Philippines Mining or Food Chapters 1 to 7 - Philippine Indigenous ...

Philippines

Philippines: Mining or Food?Introduction & Chapters 1 to 7byRobert Goodland and Clive WicksforThe Working Group on Mining in the PhilippinesSustainable development is development that meets the needs of the presentwithout compromising the ability of future generations to meet their ownneedsThe Brundtland Report, Our Common Future,UN World Commission on Environment and Development, 1987In a world overflowing with riches, it is an outrageous scandal that more than826 million people suffer hunger and malnutrition and that every year over 36million die of starvation and related causes. We must take urgent action now.Jean ZieglerUN Special Rapporteur on the Right to Food, April 2001DEDICATIONThe Working Group on Mining in the Philippines and the authors respectfullydedicate this report to all the courageous and dignified people who have beenkilled while protecting the environment and upholding human rights in thePhilippine archipelago.DisclaimerThe views expressed in this report are those of the authors and not necessarily thoseof the participating or supporting organizations. The authors have, however, donetheir utmost to reflect the views of the many people they met in the Philippines andthe views and reports of the people and organizations who have commented on earlierdrafts if this report.

© Copyright Working Group on Mining in the Philippines 2008First Published in 2008 by the Working Group on Mining in the Philippines,28 Redington Road, London, NW3 7RB, United Kingdomwgmpuk@tiscali.co.ukISBN Number: 978-0-9560616-0-7Report authors: Robert Goodland and Clive WicksReport editors: Cathal Doyle, Ellen Teague, Sarah Sexton and Frank Nally.Report layout and cover design Frank Nally and Cathal DoyleFront Cover Photos:-Placer Dome Marcopper Mine Marinduque Island by Dr Catherine Coumans,MiningWatch, Canada;- Rice fields on Authors Field Trip to Midsalip

Map of the Philippine ArchipelagoCase Study Locations5. MINDORO NICKELPROJECT6. SIBUYANISLAND2. LIBAY SIBUTAD3. TAMPAKANSAGITTARIUSCOPPER & GOLD1. MIDSALIP4. MATI DAVAOORIENTAL PUJADABAYCase Studies available in individual documents at:http://www.piplinks.org/miningorfoodMAPS associated with these 6 Case Studiesare available at http://www.piplinks.org/mapsi

The Working Group on Mining in the PhilippinesThe Working Group on Mining in the Philippines was established in 2007, after thepublication in January that year of the report, Mining in the Philippines: Concernsand Conflicts. Based in Britain and chaired by the Right Honorable Clare Short MP,UK’s former Minister of International Development it includes representatives fromthe Columban Missionary Society, the Ecumenical Council for CorporateResponsibility, Philippine Indigenous Peoples’ Links and IUCN- CEESP.The AuthorsRobert Goodland is an environmental scientist specializing in economicdevelopment. He advised the World Bank Group from 1978 through 2001. He thenbecame the technical director to H.E. Dr. Emil Salim’s independent ExtractiveIndustry Review (http://www.ifc.org/eir) of the World Bank Group’s portfolio of oil,gas and mining projects. He was elected president of the International Association ofImpact Assessment, and Metropolitan Chair of the Ecological Society of America.He was awarded the World Conservation Union’s Coolidge medal in October 2008.(RbtGoodland@aol.com)Clive Wicks has 48 years of experience of working in engineering, agriculture andenvironment, specializing in the impact of extractive industries on the environment.He is a vice chair of IUCN-CEESP (IUCN’s Commission on Environmental,Economic and Social Policy) and co-chairs SEAPRISE (IUCN-CEESP’s WorkingGroup on the Social and Environmental Accountability of the Private Sector). Heworked in the international environmental movement for the last 24 years, mainlywith WWF UK. He headed WWF UK’s African, Asian and Latin Americanprograms, and represented WWF at G8, World Bank, International FinanceCorporation, UNEP and UNDP meetings on extractive industries.(Clivewicks@googlemail.com)ii

AcknowledgementsThe Authors wish to thank all those who helped them, both during their trip to thePhilippines and in the last year, for the substantial information provided to help themwith their research. This report would not have been possible without the support ofmany people in all the areas visited, including Indigenous Peoples, who opened theirhearts and shared their concerns with the authors about the environmental and humanrights abuses caused by mining. They are the real authors of this report.However, in view of the vast number of extrajudicial killings that have taken placesince 2001, now believed to be over 1,000, including a Bishop of the IndependentChurch, the authors are reluctant to name people or organisations in the Philippines.The authors admire the many other people, including lawyers, some of whom havealso lost their lives while trying to protect their people from mining industry abuses.The authors admire the courage of the politicians, bishops, priests, sisters and pastoralworkers of the Catholic Church and the leaders of many other faiths and none andhuman rights lawyers who have the courage to speak out against the destruction thatmining is currently and will increasingly cause to their beautiful, fruitful and biodiversearchipelago. It has been a great honour and a humbling experience for theauthors to work with such brave and committed people.They would like to thank the Local Governments Units, the Catholic Church,especially the Columban Missionaries and the bishops, priests, sisters andcommunities who welcomed them during their trip and provided accommodation,transport and food for the team.The best help the authors could provide was to apply their long years of experienceand professional knowledge of the extractive industry around the world and theirknowledge of environmental and human rights ‘best practise’, laws and conventionsin an impartial and professional way.They would like to especially thank PAFID for their contribution to the mapping ofthe areas visited in their February 2008 Field Trip, LRC-KSK-Friends of the Earth fortheir expertise on the law and assisting Indigenous Peoples protect their rights,Professor Arturo Boquiren, Professor Ernesto Gonzales for their contribution andinsights about the economics of mining versus environmental value and Cathal Doyleof the Irish Centre for Human Rights for input on the rights of indigenouspeoples.Paul K.From The Working Group on Mining in the Philippines (WGMP):The Working Group would like to thank Robert Goodland and Clive Wicks for theirdedication and passion for human rights and environmental justice, which has ledthem to generously give of their time and expertise to travel to the Philippines andanswer the call of an ever increasing number of communities to help them protecttheir rights, their lands, their lives and livelihoods. We wish to thank Cordaid, theHolly Hill Charitable Trust, Paul K. Feyerabend Foundation, the Columbans, theIUCN-CEESP (Commission on Environmental Economic and Social Policy), for theirfinancial support to realise this report and maps.iii

Table of ContentsINTRODUCTION 1Chapter 1: Mining and Food Security 41.1 The Importance of Rice 41.2 The 2008 Food Price Frenzy 51.3 Peak Oil, Peak Food, Peak Phosphate, Peak Water & Peak Stable Climate 71.4 Why Does the Philippines Import Rice? 81.5 Reasons for Decreased Domestic Rice Production 9Chapter 2: Mining and Forests 112.1 Deforestation Harms Rice and Fisheries 112.2 The Need for Watershed Conservation 132.3 Deforestation Increases Poverty 132.4 Indigenous Peoples and Forests 132.5 Rainforestation 14Chapter 3: Mining and Marine Resources 153.1 Mining and Fisheries 153.2 Pollution From Mining 15Chapter 4: Flawed Government Policy 184.1 Scale of the Mining Problem 184.2 Conflict of Interest 204.3 DENR Promotes Mining and Demotes Environment 204.4 Corruption in Environmental Governance 224.5 Philippine Mining Act, 1995 234.6 Separate Exploration from Exploitation 294.7 Post-Mining Rehabilitation Must Be Enforced 294.8 Government and Society Split on the Benefits of Mining 32Chapter 5: Indigenous Peoples 365.1 Indigenous Peoples and the National Commission on Indigenous Peoples 365.2 The Role of the National Commission on Indigenous Peoples 375.3 Rights of Ownership and Ancestral Domain 385.4 Right to Develop Lands and Natural Resources 385.5 The Right to Benefits 385.6 Protections Afforded by Indigenous Peoples’ Rights Act 395.7 Free and Prior Informed Consent 395.8 FPIC and ESIA 415.9 Indigenous Peoples need Environmental and Social Impact Assessments 42Chapter 6: Human Rights, Militarization and Mining 446.1 Human Rights and Mining 446.2 Official Reports Documenting Human Rights Violations 456.3 Human Rights, Civil Society and the Catholic Church 476.4 The Human Security Act 486.4 Further Militarization of Mining Projects and Investment Defense Forces 496.5 The Relationship Between DENR and NCIP 51iv

6.6 DENR Engulfs NCIP 51Chapter 7: Philippine Mining Economics 537.1 Deficiencies in Mining Economics 537.2 Internalizing Currently Externalized Costs 547.3 Policy Options for Internalization 547.4 Benefit Allocation 557.5 The Resource Curse 557.6 Impact-Benefit Agreements 577.7 Assessment of Cost Externalization in Philippine Mining 597.8 Mining is the wrong Engine for Growth 61Chapter 8: The Position of the International Agencies 708.1 The World Bank Group 708.2 International Development Assistance to DENR 72ANNEX: Table of Contents for Entire Report Including Case Studies 73v

INTRODUCTIONThe Philippines has rich and diverse natural resources. However, theseresources are being rapidly depleted due a variety of mutually reinforcingnegative factors: high population pressure with the majority of the poorderiving their income from natural ecosystems; advancing industrialization,conflicts of interest between long term environmental concerns and short termprofit motives in particular regarding logging and mining; absence ofpolitical will (and therefore of allocation of resources) to enforce effectiveimplementation of a relatively comprehensive legal and regulatory regime andlack of clearly defined mandates and responsibility between the various layersof central and local authorities.The European Commission, 2005 1The Philippines, an archipelago of 7,107 islands, is rich in minerals: gold, copper,chromite, nickel, coal, limestone, iron ore, silver, platinum, palladium and uranium(although much is considered low-grade ore). Many of these deposits, however, arelocated in areas of rich biodiversity which contain the country’s few remainingforests, in geohazard zones prone to typhoons, earthquakes, landslides and volcanoes,or within the ancestral domain of Indigenous Peoples.Large-scale mining in the Philippines typically consists of open-pit mining ofminerals, especially copper and gold ores, and strip-mining for nickel. To extract theores, thousands of tonnes of earth and rocks have to be removed, forests cleared, andwater and drainage systems diverted. Strip-mining for nickel is especiallyproblematic as nickel-rich earth is stockpiled causing massive damage to the land.The industry also requires large volumes of water for mining, milling and wastedisposal, directly competing with the water necessary for rice growing, agriculturalproduction and human needs.Such mining has had severe environmental impacts, not only in the areas mined, butalso on land, waters and seas further afield. Rivers, lakes and irrigation systems havebeen polluted by mine tailings and toxic metals; forest loss has led to rivers drying upin some seasons and flooding in others.Yet, since 1992, the Government of the Philippines has been pursuing an aggressivepolicy to “revitalize” the mining industry, potentially opening up 30% of thecountry’s land area to mining. The resulting massive increase in mining projects willaccelerate the rate at which the country’s remaining vital tropical forest cover is beinglost. Apart from exacerbating devastating soil erosion, such expanded mining willfurther damage watersheds and the 371 major river systems that are still biologicallyalive. Loss of watershed functions directly reduces the water supply and irrigation.1http://www.delphl.ec.europa.eu/docs/cep%20Philippines.pdf: European Commission, 2005.Philippines country environmental profile. Makati City, Delegation of the European Commission tothe Philippines. 75 p.1

In July 2006, the Right Honorable Clare Short MP, former UK Minister ofInternational Development, led a Fact Finding Mission on Mining to the Philippines,the report of which, “Mining in the Philippines: Concerns and Conflicts” waspublished in 2007. 2 This report noted that:“Mining in the Philippines is being developed at a speed…scale…and in amanner likely to cause massive long-term environmental damage and socialproblems. Current mining plans will undermine the Government’s ownstrategy for sustainable development by destroying or severely damagingcritical eco-systems, including watersheds, rivers, marine eco-systems andimportant agricultural production areas.”The report raised particular concerns about the implications for food security ifmining in the Philippines continues on the scale that was planned.“The [Fact Finding Mission] team fears further damage to the environment bymining…will increase the threat to the country’s long-term food security andthe survival of future generations of Filipinos….International experience suggests that if pursued on the scale currentlyproposed by the Philippine government, mining could weaken the foodsecurity of affected communities and even of the country as a whole. Localcommunities feared that pollution and siltation of rivers may deplete watersources, reducing rice production and fisheries.”The Food Crisis at the beginning of 2008 which was linked to the shortage andconsequent skyrocketing price of rice, the stable food for Filipinos, alerted manyFilipinos to the urgency of this concern regarding the country’s food security. Thus astark choices now face the Philippines: a few years of mining or thousands of years ofsufficiency of irrigated rice and fisheries production? If mining is to make a positivecontribution to national development, it will have to fit within the country’ssustainable development strategy. The Philippines is one of the top 10 countries inthe world likely to be most affected by climate change, and the impacts of mining willcompound the environmental problems the country already faces. As the thenSecretary of the Government Department for the Environment and Natural Resources(DENR), Heherson Alvarez, put it in 2001:“What does it gain a nation to be short-sighted and merely think of moneywhen … irreparable damage to the environment will cost human lives, health,and livelihood capacity of our farmers and fisherfolk endangering the foodsecurity of our people?” 3This second report, Philippines: Mining or Food?, follows up on the issue of foodsecurity highlighted in the 2007 report. It is based on a field trip to the archipelago bythe authors, Robert Goodland and Clive Wicks, in February 2008. They visited anumber of mining locations on the islands of Mindanao and Mindoro. An importantpart of the process has been a mapping exercise to demonstrate the overlap of mining2 “Mining in the Philippines: Concerns and Conflicts” by Doyle, C., Wicks, C. and Nally, F. 2007.Society of St. Columban, Solihull, UK: 62 p.3 Philippine Star, 13th November 20012

locations – both existing and proposed – with indigenous ancestral domains,watersheds and areas of environmental importance, all of which are critical foragriculture, fisheries and food security. It is hoped these maps will be useful tools forthose campaigning against destructive large-scale mining.This Report aims to:• Outline the Philippine Government’s approach to mining in the light ofemerging evidence of its social and environmental impacts.• Support and inform people impacted by mining, and inform decision-makers.These include the governors, mayors, and local government officials whomthe authors met during the field visits who asked for help to betterunderstanding the mining industry, its impacts and how they could protecttheir people from long-term harm.• Ensure that aid agencies, banks, investors, foreign chambers of commerce, andgovernments supporting mining companies from their home countries are fullyaware of the problems that the expansion of mining is causing for the Filipinopeople, and for their tropical islands archipelago and biodiverse environment,and especially with regard to impacts on Indigenous Peoples.• Foster a productive working relationship between North and South. Greatercooperation would help to ensure that northern mining corporations are clearabout local sentiments and concerns, while at the same time potentiallyimpacted Indigenous Peoples, farmers, and fisherfolk are informed aboutmining proposals, their voices are heard, and that they are involved indecision-making.The Report is divided into three sections. The first contains eight chapters coveringthematic areas of concern, the second covers the six case studies highlighted by theauthors, with each one prompting its own set of recommendations, and the thirdsection concludes with the of the authors main cross cutting recommendations..3

Chapter 1: Mining and Food SecurityThe stark choice facing the Philippines is between a few years of mining andthousands of years of irrigated rice and fisheries production. Mining reduces theoptions for future generations. The lessons learnt from the (2002-2004) independentWorld Bank-funded Extractive Industry Review (EIR) have not been followed in thePhilippines.“The right to food is a human right and is a binding obligation wellestablishedunder international law, recognized in the Universal Declarationon Human Rights, and the International Covenant on Economic, Social andCultural Rights.”Article 25, UN Declaration of Human RightsInternational Covenant on Economic, Social and Cultural Rights, 19661.1 The Importance of RiceRice is the staple food of the vast majority of Filipinos. 4 It is the backbone of thecountry’s economy, and an integral part of its culture. Irrigated rice cultivation in thePhilippines can be traced back thousands of years. A massive amount of social andfinancial capital has been invested by people, aid agencies and the PhilippineGovernment (through the National Irrigation Authority) to achieve the present levelsof irrigation for rice and other crops. Filipino rice farmers are among the mostproductive in the world, using less biocides, optimal fertilizers, and efficient postharvestprocesses than many others. Filipino farmers are also more efficient thanmost of their neighbors in South East Asia. While Filipino farms in Central Luzonuse just 56 person-days of labor per hectare from land preparation to harvest,Indonesian farmers in West Java use 136 person-days per hectare, while in the RedRiver Delta of Vietnam they use 270 person-days.The Philippines maintained self-sufficiency in rice through the 1970s, and was a netrice exporter in the early 1980s. But deforestation, land conversion, systematicgovernment neglect of agriculture, and rural out-migration have all seriously damagedthe rural economy, especially rice production. Between 1984 and 1994, the countryimported a modest 150,000 tonnes per annum. Since then, it has become the world’slargest rice importer: over 2007-2008, rice imports shot up 587%. The Philippinesbought in 1.8 million tonnes of rice in 2007 – 16% of its requirement – and isexpected to import 2.7 million tonnes in 2008. Rising demand for rice in the MiddleEast and Africa, among other factors, has sent the price of rice up in Vietnam andThailand, the world’s top exporters. In April 2008, rice broke the $1,000 per tonnebarrier, up from $325 per tonne.4 Information on the status of rice is mainly drawn from: Dawe et al. 2006, Tiongco & Dawe 2002,Tolentino 2006, Balisacan 2006, Gonzales 2008, and especially the USDA Economic ResearchService’s monthly “Rice Report”: http://www.ers.usda.gov/Briefing/Rice/. The Philippines hosts theInternational Rice Research Institute (IRRI).4

More than 60% of Philippine rice production is irrigated; only Malaysia, at 65%, has ahigher proportion in Asia. This is the source of the Philippines productivity, but alsoits vulnerability to the impacts of deforestation and mining: pollution, siltation,landslides, drought, and flash floods all take their toll. Agriculture Secretary ArthurYap stated in 2007 that the Government has allocated an additional P1.5 billionPhilippine pesos (US$ 35,495,000) to boost rice production, in particular, to supportthe planting of an additional 600,000 hectares of rice during the rainy season in the 10poorest provinces of the country, and another 500,000 hectares in other provinces.This planting, however, would all be endangered by mining and other developmentsthat reduce the area of agricultural land and its productivity.Over-logging has drastically reduced Philippine rice harvests. Its effects will continueuntil watershed sources of irrigation waters are reforested. The watersheds no longerprovide regular year-round supplies of water to the paddy fields downstream.Droughts and flash floods in deforested areas have increased. Widespreaddeforestation has intensified the Philippines’ vulnerability to climate change-relatedweather extremes, including severe typhoon rains and summer droughts.Mining will reduce rice production still further. The Marinduque Marcopper minecatastrophe in central Philippines and the Abra river pollution in Illocos Sur providedstark warnings of the damage that could be caused. 5 The provincial government ofMarinduque has sued Marcopper's parent company, Placer Dome, for $100 million indamages. Placer Dome was purchased in 2006 by Barrick, which has now beenincluded in the lawsuit.The Philippines is likely to find it increasingly difficult to import sufficient rice tooffset its current shortfall. It therefore needs policy and budgetary shifts thatprioritize food production domestically.All evidence suggests that promoting mining development will directly contradictsuch efforts, especially in the key rice producing regions, including the islands ofMindanao, Mindoro and Sibuyan (See Case Studies 1-6).1.2 The 2008 Food Price FrenzyOver the past few years, the prices of wheat, corn, rice, and other basic foodstuffshave doubled or tripled; much of the increase took place in the first half of 2008.High food prices affected even relatively affluent people in OECD nations, but they5 The copper mine on Marinduque Island operated for some 20 years, until a toxic spill in 1996 killedthe Boac river, caused colossal damage to the people, their fisheries and agriculture, and effectivelyhalted mining on the island. More than ten years later, communities throughout Marinduque still sufferfrom respiratory, skin diseases, and heavy metal poisoning. See Oxfam Australia Case Study:Marinduque Philippineshttp://www.oxfam.org.au/campaigns/ mining/ombudsman/2004/cases/marinduque/marinduque.html.See also: UNEP Final Report of the United Nations Expert Assessment Mission to Marinduque Island,Philippines, 30 September 1996 pp.65, 69 (which declared the affected river biologically dead).Cyanide used to process gold from the Lepanto mines in Illocos Sur in the Northern Philippines andpolluted the Abra river downstram of the mine, affecting agriculture and water suply. See:http://www.minesandcommunities.org/article.php?a=1251. See also: Save the Abra River Movement(STARM): http://www.minesandcommunities.org//article.php?a=7516.5

have been truly devastating in developing countries, where food often accounts formore than half a family’s spending. For the poor, 50-80% of their income tends to goon buying food.All major grains (rice, wheat, corn/maize, soya, barley, and rye) are at or near all timeworld record high prices. Specifically, in the past year the price of corn/maize hasrisen by 31%, soybeans by 87%, and wheat by 130%. Food riots broke out in manycountries during 2008. 6 Pakistan reintroduced rationing for the first time in twodecades. Russia froze the price of staples for six months. Major grain exporters(India, Vietnam, Thailand, Egypt, Cambodia, Indonesia, Kazakhstan, Russia,Argentina, and Ukraine) banned or sharply restricted exports in 2008, and raisedprices in an attempt to shore up domestic supplies.Thailand and Vietnam have historically met the Philippine demand for rice. Thailandraised its rice prices to an all-time high of US$855 a tonne in April 2008, up $102from March. Vietnam has been sharply curtailing its exports after a record cold spellin the north of the country destroyed more than 110,000 hectares of paddy and riceseedingfields. Even if both countries were able in the future to release some rice forexport, the price is likely to remain very high. Global stockpiles of rice are projectedto decline.Droughts in several grain exporting and producing countries 7 depressed yields in 2007thus raising grain prices. Australia, normally the world's second-largest wheatexporter, is suffering its tenth year of epic drought, now followed by floods. Recordflooding in West Africa and unusually severe snowstorms in China have all impairedfood production. Higher fuel and fertilizer prices contribute to high rice prices.Climate change-related extremes of weather threaten a continuation of suchinterruptions to production and argue for precautionary approaches and protection aswell as promotion of domestic production.Early in 2008, the Philippines paid nearly $800 per tonne of imported rice. By mid-April, it had to pay $1,170 per tonne. The current costs for rice imports in 2008 maytherefore exceed $2 billion. Meanwhile, the country expects to receive about $1billion for its export of gold, copper, and nickel. When this report was drafted inApril 2008, it was already a source of concern that the Philippines imports so muchrice. Since then, the high price of rice has obviously intensified this concern as it hascaused a nation-wide crisis.Rice prices are substantially higher in the Philippines than in neighboring countries atcomparable levels of economic development, because successive government policieshave controlled rice imports. This penalizes the poor, although it encourages farmersto produce more rice if they can afford increasingly expensive fertilizer and other6 In 2008, food riots, violence and protests had broken out in more than 20 countries, as listed bywww.earthpolicy.org/Updates/2008/Update72_data.htm, including Haiti, Bangladesh, China, Pakistan,Indonesia, Egypt, Philippines, Trinidad and Tobago, Côte d'Ivoire and another dozen African nations.7 The world's six major rice exporting nations – Thailand, Vietnam, China, India, Pakistan andMyanmar – account for 70% of the world's rice exports. As of April 2008, they agreed to form a cartelto stabilize world rice prices.6

