Stop everything!

Michael Alan Hamlin

Posted on February 9, 2011

Last week, President Benigno S. Aquino, III issued two bans on commercial activities that involve exploitation of the Philippines’ natural resources. Both were done with the best of intentions, and in most respects appear reasonable. At least they seem reasonable to businesses and individuals who don’t rely on natural resources for revenue and jobs. For those that do, the impact is significant.

Mr. Aquino began the week by announcing a total ban on logging. According to government statistics, floods and landslides in 2010 caused the deaths of 36 people and injured 32 more. They displaced about 120,000 families, and caused close to P150 million in damages to property and infrastructure. The reality is probably far worse. The Philippines has been badly denuded for close to a century, with disastrous results.

Just how disastrous was seen in 2009, when 80% of the Philippine capital was submerged by typhoon “Ondoy.” That storm—the worst in 40 years—left 200 people dead; hundreds of millions of pesos worth of damage to agriculture, infrastructure, private businesses, and personal homes and possessions; and IT-BPO investors and others shocked when their operations had to be suspended, in some instances for several days.

Experts concluded that there were many reasons for the tragic flooding, and logging was at the heart of them. The reasons included unbridled destruction of watersheds, construction of illegal shelters along waterways, and building of commercial and residential developments in flood zones. With nothing to stop the water from cascading through these areas and flood control infrastructure far shoddier than just inadequate, Metro Manila was a ticking water bomb.

Calls for a total ban on logging are nothing new. Former senator Orlando S. Mercado was the principal author of a bill intended to ban commercial logging during the administration of Mr. Aquino’s mother, the late former president Corazon C. Aquino. Politically connected commercial loggers thwarted Mr. Mercado and his supporters. Although commercial logging is highly regulated, out-of-control corruption, greed, and opportunism have ensured that the Philippines’ once great forests remain stripped.

Since nothing else has worked to preserve what’s left of the Philippines’ denuded forests or to renew them, Mr. Aquino has decided that no logging will be allowed. There are probably other alternatives that should work in an environment where laws are efficiently and effectively enforced. But since those conditions don’t exist in the Philippines, the president has ordered commercial loggers to just stop.

Of course, if he is unable to make them stop and keep them stopped, it’s not going to look good for Mr. Aquino. Hopefully Environment Secretary Ramon Paje, who announced the ban, and Mr. Aquino’s advisers have considered this possibility, or should I say probability?

Mr. Paje also announced later in the week that government was cancelling some 500 inactive mining permits and suspending all large-scale mining applications for the rest of the year. The objective again appears to be to bring some order to what has been another chaotic instance of corruption- and greed-driven opportunism. However, the suspension seems odd for two reasons.

First, large-scale mining is undertaken by large multinational companies with the significant capital resources and track records necessary for this work. The second reason is that Mr. Aquino’s administration has announced that mining is an economic priority, and Congress has vowed to amend the Mining Act to make it easier for investors to extract and export mineral deposits, especially copper and gold, and create both jobs and direct and indirect tax revenues.

The administration has also criticized Governor Arthur Pinggoy of South Cotabato for implementing a ban on open-pit mining. Xstrata Sagittarius Mines, Inc. (SMI) has been developing what appears to be the third-largest copper and gold mine in the world in the municipality of Tampakan. Experts estimate that if the mine begins operating in 2016 as planned, it will produce around P5 billion in annual tax revenues alone.

The administrative authority for local government to ban open-pit mining is one of the amendments slated for the Mining Act overhaul. Mr. Pinggoy’s critics suggest that his motivation is political, rather than out of concern for the environment. Since the benefits of the mine won’t be apparent during his current term, the governor could care less. In the meantime investors like SMI are scratching their heads.

And announcing suspension of large-scale mining projects that can attract multinational investors will make them scratch even harder. Meanwhile, others might well ask, “When does the moving forward process start?”

(Michael Alan Hamlin is the managing director of TeamAsia and a Manila-based author. His latest book is High Visibility: Transforming Your Personal and Professional Brand. Write him at mahamlin@teamasia.com and follow him on TwitterFacebook and LinkedIn.). Copyright © 2011 Michael Alan Hamlin. All Rights Reserved.)

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