor and our lawyers rich. In the meantime, the Supreme Court should allow economic and common sense to prevail. It should reconsider its decision and let the Mining Act, which was passed by Congress, to stand.