inputs. The Government, however, has only this year (2008), as an emergencyresponse to rocketing prices and depleted reserves, lifted import restrictions andinstructed customs officials not to chase illegal rice importers.1.3 Peak Oil, Peak Food, Peak Phosphate, Peak Water &Peak Stable ClimateThe issue of food security in the Philippines, and its link with mining, is affected byglobal factors. World oil production, for example, is estimated to be at or beyond itspeak, and its price is expected to continue to rise. Food production also seems to be ator near its peak 8 because practically all potentially arable land has already beenutilized; plowing remnant wildlands will be increasingly costly in diesel and fertilizer.Land is both finite and scarce. Phosphate production for fertilizer is also at recordlevels and may also be at or near its peak. Increases in grain yields are slowing andbecoming more costly to achieve. The claimed yields and benefits of geneticallymodified seeds are in serious doubt. 9 Water is becoming increasingly scarce andexpensive, and aquifers are depleting fast. Around ten thousand years of relativeclimate stability also seem to have ended as climate change begins to bite. The era ofcheap food seems to be over.Over the long term, aiming for sustainable food security is the prudent andresponsible course. In the short run, it may be cheaper for the Philippines to importrice, but that era seems over, possibly for ever, for five compelling reasons. 108 In good harvest years, there is still enough food produced in the world (just) to feed current numbersof people, but it doesn't reach all those who need it. Food available in shops is becoming too expensiveto be affordable by the poor. Less than half the world's grain production is eaten directly by humans.Most grain goes to animal feed for meat production or increasingly for agrifuels. Food is increasinglyless an essential sustenance and means of securing people’s livelihoods and more of an industrialcommodity and raw material for speculation.9www.cetos.org and www.cqs.com/50harm.htm10 It is not the purpose of this report to suggest how agriculture needs to be revamped or food securityensured, but several strategies and avenues suggest hope. Conservation is the key. Tight recycling ofall wastes, sewage, composts, and water is essential. Water storage and water harvesting is a tried-andtestedlow and effective technology. Stopping accidental forest fires and deforestation, and increasingreforestation would inter alia halt all clearly uneconomic agrifuel production. Eating less meat is notonly healthier for individuals but also reduces the risks of climate change, according to theInternational Panel on Climate Change. More attention to agriculture and food security than to thedamaging sectors such as mining will be essential. This should help to prevent, or at least minimize,what has become known as the “resource curse” or the “Dutch Disease”, (see Chapter 7 Box 1. ThePhilippine Government has already banned urban encroachment onto agricultural lands, and in April2008 revived its goal of rice self-sufficiency, which President Gloria Macapagal Arroyo stressed in herJuly 2008 State-of-the-Nation Address. Although there is no need for total autarky (national economicindependence, self-sufficiency, and non-reliance on international trade), more domestic foodproduction – rather than focusing on export crops – would help greatly. Reconnecting agriculture withfood, nutrition and reduction of poverty would help, too, instead of prioritizing free trade incommodities. Safety nets are ever more essential for the poor and vulnerable.7

First, world population growth means that 70 million more people need to be fed,clothed and housed every year.Second, the sharp growth in meat demand from the new middle classes in China andIndia is exacerbating food shortages. It takes 700 calories of grain to produce 100calories of beef. The chair of the International Panel on Climate Change (IPCC) andNobel Laureate, Dr. Rajendra Pachauri, and the UN Climate Chief, Yvo de Boer,emphasize that eating less meat would reduce climate change risks fast, substantiallyand at low cost.Third, allocation of land and grains to agrifuels or biofuels (such as sugarcane, maize/corn, and soya) reduces available land for food. The shift from food to fuelproduction using crops like corn has been described as a “crime against humanity” bysome UN officials. Subsidizing agrifuels to provide fuel for cars is effectively taxingthe food of the poor, who cannot compete in purchasing power with the transportationwishes of the more wealthy. In addition, agrifuels are accelerating the pace of climatechange by promoting deforestation. According to the World Bank (2008), diversionof food and land to agrifuels accounts for most of the recent rises in food prices.Fourth, food and fuel are inextricably linked. Fuel is essential to produce food inmodern farming methods (for instance, diesel is needed for tractors and/or waterpumps), and food can substitute for fuel (agrifuels). As a result, the price of food isnow locked into the price of oil, which exceeded $100/barrel throughout most of2008. The closely linked costs of diesel, transport, shipping, tractors, and fertilizerstranslate into higher food prices. Fertilizer price hikes mean that poor farmers maynot be able to boost yields in the short term.Fifth, climate change has already begun to curtail crop yields. The United States andCanada, the world’s top two wheat exporters, suffered substantial drops in yield in2007/8 attributed to flooding and drought. Glaciers melting, glacier-fed rivers drying,and aquifer depletion contributed elsewhere to declines in crop yields. As thePhilippines is an island archipelago, sea-level rise will be especially damaging toagriculture, especially to rice production, as it is concentrated on the coastal plainsand river deltas.1.4 Why Does the Philippines Import Rice?The Philippine policy of prioritizing export-led agricultural production over foodproduction for domestic consumption has long been a source of controversy and it hasbeen a challenge to maintain a balance between the two. In the 1970s and 1980s, theWorld Bank, IMF and others relentlessly pushed the Philippines to export asparagus,cut flowers, and pineapples.The intensification of logging from the 1950s through to the 1980s and the pushtowards mining today are both premised on the theory that increasing the Philippineeconomy by exploiting the country’s non-renewable natural resources will eventuallybring capital accumulation, so that rewards will trickle down to the whole population.But while the Philippine forests did meet world demand for a period, the benefits inthe Philippines were confined to a tiny élite and the significant costs externalized8

widely among the rural poor. All the indications are that mining is having similarresults.Generations of Philippine policy makers have undervalued those sectors of theeconomy that, through subsistence and small-scale commercial production of rice,fish and other staples, have continued to feed the people (albeit with increasingdifficulty). Planning and development decisions have tended to assume that thissector would continue and could always be supplemented cheaply by imports fromThailand, Vietnam and elsewhere while the Philippines could improve its purchasingpower through exports.These assumptions can no longer be taken as given, as farmer and fisher groups havelong predicted. A development plan that depended on imports, particularly of rice,did not have any contingencies in place to deal with problems of temporary or longtermshortages or of rising prices. The Philippine Government is now desperatelysearching world markets to purchase rice at premium prices. At these prices, and withcurrent and growing demand, it is now increasingly clear in the Philippines that:• The country needs to maintain and expand domestic irrigated riceproduction to feed the population;• Importing rice on the current scale will be a major drain on economicdevelopment given the prices that grain staples command on the worldmarket;• Mineral exports, based on negative impacts on rice and fish production,will not provide the promised boost to the economy.The biggest current challenge for the Philippines is how to produce enough food athome and earn enough cash to buy grain on the international market to make up theshortfall. Could the country gain enough income from mineral exports to buyinternationally traded grain, assuming such grain is available? Minerals are a finite,non-renewable resource. Even if a mine is profitable in the short term, the profits willsoon decline and cease, often after just a few years of production.Soaring prices of oil, fertilizer, rice and other foodstuffs combine with climatechange, population, and environmental decline to make the Philippines one of theworld’s largest rice importers. When internationally traded rice was cheap andplentiful, importing food was feasible; now that strategy is hemorrhaging the nation’sfinances. The poor suffer first, worst and longest.1.5 Reasons for Decreased Domestic Rice ProductionThe area planted to rice in the Philippines was at its highest historical level between1995 and 2000. Since then, it has dropped by 10%, mainly because agriculture is nolonger regarded as a priority for the country’s economy or development. In addition,rice lands have been encroached upon by export agriculture, urbanization,industrialization, and siltation from logging and mining. Some 50 of the 78 riversystems in the Philippines are biologically dead because of industrial and domesticwaste pollution. Many rivers can no longer be tapped for irrigation. Mining is9

already a major polluter in some watersheds. Mining pollutants accumulate in soilsand plants, especially mercury, cadmium, lead, copper, arsenic, and cyanide.The Philippines has less than 0.075 hectare of arable land available per person, lessthan nearly all its neighbors. Thailand, with 0.28 hectare per person, has nearly fourtimes as much. In the Philippines, rice has occupied 30% of the total arable landharvested during the last 10 years, whereas in Vietnam and Thailand, the figure isdouble at 60%. Much of the land in these countries is flat, whereas in the hilly andmountainous Philippines, expensive terracing limits expansion.Few expect that any profits from mining will be allocated to rice imports or toimproving domestic rice production. The primary beneficiaries from mining revenues– mining companies and individuals and some government departments – are unlikelyto spend their profits on expanding food security. In any event, the minimum miningrevenue accruing to the country ends as soon as the mine depletes, often in one or twodecades. During that time, the impacts of mining tend to reduce domestic riceproduction, citrus and fruit growing, and fisheries for environmental and economicreasons.Even after the mine closes, effluents, pollution, acidity, contamination, and leachingof heavy metals from tailings dumps and piles of overburden, together with flashfloods and droughts, continue to damage agriculture and the environment for decadesafterwards.10

Chapter 2: Mining and Forests2.1 Deforestation Harms Rice and Fisheries“The advanced state of environmental degradation has had seriousrepercussions for the human population. The loss of soil fertility, pollutionfrom large-scale mining operations, and reduced productivity of fisheriesaffect the livelihood of millions of rural inhabitants. Erosion fromdeforestation is blamed for frequent flooding and massive landslides, whichclaim many lives every year”.Posa et al. 2008Only about 6% of the Philippines’ primary forest remains and some estimates suggestthe figure may now be as low as 3%.Forest faces: hopes and regrets in Philippineforestry. RAP publication, 2008. Bangkok,Thailand: Food and Agriculture Organization ofthe United Nations, Regional Office for Asia andthe Pacific, and Environmental Science for SocialChange (Philippines).Most of the primary forest lost has been exported as unprocessed logs. What has thePhilippines gained from cutting down such a valuable and potentially sustainableresource? Most of the astronomic profits obtained from logging accrued to only a fewélite families (McDonagh 2004, Vitug 1993, 2000a, 2000b). Forest loss hascontinued to cause problems throughout the country, even if the logging itself is nowfar less. Forestry jobs havedried up, although logexports used to be a majorexport earner. Fisheries andagriculture still create jobsfor about half of allFilipinos. Meanwhile,deforestation has severelydamaged the nationalagriculture sector andcontinues to do so. Morethan half the Philippines ismountainous or hilly withsteep slopes, making it proneto soil erosion.1900199911

Soil erosion has accelerated dramatically in recent years; 50% of the fertile topsoillayer has been irreversibly lost in the last decade. Because of forest loss, 25% ofagricultural lands and 40% of nonagricultural lands throughout the country aremoderately or severely eroded. The combination of deforestation and soil erosion hasmeant that agricultural yields have not risen but remain stagnant. Siltation hasdamaged rice and fish production, while rice lands are also increasingly harmed bysalinization and water logging.In recent decades, fragile upland slopes have been increasingly cultivated, furtherintensifying soil erosion. Around 76% of the total land area faces degradation,according to the European Commission (2005). The Philippines experiences thehighest number of tropical cyclones (around 20 per year) compared with othercountries; these, and heavy rainfall exacerbate soil erosion, making it economicallyonerous. Moreover, extreme weather conditions cause droughts, cyclones and heavyrain on deforested areas, leading to increasingly frequent floods and landslides, whichare devastating for vulnerable communities. Water demand by the year 2025 ispredicted to be three times that of 1995. Water conservation should be an urgentnational priority, especially through reforestation. 11As a result of unsustainable logging, over-harvesting and extensive forest clearing foragriculture, the Philippines went from being the world’s biggest exporter of tropicalhardwoods in the 1970s to a net importer of forest products by the 1990s. Thecountry now imports approximately 60% of the wood it uses. After the fall ofPresident Ferdinand Marcos in 1986, the damage was undeniable, but theGovernment’s ban on logging in 1991 did not prevent the continuance of rampantillegal logging. Unsuccessful reforestation has perpetuated deforestation, with all itsinherent economic, environmental and social costs. Government encouragement formining is a serious threat to the forests that remain.Following the humanitarian tragedy caused by flooding and landslides in Quezon andAurora provinces in 2004, President Gloria Macapagal-Arroyo suspended all loggingpermits in the country, and enacted more meaningful penalties and sanctions forillegal deforestation and timber poaching. These penalties and log export bans,although 25 years too late, were commendable improvements. Unfortunately, it waslater clarified that the suspension of logging applied only to natural forests and not totree plantations, which meant in real terms that the areas in which logging wasallowed actually expanded. Although illegal logging is pervasive throughout thePhilippines it is not really tackled, for environmental crimes in general are notconsidered as very serious.The Philippine Master Plan for Forestry Development stipulates that 1.5 millionhectares of the remaining 2.8 million hectares of second-growth forest on land below50% slope should be put under community forest management over a 10-year period.This Plan was adopted in the 1980s, and accelerated by a 1988 Asian Development11 While the total amount of forest cover remaining in the Philippines is debatable, there is widespreadagreement that the overall decline in forest cover is alarming. It is estimated that in 1930 about 60% ofthe country was covered by primary forest. Between 1969 and 1988, an average of 2,000 squarekilometers were logged annually. Today, only 3% to 6% of the original primary forest remains. Thisfigure is the smallest of all the countries of the region (except for Singapore).12

Bank (ADB) loan of $240 million. Yet, despite this target only 0.27 million hectareswere planted.2.2 The Need for Watershed ConservationThe Government’s Department for Environment and Natural Resources (DENR) hasprojected a five-fold increase in mining projects by 2010; if this mining goes ahead, itwill speed up the loss of the country’s remaining forest cover. Apart fromexacerbating devastating soil erosion and landslides, such expanded mining willfurther damage watersheds and the 371 major river systems that are still biologicallyalive.Loss of watershed functions directly reduces the water supply and irrigation so badlyneeded by rice lands. As 4,000 litres of water are needed to produce one kilogram ofrice, watershed conservation must become an immediate priority. The hectaragedevoted to rice production is declining partly because of the low farmgate price forpalay (unhusked rice). Many farmers are shifting to other crops, saying that the pricepaid by the National Food Authority is below their production costs. This underminesthe Philippine Government’s goal to achieve 100% rice sufficiency by 2013. 122.3 Deforestation Increases PovertyAbout 24 million people in the Philippines live in or adjacent to forest land. Thenumber of people directly dependent on forest resources (excluding water supplyfrom catchment areas) is estimated to be as high as 30 million out of a total populationof some 90 million people. Deforestation has greatly contributed to theirimpoverishment. It has also reduced groundwater recharge, which has beenenormously expensive for farmers. The Food and Agriculture Organization of theUnited Nations (FAO) study in Nueva Ecija (Central Luzon) showed that, because theground water recharging is low because of deforestation, farmers have to bore shallowtube wells up to 36 meters in depth, a practice that contributes to the salinization ofgroundwater. In the 1960s, water could easily be extracted from a depth of sixmeters. (Philippines Coastal 2004; ECEP 2005)2.4 Indigenous Peoples and ForestsOur urgent recommendation, that Indigenous Peoples and communities in uplandforests should be permitted and encouraged to manage their forest watersheds, whichwould boost national rice production, comes from the Government’s own policies.12 Center for People Empowerment in Governance (Cenpeg): www.gmanews.tv/story/112869/Miningprojects-threaten-food-production%E2%80%93-NGO:11 August 2008 Mining projects threaten foodproduction – NGO13

Community-based forest and watershed management are Government priorities, eventhough they are proving challenging to achieve (Bacalla 2006). Posa et al. (2008)outline the need for them:“The concept that communities themselves are often in the best position tomanage and protect their resources is…the backbone of the government’ssocial forestry initiatives”.The Government adopted the community-based forest management program in 1995as a strategy to achieve ecological stability and social equity. In this scheme, localcommunities have responsibility for forest rehabilitation, protection, andconservation. Tree planting can have various management goals, such as biodiversityprotection, forest regeneration, and agroforestry. “The right to use forest resourcesand the right to security of tenure are incentives to plant trees and defend forestsagainst illegal logging” (Lasco and Pulhin 2006).The Natural Resources Development Corporation of the Government’s Department ofthe Environment and Natural Resources (DENR) already partners with localgovernment to rehabilitate catchment and forests. This type of partnership needs to begreatly expanded because of the risks to rice production and of flooding. As povertyreduction strategies and the creation of sustainable jobs, such programs are highlyeconomic. But the goal of rehabilitating hundreds of hectares need to be raised to tensof thousands of hectares.2.5 RainforestationMining operations that remove forests on watersheds damage Indigenous Peoples’livelihoods and destroy irrigation downstream. ‘Rainforestation’ works well toconserve watersheds and ensure the gradual release of water all year to irrigationdownstream. Its main concept is to plant highly diverse endemic fruit, lumber andother useful trees at high densities, instead of planting a single or a few species ofalien timber trees, so as to achieve a three-story plant structure resembling the naturalrainforest. The trees can be cultivated together with conventional tropical agriculturalcrops as intercrops. The result is a home-garden type of agro-forestry system. Thecritical first step is to get the ground covered as fast as possible to reduce soil erosionby planting fast-growing legumes, vines, and bamboos. Saplings and seedlings arebest planted at different ages. The long-standing Philippine environmental group, theHaribon Foundation for the Conservation of Natural Resources, with the support ofthe European Commission and other NGOs, is now promoting rainforestation as analternative to traditional reforestation. Both rainforestation and traditionalreforestation need to be massively accelerated and expanded.14

Chapter 3: Mining and Marine Resources3.1 Mining and FisheriesAlthough most mining takes place on land, it has profound impacts on waterresources, the sea and on deltas and estuaries, shallow coastal zones, coral reefs, seagrass beds, mangroves and marine life. 13Philippine fisheries used to be the envy of the world – sustainable, abundant, healthyand highly profitable. They reaped major export benefits, accounting for about 5% ofGDP at one time. Coral reef fishing communities and companies could earn $50,000per km² per year in healthy coral reefs. Mangroves, too, are highly productiveecosystems, yielding annual average returns in of at least $60 per hectare (PhilippinesCoastal 2004).Yet coastal and marine resources are now in dire crisis. Massive fish kills are beingdocumented with increasing frequency and the numbers of river and coastal fish havedeclined precipitously. The causes are several: coral reefs have been dynamited,cyanide and biocides are used to catch fish, and decades of over-fishing. But a keycause of the decline is mining pollution, particularly acid mine drainage and theleaching of cyanide, mercury, cadmium, arsenic, lead and other heavy metals intoaquatic and food systems. In addition, fish, invertebrates and their food have all beensmothered by silt created by mining. In the last few decades, about 70% of thenation’s coral reefs have been destroyed and 75% of the nation’s mangroves cleared;mining has made a significant contribution to this destruction. Reefs and mangrovesare essential nurseries for fish and other marine resources. Red-tides – denseaccumulations of algae that damage marine life – have become common and areintensifying (Maclean 1988, Hallegraeff & Maclean).3.2 Pollution From MiningThe processing of extracted gold ore uses many tonnes of mercury each year toseparate the gold from sand and gravel. The mercury forms an amalgam with gold,which sinks to the bottom of the container. The gold is then separated from theamalgam by sublimating the mercury with a blowtorch or in a retort. The mercuryvapor that is released into the air is toxic to humans and other forms of life. Themercury eventually enters water systems where it bio-accumulates in fish. At leastone-third of all Philippine fish contain toxic levels of mercury from mining.Overtopping – the rupture of mining tailings lagoons and landslides below mines –has also released poisonous volumes of toxins into the aquatic food chain.Abandoned mines leak mercury, cadmium and other heavy metals for many decades.The areas below abandoned mercury mines are the worst affected. For example, fish13 Sources: Armada et al. 2005, Baru et al. 2005, Blesshe et al. 2006, Brigden & Cotter 2006,Carpenter & Springer 2005, Consultation 2006, Dalzell et al. 2000, Fisheries 2004, Furio & Gonzales2002, Green & White 2004, Hayes 2007, Macabuac 2005, Maramba et al. 2006, National Hydraulic2004, Philippines Coastal 2004, Prantilla 2008, Ross & Chua 2005, Subade 2005, White et al. 2002,2005, and UNEP 2005.15

– such as ibis, tabas, lapu-lapu, torsillo, saging, and kanuping – off the coast ofPalawan’s Honda Bay mine exceed permissible levels for methyl mercury, althoughthe mine was closed in 1976. In 2008, a report (Prantilla 2008) summarizing threedecades of fish mercury research from the ocean off Davao, showed that it lowerschildren’s IQ levels for life. This report also demonstrated that fœtuses and babies areparticularly harmed by mercury in fish.Just one example of the damage caused by overtopping is provided by the coppermine of Canadian-owned Placer Dome near Marinduque, which operated 1975-1996.The mine dumped more than 200 million tons of mine tailings directly into theCalancan Bay over that period, eventually covering more than 80 square kilometers ofthe bay with mine tailings. In 1996, a toxic overspill killed the Boac river, causedcolossal damage to the people, their fisheries and agriculture, and effectively haltedmining on the island. Local people today suffer from arsenic and lead poisoning,especially children, and many suffer from chronic pain. The mine’s pollution affectedthe livelihoods of many of the fishing villages.Cyanide (used in gold processing in particular) has also been detected in marineresources throughout the Philippines. Research in 2006 found that the AustralianLafayette Corporation, which started mining gold, silver, copper, and zinc on RapuRapu island in 2005, did not implement environmental safeguards, resulting in spillsof cyanide and other contaminants from the mine into the sea and around the island.The spills caused massive fish kills after heavy rains in October 2005. Cyanide andacid mine drainage resulted in very high levels of heavy metals below the Rapu Rapumine. Cadmium, copper, and zinc occurred in dissolved forms at many hundreds oftimes typical background levels for these metals in river water. Cadmium and copperare both highly toxic to plants, animals and humans, while many aquatic species areacutely sensitive to cadmium. The fish catch in the village where the mine is locateddropped by 93%, according to a study by the Ibon Foundation, a Philippines researchinstitution. (Bridgen 2006, IBON Foundation 1997, IBON Foundation andDanchurchaid 1997). 14Fish catches are diminishingfrom the coasts and from thecontinental shelf. Fish used to bea low cost, healthy food; adeclining catch means the poorare increasingly unable to affordit.14 IBON Foundation, and Danchurchaid. 1997. The state of the Philippine environment. IbonFoundation, Databank & Research Center. IBON Foundation 1997. The Philippine Fisheries. Manila:IBON Foundation, Databank & Research Center. See also the official website of the Convention onInternational Trade in Endangered Species of Wild Fauna and Flora (CITES)16

The graph below illustrates that catch per unit effort has declined precipitously – toomany vessels pursuing too few fish.Some fish can occasionally be found way off-shore, but the fuel costs for vessels totravel such long distances means that affordable coastal fisheries have been replacedby expensive high-seas fisheries that export more of their catch. In addition, possiblyup to 1.5 million jobs have been permanently lost in the fishing industry (Dalzell et al.2000).Percent of the world's undeveloped forests threatened by mining: 40%Percent of the world's energy consumed by the mining industry: 7 to 10%Tons of acid-rain-causing sulfur dioxide emitted each year by the mining industry: 142million tonsEstimated percent of the world's gold production that will come from indigenous people'slands between 1995 and 2015: 50%Average tons of waste generated at a mine site to produce a single gold ring: 3 tonsPercent of gold refined in 2001 that went to the jewelry trade: 82%Tons of toxic sludge released into the Boac River in Marinduque, Philippines by a Canadianmining company when its storage pit ruptured in 1996: 3 million tonsTons of contaminated waste poured into Indonesia's Ajkwa River each year by the U.S.mining company Freeport-McMoRan, which is working one of the world's richest gold belts,on the island of Irian Jaya: 70 million tonsPercent of world gold separated from waste ore by cyanide heap-leaching: 85%Dose of cyanide that will kill an average adult: 1 teaspoon of 2 percent cyanide solutionSources: The Worldwatch Institute, the Mineral Policy Center, and Greenpeace International.Also see The Resource Curse, http://www.sierraclub.org/sierra/200405/terrorism/printable_all.asp17

Chapter 4: Flawed Government PolicyThe Philippine Government has, at least on paper, advocated deep concern with thedegradation of the country’s environment. The Government’s official “PhilippineAgenda 21” notes:“....While there is an acceleration in economic growth, there is evidence thatenvironmental quality is fast deteriorating, as dramatized by the increasedincidence of environmental disasters such as problems associated with minetailings, deforestation, pollution, salt-water intrusion and a host of otherdestructive activities. The regenerative capacities of already fragmentedareas in various bio-geographic zones are similarly threatened.”Philippine Agenda 21 - a national agenda for sustainable development.Philippine Council for Sustainable Development.But the Department of the Environment and Natural Resources (DENR), theGovernment department tasked with caring for the environment and managing naturalresources, is poorly resourced. The European Commission believes it to be sounderfunded that it cannot fulfill its mandate from the Philippines Government (EC2005). According to a 2003 World Bank study on the Governance of NaturalResources in the Philippines, the DENR’s annual budget, as a percentage of thenational budget, declined from 1.05% in 1997 to 0.6% in 2002. In 2004, it dropped to0.8%. The DENR is thus able to cover its basic expenses only, mainly salaries, anddo little more. Such underfunding means that DENR often fails to give theenvironment the priority it is mandated to do.4.1 Scale of the Mining Problem“An unprecedented golden age in Philippine mining is coming that can upliftthe lives of millions of impoverished rural masses as well as our wholeeconomy, if we ensure that the evils of corruption can be moderated, if nottotally stopped”.Joselito AtienzaDENR SecretaryFebruary 2008 15Like numerous DENR Secretaries before him, the incumbent in 2008, JoselitoAtienza, has boasted that the Philippines has Asia’s biggest nickel deposits and theworld fifth largest gold reserves. Total mineral wealth is estimated at $3 trillion ingold, copper, nickel, and other minerals. But less than 2% of the Philippines ninemillion hectare mineral area has been explored. Atienza has claimed that Indian steelmagnate Lakshmi Mittal, Australian mining company BHP Billiton, the Dubai-basedEmaar Group and many Chinese entities are all seeking mining opportunities in thePhilippines. Secretary Atienza claims that the 2007 mining investments of $4 billionwill be topped in 2008 by $10 billion or more. By 2009, mineral sales value could15 A golden age in Philippine mining is coming by Wilson Lee Flores Monday, February 25, 2008Philippine Star Archive http://www.philstar.com/archives.php?aid=2008022453&type=218

each $27 billion. In recent years, mining has grown dramatically in terms of itscontribution to gross domestic product (GDP); it expanded by 33% in 2007 over theprevious year, the fastest of all sectors.But mining’s overall contributions to national GDP are still minor compared withthese other sectors: 0.1% in 2006 and 0.7% in 2007. Its contributions towardsGovernment revenues, moreover, are far less than they could be because theGovernment’s friendly fiscal regime grants mining corporations “tax holidays” andclaims little or nothing of the actual revenue – this regime, however, makes mining allthe more profitable for mining corporations.Corporate profits are further boosted by offloading onto civil society and localgovernments most of the social and environmental costs. Without proper evaluationof these costs, the true scale of mining’s impacts for the Philippines is masked.There have been numerous Government initiatives to promote mining over the pastdecade or so. The 1995 Mining Act has been the most significant (see below). Morerecently, the Government prioritized 32 large-scale mining projects in September2007, several of which are featured in this report and have already caused fiercecontroversy.Discourses on Natural ResourceState - “development fantasy” - billions of dollarspay debt through natural resourcesMining Industry- high risk, capital intensive- natural resource is material inputgoverned by economies of scaleCommunity-natural resources are a LIFE resourceMining stands at the centre of the divideBetween the Rich and the Poor.From theNorth…..to the NorthMININGGloriouspromisesContracts &AgreementsFrom the SouthTo theSouth19

CommunityResource for subsistenceand livelihoodState, Chambers of Commerce,Banks, and Mining CompaniesResource for production andconsumption. Driven by globalmarketsProduction for lifeProduction for Commodity4.2 Conflict of InterestThe interests of mining and those of social and environmental health are oftendiametrically opposed, or at least in conflict. The Government’s Department forEnvironment and Natural Resources (DENR) encapsulates this very conflict ofinterest because the Macapagal-Arroyo Government charged it with promotingmining even though it is already the Government’s enforcer of environmentalregulations. Since 2000, the World Bank and other international donors have tried toconvince the Government to create a National Environmental Management Agency toindependently enforce environmental laws and regulations. But Congress has notacted upon the Bill that would make this possible. Although the initiative has notprogressed, there is continued clamor for greater transparency and public scrutiny ofinformation about the deals reached between the Government and mining companiesthrough public disclosure and through the NGOs and community groups participatingin the review before permits are granted and in monitoring of any approved miningprojects. The Government and mining companies counter these demands witharguments about the need to maintain commercial confidentiality.4.3 DENR Promotes Mining and Demotes EnvironmentThe Government’s paramount duty, and thus that of all Government departments, is toprotect its citizens. The conflicting roles of DENR – to promote mining and to protectthe environment – have de facto been resolved. DENR allocates substantialpersonnel, budget, and support to its body dealing with mining, the Mines andGeosciences Bureau (MGB), while depriving of resources those departmentsresponsible for environment, forest, protected areas, watershed, wildlife, andbiodiversity.The powerful divisions within the DENR, such as the MGB, have full information inthe mining permit processes, while, in stark contrast, the DENR’s environmental,protected areas, watersheds, 16 wildlife, biodiversity and social departments are often16 According to the National Economic Development Authority (NEDA) development plan, “themanagement of watersheds has not been properly given attention. This has led to shortages of water20

kept in the dark. When differences of opinion arise, DENR tends to side with themining corporations against their environmental staff. This is a classic case ofregulatory capture: the Government’s regulatory agency that is supposed to be actingin the public interest becomes dominated by the very industry that it should besupervising. Because vested interests in the mining industry have a concentratedstake in DENR’s decisions, they seek the means – direct or indirect – to capturedecision makers.In the Philippines, the mining corporations have largely succeeded in such regulatorycapture, which has caused deep rifts within Filipino society: laws protecting peopleand their resources are circumvented; national checks-and-balances are undermined ortotally gutted; protected area legislation is by-passed; and mining corporations arefacilitated and favored, making environmental prudence all the more difficult.To “revitalize” the mining industry in the Philippines, the Government announced in2004 (Executive Order No. 270) that it would reduce the procedures and norms forenvironmental permissions, which the DENR Secretary described in of that yearOctober as “obstacles for private investment to the country”. President GloriaMacapagal-Arroyo passed various executive and administrative orders (includingExecutive Order 270 leading to the Mineral Action Plan) that simplify and fast-trackthe processing of mining applications and issuing of mining permits, “harmonize”laws that contradict the 1995 Mining Act (see below), and reduce people’s rights andlocal government rights to oppose mining projects.This deregulatory approach could be considered positive if the goal was to simplifythe complexity of the current permissions system. But, according to the EuropeanCommission (2005), DENR seems to be looking to remove regulations so as to attractmore investors rather than simply to speed up the permissions process. 17When the DENR invariably sides with large-scale mining against environmental lawsand prudence, the people and the nation suffer. The law is sapped when juridicalperiods of public comment are reduced from 6 months to 3 months to 30 days to thecurrent limit of 15 days. 18 The law is rendered meaningless when land within afor irrigation, industrial and domestic uses and is thus likely to negatively affect future developmentinitiatives.”17 DENR’s Secretary Joselito Atienza emphasized on 11th January 2008: “We should be moreaggressive in helping mining companies deal with the local community, anticipating social,environment and other concerns and issues that could affect the security of the mining projects.” Soonafterwards, DENR became more aggressive. For example, on 31st January 2008, the Army became thesecurity agency for mining conglomerate DMCI Mining Corp. (DMCIMC) that is in dispute withanother mining firm over the proposed ore port site in Sta. Cruz, Zambales?. DMCIMC will exploitfive million tonnes of nickel for five years. The agreement between the Army’s 7th Infantry Divisionand DMCIMC to protect 3,700 hectares of ore-rich land stated: “We have to support mining companiesbecause they make contributions to the economy”.http://209.85.173.104/search?q=cache:GckRqw54HoQJ:wwmineweb.com/mineweb/view/mineweb/en/page36%3Foid%3D%204426%205%25%2026sn%25%203D%20Detail+PACT%2BPhilippines%2BMining&hl=en&ct=clnk&cd=2518 DENR: Company Procedure Compliance Time & Cost 1. Self-monitoring Report 2 days PHP6,000each instance, PHP24,000 annually. 2. Environmental Performance Report and Management Plan 5days PHP15,000 each instance. 3. Approval of Exploration Permit Applications (EPA) (filed post21

nationally protected area can be excised from protection whenever a miningcorporation wants to mine it. The case studies in this report all provide examples ofmining being permitted in key biodiversity and protected areas.Debasing national laws is one thing; passing industry-friendly legislation to over-ridenational laws and social provisions is another. When corporate mining trumpssocietal protections, the nation is in dire straights. Corporate welfare is theGovernment's bestowal of grants, tax breaks, or other favorable treatments oncorporations. Corporate subsidies imply that corporations need such favorabletreatment more than the poor and vulnerable. DENR is on the side of tax holidays;exemption from excise taxes, import duties for capital equipment and for spare parts,wharfage rates, royalties, sales taxes, corporate taxes, income tax, and import duties;and unrestricted repatriation of money obtained in the Philippines.Sometimes, social legislation has been specifically suspended to help a miningcorporation, such as suspension of the rights of association, to collective bargaining,and to join trade unions or syndicates. In some countries, even occupational healthand safety legislation may be suspended for a mining corporation. The use ofnational armed forces, often at taxpayers’ expense, to help mining corporations, isalso globally widespread, and not just specific to the Philippines case.4.4 Corruption in Environmental GovernanceBesides regulatory capture within the DENR, corruption within the PhilippineGovernment is also a problem. Transparency International’s Annual CorruptionPerceptions Index (CPI) of 2007, ranked the Philippines 131 out of 179 nations (1perceived as least corrupt, 179 most corrupt). In 2008, the country was ranked as themost corrupt of 13 Asian nations by the Political and Economic Risk Consultancy.Michael Clancy, head of the Philippine Business Leaders Forum, said in 2008 thatwidespread corruption in the Philippines is a bigger deterrent to investment thanperceived security risks. The Philippines had the lowest Foreign Direct Investment(FDI) of all countries in Southeast Asia in 2007 at $2.7 billion, slightly lower than in2006. Indonesia won $10 billion in FDI, while Vietnam garnered $19 billion. TheFraser Institute, a Canadian-based mining research group, in its 2007 annual survey ofmining industry executives, ranks the Philippines high for mineral potential, but nearthe bottom of the 65 mining regions and countries surveyed as an investmentdestination, only slightly better than Zimbabwe. Corruption and political instabilitywere the main reasons given for concern,Aug. 26, 2005) requiring clearance from DENR Secretary prior to the approval by MGB RegionalDirector pursuant to DENR MO 2005-020, 30-180 days. 4. Processing and Evaluation of MiningRights Applications by MGB Regional Office and MGB Central Office which more often requiresdouble compliance by the applicant over one document (i.e., EWP & EXWP, Area Computation)depending on the standards and knowledge set by evaluators from different offices. One month eachinstance: PHP 20,000, depending on location of Regional Office. 5. Approval of EnvironmentalCompliance Certificate and Permit to Transport.22

The Asian Development Bank (ADB) emphasizes, in its March 2008 report,Philippines: Critical Development Constraints, the direct link between corruption,political instability, and decline in investment growth in the Philippines. It notes that:“The perception of worsening corruption was found to partly explainthe low investment rate in the Philippines … A key reason for weakrevenue generation – leakages in revenue collection – is rooted inpersistent corruption and patronage distribution. … For instance,corruption undermines tax collection; political instability hindersinvestment and growth, and reduces the tax base.”In the context of extractive industry projects, corruption tends to be localized. The2004 Extractive Indusries Review (EIR) found that “there was often the increasedrisk of corruption by local officials dealing with land issues” (EIR 2004). Themultiple standards for land valuation offer ample opportunities for corruption at thelocal and national levels. Some environmental NGOs allege that many politicians andDENR staff are involved in the illegal logging business. There is a lack of internalcontrols to curb bribery, which has traditionally been notorious in illegal logging andmining concessions (European Commission, 2005).The EIR (2004) also highlighted that issues of weak governance (such as corruption)are particularly problematic in the extractive sector because all revenues arechanneled through central government, making it a national level problem as well.The Philippines Corruption Prevention Project includes the DENR among theinstitutions targeted to participate in National Corruption Prevention conferences,public corruption surveys and other transversal actions. 19Money lost to corruption translates to lost opportunities for the Government toalleviate poverty. The World Bank estimates about BHP30 billion pesos (US$739,900,000) are lost annually to corruption, which could have been invested inpoverty reduction, education, health, and livelihood assistance.4.5 Philippine Mining Act, 1995The 1995 Mining Act liberalized the legal framework for mining, making it far lessrestrictive. It allows greater foreign ownership, full repatriation of profits, tax breaksand tax holidays of 5-10 years, and lower duties and tariffs. Overall, it has been themost significant (and contested) measure to encourage more foreign investment inmining since the Government decided in 1992 to pursue an aggressive policy torevitalize the sector. 2019Eiji Oyamada, 2005, “President Gloria Macapagal-Arroyo’s anti-corruption strategy in thePhilippines: an evaluation, ”Asian Journal of Political Science 13 (1): 81 – 107.20 Mining has a long history in the Philippines of both small-scale artisanal mining and large-scalecorporate mining. It boomed in the 1960s and 1970s under President Ferdinand Marcos, during whichthe best quality ore was extracted. But mineral exports declined in the 1980s: they accounted for 22%of total exports between 1970 and 1974, but just 7% between 1986 and 1995. See Christian Aid andPIPLinks, Breaking Promises, Making Profits: Mining in the Philippines, December 2004, p.7.23

As a Senator, it was Gloria Macapagal-Arroyo who introduced the Act in the Senate(several years before she became President in January 2001). President Fidel V.Ramos signed it into law on 3 rd March 1995 (officially Republic Act 7942), whichwas hailed by the London-based Mining Journal (the mining industry's leadingweekly newspaper) as “among the most favourable to be found anywhere”. 21 Many ofits measures had been suggested or encouraged by the World Bank, while selectedcompanies had been invited to assist in the drafting. 22The Act not only affirms the State’s ownership of mineral lands and its right toexpropriate them, but also allows the State to grant mining companies 100%ownership of such lands (and thus rights over forests, water and settlements as well asthe minerals). Chapter 1, Section 2 of the law declares that is the State’s policy topromote the rational exploration, development, utilization, and conservation ofmineral resources. (In practice, the fourth goal, conservation, has been eclipsed bythe other three: exploration, development, and utilization.)The Mining Act and Mining Policy FrameworkThe 1995 Mining Act was passed primarily toattract foreign investments while getting aroundthe constitutional provision of Filipino corporateownership in resource extraction.The law was passed as a key economic measure of theRamos administration, a way of saying the Philippines was“open for business” – a policy congruent with theliberalization mantra of the IFIs and IDAs.Act grants different types of mining rights:• Exploration permits for corporations and individuals• Mineral production Sharing Agreements (MPSA)• Financial Technical Assistance Agreements (FTAA)The act allows100% ownershipparticipation inthrough, FTAAsSlide Caelito T. Anonuevo, Ramon Fernan III, Filomeno Sta. Ana III Action forEconomic Reforms Baguio Philippines 2007 www.aer.ph21 James Otto, director of Institute for Global Resources, Policy & Management, Colorado School ofMines, confirmed the World Bank’s role in a presentation to NMP (National Mineral Policy) NationalConsultation in Metro Manila, 3-4 December 2003; London Mining Journal quoted in NewInternationalist, Issue 299, March 1998; Companies invited to draft the new mining law at 1993 PanAsian Mining Congress, Singapore, September 1993. During the 1990s, the World Bank encouragedmany countries to revise their national mining codes, in particular to weaken social protections and tofavour mining corporations.22The Philippine Government invited companies to attend and take part in the drafting process at aworkshop during the 1993 Pan Asian Mining Congress held in Singapore.24

Box 4.1: Some Provisions of the 1995 Mining Act● 100% foreign ownership of mining projects allowed (compared to 40% previously).● A foreign company can lay claim to an area of up to 81,000 hectares onshore or 324,000hectares offshore. Philippine-based companies are restricted to 8,000 hectares in oneprovince and 16,000 hectares within the country.● Companies can repatriate all profits, equipment and investment.● Companies are guaranteed against state expropriation.● Excise duties cut from 5% to 2%; tax holidays and deferred payments allowed until allcosts are recovered.● Losses can be carried forward against income tax.● The Government commits itself to ensuring the removal of all obstacles to mining,including settlements and farms.● Companies are promised priority access to water resources within their concession.● Companies are given the right to sell gold directly onto the international market withoutintervention from the Central Bank.● Mining leases last 25 years with an option of a 25-year extension.Source: Christian Aid and PIPLinks, December 2004Breaking Promises, Making Profits: Mining in the Philippines, p 8The Act provides for a Mineral Production Sharing Agreement (MPSA) to be signedbetween the Government and a mining company. It grants the mining proponentexclusive rights to conduct mining operations within a contract area.The centerpiece of the Act, however, is the Financial and/or Technical AssistanceAgreement (FTAA), which gives mining companies 100% ownership and controlover mineral lands for up to 50 years. The maximum mine area in any one agreementis 81,000 hectares.As soon as the 1995 Mining Act was passed, there was a huge rush of applicationsexplore or mine. At that time, the nation had 262 existing Mineral Production SharingAgreements (MPSAs), which included sizeable indigenous lands. Two FTAAs cover447,308.26 hectares that include indigenous communities, with 54 more FTAAapplications targeting 2,350,643.34 hectares. But the Act has not gone uncontested.There have been several legal challenges both from within and outside theGovernment contending that the largesse within the 1995 Mining Act isunconstitutional because an FTAA provision allows foreign contractors to own 100%of mining operations, including the land and minerals. This violates the provision inthe 1987 Constitution that “all lands of the public domain, waters, minerals, coal,25

petroleum and other mineral oils, all sources of potential energy, fisheries, forests,timber, wildlife, flora and fauna and other natural resources are owned by the state.”The La Bugal-B’laan Tribal Association from Mindanao (see Case Study 3) is one ofthe groups that brought such a legal case, and on 27 th January 2004, the SupremeCourt found in their favor. It declared as “unconstitutional and void” severalprovisions of the 1995 Mining Act. 23But the Government appealed against the Supreme Court’s ruling. Allegedly underpolitical pressure, 24 on 10 th December 2004, the Supreme Court reversed its ownappeal decision, declaring that the 1995 Mining Act was constitutional after all andupholding the provision in the Mining Act allowing companies that are up to 100%foreign-owned to enter into an FTAA with the Government. 25The Mining Act and Mining Policy FrameworkThe Mining Act’s constitutionality was questioned in a suit filed by the La Bugal-B’laan Tribal Association in February 1997. The suit was against AustralianownedWestern Mining Corp, (now Xstrata and Sagitarius Mines Inc.) whichentered into an FTAA with Philippine Government.In January 2004, the Supreme Court ruled that the law violated constitutionalprohibition against foreign ownership of natural resources but later reversed itself,saying that it was unwise “to strangulate growth for parochial and narrowinterests.”In a dissenting opinion, Justice Carpio said the law negates the State’s ownershipof mineral resources as explicitly mandated by the 1987 Philippine Constitution.The profit share of the government in terms of taxes, fees etc. are “not contractualpayments to the State as owner of the mineral resources but are mandatoryexactions based on the taxing power of government”.23(a) The proviso in Section 3 (aq), (b) Section 23, (c) Section 33 to 41, (d) Section 56, (e) Thesecond and third paragraphs of Section 81, and (f) Section 90.24 Political pressure was cited by Jose De Venezia, Speaker of the House of Representatives, at ameeting of international mining investors held in London, UK, on 17 June 2005. He said that, togetherwith the Chamber of Mines, “we mounted a strong campaign to get the Supreme Court to reverse itself.It was a difficult task to get 15 proud men and women of the Supreme Court to reverse themselves, Butwe succeeded. Finally, the law was declared constitutional”. http://www.minesandcommunities.org/article.php?a=83325 The Supreme Court based its decision to overturn its original ruling concerning the economicbenefits of FTAAs on the argument that an additional Government share of net mining revenues cancompensate for the low tax rates and high incentives granted by an FTAA. Such revenue sharing isunlikely to be sufficient however, because in future FTAAs, companies may either reduce their netmining revenues or ensure that the State is entitled to a smaller portion of them. In addition, FTAAcontracts may be negotiated containing clauses that enable the company to reduce the Governmententitlement (see Case Study 3).26

The Supreme Court’s decision is contentious, and parliamentarians, impactedstakeholders, municipal and provincial authorities and the Church are still urging thatthe 1995 Mining Act be revised. They still claim that both the Act itself and thesupporting order establishing Financial and/or Technical Assistance Agreements(FTAAs) usurp legislative power and nullify the Philippine State’s role as owner-intrustand investor in the country’s minerals. Under the Agreements, “thegovernment’s source of revenue will largely rely on the collection of taxes, fees androyalties” and does not include a share in the benefits, profits or proceeds of theenterprises. 26The first Congressional petition 27 asked the Supreme Court to issue a temporaryrestraining order (TRO) to stop the DENR from granting any Mineral ProductionSharing Agreements (MPSAs).The second petition, brought by local people from Davao Oriental province inMindanao in March 2008, asked the Supreme Court to nullify seven MPSAs coveringmore than 17,215 hectares that the DENR had issued to two mining firms, HallmarkMining Corporation and AustralAsia Link Mining Corporation, to mine nickel andcobalt. (The Anglo-Australian mining giant, BHP Billiton, is now a joint partner intheir project, see Case Study 4)In 2008, the Supreme Court ordered DENR Secretary Atienza to comment on apetition filed by several lawmakers to declare the 1995 Mining Act unconstitutional. 28Until then Atienza had refused to comment on either petition.Filing Petitions in Supreme Court March 200826 For example, the controversial Rapu-Rapu Mining Inc. claimed it made P134.4 million profit in fourmonths in 2005, yet paid only PHP2.07 million in taxes, or a mere 1.5 percent of its revenues27Reps. Ana Hontiveros Baraquel of Akbayan, Lorenzo Tanada III of Quezon province, and TeodoroCasino of Bayan.28 Tetch Torres, “SC acts on petition to declare Mining Act unconstitutional,” INQUIRER.net, 7th April2008.27

Box 4.2: Petition to the Supreme Court from members of CongressRA 7942 [The 1995 Mining Act] is unconstitutional as it violates Article XII, Section 2 of the1987 Constitution, which states that:“all lands of public domain, waters, minerals, coal, petroleum and other mineral oils, allforces of potential energy, fisheries, forests, timber, wildlife, flora and fauna and othernatural resources are owned by the State.”The petitioners said that the:“exploration, development, and utilization of natural resources shall be under the full controland supervision of the State. The State may directly undertake such activities, or it may enterinto co-production, joint venture, or production-sharing agreements with Filipino citizens, orcorporations or associations at least 60% of whose capital is owned by such citizens.”But they said that Section 80 of RA 7942 and Section 212 of Department Order 96-40 violatethe Constitution since they provide that the government’s share shall be in excise taxes.“This fiscal arrangement is glaringly contradictory to the constitutional provision that thedevelopment of the national patrimony should be based on an equitable distribution ofwealth,” they stressed.But in a full court decision penned by retired Chief Justice Artemio V. Panganiban, theSupreme Court declared in 2008 that the Philippine Mining Act of 1995 was constitutional.In their petition, the three legislators said that studies show that the open-pit mining carriedout by the two mining firms, Hallmark and AustralAsia, is polluting the groundwater withtoxic wastes and sediment. They stated that:“The groundwater has been found to be the water source of the residents of the affectedareas. The contaminated water shall be detrimental to the health and lives of those whodepend on the groundwater, as well as damaging the farmlands being irrigated by thewatersheds, not to mention stressing the ecological habitat of marine life on Pujada Bay onwhich the coastal residents depend.”The 1995 Mining Act is now being challenged by Congressand by civil society on the grounds that the many andgenerous fiscal incentives granted to mining companiesplace the nation at a disadvantage; they debase thePhilippines to the role of a tax collector in the exploitationof its own resources, instead of being a direct beneficiary.In addition, the unrealistically low lease rates (an averageof PHP7.5 (US$0.18) per hectare), which were set wayback in the 1970s, damage the economy even if the miningcompanies do pay taxes. 2929 This point was emphasized by Judge Jesus Quitain who stressed: “The government and its lineagencies such as the DENR should be pro-people instead of pro-investment.”http://www.sunstar.com.ph/static/net/2008/04/28/.gov.t.entices.mining.investments.recklessly.html28

4.6 Separate Exploration from ExploitationThe Mineral Production Sharing Agreement (MPSA) grants the mining proponentexclusive rights to conduct mining operations within a contract area. Pending theDepartment of the Environment and Natural Resources (DENR)’s approval of anMPSA, however, the Mines and Geosciences Bureau (MGB) Director may issue aTemporary Exploration Permit (TEP) to the mining applicant for 12 months. This is ahighly flawed procedure. The TEP must not be construed, as it often is, as a permit toexploit. Exploration and mining must be kept separate. An exploration permit mustnot automatically lead to a permit for mining. DENR should emphasize that grantinga TEP for exploration in no way means an exploitation permit may be forthcoming.Exploration also needs a judicious level of Environment and Social ImpactAssessment (ESIA). The Free and Prior Informed Consent (FPIC) process (seediscussion below) must begin as soon as a TEP is applied for.4.7 Post-Mining Rehabilitation Must Be EnforcedFlaws in the mining laws and their implementation contribute to the environmentaland economic damage brought about by mining. The 1995 Mining Act stipulates thatmining companies should fully rehabilitate the area after they have finished mining.Rehabilitation and restoration of mined-out sites adds to the cost of mining, socorporations are not keen on legislation mandating decommissioning and restoration,even though it tends to be standard practice in their home countries. The Departmentof the Environment and Natural Resoures (DENR) seems to recognize this grave flawbecause Mines and Geosciences Director Horacio Ramos says that HolcimPhilippines (a subsidiary of the Swiss-based aggregate [crushed stone, gravel andsand] supplier) was the first company to deliver a post mine rehabilitation plan,including a commitment to fund it, together with its application to mine.This makes it a milestone, not only for the company but also for the DENR and themining industry. Under Holcim Philippines’ plan, the company would rehabilitate its11 limestone, silica, and shale quarries in forest lands on which it would spend PHP72million pesos (US$ 1.75 million) for 12 years starting in the year 2010. The PHP72million pesos mine rehabilitation plan fund is part of an account of more than 1 billionpesos (US$ 24.3 million) that the company has committed to spend on environmentalprotection, enhancement and rehabilitation. After highlighting the nation’s firstpostmine rehabilitation, DENR Chief Joselito Atienza promised that henceforth “therewill no longer be any abandoned mines.” 3030 Philippine Free Press. 2007. Responsible Mining. Special Feature 29th December 2007, pp. 23 –24. Makati, Metro Manila, Philippines.29

Box 4.3: Sensitive Areas or “No-Go Zones”Five main types of Sensitive Areas or No-Go Zones have been identified. These are areaswhose value would be jeopardized by extractive industries. If potentially affectedcommunities reject a project proposed for their lands, the lands would then be off-limits tomining.1. Indigenous Peoples’ Ancestral Domains, or areas on which vulnerable ethnic minoritiesdepend. The National Council of Churches in the Philippines has called for a total ban onmining in ancestral domains (Makilan 2005). As a minimum standard Philippine law requiresthat Indigenous Peoples’ Free and Prior Informed Consent be obtained.2. Conflict Areas. No mining should be permitted in conflict or disputed areas becausemining only intensifies the conflicts. The World Bank’s Extractive Industries Review (EIR2004) noted that “The large economic rents generated by extractive industries may helpprovoke or prolong civil conflict. Indigenous peoples are particularly vulnerable” (p6). TheReview recommended that one of the “core macrogovernance” criteria in relation to miningshould be “the absence of conflict or of a high risk of conflict” and that in no circumstancesshould mining be permitted in areas involved in armed conflict. Following thisrecommendation, Datu Jun Mantawil, the highest ranking official of the Moro IslamicLiberation Front (MILF), urged Malacañang (GoP) to stop issuing mining permits in any areaunder the proposed Bangsamoro Juridical Entity (BJE) – a proposed Moro homeland –pending the outcome of peace talks between the Government and the Moro Islamic LiberationFront. The MILF peace panel urged President Macapagal-Arroyo and DENR Secretary LitoAtienza to freeze all applications for mining permits in areas inside the proposed BJE (Hicken2008).3. Cultural property. No mining should be permitted on religious or sacred sites,archeological and historic sites, burial grounds, sacred groves, sacred mountains (such asMount Canatuan in Mindanao 31 ), sacred lakes, rivers and springs, spirit abodes, or spiritdwelling places.4. Fragile watersheds, such as those protecting a dependent project downstream. Forexample, a tailings retention dam above irrigated rice planting should not be allowed.Riparian or riverbank ecosystems are important for conserving water supply, irrigation andfisheries and other services that deriving from the interface between the terrestrial and theaquatic ecosystems.5. Biodiversity and endemism areas, or endangered species ambits, rare habitats, andintactness (such as coral reefs, tropical rain forest, remaining old growth, and wilderness).Specifically, mining should not occur in World Heritage Sites, World Biosphere Reserves,IUCN I–IV protected areas, or in any marine protected areas. 1 The Extractive IndustriesReview (EIR 2004) recommended that mining should not be permitted that would “affectcritical natural habitat, as defined in the World Bank’s policy on Wildlands “31 Mount Canatuan is a sacred mountain to the Subanon Indigenous Peoples. Its top was bulldozed byCanadian company TVI to construct an open-pit gold mine, despite widespread opposition and withoutthe Local Government Unit permit.30

Box 4.3 contd : Sensitive Areas or “No-Go Zones”This categorization of five sensitive areas should serve as a “red flag” to indicate specialscrutiny and agreement before permitting mining in such areas. The actual definition of andagreement on project-specific “no go” zones requires stakeholder participation to assess thedegree of risk or losses that potentially impacted stakeholders might be willing to accept.This process will be strongly influenced if an unambiguously compensatory offset area isproposed and financed in perpetuity. In some cases, this offset could be more valuable forlocal communities and for conservation than not allowing the mine to go ahead. Biodiversityoffsets are conservation activities intended to compensate for the residual, unavoidable harmto biodiversity caused by development projects (ten Kate et al. 2004). The decision thereforeis tightly linked to Free and Prior Informed Consent (FPIC) and an Impact-CompensationAgreement (ICA). The better understood physical risks of mining also apply to any decisionin areas that are seismically active or cyclone-prone or that have tectonic fault lines, highpopulation densities, or very high rainfall, especially if the protective forest has been or willbe reduced._____________________________________Sources: Bishop et al. 2006; Dudley & Stolton 2001.* The Forest Stewardship Council and the World Bank describe these areas as “sensitive areas,” “highconservation value” areas, and “No-Go” areas. Definitions here follow those in Phillips 2001.Box 4.4 : Acid Mine DrainageAcid mine drainage (AMD) is often the most severe waste legacy from mining,causing damage through the strong acids and the heavy metals contained in them.While some acids seep naturally from rock, they are rarely dangerous. Heavy metals– Copper (Cu), Nickel (Ni), Cadmium (Cd), Lead (Pb), Zinc (Zn), Mercury (Hg),Arsenic (As), and Tin (Sn) – are also widespread in the environment, but are usuallynot dangerous because they are insoluble under normal conditions.Mining can create or exacerbate acid drainage by fragmenting much sulfide-bearingrock, or by exposing the dumps or tailings to oxidation in the air. The sulfide exposedto air oxidizes into sulfuric acid, which is extremely damaging to all forms of lifeIn addition, the sulfuric acid releases heavy metals from the rock, which may thenenter the hydrological cycle or be blown for long distances downwind. Even smallamounts of heavy metals released by a project bio-accumulate over the years and upthe food chain. They poison drinking water, wreck irrigation and other agriculture,wipe out fish and aquatic organisms far downstream from the project, and maycontinue to do so for centuries or more after the mine has closed. Such retoxificationhas been called a ‘chemical time bomb’ as it is so damaging to humans and other life.Prevention is the preferred means of dealing with acid mine drainage, given that it isalmost impossible to stop once it has started. If it does start, however, then annualapplications of limestone or water treatment plants can treat it to a certain extent. 3232 Atlantic Richfield agreed to pay $87 million for such a water treatment plant to clean highly toxicwater in its Berkeley open-pit copper mine in Butte, Montana following the Federal District Court caseof March 2002.31

4.8 Government and Society Split on the Benefits of MiningAt present, the Office of the President, the Department of the Environment andNatural Resources (DENR) 33 and mining corporations are all willing to bend, suspend,or overlook national laws protecting citizens and their livelihoods, and to eliminatethe checks and balances that the Government has put in place, in order to promotemining.But the people impacted and potentially impacted by mining, their advocates, theChurch (see Annex A) and many local government officials (see Annexe B) arestrongly opposed to further large-scale mining. There are continual calls to repeal orrevise the 1995 Mining Act. 34 Some have said that they will accept mining, but onlyif they have iron-clad guarantees that the mining will not damage their lives andlivelihoods. Local government officials insist that national laws must be followed,and no exceptions granted to checks-and-balances.Supreme Court Justice Antonio Carpio confirmed in 2007 that the provisions of the1995 Mining Act waive the State's ownership rights under the Constitution overmineral resources and override the State’s constitutional duty to control and supervisefully the exploitation of mineral resources. 35 He quoted then DENR Secretary AngeloReyes as admitting that: “The Filipino people will receive nothing, zero, nil from theprofits of the estimated PHP47 trillion mineral wealth of the country.”“Let me repeat that: the DENR Secretary, doing his own arithmetic, publicly admittedthat, under the profit sharing formula in DAO 99-56 approved in La Bugal, thegovernment will receive “somewhere from zero to nil” in the mining revenues offoreign contractors. “Zero to nil” means not even a pittance. The Filipino people will33 DENR has not always sided with the mining industry. For example, in 2001, then DENR SecretaryHeherson Alvarez, emphasized: ‘What does it gain a nation to be short-sighted and merely think ofmoney when an irreparable damage to the environment will cost human lives, health, and livelihoodcapacity of our farmers and fisherfolk endangering the food security of our people?’34 Even the mining lobby wants the Act to be clarified. For example, in 2008, the Federation ofPhilippine Industries (FPI) urged the government to clarify the benefit sharing equations under theMineral Production Sharing Agreement (MPSA). The most recent call for revision was on 11th March2003, when Parliamentary Representatives, joined by the Legal Rights and Natural Resources Centreand Attorneys Marvic Leonen and Rhia Muhi, contended that the Mining Act is grossly asymmetricbecause it is inherently disadvantageous to the Filipino people but substantially advantageous toforeign mining companies.35 Justice Antonio Carpio, Keynote Speech, Regional Convention of Mindanao Lawyers 21-23November 2007, “Closing the Gaps Between Law and Justice” 9 pp. He stressed that we ought now toknow better in the exploitation of our mineral resources. We must learn from our past mistakes (e.g.,deforestation) in the exploitation of our forest resources, otherwise we will be forced to repeat the samemistakes in the exploitation today of our mineral resources.32

eceive nothing, zero, nil, in the profits from the estimated P47 trillion mineral wealthof the country. This is the conclusion of the DENR Secretary.” 36Similarly, Senator Aquilino Pimentel (2007), in his report, Mining in the Philippines:bane or bust, seriously questions whether the nation benefits at all from mining.Trickle-down economics doesn’t work, he wrote, or, when it does, it is the mostinefficient and damaging way of creating jobs. If one internalizes the full costs ofmining (eviction and dangers to Indigenous Peoples, river pollution, destruction offorests, mangroves, coral reefs, agriculture and biodiversity), it is clear that there is nonet benefit of mining. The damage from mining and its continuance for manydecades after the corporations have left clearly outweighs the brief receipts frommining accruing to the nation. Senator Pimentel supports Bishop Deogracias Iñiguez:“There is a need to reassess the cost and benefits of mining in the Philippines takingnote of the tragedy it brings in the name of economic development before opening thedoors to more mining firms.” Senator Pimentel concludes that mining firms shouldbe forced to adhere to Filipino legislation without double standards, and unless theydo, they should not receive any permits. Existing permits should be cancelled fornon-compliance. Mining forms must respect human rights, especially for IndigenousPeoples.The latest constitutional challenge against the 1995 Mining Act reinforces thewidespread arguments as to why the Mining Act of 1995 should have been scrapped,long ago. The Natural Resources Center in Manila, an NGO think-tank, has longdecriedthe human rights, environmental and other destructive impacts of the MiningAct on mining-affected communities, including Indigenous Peoples’ lands. “Even thestate and the Filipino citizens will also stand to lose economically and financially ifwe rest content with these fiscal provisions and with the Mining Act itself.” One ofthe community-petitioners from Davao Oriental, has declared, “We call on theFilipino people to demand the scrapping of the Mining Act of 1995. It victimizes notonly the indigenous peoples, but short-changes the nation and sell-out its patrimony.”Box 4.5: Nickel Mining by Sumitomo’s Rio Tuba company,in Bataraza’s Coral Bay, Southern PalawanThe Rio Tuba Nickel Mining Corporation (RTNMC) of Bataraza, Southern Palawan is 54% owned bythe Japanese Sumitomo Corp. It was established in the early 1970s under a policy regime that gave it avirtual blank check in amassing profit. Palawan, however, is one of the world’s biodiversity “HotSpots”. Most of these areas are also populated by Indigenous Peoples or indigenous culturalcommunities (ICCs) who have lived on the land for generations.The Strategic Environmental Plan (SEP) for Palawan (special law RA 7611) was designed to protectPalawan’s extraordinary biodiversity and Indigenous Peoples. Despite the law, most (73%) of themining is inside non-allowable areas (Core Zones or Restricted Use Zones under the SEP) and most areinside ancestral domains. The mandatory Free and Prior Informed Consent (FPIC) process has beeneither absent or questionable. There has been no successful rehabilitation program in 11 abandonedmining operations. Negative environmental and socio-cultural impacts have remained unresolved.Endorsements given by local government units in the early stages of mining projects have not36 Newsbreak. Antonio Carpio: Closing the Gaps between Law and Justice, Friday, 30 November 2007http://www.newsbreak.com.ph/index.php?option=com_content&task=view&id=3975&Itemid=8888909433

conformed to the social acceptability requirement of applicable laws.From 1995 to present, the RTNMC paid PHP76.2 million (US$1.85 million) in excise taxes to thecentral government, but only PHP14.8 million (US$0.36 million) has been remitted to the province ofPalawan, equivalent to the taxes due for the years 1992-1994. The Local Government Unit’s pendingshare of PHP31 million (US$0.75 million) is still to be released to the municipality by the nationalgovernment. In addition, the tax assessment on real estate and property (structures and machineries) in2006 are PHP1.78 million (US$ 43,300) and PHP 4.39 million (US$ 106,809) respectively. RTNMChas not paid its property taxes for two years.RTNMC has complied (mostly) with its legal obligations to the government, in terms of excise taxpayments and property taxes, but the host communities have hardly benefited or the municipalitydeveloped. Current policies on mining provide even more incentives for investors such as tax holidaysand exemptions on anti-pollution devices.The Social Development Management Program (SDMP), a PHP89 million (US$ 2.16 million) 5-yearplan, covers 11 barangays and 12 municipalities supporting basic needs and donating equipment andvehicles, and a useful scholarship program. Creation of 586 jobs is one of the main benefits. But dataat the beginning of 2008 shows that only 281 are the current employees; the rest are migrants. Lowsalaries and lack of benefits for the contractual and seasonal employees exacerbate conflicts betweenemployees. Labour dispute cases have been filed at the Department of Labor and Employment(DOLE).After nearly four decades of nickel mining, the following negative impacts are clear: a surge inprostitution; (b) deforestation and loss of wildlife habitat in the mined out areas and the Gotoklimestone quarrying area;(c) decrease in quantity and quality of water supply;(d) adverse impact on irrigation systems and decrease in agricultural productivity;(e) erosion and flash floods;(f) threats to coastal resources brought by erosion and effluents;(g) water and air pollution; and(h) health impacts such as skin lesions. I feel (a) thru (h) can be run on to save spaceAs the Bataraza municipality has become dependent on mining incomes over the years, traditional nonminingsectors (fisheries and agriculture) have not prospered.In 2001, the average annual income of a Bataraza family was lower than the average household incomein Palawan. In a poverty mapping exercise conducted by the Peace and Equity Foundation, Batarazawas at the bottom of the list of the poorest municipalities in the province. Any benefits of mining inBataraza have not been equitably and efficiently distributed, because the national government exercisesdiscretion in the release of LGU shares. RTNMC business incentives have not produced any positiveimpact on the economy of Bataraza but the company has more than recouped its investments.RTNMC did introduce some corporate social responsibility projects, but they have not ensuredequitable direct benefit to the communities. Identification of community projects were not effectivelyreviewed. No criteria were developed to ensure projects were sustainable and feasible for thecommunities. Instead, the projects were identified based on the preference and judgment of a few nonrepresentativeleaders and, as a result, do not represent the needs of the majority. Impacts on theenvironment are not effectively monitored, and the environmental costs are undervalued. Althoughthese impacts are clearly evident, the communities lack the technical skills and resources to monitorthem. The planned expansion of the mining operations to Mt. Bulanjao presents a conflict in theinterpretation of policies concerning natural growth forests. While it is clearly to be considered aprotected area under the zoning system of RA 761,1 there have been compromises made in favor of thecompany in apparent contradiction with existing regulations.34

Box 4.5 contd. : Nickel Mining by Sumitomo’s Rio TubaRecommendations1. An assessment of the Strategic Environmental Plan for Palawan (SEP special law RA 7611) vis-àviscurrent mining policies should be conducted. Since the SEP prohibits the destruction of naturalforests and these areas have been declared as core zones or areas of maximum protection, thegovernment must determine to what extent commercial mining operations can still be allowed inPalawan.2. Clear rules and regulations on the implementation of the 1% royalty share for the affectedIndigenous Peoples are needed. In the case of Indigenous Peoples and indigenous culturalcommunities in Bataraza, the royalty payment was integrated in the compensation program. Miningcompanies have used the royalty payment as a strategy to get Indigenous Peoples’ consent. Thepayment and beneficial use of such royalties must be monitored and evaluated.3. Transparent and participatory monitoring and evaluation of the mining company’s socialdevelopment projects are needed. A transparent, representative and independent multisectoral groupshould identify community development projects and manage the funds allocated for them.4. DENR and the exploitation permitting process must be strengthened in order to ensure compliancewith environmental laws and that the utmost benefits are realized and negative impacts minimized.Abbreviated from a report by Grizelda Mayo-Anda and Katherine Mana-Galido of the Ateneo de Manila University School ofGovernment and the Environmental Legal Assistance Center March 2008 (in press)35

Chapter 5: Indigenous Peoples5.1 Indigenous Peoples and the National Commission onIndigenous PeoplesPhilippine society includes 42 Indigenous Peoples’ groups who comprise about 17%of the national population of some 90 million people. There are 114 ethno-linguisticgroups. Indigenous cultural communities / Indigenous Peoples are recognized andtheir rights guaranteed under the 1987 Constitution and in the Indigenous PeoplesRights Act (IPRA) of 1997. 37 The failure to ensure the effective implementation oftheir self-determination and ancestral domain rights is one of the most seriousdevelopment issues facing the Philippines today. IPRA’s definition of ancestraldomain includes all “natural resources therein”. As Indigenous Peoples directlydepend on these natural resources (such as forests, watersheds, rivers, wildlife, andfisheries), they are the primary stakeholders and must be recognized as full partners inthe sustainable management of such resources. In accordance with the requirementsunder IPRA, the Government established the National Commission for IndigenousPeoples (NCIP).The 1997 IPRA was the first timethat a state in the Asia-Pacificregion explicitly recognized therights of Indigenous Peoples totheir ancestral domains, to selfdetermination, to free and priorinformed consent (FPIC), and tothe free exercise of their culture.The Act affirms that native title isthe underlying principle of theirancestral domain rights. It offersan option to apply for aCertificate of Ancestral DomainTitle (CADT), which providescommunities with formal deeds ofownership. Commendably,IPRA’s provisions afford some ofthe strongest protections forIndigenous Peoples rightsavailable in any nationallegislation.37 Sources: Ali 2003, Broad & Cavanagh 1993, Broad 1994, Burton 1996, 2003, 2004, Cariño 2005,Caruso et al. 2005, Clark 1994, 1998, 2001, Cruz et al. 1999, Eder 1987, 1994, 2008, Evans et al.2002, Feraro-Banta 1985, Family Planning Programme 2000, Gariguez 2003b, 2006, 2007, 2008,Gaspar 2000, 2004, 2005, Gedicks 2001, Helbling & Volker 2004, Helle 1997, Holden 2005a, 2005b,Holden & Jacobson 2006, 2007, Indigenus 1997, Javier 1987, Kikuchi 1984, Labonne 1999, Lopez-Gonzaga 1979, 2002, Mendiola 1998, Nettleton 1997, Nijhof 1997, Philippine Solidarity Group 1997,Postma, Antoon. 1988. Annotated Mangyan bibliography (1570-1988): with index. Panaytayan,Mansalay, Oriental Mindoro, Philippines: Mangyan Assistance and Research Center. Rodil 2004, Vidal2004.36

But the enforcement of these provisions is clearly inadequate and ineffective. TheEuropean Commission (EC 2005) attributes the failure to implement IPRA tobureaucratic inadequacies and discriminatory behavior on the part of politicians andcivil servants towards indigenous groups. Arguably, some countries with weakerlegislation but with better enforcement afford better protection to their indigenouspeoples.5.2 The Role of the National Commission on IndigenousPeoplesThe National Commission on Indigenous Peoples (NCIP) is mandated to upholdIndigenous Peoples’ rights. Among its responsibilities is the processing of ancestraldomain titles.Although the Government has already recognized some ancestral domain claims inNorthern Mindanao, Palawan, Northern Luzon and other areas of the country, theboundaries of some of these domains have not been properly identified and mapped,and Deeds of Title have not been handed over to the communities. This situation hascaused extreme frustration within the communities whose claims were considered,while other communities saw their ancestral domain claim applications either rejectedor ignored for nearly a decade. In the meantime, transgressions of ancestral lands anddomains in the Philippines continue.Problems are further intensified by reported malpractice by some NCIP staffmembers, who are alleged to collude with the mining companies, many of who seeFPIC simply as an obstacle to be by-passed. As a result, it appears that miningcompanies are being aided and abetted in their use of divide-and-rule tactics toundermine Indigenous Peoples’ traditional structures.International best practice would require that, when multiple mining operations arebeing proposed for the same area, particularly a water catchment area, a full StrategicEnvironmental Assessment (SEA, see Annex C) must be conducted by anindependent body under the supervision of an Inter-Ministerial team. Such an SEAassesses the cumulative impact of all proposed mines and other activities on theecosystems on which agriculture, fisheries, and water supply depend downstream.Not all staff of the NCIP have been well trained on the problems or types ofinformation that should be provided to Indigenous Peoples to ensure that FPICprocesses are meaningful and lead to well informed decisions. For example, riverscan only carry so much sediment and pollutants before they cause major flooding ortoxicity problems for people and animals. NCIP staff are not trained to assess thecumulative impact of multiple applications on terrestrial or aquatic ecosystems.The authors did not meet a single Indigenous Peoples’ group that had been providedwith adequate information to make an informed choice on mining. In some cases, allthat had happened was an informal meeting consisting of a few oral promises from themining company, backed by a few more promises from the DENR’s Mines andGeosciences Bureau (MGB) that DENR staff would ensure that no damage would becaused.37

5.3 Rights of Ownership and Ancestral DomainNo mineral agreement is supposed to be approved unless there is a prior certificationfrom the National Commission on Indigenous Peoples (NCIP) that the area inquestion does not overlap any ancestral domain or that the written free and priorinformed consent has been obtained from the Impact Compensation Contract with theIndigenous Peoples concerned.This consent, if given, requires that the company enter into a Memorandum ofAgreement (MOA), sometimes called the Impact Benefit Contract, or Impact BenefitAgreement, through the Indigenous Peoples’ representative structures. TheMemorandum of Agreement must address the benefit sharing arrangements andmeasures to be taken in case of damages suffered by the community as a result of themining operation. A monitoring team must be established and appropriate grievancemechanisms put in place. In practice, however, MOAs are generally weak,monitoring is inadequate and grievance mechanisms are often nonexistent.5.4 Right to Develop Lands and Natural ResourcesWithin their ancestral domains, indigenous cultural communities and IndigenousPeoples have the right to control, manage, develop, protect, conserve, and sustainablyuse: (a) land, air, water, and minerals; (b) plants, animals, and other organisms; (c)collecting, fishing, and hunting grounds; (d) sacred sites; and (e) other areas ofeconomic, ceremonial, and aesthetic value in accordance with their indigenousknowledge systems and practices, as well as their customary laws and traditions.Some have adopted Ancestral Domain Sustainable Development and Protection Plansthat provide for all people to equitably benefit from the fruits thereof. In all instances,indigenous cultural communities and Indigenous Peoples shall have priority in thedevelopment, extraction, utilization and exploitation of natural resources.5.5 The Right to Benefits 38Under Philippine law, indigenous cultural communities and Indigenous Peoples havethe right to benefit 39 from the utilization, extraction, use and development of lands andnatural resources within their ancestral lands/domains and to be compensated for anysocial and/or environmental costs of such activities. Accordingly, the concernedindigenous cultural community or Indigenous Peoples community should be extendedall the benefits already provided under existing laws, administrative orders, rules and38 This section is based on the useful “Primer on the Philippine Minerals Industry” by QuisumbingTorres (2007)39 The right of impacted stakeholders to benefit from a mining projectare often called impact-benefitagreements (IBA), or Impact Compensation Contracts, profit sharing agreements, participationagreements, royalty or benefits allocation agreements, and cooperation agreements.38

egulations governing particular resource utilization, extraction or developmentprojects/activities, without prejudice to additional benefits as may be negotiatedbetween the parties.5.6 Protections Afforded by Indigenous Peoples’ Rights ActThe 1997 Indigenous Peoples Rights Act (IPRA) guarantees Indigenous Peoplespreferential rights to their ancestral domains and all resources found therein.Ancestral domains are defined as all areas generally belonging to indigenous culturalcommunities and Indigenous Peoples, subject to property rights within ancestraldomains already existing, “comprising lands, inland waters, coastal areas, andnatural resources, held under a claim of ownership, occupied or possessed byindigenous cultural communities and Indigenous Peoples by themselves or throughtheir ancestors, communally or individually since time immemorial, continuously tothe present, except when interrupted by war, force majeure or displacement by force,deceit, stealth, or as a consequence of government projects or any voluntary dealingsentered into by the government and private persons, and which are necessary toensure their economic, social and cultural welfare”.5.7 Free and Prior Informed ConsentThe Indigenous Peoples Rights Act (IPRA) requires that where development projectsimpact on Indigenous Peoples, their Free and Prior Informed Consent (FPIC) must besought “in accordance with their respective customary laws and practices”. The rightto FPIC extends to natural resource extraction projects. FPIC is defined as:“the consensus of all members of the ICCs/IPs [indigenous culturalcommunities and Indigenous Peoples] to be determined in accordance withtheir respective customary laws and practices, free from any externalmanipulation, interference or coercion, and obtained after fully disclosing theintent and scope of the activity, in a language and process understandable tothe community”. (IPRA Section Chap. III 3 g)The IPRA asserts that in the absence of such a clear level of consent, a project cannotproceed. The importance of FPIC was reinforced by the United Nations’ formaladoption of the Declaration on the Rights of Indigenous Peoples in September 2007.The tendency of the NCIP to act as a facilitator of the interests of mining companiesrather than to uphold Indigenous Peoples’ rights is highlighted in a submission madeby a consortium of international NGOs from the UK and Ireland to the United NationsHuman Rights Council’s Universal Periodic Review in April 2008. It stated thatindigenous communities had raised the following issues that they claimed were“serious impediments to the effective implementation of their right to FPIC andresulted in violations of their customary laws, disregard for their institutions anddestruction of their sacred sites”. (UNHRC 2008)First, the National Commission on Indigenous Peoples (NCIP) is the body mandatedto “protect and promote the interest and well-being of the ICCs/IPs [indigenouscultural communities and Indigenous Peoples]”. It is responsible for ensuring39

adherence to the implementing rules and regulations of the IPRA. The perceptionamong Indigenous Peoples, based on their experience of the FPIC process to date, isthat the NCIP is failing in its mandate. Rather than protecting and promoting therights of Indigenous Peoples, it appears that the NCIP is facilitating the entry ofmining companies. Some blame this on a lack of funding for the NCIP others on itslack of independence from a political agenda that is strongly pro-mining. They feelthat the selection process for its commissioners, which is under the Office of thePresident and not under the control of Indigenous Peoples, is at the root of itsproblems.Second, Indigenous Peoples feel there is inadequate respect for their traditionalcultures. Their right to FPIC is often viewed as a technical obstacle to be overcomeas quickly as possible. Meetings organized by the NCIP as part of the FPIC processoften take place in locations not in accordance with traditional customs of theIndigenous Peoples. In addition, the decision-making process does not adhere to therequirement that consensus of all members of the community be reached inaccordance with customary laws.Third, and related to the above point, the NCIP guidelines for the implementation ofFPIC impose restrictions on the time, manner and process of FPIC, which are not inconformity with the customs, laws and traditional practices of indigenouscommunities. One of these restrictions is the imposition of restrictive anddiscriminatory timeframes for completion of the FPIC process. The total time nowallotted to the conduct of an FPIC process is only 55 days, effectively allowing in theregion only 15 days for community consensus building. This does not giveIndigenous Peoples sufficient time to conduct their traditional indigenous decisionmakingprocesses or to consider the wide-ranging implications of mining, therebyeliminating the possibility of taking informed and culturally appropriate decisionsabout whether to grant their FPIC. 40The fourth issue concerns factionalism and misrepresentation. A pattern appears toexist where the NCIP, in conjunction with the mining companies, attempts tocapitalize on, or generate, division within indigenous communities. 41 In cases wherethe consent of the Indigenous People has not been forthcoming, non-representativeindigenous leaders have been created and recognized by the NCIP and the miningcompanies. Some communities have also described manipulative processes includingthe misuse of attendance sheets as proof of consent and offers of cash or food in40These restrictive and discriminatory timeframes were introduced in the 2002 FPIC guidelines. Atotal of 55 days was allocated for all steps with fixed time windows for each step of the FPIC process,namely, notice period, consultative community assemblies, community consensus building anddecision-making meetings. 15 days were allocated to community consensus building. The 2006 FPICrevision retains this restrictive timeframe, requiring that all steps involving the Indigenous Peoples inthe FPIC process be completed within 55 days, but it does not allocate fixed time windows to eachstep. This has the potential to reduce the community consensus-building period to even less than 15days.41Indigenous communities at Mount Canatuan, Midsalip and Mindoro have all attested to andprovided clear evidence of the NCIP’s involvement in the creation of ‘representative’ structures that donot adhere to their traditional law and practices. See also “National Consultation with the UnitedNations” Special Rapporteur on the Situation of Human Rights and Fundamental Freedoms ofIndigenous Peoples 2nd February 2007, available at http://ecozoic.multiply.com/journal/item/22.40

exchange for consent. Indigenous Peoples view the selection of leaders throughprocedures that do not respect customary laws as a violation of their culture, traditionsand rights. According to them, consent obtained in this manner should not and cannotbe the basis of FPIC. This view is supported by IPRA, which requires that consent beobtained “in accordance with the customary laws and practices” and “free from anyexternal manipulation”. Cases similar to those recounted to the Right HonourableClare Short MP in 2006, where mining companies were involved in engineeringconsent, have been documented throughout the country. 42Finally, expert or even rudimentary independent information regarding mining is notbeing made available to Indigenous Peoples. Rather than being informed about thepotential impacts of mining, as required by IPRA, the information they are currentlyproviding to communities appears to amount to little more than promotional materialfrom mining companies. 435.8 FPIC and ESIAEnvironmental and Social Impact Assessments (ESIA) should occur within theframework of the Free and Prior Informed Consent (FPIC) process. 44 If, at the outsetor at any stage during the process, an indigenous community does not wish to grant itsconsent or to proceed with an FPIC process, then their decision must be accepted.This would eliminate the requirement to proceed with an ESIA, as to do so would befutile and could be construed as an attempt to undermine the community’s decision.If, on the other hand, the community wishes to proceed with the FPIC process, theyshould be afforded the opportunity to digest thoroughly and understand theimplications of the ESIA; when the preventive, mitigatory and compensatorymeasures have been understood, then the FPIC process can address the decision. Ifthe process of FPIC leads the potentially impacted Indigenous Peoples to decide thatthe benefits from the proposed mining will unambiguously outweigh the impacts andrisks, and that the compensation for residual or unavoidable impacts clearly outweighthem, and that offsets, performance bonds or industrial insurance are reliable, then theindigenous community may agree to the initial stage of exploration, or to subsequentexploitation stages of a mining project.Because each stage of a mining project presents different challenges for a community,and because mining projects often evolve differently than anticipated at the outset,consent has to be sought throughout each stage of mine development, and especially if42 “Mining in the Philippines: Concerns and Conflicts” by Doyle, C., Wicks, C. and Nally, F. 2007.Society of St. Columban, Solihull, UK: 62 p.43 Extract from NGO Submission to the Human Rights Council Universal Periodic Review Mechanism,UPR 1st Session, 7th – 18th April 2008 on the Philippines was submitted on 23rd November 2007 onbehalf of the following organizations: Catholic Agency for Overseas Development (CAFOD),Columban Faith and Justice Office, Indigenous Peoples Links, Irish Centre for Human Rights NationalUniversity of Ireland Galway, IUCN Commission on Environmental, Economic and Social Policy, andTrocaire.44The most useful technical analyses of FPIC and ESIA, together with constructiverecommendations for making these two safeguards function effectively, are contained in Muhi (2007)for FPIC, and by Gorre & Lamchek (2005) on the ESIA process.41

there are any changes in the scope or impacts of the mining proposal. IndigenousPeoples must be fully informed from the outset with all information that is availablewith regard to the potential impacts of mining provided even if FPIC is being soughtonly for the exploration phase. This is important as experience shows that oncecompanies obtain access to communities for exploration activities, the potential formanipulation of subsequent FPIC processes increases.FPIC for exploration comes first, but in no way should it be construed as ensuringsubsequent FPIC for exploitation or operation. FPIC for exploration is totallyindependent from FPIC for exploitation. The detailed and agreed on conditions underwhich the community will benefit from mining and be compensated for losses mustbe codified in a legally binding agreement in a language the indigenous communitycan understand. Such agreements have been the focus of a number of recentpublications and are generally described as an important means to ensure that therights and interests of communities and their members are protected, and that benefitsfrom mining are bestowed on the community. Thus FPIC, which requires upholdingthe right of indigenous communities to say ‘no’ to mining projects and to make theirdecisions in a culturally appropriate manner, is a powerful tool to further their right toself-determination, prevent conflict and, if and where communities decide to granttheir consent on this basis, can help to foster agreement and ensure mutuallybeneficial outcomes.Box 5.1: Killing and Intimidation of NCIP OfficialsWhile the Indigenous Peoples’ policies of the Government are routinely violated byGovernment, especially the Department of the Environment and Natural Resources(DENR), officials of the National Commission on Indigenous Peoples (NCIP) havebeen directly intimidated and killed. A recent example comes from South Cotabato.NCIP Regional Division Chief Engineer Rafaelito U. Handoc, director of NCIP’sSouth Cotabato Regional Office based in Koronadal City, was gunned down in broaddaylight in March 2008. Earlier in 2008, NCIP Provincial Coordinator TammyDawang, who was also a tribal leader, was gunned down in nearby Polomolok.Source: The Nation S1/1107-08 March, 2008.5.9 Indigenous Peoples need Environmental and SocialImpact AssessmentsIn the absence of a full Environmental and Social Impact Assessment (ESIA) study,there is not sufficient information on which to make the promises that have been madeduring previous FPIC processes. These ESIAs should be prepared in a participatoryand transparent manner and reviewed by an independent body, which should preparea summary report in the language of and in a format comprehensible to the localpeople. This report should provide a clear indication of the potential risks andopportunities mining will bring. The summary report should be presented by anindependent person who can answer any questions the Indigenous Peoples have in animpartial way. The report must show the impact the mine will have on other groupsas well as Indigenous Peoples. If it is going to have any potential impacts on42

livelihoods such as reducing rice production or the development of fish ponds, thismust be stated. If the relations between Indigenous Peoples and other stakeholderscould be affected as a consequence of Indigenous Peoples giving FPIC, then theymust be informed of this well in advance of taking their decision.The ESIA summary report should include details of the protection that will beprovided by financial performance bonds and insurance cover both during the life ofthe mine and after it has closed, which is the time when many problems associatedwith mining have historically occurred. Communities should be made fully aware ofthese post closure risks. Good insurance cover can play a role in reducing some ofthese risks as the insurance companies will carry out inspections to ascertain the risksinvolved. These assessments by insurance companies should be a mandatory part ofan ESIA. The financial bond should be retained for many years after the mine hasclosed and released only when all risks of acid mine drainage (AMD) or tailing damscollapse have been eliminated.Acid Mine Drainage in Marinduque, PhilippinesPhoto by Dr Catherine CoumansThe authors suggest that, as a minimum,all stakeholders or potentially impactedpeople need the ESIA at the initial stageto understand the mining proposal.Indigenous Peoples must be able tocomprehend the scope of the proposal.If they have never seen a project similarto that being proposed, they should beafforded with the opportunity to inspect the nearest similar one so that theyunderstand what it is that they are being asked to decide. A representative movie filmwith an accurate portrayal of mining operations could then be shown to everyone inthe affected communities and potential impact areas. FPIC is a process; it takes time,sensitivity, and experience. Above all, it requires respect for Indigenous Peoples’own decision-making processes and practices and their right to determine their ownfutures.43

Chapter 6: Human Rights, Militarization and Mining6.1 Human Rights and MiningThe United Nations Charter and treaty bodies, some members of the Philippine Senateand Congress, the Supreme Court Chief Justice Reynato Puno, some ProvincialGovernors, municipal councils, much of civil society and the Churches are openly anddeeply concerned by the numbers of human rights violations that take place in thePhilippines. These include beatings, maiming, intimidation, torture, extra-judicialkillings or summary executions, abductions, and enforced disappearances in what iswidely viewed as state-sponsored or state-protected terrorism.Members of civil society, Indigenous Peoples’ organizations, the churches, Muslimgroups and international non-governmental organizations have all expressed theirconcerns that these violations sometimes occur in the context of opposition tomining. 45 While not the central theme of this report, addressing such conflict andviolence is unavoidable when considering the context in which mining is beingpursued and its associated social impacts. This section, although important, is brief;rather than presenting new information, it points to the substantial body of reputableand high level investigations and reports, including by United Nations SpecialRapporteurs that attest to the extent of human rights abuses and militarization in thePhilippines. 46 Six substantive reports from civil society expand on and corroborate the45 The following are just a few examples: (a) In July 2007, the Supreme Court hosted a Summit onextrajudicial killings and enforced disappearances, promulgated the rules of “Amparo”, designed tostop the Armed Forces of the Philippines (AFP) from stalling a case by simply denying that they have aperson in custody. (b) In March 2007, the Chief Justice of the Supreme Court, Reynato Puno, issuedAdministrative Order 25-2007 designating 99 trial courts across the country as special tribunals to trycases of political killings. (c) In 2007, both the AFP and Philippines National Police (PNP) establishednew human rights offices to deal with extrajudicial killings and enforced disappearances. (d) PresidentArroyo ordered the creation of the new Presidential Human Rights Committee, in addition to theexisting Commission on Human Rights and the Ombudsman’s Office (The Office of the President,“PGMA fires off several directives to stop extrajudicial killings”, 30th January 2007,www.op.gov.ph/news.asp?newsid=17122.)46The human rights group, Karapatan, estimate the number of extra-judicial killings of miningactivists at 18 (see: http://www.kalikasan.org/kalikasan-cms/?q=node/145). Other sources also identifyextra-judicial killings of mining activists, but do not provide estimates of the total numbers killed.While the number of and reason for extra-judicial killings can be difficult to ascertain and verify, thereappears to be widespread agreement that mining activists are among the target groups. Internationalhuman rights groups such as Human Rights Watch (HRW) identified anti-mining activists along withpolitical activists, student activists, political journalists, clergy, and agricultural reformers as the groupstargeted. Out of a sample of 13 cases that HRW investigated, two were anti-mining activists, PastorIsias de Leon Santa Rosa in Bicol and Manuel Balani both killed in 2006. In both cases, the evidenceavailable points to military involvement in the killings. For more information, see: (a)hrw.org/reports/2007/philippines0607/4.htm; (b) www.miningwatch.ca/index.php?/; (c) Newsletter_22/ Political_Killings_Increase, and (d) Statement by Allan Laird to the Subcommittee on HumanRights and International Development of the Canadian Standing Committee on Foreign AffairsInternational Trade, 18th May 2005 meeting in Ottawa, Kingking Mines Inc. “Corporate Support ofTerrorism in the Philippines”, http://www.dcmiphil.org/Allan_Laird%27s_Statement.pdf Laird was aProject Manager in the Kingking Mines Inc. project in which Canadian mining company TVI Pacificheld a 25% interest. Laird reports that approximately $2 million was provided to terror/insurgentgroups during the course of this project and that TVI was aware of these expenditures. A memo44

eight official reports on human rights abuses related to the Philippines mining andother sectors.Extra Judical Killings and Enforced Disappearances12001000800600400Killings and DisappearencesExtra Judicial KillingsEnforced Disappearences20002001 2002 2003 2004 2005 2006 2007Extra Judical Killing and Enforced Disppearances in the Philippines 2001 - 2007Cathal Doyle Presentation to UKSIF London 2008 Data Source: KARAPATHAN,6.2 Official Reports Documenting Human Rights Violations1. Rodolfo Stavenhagen, UN Special Rapporteur for the Human Rights of IndigenousPeoples, Report of the Special Rapporteur on the Situation of Human Rights andFundamental Freedoms of Indigenous People, Report for 59 th UN Commission onHuman Rights, 2003.The United Nations Special Rapporteur, Rodolfo Stavenhagen, visited the Philippinesin 2003 to look at human rights and the fundamental freedoms of Indigenous Peoples.He identified militarization of Indigenous Peoples’ lands in the context of mining as agrave human rights problem. 472. Task Force Usig report, Department of Interior and Local Government (DILG),2006.This government task force was led by the national police’s investigative unit of thePhilippines National Police to probe the unrelenting killings of activists and familycontaining an itemized schedule of meetings and a record of illegal payments was included in hisstatement.47“Of particular concern are the long-term devastating effects of mining operations on the livelihood ofindigenous peoples and their environment. These activities are often carried out without their prior,free and informed consent, as the law stipulates. Communities resist development projects that destroytheir traditional economy, community structures and cultural values, a process described asdevelopment aggression. Indigenous resistance and protest are frequently countered by military forceinvolving numerous human rights abuses, such as arbitrary detention, persecution, killings ofcommunity representatives, coercion, torture, demolition of houses, destruction of property, rape, andforced recruitment by the armed forces, the police or the so-called paramilitaries.” (Stavenhagen2003)45

members in the Philippines. It has been criticized for downplaying the number ofpeople killed.3. Melo Commission Report. Commissioned 2006; report published 2007In 2006, President Gloria Macapagal-Arroyo, under increasing pressure from theinternational community, created an independent commission (AO 157) to probe thekillings of media workers and activists. It was led by former Supreme Court JusticeJosé Melo, and included the National Bureau of Investigation Director, NestorMantaring; the Chief State Prosecutor, Jovencito Zuño; the Roman Catholic Bishopfor Butuan, Juan de Dios Pueblos; and the Regent from the private sector, NeliaTorres Gonzales. The Melo Commission Report put the blame for much of theviolence on the Philippine military, stating that it had acted outside the law. 48President Macapagal-Arroyo proposed creating special courts to try cases ofextrajudicial killings to end the culture of impunity in the military. Member ofCongress Teodoro Casino, one of six lawmakers charged with rebellion in 2007 afterPresident Macapagal-Arroyo declared a State of Emergency (the charges weresubsequently overturned) says the administration's hand is clearly seen in theviolence.“You can't attribute widespread killings to a few generals. It has to go all the way up.It’s the government's counterinsurgency policy that’s provided the environment forthese human rights abuses to take place.” There is evidence implicating “someelements and personalities in the armed forces … as responsible for an undeterminednumber of killings, by allowing, tolerating, and even encouraging the killings.”4. John Ruggie, Special Representative on the Issue of Human Rights andTransnational Corporations and Other Business Enterprises (Interim Report), 2006,UN Doc E/CN.4/2006/97.Ruggie emphasized that the impact of the extractive sector was particularly severe onIndigenous Peoples, in particular:‘The extractive sector is unique because no other has so enormous andintrusive a social and environmental footprint’ (para 29) which operates incontexts where ‘there is clearly a negative symbiosis between the worstcorporate-related human rights abuses and host countries that arecharacterized by a combination of relatively low national income, current orrecent conflict exposure, and weak or corrupt governance’ (para 30).5. United Nations Special Rapporteur on Extra Judicial Killings Professor PhillipAlston, “Promotion and protection of all human rights, civil, political, economic, andcultural rights, including the right to development”, 2007.In his Report, Dr. Alston concluded that the Philippine military leadership was “in astate of denial” regarding its role in the killings (p.66). Department of Justice48 www.csmonitor.com 23rd February 2007.46

Secretary Raul Gonzalez subsequently called the Special Rapporteur a muchacho(lowly servant boy). Defense Secretary Hermogenes Ebdane called him “blind, muteand deaf.” Dr Alston later said in response to these statements, “…anyone readingbetween the lines will receive a far more disturbing message: Those governmentofficials who must act decisively if the killings are to end, still refuse to accept thatthere is even a problem.”6. Manfred Nowak, Report of the Special Rapporteur on Torture and Other Cruel,Inhuman or Degrading Treatment or Punishment, UN, Geneva, 2007.This report provides details of individual cases that were transmitted to thePhilippines Government and replies received (see A/HRC/4/33/Add.1 20 March2007).7. Martin Scheinin, Report of the Special Rapporteur on the promotion and protectionof human rights and fundamental freedoms while countering terrorism, UN Geneva,2007. Communications with Governments A/HRC/6/17/Add.1.Special Rapporteur Scheinin stated his intention to address the issue of IndigenousPeoples in the Philippines who defended their traditional lands and land rights orresisted the encroachment by foreign commercial operators on their territories. Henoted that they were often criminalized as subversive, and their members prosecutedas “terrorists”. He also stated that he intended to visit the Philippines in 2008 toinvestigate the situation further.8. Hina Jilani, Report of the Special Representative of the UN Secretary-General onthe Situation of Human Rights Defenders, 2007, addendum. Geneva: UN: Summaryof cases transmitted to Governments and replies received. A/HRC/4/37/Add.1 27March 2007.The United Nations Committee on the Elimination of all Forms of RacialDiscrimination (CERD) is currently investigating a case in relation to human rightsviolations associated with TVI Pacific’s mining operations at the Subanon’s sacredMount Canatuan under its Early Warning and Urgent Action Procedure. In its secondletter to the Government of the Philippines, requesting additional information, thecommittee stated its concern that Mount Canatuan “is not an isolated case but israther indicative of similar situations faced by other indigenous communities in the[Philippines]”. A review of the Philippines Government’s compliance with itsobligations under the International Convention on the Elimination of All Forms ofRacial Discrimination is also scheduled for 2009; mining issues vis-à-vis IndigenousPeoples’ rights are expected to be high on the agenda.6.3 Human Rights, Civil Society and the Catholic ChurchThe official accounts and allegations of human right abuses are corroborated bydocumentation of human rights violations produced by Indigenous Peoples47

themselves, as well as that of many local and international civil societyorganizations. 49The Catholic Church and other churches are profoundly concerned with theresurgence human rights violations, especially those involving vulnerable groups, thepoor and Indigenous Peoples which are being perpetrated in the interest of being“mining friendly”. Box C.1 lists the main declarations and registries of recentviolations that have stemmed from mining.It is impossible to deny that human rights violations are unacceptably high and thatmany are closely linked to mining. For Civil Society Reports on Human Rightsviolations, See Annex B.6.4 The Human Security ActThe Philippine anti-terrorism act, known as the Human Security Act, took effect on15 th July 2007.Civil society, non-governmental organisations, indigenous and non-indigenouscommunities and church members among others have all been vocal in theircondemnation of the Act. An example of this is the position of the National Councilof Churches in the Philippines, a body composed of Protestant and Catholic Churchleaders, which has described the new anti-terror legislation as “a travesty againstGod's will for human freedom”.At the core of their concerns is the Act’s definition of terrorism. This definition is allencompassing and can potentially be abused to silence legitimate critics of theGovernment. Under section 3 of the Act, terrorism is defined as any act “sowing andcreating a condition of widespread and extraordinary fear and panic among thepopulace in order to coerce the government to give in to an unlawful demand”. Theterms used in this definition are deliberately vague and the interpretation of theirmeaning rests with an Anti-Terrorism Council (ATC) established under the Act.Given this vague definition of terrorism and the extraordinary powers vested in theAct, individuals and groups that voice their dissent against Government policies cannow be declared ‘terrorists’. This situation is particularly alarming given thatmembers of indigenous communities and support organizations advocating alternativesustainable livelihood options and opposing the entry of mining projects in their landshave in the past been labeled as ‘terrorists’ and continue to be so. This labeling is49 Stop the Killings in the Philippines Campaign (www.stopthekillings.org). The human rights groupKarapatan said about 900 people, mostly leftist political activists, have been murdered since PresidentMacapagal-Arroyo came to power in 2001. Human rights abuses are documented in: Cariño & Rood1993, Clark 1994, Despouy 2007, Doyle, et al. 2007, Eder 1987, 1994, FPP 2000, Gariguez 2007,Holden 2005 et seq., Human Development Network 2005, IBON Foundation 2005, 2007, IndigenusPilipinas 1997, Le Billon 2005, Lawyers Committee for Human Rights 1985, Nettleton 1997, Nettletonet al. 2004, Pimentel 200l, 2007 Philippine Solidarity Group Netherlands 1997, Philippine HumanRights Information Center & Philippine Alliance for Human Rights Advocates 2006, Ross 2004a,2004b, Sheppard & Lin Neumann 2007, Stokke 2007, Supan et al. 2006, Survival International 1996,United States 2008, Yu 2006.48

used to intimidate the individuals and places them at risk of becoming targets forextrajudicial killings or enforced disappearances.Rather than ensuring the security of human rights defenders and social activists bypursuing those guilty of perpetrating crimes against them, the Government has,through this Act, which heightens the risk of violations of due process and humanrights, instead increased their vulnerability.6.4 Further Militarization of Mining Projects and InvestmentDefense ForcesOn 8 th February 2008, Philippine President Gloria Macapagal-Arroyo declared thather Government was creating "Investment Defense Forces" (IDF), which would beunder the control of the Office of the President and are designed to serve as a“protective shield” of weapons and personnel for mining operations, powerinfrastructure and other facilities vulnerable to rebel forces. She also proposed thatthe regular military would continue to guard vital infrastructures and mining projects,to be identified by the IDF and the local Peace and Order Councils (POCs).The stated purpose of the IDF is to encourage more investment in the extractivesector, particularly in Mindanao. The end result will be increased militarizationthrough the deployment of these "Investment Defence Forces" to protect miningoperations in areas where indigenous communities live and on which they depend fortheir livelihoods. As these are generally regions where Indigenous Peoples havealready been intimidated and harassed in the past by Government forces, vigorousvocal Indigenous Peoples’ resistance to this new proposed militarization of their landsis developing.The silence of the National Commission on Indigenous People (NCIP) in the face ofthe creation of the IDF, and in view of the hardships faced by Indigenous Peoples andthe destruction and deaths associated with mining operations in these areas, shows theextent to which it is complicit in the abuse. The NCIP silence is also indicative of theextent to which the Department of the Environment and Natural Resources (DENR)and mining promotion have trumped the NCIP and rendered it ineffective inupholding the rights of indigenous communities.The allocation of taxpayers’ money to create the new “Investment Defense Forces”suggests that protection of mining corporations is more important to the Governmentthan protection of its own citizens. It also shows that the Government views theestablishment of this new army unit as a more convenient and cost effective solutionto the issues associated with mining, than improving the effectiveness of NCIP andDENR and tackling the causes of violence by protecting vulnerable IndigenousPeoples and respecting their rights and the environment upon which they depend fortheir livelihoods. 5050(a) The last remaining 50 houses of the Mamanwa tribe were all demolished on 18th March 2008 byarmed guards for the San Roque Metals Corp, according to Tribal Chieftain Bae Chermelita Montero.Since time immemorial, more than 500 Manobo-Mamanwa Indigenous Peoples had lived peacefully inthis village: Sitio Hinaki, Barangay Tagmamarkay, in Tubay, Agusan del Norte. (b) ‘Addressing49

Box 6. 1 : Armed Forces Become Security for Mining CorporationsOn or Off-Duty? Uniformed or in Mufti? Active or Retired?Former Army Major General Jovito S. Palparan Jr. was recently reported byNewsbreak to have led troops of the 24th Infantry Battalion on 12 th April 2008 in atakeover of a mine site in Doña Remedios Trinidad, Bulacan. Just over two weekslater, on 29 th April 2008, he was reported to have led the same troops in an attempt tosecure the contested Masinloc Seaport in Zambales, but he may have been repulsed byPolice Commandos. An official enquiry into the events has been set up and a law suitis now pending against him.The major general seems to have persuaded current members of the army and thepolice into joining him in these unauthorized missions, even though it is widelyknown that he retired from the army in 2006.“Retired” Major General Palparan now runs his own security agency, “24 HoursSecurity Providers”, which has been contracted by Faith Investment House, Ore AsiaMining Corp., Consolidated Mining Inc., and other mining corporations. In his armyservice days Palparan had been named the “Butcher of Mindoro” and the “Butcherof Eastern Visayas.”In 2002, the President awarded Palparan the Gawad sa Kaunlaran award andpromoted him to Brigadier General in January 2003. In 2004, he was promoted toMajor General and appointed Chief of Staff of the Army. Palparan's statements in anarticle published in the Philippine Daily Inquirer on 2 nd July 2006 alleged that threegoups (a). Pamalakaya, (b). party-list group Anakpawis, and (c). the New People'sArmy) committed wrongful activities in the coastal towns of Bulacan.What does it suggest about quality of governance if a senior General who retired someyears ago can commandeer active-duty soldiers and invade a seaport? What does itsuggest about army discipline if a commander fails to stop a retired officer fromabusing active-duty troops?Extrajudicial Executions in the Philippines: A call to end impunity’ 7th Session of the Human RightsCouncil Side Event: Amnesty International, International Secretariat, London Diakonie / ActionNetwork Human Rights – Philippines, Germany World Council of Churches, Geneva, 19th March2008. Conference on "Political Killings and the Rule of Law – the Philippines Example" ActionNetwork Human Rights, Philippines: www2.wcc-coe.org/pressreleasesen.nsf/index/Info-08-02.html.50

6.5 The Relationship Between DENR and NCIPThe Department of the Environment and Natural Resources (DENR) is powerful andhas the strong support of the President, in contrast with the National Commission onIndigenous People (NCIP), which has often been marginalized from decision-making.It seems to be expected to deliver what the DENR and mining interests require.The current DENR Secretary Lito Atienza has stated that he is concerned at the stateof ancestral domains, which have been badly damaged by illegal loggers, miners,poachers, armed insurgents, and the pressures of commercial activities. Ironically,however, he has also ordered indigenous communities to be “non-adversarial” whenDENR harnesses the natural resources located in their ancestral domains. He hasargued that Indigenous Peoples are obliged to cooperate with the Government becausethe use of natural resources under the Philippine Constitution has a social function.He has also stated that these resources belong to the state, not to the IndigenousPeoples, even if the area in question is an Ancestral Domain that IPRA has recognizedas including the natural resources contained therein. 51Based on their assessment of the NCIP inability to fulfill its mandate, the authorsconcur with the recommendation made to the Human Rights Council in the NGOsubmission (see HRC, Chapter 8 ) in relation to the NCIP. This stated that:“It is imperative that the weaknesses of the NCIP, which to date, has provedincapable of implementing IPRA and upholding Indigenous Peoples’ rights,are urgently addressed. The NCIP’s lack of legitimacy and credibility in theeyes of Indigenous Peoples requires that the commission be either completelyreformed or replaced. To ensure representation of indigenous peoples, thestaff and commissioners of the NCIP must be chosen by bona fide indigenouspeoples themselves through their legitimate traditional structures, and not bythe Office of the President. The commission must also be granted sufficientfinancial and qualified human resources with which to carry out its mandateand its operations of must be ‘free from political interference ”Moreover, NCIP’s budget has been incommensurate with its mandate.6.6 DENR Engulfs NCIPIf in recent years it has often seemed that NCIP has been run, if not dominated andover-ruled, by DENR, it has become official policy since May 2008 when the NCIPwas officially subsumed under DENR, effectively demoting and subordinatingindigenous affairs to the DENR’s agenda.51DENR Secretary Atienzo’s speech was read for him on 18th February 2008 by DENRUndersecretary Teresita Castillo at the conference: “The Assessment and Planning of the NationalCommission on Indigenous Peoples”51

On 23 rd May 2008, President Macapagal-Arroyo issued Executive Order 726“Transferring the National Commission on Indigenous Peoples from the Departmentof Agrarian Reform to the Department of Environment and Natural Resources.” On23 rd May 2008, the Office of the President forwarded this Executive Order (No. 726)to the NCIP.The transfer has serious implications for disputes on Indigenous Peoples’ lands. Incases where national priorities conflict, such as between Indigenous Peoples andmining corporations, the two Government agencies responsible can take the dispute toa higher level for resolution. Until this transfer, the NCIP could (in theory) havestood up to DENR. This is no longer possible. With the NCIP now subsumed withinthe DENR, there is little hope that conflicts will be addressed in an unbiased manner,given that the agency promoting mining, the DENR, also has responsibility for bothIndigenous Peoples and their environment. This engulfing and subsuming of NCIPclearly strengthens mining interests while weakening protection of IndigenousPeoples’ rights. 5252 The first-draft text of this report was finished in May 2008. On 24th May, NCIP was suddenlyevicted from Agrarian Reform and subsumed inside their strongest critic, namely the DENR, theclearest example of regulatory capture. The authors thought NCIP would no longer be able to exertany restraining influence on DENR’s zealous promotion of mining. Just as this manuscript was beingsent to press in Mid-October, the NCIP was plucked out of the DENR and lodged in the Office of thePresident. Will mean that Indigenous Peoples will be better protected or less so?52

Chapter 7: Philippine Mining Economics“Not only have the oil, gas and mining industries not helped the poorestpeople in developing countries, they have often made them worse off. Scoresof recent academic studies and many of the bank's own studies confirmed ourfindings that countries which rely primarily on extractive industries tend tohave higher levels of poverty, child morbidity and mortality, civil war,corruption and totalitarianism than those with more diversified economies.Does this mean extractive industries can never play a positive role in anation's economy? No, it simply means that the only evidence of such apositive role we could find took place after a country's democraticgovernance had developed to such a degree that the poorest could see someof the benefits…”Dr Emil Salim,World Bank Extractive Industries Review 2004quoted in UK Financial Times, 16 th June 20047.1 Deficiencies in Mining EconomicsThe over-riding variables that make the difference between better mining and worsemining is the extent to which the negative impacts on people and the environment –external costs – are prevented, minimized and rectified if they do occur and the extentto which market failures are addressed. Best practice is for the mining company totake account of, budget and pay for – that is, internalize – all social and environmentalcosts and to resolve market failures and inefficiencies at the earliest stage in designinga mining project. Incorporating environmental, social and human sustainability into aproposed project makes good economic sense. For an economy to be sustainable,capital levels should be maintained, and for development and the economy to besustainable, the narrow economic definition of ‘capital’ must be broadened to includesocial, human and environmental assets. When economists incorporate these data intotheir analyses, they are in fact evaluating the state of the economy much moreaccurately than when they work solely with the monetary ‘bottom line’ figures.The tools and approaches that facilitate best practice in designing and evaluatingextractive projects include revenue management (the allocation of costs, impacts andbenefits), the Precautionary Principle, environmental liability insurance, performancebonds, internalization of currently externalized costs, diversification and fosteringvalue added and domestic processing as ways of amplifying and prolonging thebenefits of an extractive industry to the host country and people.Environmental liability insurance, bonds and funds set up by the extractor aredifferent methods of achieving the same goal: in the event of environmental or socialdamage – a worst-case scenario if the Precautionary Principle has been followedthroughout the whole process – there are sufficient earmarked monies available torectify the harm caused. Many negative side effects of mining, such as pollution,remain externalized costs. It is more than high time for economic analyses of miningto better represent the true cost of the industry’s activities by internalizing them.53

Initiating domestic processing and other value-added activities can help to sustain thedevelopment brought by an extractive industry.7.2 Internalizing Currently Externalized CostsIt is inequitable to impose costs on society solely for private benefit and gain. Doingso intensifies poverty, hinders sustainability and cannot be called development.Mineral extraction and production often incur significant social and environmentalcosts, which fall disproportionately on the poor, the group least able to afford them.Externalizing the costs of mining means that the poor are subsidizing the miningcorporations’ profits. Such corporations may obviously prefer to externalize as muchof the costs of their extraction as possible unless they are prohibited from doing so. Ifthey do not themselves start to internalize and account for these costs, the PhilippinesDepartment of the Environment and Natural Resources (DENR) should not grantthem permits to mine in order to prevent social injustice and to encourage goodeconomics.Best practice is for the mining corporations to internalize all the costs of mining. Thisencompasses enhancing Indigenous Peoples’ livelihoods, protecting agriculture,conserving biodiversity, protective forests and watersheds, preventing toxic spills, andpaying for clean-up costs. Internalizing implies not only paying for the costs ofimproved technical measures to minimize and prevent damage to people and theirenvironments, but also shifting directly to more environmentally benign activitiesthan extraction. Mining companies should routinely carry out broad economicanalyses, as well as narrow financial ones, to clarify how they can contribute to acountry’s development goals. It is in the company’s self-interest to earn and maintaina social license to operate, as well as in the interest of the national society.7.3 Policy Options for InternalizationThe better extractive corporations are already internalizing social and environmentalcosts into their costs of production. The Department of the Environment and NaturalResources (DENR) should encourage other corporations to follow that lead.Companies that persist in externalizing costs and negative impacts should becomeineligible for DENR mining permits. DENR should rank mining corporationsaccording to their track records of internalizing their costs. The international anticoruptiongroup, Transparency International, has reached an agreement with themining industry on the use of blacklists to reward best practice and penalize worstpractice. DENR should follow this lead. The Mayor of Mati (in Davao Orientalprovince on Mindanao) has adopted the right approach: her region is highly soughtafter for its nickel and cobalt deposits, but she says she will issue permits only tothose mining corporations that have a prudent track record (see Case Study 6).Moreover, developing countries that do permit mining should ensure they obtainlevies on extraction and allocate them towards developing sustainable alternatives tomining. Otherwise, nations that are currently dependent on mining will have little toshow for it in the near future.54

7.4 Benefit AllocationIn mining, production or benefit sharing usually refers to the mining corporationsharing the profits and paying royalties, taxes, and duties to national and/or localgovernments and/or people. Most of these benefits accrue to the national governmentand are provided for under national legislation. Compared to legislation in othermineral extracting countries, the laws in The Philippines are atypical; the 1995Mining Act makes no provision for companies to pay the government a pre-tax shareof the cash flow generated by a mining project. In most countries, mining companiesroutinely pay an average of 38% of pre-tax cash-flow, 53 but the PhilippineGovernment receives zero.Philippine legislation provides for mining companies to pay the Government onlytaxes, duties, and some fees – eventually; mining companies are allowed to fullyrecover their pre-operating and property, including land, expenses before paying theirfinancial obligations to the Government. This is aside from the substantial taxholidays the Government has granted foreign investors in mining. This practicemakes no sense at all from a national development perspective, since mining is neitherseeking a higher market share of a sector nor seeking to operate more efficiently, butsimply seeking to take assets out and away.Moreover, the 1995 Mining Act expressly states that the excise tax on mineralproducts shall constitute the “total government share in a mineral production-sharingagreement”; under the Tax Code, the excise tax is just 2% of the market value of thegross output of the mining operation (Avila 2008). Charles Avila put it starkly: ThePhilippines is a give-away country concerning its minerals: one wonders, therefore,why anyone should respect it as sovereign at all (Avila 2008).7.5 The Resource CurseIn economic terms, exploitation of natural resources, such as minerals, has frequentlynot helped developing countries to develop – rather the reverse. This dismalconclusion has been confirmed many times over. 54 Over the last few decades, it hasbeen shown evidence that the more a developing country depends on mineraldevelopment, the slower its rate of growth in per capita income. More broadly,reliance on mineral development has not been consistent with sustained economicdevelopment (Power 2002, Sachs & Warner (2001).Economic geographer Richard Auty (1994, 2004) analyzed the economicdevelopment of 85 countries between 1960 and 1993 to see what contribution natural53 Examples of the percentage of pre-tax cash flow that mining companies pay national governmentsare: Chile 15%, Bolivia 27%, Venezuela 32%, Peru 36%, United States 37%, Mexico 37%, Botswana40%, Brazil 41%, Argentina 46%, Canada 47%, Guyana 48%, Australia 51%.54 For example, Stijns 2006, Auty 1994, 2004, Ross 1999, 2001, 2004 a and b, , Sachs & Warner 2001,Power 2002.55

esource abundance had made. He separated out the smaller nations that he assumedwould be less diversified economically and, of these, separated out still further thecountries that relied on solid mineral extractions as opposed to that of oil and gas. Hefound that these small, solid mineral countries actually had negative economic growthbetween 1970 and 1993 (– 0.2% per year). As a result, they went from having a percapita GDP well above those in small, non-mineral countries to well below them. Hefound that mineral-driven resource-rich countries were among the poorest economicperformers (see also Power 2002).Box 7.1 : The Dutch Disease Kills Philippines RiceIn the 1960s, The Netherlands discovered gigantic reserves of gas in its North Sea territories.Many analysts subsequently concluded that this find, far from bringing the country wealthand development, did the opposite. The revenues from sales of the gas raised the foreignexchange rate and thus made other sectors of the Dutch economy less competitive. Theexperience of how exploiting natural resources – oil, gas, minerals, and forests – can be at theexpense of a country’s economy and development has therefore become known as the “DutchDisease”. Energy researcher David Hoffman defines it as follows:“Dutch Disease occurs when disproportionate investment into a specific extractive industry .. . causes wages and price distress in other sectors, ultimately leading to distorted growth ofservices, transportation and other non-tradeables at the expense of non-[extractive] industryand agriculture.” 55In some countries, it has also exacerbated conflict, corruption, weak governance and poverty.Jamaica “caught” the Dutch Disease when it discovered bauxite, Venezuela did likewise withits oil discoveries.One of the main symptoms of the “disease” is that discovery and exploitation of the resourcediverts attention away from other sectors upon which the whole economy and society depend,but for which the resource exploitation does not compensate. On this diagnosis, thePhilippines would seem to have the “disease” badly. The Philippine Government’s currentobsession with mining as an economic savior is diverting attention away from food(particularly rice) production and other sustainable activities.Overall, mineral development is proving to be not only less beneficial than anticipated; it isharming the country’s economy. The Government should prioritize poverty reductionthrough sustainable job creation, food production and management of the country’s incrediblebiodiversity – mining hampers all three.Mining wages are higher than farming wages, serving to lure workers in to the industry. Butmining creates far fewer jobs than agriculture does, and those it does create are short-lived.Mineral exports create surplus foreign exchange, which raise the Peso exchange rate and thuslower the country’s overall international competitiveness. Thus the mining boom can be heldpartly responsible for lagging agricultural production. Short-lived mining booms damageagriculture for decades. The Dutch Disease exacerbates and magnifies the damage thatmining already causes to rice production from erosion, siltation, and pollution.55 David Hoffman, “Oil and Development in Post-Soviet Azerbaijan”, NBR Analysis, National Bureauof Asian Research, Vol. 10, No. 3, August 1999, pp.5-28.56

7.6 Impact-Benefit AgreementsDevelopment officials have been accustomed to thinking that the benefits of adevelopment project, such as a highway, reservoir, or mine, outweigh any negativeimpacts on surrounding communities in either the short or long term. Those whohave benefited from such projects usually lived far away from them and experiencedfew detrimental impacts, while those living close to, invariably bore the brunt ofdamage without gaining the benefits. When asked about this, officials would claim“one cannot make an omelet without breaking eggs”. They might admit that somepoor people might be negatively impacted, but considered that this was unavoidable.In any event, they would continue, such impacts were outweighed by the hugebenefits to the nation of improved transport, more electricity or revenues from miningroyalties. 56Awareness of negative environmental impacts is nothing new. One of the first to beidentified as such were London’s “killer smogs” – dense combinations of smoke,pollution and fog that periodically engulfed the UK’s capital in its colder months,such as that of December 1952, during which time the death rate doubled or more.During the 1950s, some countries started to acknowledge that a development schemecould sometimes produce more negative impacts than positive ones. Cost-benefitanalysis was formulated around this time, but failed to address most social andenvironmental costs. The voices of the communities who would bear the costs wereoften not heard or listened to; the communities did not even substantially enterdevelopment officials’ thinking or awareness. If the realization that projects hadnegative social and environmental impacts was long in coming, it took even longerbefore the issue was addressed. Ensuring that more vulnerable groups (women,children, older people, disabled, Indigenous Peoples) do not bear the brunt ofdevelopment projects has yet to be fully achieved. The social impacts of displacingpeople who are “in the way” of a project impoverishes them still further; the use offorce in such displacement is the norm.In the late 1960s, efforts began to be made to weigh up the magnitude and distributionof impacts and benefits of a proposed economic development project to ensure theywere tolerable and equitable. The tool designed to do this was the Environmental andSocial Assessment (ESA), sometimes called the Environmental and Social ImpactAssessment (ESIA). As its name indicates, this process aims to identify the mainsocial and environmental impacts of a proposed project. It should enable impacts tobe identified that can be ‘designed out’, or even prevented, by improving projectdesign. Some impacts, however, cannot be totally prevented. Efforts can be made tominimize them through design improvements and then to mitigate or compensate forthem. The mitigation plan of the ESA is thus critical: it states which impacts willremain, what will be done to reduce them, and what will be done in terms ofmitigation or compensation.56 Similar arguments were made in the Supreme Court Ruling in the La Bugal-B’laan Tribal Assn. vRamos: Case G.R. No. 127882. December 1, 2004.57

In best practice, it is only after the potentially impacted people have agreed to theESA’s identification of impacts (and after they have indicated impacts that theassessors may have not taken into account), and have agreed on design changes tominimize the impacts that the most important agreement be reached: Free and PriorInformed Consent (FPIC). Agreeing on impacts, their minimization, and theirmitigatory and compensatory measures are essential steps on the way to Free andPrior Informed Consent. Only once agreement has been reached on the package ofmitigatory and compensatory measures can the inevitable negative residual impactson the affected people be compared with any benefits of the project that will accrue tothe people. Such a comparison is the start of the Impact Compensation Contract(ICC). 57The ICC sets out the agreed residual impacts and compares them with the package ofcompensation and offsets that is being offered and negotiated in order to obtain theconsent of the impacted people and to guarantee that the benefits clearly outweigh thecosts, particularly to the surrounding communities. The IBA check lists expand on allthe measures that the proponent is promising in legal terms to implement, togetherwith a budget, schedule, and identification of those responsible for the measures.Economist Arturo Boquiren (2007) has looked at this process in Philippines mines.He notes that corporate mining proponents usually have a fundamental and strongpremise: that the benefits are so large that the environment can be sacrificed andenvironmental costs ignored. Estimates of the potential benefits of mining in thePhilippines vary hugely. Some mining proponents claim that the potential benefit is$800 billion; others estimate it at $8 billion. Boquiren contrasts both claims againsthis own calculation of an estimated PHP 92.7 billion (US$ 2.255 million) loss frommining, if current levels continue. Boquiren compared locally obtained income inboth mining and non-mining municipalities, and found no statistical differencebetween them. He concluded that large-scale mining does not lead to increased localgovernment income, but rather the reverse: poor non-mining municipalities hadhigher local government growth rates than mining municipalities. Overall, heconcluded that hosting mining is not necessary for growth and development.Boquiren also found that poverty rates in areas with large-scale corporate mining weresignificantly higher or the same as those in communities without such mining.Similarly, the proportion of underweight babies in mining communities was notsignificantly different from those in non-mining communities. His research suggeststhat sufficient livelihoods can be achieved without mining. This is a strikingconclusion given the massive investments in mining compared to modest investmentin agriculture. Diverse livelihoods, encompassing banana growing and broommanufacture, are far more effective at reducing poverty than mining. Moreover, oncemining has moved into an area, it becomes difficult to restore and convert the landback to other uses.If the relatively new concept of Payments for Environmental Services – developingdirect incentives and payment mechanisms to encourage conservation and reduce57See http://impactbenefit.com. See also: Canadian Institute 2003, Dreyer 2006, Green 1998, Hitch2007, O’Faircheallaigh 1999–2000, O’Reilly 1999–2000, O’Reilly & Eacott 1999, Boquiren 2007,Sosa & Keenan 2001, Tungavik 1988.58

poverty – is used, the contrast between mining and non-mining sectors soars,particularly when issues related to mining are taken into account, such as conflictingland and water claims between mining companies and Indigenous Peoples (WWF2006). In sum, mining’s profits are grossly exaggerated while its costs are largelyoverlooked or externalized (EIR 2004, Goodland 2004, Boquiren 2007).7.7 Assessment of Cost Externalization in Philippine Mining(This section written by Professor Ernesto Gonzales)Mining is the flagship development program of President Gloria Macapagal-Arroyo’sGovernment, which believes it can lessen the debt burden of the country. But the tollof “bad economics” in mining is now being felt throughout the country because of themounting externalized costs of environmental degradation that is exacerbatingpoverty on a massive scale. This externalization of mining costs means that a 1%increase in Gross Domestic Product leads to a 9% rise in poverty (Gonzales 2006).Economic disorder on a massive scale is manifested by the current rice crisis and theworsening state of fisheries and other sectors. Tables 7.7a & 7.7b show the scale ofmining’s externalized costs relative to the other sectors of the economy.Table 7.7a: Consolidated Table on Cost Externalization in PhilippineMining (Gonzales, 2008)MiningIndicatorEnvironment Indicator Poverty Indicator FisheryYearIncomePalay CoconutForest LandMagnitudefromFarming Farming UnemploymentFisheryDegradation Degradationof PoorMining (inCost (in Cost (in RateValue(in million) (in million)Familiesmillion)million) million)1994 2,434.14 46.64 143.67 6.05 2.57 6.8 259,6381995 2,397.00 43.35 156.97 6.50 2.89 6.9 281,8161996 2,432.48 100.94 161.98 7.00 2.78 5.75 305,9241997 2,468.48 88.42 163.86 7.06 3.11 6.1 332,1311998 2,505.01 115.39 182.64 7.52 3.10 7.9 360,623 1,267.521999 2,542.08 133.59 177.63 7.98 3.08 7.85 391,605 1,507.182000 2,588.76 151.79 163.86 8.10 3.12 7.9 411,963 1,746.832001 2,900.37 169.99 182.64 8.29 3.10 8.25 443,613 1,950.112002 3,667.41 188.19 177.31 9.14 4.77 7.75 477,778 2,255.242003 4,290.63 206.39 181.54 9.70 5.23 7.25 537,035 2,483.982004 4,386.51 224.59 192.47 10.06 6.98 7.3 581,871 2,712.722005 4,794.00 242.79 196.93 9.89 7.05 4.5 626,707 2,941.462006 4,506.36 260.99 201.40 9.52 6.20 4.6 671,543 3,170.20See: Gonzales. 2008. “Econometric Treatment of Cost Externalization in Philippine Mining”.The consolidated data in Table 7.7a clearly shows the correlation between increasedmining and forest and land degradation, together with increasing costs of rice andother farming and fisheries, and the increasing prevalence of poverty in the country.Just one example occurred in Oriental Mindoro recently, when massive soil erosionexascerbated by exploratory mining activities in the uplands led to floods coveringthousands of hectares of rice lands and the inundation of the fish-rich Naujan lake andcoastal areas’ littoral zone, which impaired the fertility of rice lands and theproductivity of the fisheries. When the land is degraded, farming costs more in inputsto maintain yields. When off-shore fishing is damaged, fisheries have to shift furtherout to sea at greater cost. Therefore, the added cost of mining harms the environmentand social welfare and contributes to increases in poverty.59

A review of specific regions, such as Mindoro-Marinduque-Romblon-Palawan(MIMAROPA), shows the same trends:Table 7.7b:Consolidated Table for the MIMAROPA Region 2007(Note: MIMAROPA refers to Mindoro, Marinduque, Romblon and Palawan)YearMiningIndicatorIncome fromMining (inmillion)MIMAROPAEnvironment Indicator Poverty Indicator FisheryForestDegradation(in million)LandDegradation(in million)PalayFarmingCost (inmillion)CoconutFarming Cost(in million)UnemploymentRateMagnitudeof PoorFamiliesFisheryValue (inmillion)1994 846.00 32.98 101.60 5.06 0.84 8.90 106,7051995 830.00 30.66 111.01 5.45 0.95 9.00 114,4731996 842.00 71.39 114.55 5.86 0.91 7.10 122,8071997 855.00 62.53 115.88 5.91 1.02 7.50 131,7481998 867.00 81.60 129.16 6.3 1.02 9.40 141,339 6,442.611999 880.00 94.47 125.62 6.68 1.01 9.40 151,629 6,378.822000 896.00 107.34 115.88 6.79 1.03 11.30 162,668 6,330.882001 1,004.00 120.22 129.16 6.94 1.02 10.50 172,675 7,673.152002 1,270.00 133.09 125.40 7.66 1.57 10.10 183,298 8,088.622003 1,486.00 145.96 128.38 8.12 1.72 6.00 199,485 8,735.792004 1,616.00 158.83 136.11 8.43 2.29 8.00 215,672 9,347.292005 1,660.00 171.70 139.27 8.28 2.32 3.70 231,858 10,001.602006 1,560.00 184.57 142.43 7.97 2.04 3.40 248,045 10,701.71Forest degradation/land degradation vis-à-vis mining: Table 7.7b shows thatmining directly increases forest degradation of MIMAROPA. For every increase inthe income from mining, PHP 7.55 million-worth (US$ 0.184 million) ofenvironmental degradation occurs in MIMAROPA. In addition, Table 7.6b showsthe indirect relationship of land degradation to mining. Every increase in incomefrom mining results in a PHP 10.66 million (US$ 0.259 million) of land degradation.Fishery value vis-à-vis Mining: The relationship between mining and fishery incomealso is indirect. This means that for a decrease in mining income, a 0.2 millionincrease in the fishery value is obtained. This trend shows how mining results in anegative impact on the fishery value of MIMAROPA.Palay Cost/Coconut Cost vis-à-vis Mining: As the income and investment frommining increases, the costs of palay (unhusked rice) and coconut also increase as aresult of declining land quality and other externalities brought by the mining. Bettertechnology and soil treatment are now necessary. The table shows that every increasein mining income leads to a PHP32.72 million (US$ 0.796 million) increase in palay60

cost and a PHP 534.91 million (US$ 13 million) increase in coconut costs. Thisshows the direct impact of mining on the costs of palay and coconut.Mining vis-à-vis Unemployment and Poverty: Tables 7.7a and b also show thatmining is both directly and indirectly related to unemployment and poverty. Thismeans that for every increase in the income from mining, there is an equivalentdecrease in unemployment. The reverse is that same increase in mining income anddecrease in unemployment still would lead to a 0.01 increase in poverty in the case ofMIMAROPA region. This could partly be interpreted by relating mining to inmigrationof skilled workers due to the failure to employ local villagers. Ordinaryfishermen and farmers in the adjacent area without appropriate training cannot beemployed in the mining sector. Therefore, the deterioration of the economy of thecommons in agriculture and fisheries, as well as ineligibility of farmers and fishermenfor employment, probably contributed to massive migration into the cities and thegrowing incidence of Overseas Contract Workers. The totally marginalized are beingthrown into urban ghettos where they become informal settlers. They are now thetarget of massive demolitions due to severe social displacement. On the aggregate,around 40% to 50% of the estimated 90 million Filipinos now live in poverty.7.8 Mining is the wrong Engine for Growth 58A critique of the 1995 Philippine Mining Act(This section written by Arturo C. Boquiren, Assistant Professor in Economics, University of thePhilippines-Baguio)The Philippine government, through the Philippine Mining Act of 1995, promotesmining as an engine for economic growth and poverty alleviation. 59 However, in thePhilippine experience, the policy is misguided because mining has not solved povertydespite several decades of operation in host municipalities (Boquiren, 2007).Figure 1. Mining as depicted by government agencies in powerpoint slides.Source: Slide of the Department of Environment and Natural Resources -Philippines.58 This section, an invited input to this report of Robert Goodland and Clive Wicks, benefited greatlyfrom their insights. The critical comments of Lodel Magbanua and Fr. Frank Nally were also veryhelpful. Uncorrected errors, if any, are the responsibility of the author alone.59 President Fidel V. Ramos signed the Philippine Mining Act or Republic Act 7942 into law on 3rdMarch 1995. The Act consolidates Philippine House Bill 10816 and Senate Bill 1639 and was passedas a law by the Philippine House of Representative and the Philippine Senate on 10th February 1995.Chapter 1 Section 2 of the law declares that is the policy of the State to promote the rationalexploration, development, utilization, and conservation of mineral resources. The emphasis, however,has been only on the exploration, development, and utilization of mineral resources to the neglect ofrational and conservation.61

In the first place, are there good financial returns from mining? Table 7.8a tabulatesthe latest available data and shows that mining, including quarrying, is a laggardprofit earner. Despite high prices of metals in 2006 (see Figure 2 below) using theprice of gold as a variable proxy for metal prices overall), mining and quarryingproduced a profit of only 0.98% of equity while manufacture generated 214.23%.Overall, the top 5,000 corporations of the Philippines yielded 203.34% profit aspercentage of equity. 60 Indeed the financial contribution of mining to the economyvaries from zero to nil (and from nil to negative).Table 7.8a. Profit as % of equity of mining/quarrying compared to othereconomic sectors, 1999-2006Industry Group1999(year believed to be peak of Asian crisis)AssetsNumber ofmillioncompaniespesosin Equitymillionpesos20062000 Profit 2002 Profitas % of as % ofinEquityProfit as % ofEquityNumberequitycompaniesof Assets in Equity in Profit as % ofmillion pesos million pesos equityAgriculture Hunting and82 34,030 15,442 9.22 -0.22 2.06 78 67,966 25,803 -0.05ForestryFishing 27 5,755 580 -30.17 12.48 3.63 18 7,074 3,387 0.14Mining and Quarrying 23 137,946 36,830 -8.4 0.09 5.22 34 275,330 65,039 0.98Manufacturing 1,828 1,356,771 552,115 6.6 7.32 4.62 1,494 1,505,354 632,746 214.23Electricity, Gas and62 1,178,684 257,869 4.41 3.54 14.16 61 597,188 267,510 0.67Water SupplyConstruction 228 115,971 28,342 -9.61 -2.36 17.7 203 113,319 38,628 11.65Wholesale and Retail1,375 445,700 189,779 2.32 7.23 9.23 1,677 637,637 186,027 -4.92TradeHotels and Restaurants 163 58,037 28,004 3.21 3.25 3.30 117 70,803 39,095 2.63Transport, Storage and226 604,656 146,463 -11.07 -4.40 -8.11 254 697,843 289,046 -23.28CommunicationsFinancial Intermediation 442 3,656,378 974,348 4.75 6.35 -6.92 302 5,031,032 971,766 -8.95Real Estate, Renting and399 570,358 311,928 5.36 3.13 5.13 604 1,034,641 586,727 11.82BusinessEducation 41 12,555 8,101 12.43 10.89 12.82 36 22,712 14,654 0.89Health and Social Work 43 10,010 4,135 -5.66 7.00 0.97 33 15,178 7,647 0.19Other Community,Social and personal 81 42,908 23,611 38.75 43.12 0.49 87 59,138 7,552 -2.72ServicesTotal(top 5,000 firms)5,000 8,229,759 2,577,547 n.a. -12.14 6.19 5,000 10,135,292 3,135,651 203.34Source: Latest data available on the top 5,000 Corporation at the Philippine Securities and Exchange Commission 2008That mining is an unreliable generator of profit can be confirmed from the accounts ofthe leading Philippines mine firm, Philex Mining Company, which has long held anInternational Standard Organization (ISO) certificate of compliance to internationalstandards. 61 As indicated by Table 7.8b (the financial statement on the left “corrects”60 The figures quoted are those of the official records from the Securities and Exchange Commission.They may not be entirely accurate, but are nevertheless useful as indicators of industry comparativeprofit.61 Only two mining companies in the Philippines have gained ISO 14001 certification of compliance tointernational standards in environmental management. Philex Mining Company obtained one in 2002while Rapu-Rapu Processing Inc. of the Australian Lafayette Mining Limited was certified in late2007. Compliance with international standards in environmental management, however, does notindicate that mining will not harm the environment. Civil society groups have criticized LafayetteMining for not carrying out “responsible mining”; it is held responsible for at least two preventablemine spills. In early 2008, however, a Korean group bought out Lafayette’s interests in Rapu-Rapu.Meanwhile community groups have criticized the Philex Mining for its open pit mining that theyconsider to have destroyed their land and caused the water supply to dwindle. In spite of community62

the 2004 figures on right), 62 Philex generated an average return on investments (ROI)of only 14% for 2002-2006. In contrast, other livelihoods produce far better returns(see, for example, Table 7.8a). Further, Philex average net income is only 7.5% of itsassets at a time of annual inflation of 7.11% (based on the wholesale price index andconsumer price index over in the last 8 years).Table 7.8b. 2002-2006 financial figures of Philex Mining Company(Source: Philex Mining Company )PHILEX MINING CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME[Amounts in Thousands, Except Earnings (Loss) Per Share]Years Ended December 312006 2005 2004Revenue (notes 1,5 and 23)CopperGoldSilver₱ 6,347,7983,544,72367,478Less marketing charges 9,959,9991,467,667INCOME (CHARGES)Mining and milling costs ( including depletionand depreciation) ( Note 13)Mine products, taxes and royalties ( Note 13)General and administrative expenses (Note 13)Interest expense (Note 11 )Foreign exchange gains (losses) - netReversal of (provisions and allowances for)losses(Notes 10 and 24 )Handling, hauling and storageInterest incomeReversals of impairment on property, plant and equipment,input tax and deferred mine exploration costs (Note 8)Gain on sales of investment in noncurrent marketableequity securities, property, plant and equipment andothers – netOthers – net₱ 3,431,5241,925,89935,1245,392,547853,283₱ 2,174,1131,446,38428,0413,648,538489,9128,492,332 4,539,64 3,158,626COSTS AND EXPENSES AND OTHER(4,119,504)(355,544)(216,891)(197,992)74,849(66,381)(64,076)41,191-10,154(26,330)(3,401,639(199,128)(143,896)(192,091)142,228(450,357( 69,275)13,327401,4653,975( 15,632)( 2,669,181)(164,710)(153,928)(140,860)(5,701)12,902(58,782)8,5511,59579,585(49,343)( 4,920,524) (3,911,023) (3,139,872)INCOME BEFORE INCOME TAX 3,571,808 628,241 18,754PROVISION FOR INCOME TAX (Note 18)CurrentDeferred416,43568,706175,94943,1566,51528,041485,141 219,105 34,556NET INCOME ( LOSS ) ( Note 1 ) ₱3,086,667 ₱409,136 ₱ (15,802 )BASIC/DILUTED EARNINGS (LOSS)PER SHARE ( Note 21 ) ₱1.044 ₱0.138 (₱0.005 )complaints about Philex’s alleged non-compliance with compensation agreements and thecommunity’s expressed determination to stop open pit mining, Philex obtained a certificate of FPIC in2008 to continue open pit mining in a host community. Although a study is needed to find out howPhilex Mining obtained this consent despite community opposition to open pit mining, this authorbelieves that the explanation lies in the significant destruction of land after several years of miningoperations. Given their ensuing poverty and with the offer of a few pesos, some members of thecommunity may have regarded the consent as a means to minimize short-term monetary losses.62 According to the company’s correction of its own financial figures, Philex Mining generated a loss in2004, not a profit.63

PHILEX MINING CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME[Amounts in Thousands, Except Earnings (Loss) Per Share]REVENUE ( Notes 1 and 4 )CopperGoldSilverPalladiumLess freight, smelting and refining chargesOPERATING COSTS AND EXPENSES (NOTE12)Mining and milling costs ( including depletion and depreciation)Mine products, taxes and royaltiesGeneral and administrativeHandling, haulage and storageYears Ended December 312004 2003 2002₱ 2,174,1151,446,58428,041-₱ 2,055,3411,708,04627,8025₱ 1,571,2832,246,33536,4155332,648,538 3,704,194 3,854,566450,912 565,278 592,3733,178,426 3,225,916 3,262,1932,650,665164,710153,92858,7822,727,468146,285141,50457,7872,763,555154,687127,15550,8603,028,085 3,073,039 3,096,257INCOME FROM OPERATIONS 130,541 152,877 165,936OTHER INCOME ( CHARGES )Interest expense ( Note 10 )Gain on sale of investment in noncurrent marketable equitysecuritiesInterest incomeForeign exchange losses – netReversals of ( provision for ) write down of property, plant andequipment, input tax and deferred mine explorationcosts ( Note 7 )Realized loss from decline in value of investments innoncurrent marketable equity securities ( Note 8 )Others - net(128,876)79,5858,551(5,701)1,595-(36,441 )(108,953)-3,491(63,103)(479,628)(86,613)(18,955)(141,392 )-3,972( 42,444 )( 7,247 )-(11,163)(81,287 ) (753,363) ( 198,274 )INCOME (LOSS) BEFORE EQUITY IN NET LOSS OFAND LOSS OF DILUTION OF INTEREST IN ANASSOCIATE, CUMULATIVE EFFECT OF CHANGEIN ACCOUNTING POLICY AND INCOME TAXEQUITY IN NET LOSS OF AN ASSOCIATE ( Note 8 )LOSS ON DILUTION OF INTEREST IN ANASSOCIATE ( Note 8 )CUMULATIVE EFFECT OF CHANGE INACCOUNTING POLICY ( Note 22 )40,254--- 93,919INCOME ( LOSS ) BEFORE INCOME TAX 49,254 (627,950 21,108PROVISION FOR BENEFIT FROM INCOME TAX ( Note 17 )CurrentDeferred-6,51538,716(600,486 )(287)(27,177 )7,599(154,285 )(32,338)( 40,473)-6,520( 20,017)45,231 ( 146,686 ) ( 13,497 )NET INCOME ( LOSS ) ( Note 1 ) ₱4,023 ₱481,264 ₱34,605Earnings ( Loss ) Per Share ( Note 20 ) ₱0.001 (₱0.163) ₱ 0.012See accompanying Notes to Consolidated Financial StatementsThe years 2004-2006 cover periods in which gold prices (used as a variable proxy foroverall metal prices) were at their highest levels, as indicated by Figure 2. Despitehigh metal prices, the biggest mining company of the country made a loss in 2003 and2004.64

Figure 2. Price of Gold in US Dollars per ounce, 1971-2008 (37 years)That mining is inferior as an engine for economic growth, even when metal pricesrose rapidly in 2006 and 2007, is confirmed and affirmed by Table 7.8c.Table 7.8c. Mining as source of economic growthSource: National Statistical Coordination Board (quoted by The World Bank Philippines Brief - November 2007)Comparing Table 7.8c and Figure 2, despite high gold prices, especially in 2006-2007, mining and quarrying contributed –0.2% or almost zero to a derisory +0.5%growth from the first half of 2006 to the first half of 2007. As of June 2008, the morerecent data for 2007 has not been released. But a 2008 study indicates that for the lastseveral years, 60% of GDP growth has come from the services sector. In terms ofexpenditure, 78% of the growth is attributed to consumption. If the mine sites were tobe devoted to agriculture instead of mining, as analysed in Table 7.8d, the benefitswould be significant (Canlas and Khan 2008)65

Table 7.8d. Mining and vegetable production, 2003 (using latest officialgovernment data on mining) 63ParameterLand coveredBenefits from mining based ongovernment figures& its advocacy340,945 hectaresBenefits from agricultural production 64Assume land committed to mining in 2003 isdevoted instead to agricultureProduction valueP41.5 billion P193 billion (using even marginal lands based onthe experience of Northern Luzon)ExportUS$638 millionEmployment 104,000Variablefrom 150,000 to 341,000 (and even more basedon the experience of Northern Luzon)Multiplier effectThe Mining Industy claims between 4to 10 allied jobs created upstream anddownstream. (In an export orientedmodel like the Philippines linkagesare lower and thus job creation less)Not estimated, but the Leontief input-outputmatrix (see below table 7.8e) suggests thatforward linkage of agriculture is higher,suggesting that job creation should be higher withagriculture than with miningTaxes and fees P 2 billion (Maximum) A P2 billion revenue target will not be difficultWagesbenefitandP4 to 5 billionEasily P15 billionFrom this, it can be concluded that the private financial benefits from mining in factare inferior to those from alternative investments. Further, the financial contributionof mining to the economy ranges from almost zero to nil to negative.If society’s financial benefits from mining are zero, are society’s economic benefitsany better? Based on a study of mining firms in Luzon’s province of Benguet,Boquiren (2006) concludes that, when environmental damage is factored in, theeconomic contribution of mining to development is negative. 65If mining were indeed beneficial to society, it would show up in the poverty rates.Boquiren (2007) has shown that poverty is in fact worse in mining areas. RobertGoodland has examined the issue in more depth and made several usefulrecommendations on how poverty reduction and sustainable development can beachieved simultaneously (Goodland 2003). Meanwhile, it is the contention of thischapter that mining reinforces and perpetuates poverty.A partial explanation as to why mining perpetuates poverty is because the Philippinesis one of the most biodiverse countries in the world. Biodiversity is in fact the63 The data on benefits comes from that currently available from the website of the Mining and Geo-Sciences Bureau (GMB) of the Philippines’ Department of Environment and Natural Resources(DENR).64 Advocates of organic farming alleged that organic agriculture can result to far higher returns.65The research can be accessed at: www.geocities.com/haribonartboquirenreport/benguetmining2006.htm.66

country’s most important resource, 66 if not the world’s. Minerals can be recycled, butbiodiversity cannot: it simply dies and may be gone forever. Biodiversity is also asource of food and thus an important element for human survival.Biodiversity provides human society with a range of food and nutrient sources. Givenclimate variability, biodiversity is one of society’s most important safety nets forfuture survival. Modern industrial agriculture can produce a lot of food, but it is theunderlying diversity of food sources and agriculture gene pool that will allowhumanity to survive such climate variations over time. Mining threatens thisbiodiversity and thus long-term food security. Of particularly concern is that areastargeted for mining overlap considerably with priority areas for biodiversityconservation. Without biodiversity, those most vulnerable to poverty because of foodscarcity will become still poorer.Further, in many communities where modern agriculture is not dominant, biodiversityand the forest are their major sources of food. Mining that threatens biodiversity andthe forest deprives communities of food very directly and immediately.Figure 3. Biodiversity conservation priorities and miningSource: Conservation International-Philippines 2001 for priority biodiversityconservation areas; DENR for potential mining areas.66 See Conservation International-Philippines 2001 and Ong, Afuang, and Rosell-Ambal 2002.67

Meanwhile, watersheds are crucial for Philippine agriculture, and forests sustain awatershed. Mining companies can plant thousands of trees in cosmetic reforestationprograms, but plantations are not forests; indeed, the forest may die because of themining activities even as the reforested trees survive. Mining threatens watershedsand water supply sources not only because mine operations use water to extractminerals and dispose of their waste, but also because they alter or affect above groundand underground water routes.Figure 4. Forest cover versus areas with metallic potentialPanel A: 1999 Forest Cover (projected)Panel B: Philippine land areas with metallic potentialMining has poor forward and backward linkages with the rest of the economy, asindicated by Boquiren (2007) and by Table 7.8e below. As the mining industryappropriates resources, it stifles the development of other industries that could supportrural development better. By distorting above ground or underground land and waterfeatures, mining renders land hostile to alternative or multiple uses (even if miningcompanies create demonstration fishponds, rice farms, and other land use projects tosuggest that they have not destroyed the land’s productivity). It follows that localeconomic development is not compatible with large-scale corporate mining.68

Table 7.8e. Backward-forward linkage based on latestLeontief Input-Output Table for the PhilippinesBackward Linkage Forward LinkageSector Index ofIndex ofRankDispersionSensitivityRank1. Agriculture, Fishery, and Forestry 0.8616 10 1.0307 32. Mining and Quarrying 1.0003 5 0.8162 73. Manufacturing 1.2648 1 2.8780 14. Construction 1.1382 3 0.6292 105. Electricity, Gas, and Water 0.9208 8 0.8237 66. Transportation, Communication, andStorage1.1383 2 0.8859 47. Trade 0.9745 6 0.8800 58. Finance 0.9697 7 0.7624 89. Real Estate and Ownership of Dwellings 0.7034 11 0.6482 910. Private Services 1.1275 4 1.0581 211. Government Services 0.9009 9 0.5875 11Source: NSCB 2006: 17Allowing corporate mining is not just an investment decision. It also involvessurrendering property rights to mining business interests. Mining companies and theirinvestors may well take home a profit, but this profit will be at the expense of othersectors in society whose income, wealth and development will all be stifled.Further, because mining is capital and technology-intensive, resources that localpeople rarely possess, mining usually implies corporate or outsider control of localresources. Encouraging mining implies lopsided economic growth benefiting a smallminority while the majority may catch breadcrumbs falling from their dinner table astheir own food sources have been destroyed. This has been the experience ofindigenous communities who have entered into partnerships with mining companies.By allowing mining to operate in their ancestral domains, indigenous communitiesmore or less surrender their domains to mining companies. In effect, the 1995Philippine Mining Act goes against the spirit of the Indigenous People’s Rights Actand against the fundamental development principle of empowering IndigenousPeoples.The alternative to mining is economic development that is environmentenrichingand protecting and that promotes local control of local resources. Further,in an age of rapid climate change, the alternative use of potential mining areas asforests and agriculture is not only a rational but also usually a superior choice. Theoverall value of the forests far exceeds the monetary value typically estimated bycurrent economic valuation techniques, especially because the forest is key tohumanity’s survival from rapid climate change taking place throughout the worldtoday. Environment-friendly development can also promote equity as local controlover resources is maintained or promoted.69

Chapter 8: The Position of the International Agencies8.1 The World Bank GroupThe World Bank was involved in the expansion of mining in the Philippines, forinstance, by encouraging the liberalization of the mining sector that resulted in the1995 Mining Act. Since the mid 1990s, however, it has made some more positivemoves. The $50 million National Program Support for Environment and NaturalResources Management (World Bank 2007) is designed systematically to overcomesome of the long-standing weaknesses in the institutional performance of theDepartment of Environment and Natural Resources (DENR). This budget supportshould help the Government to rehabilitate abandoned mines, 67 map areas ofgeological hazards and potential ground water resources, strengthen environmentalmanagement, and enforce environmental laws and regulations.The World Bank also plans to conduct a Country Environmental Analysis (CEA) tosystematically evaluate the environmental priorities of development in thePhilippines, the environmental implications of key policies, including mining, andcountry capacity to address these priorities. The CEA also is aimed at supporting ashift in approach from being project-based to program based, with a stronger focus onenvironment and natural resources management.About five years ago, the World Bank tried to support the Government in creating aNational Environmental Management Agency that would independently enforceenvironmental laws and regulations. But Congress has not acted upon the Bill thatwould enact this. In the meantime, therefore, the Bank has continued to supportgreater transparency of information through public disclosure and participation ofNGOs and community groups in the review and monitoring of mining projects. 68Inadequate Institutional CapacityIn 2005, the World Bank concluded that political instability in the Philippines hadundermined the beneficial impact of the reforms that had been implemented, and thatsuch instability was rooted in governance failures. Moreover, weaknesses in publicinstitutions and corruption have also directly undermined a range of developmentobjectives. On the environment, the World Bank concluded that over the previousdecade, the Government had tried to reverse environmental degradation byintroducing innovative institutional and legal reforms. In recent years, many donors,including the World Bank, have supported efforts to improve overall environmentalgovernance in the country by building the capacity of the DENR, the Laguna LakeDevelopment Authority, the National Economic Development Authority,the Department of Public Works and Highways, the Land Bank of the67 As of 2003, there had been at least 16 serious tailings dam failures in the preceding 20 years and over800 abandoned mine sites had not been cleaned up. See: “Chronology of Tailings Dam Failures in thePhilippines (1982-2002)”. http://www.piplinks.org. See also: Ronnie E Calumpita: “857 abandonedmines pose health menace,” Manila Times, 11th October 2005.68 World Bank Director of the Philippines Department, Joachim Von Amsberg, letter to Clive Wicks,25th March 2007, available on file with Working Group on Mining in the Philippines.70

Philippines, local governments, NGOs, and local communities, and by supportinginnovative partnerships among them.In spite of all these efforts, capacity in environmental and natural resourcesgovernance still requires significant improvement, particularly in local governmentunits. In 2007, the World Bank noted the overall low ranking of the Philippines inglobal comparisons of governance and corruption. The World Bank’s 2008 report tothe Philippine Development Forum showed that 20-30% of every contract in thePhilippines is lost to corruption or inefficiency. Corruption scandals have also taintednumerous official development assistance (ODA) projects, with the Commission onAudit (COA) reporting in 2006 that at least 38 foreign-assistance projects had notcomplied with the procurement law and auditing rules. Unliquidated cash advances,absence of inventories, overstatement of accounts and delays were also amongirregularities cited by the COA. Of the ODA projects examined, four infrastructureprojects worth P101 million (US$2.46 million) were suspended; land acquisitionstotaling P36 million (US$0.876 million) were found to be unnecessary andoverpriced; while double or excess payments of various transactions worth P273.4million (US$6.652 million) were discovered.International Finance Corporation (IFC)The IFC, the private sector arm of the World Bank Group, recently announced plansto resume support for mining in the Philippines during 2008. Canada’s explorationfirm Mindoro Resources Ltd. says the IFC is expected to decide by the end ofOctober 2008 on an investment of up to $1.14 million (P53.2 million) in itsPhilippines projects, possibly the Agata North nickel/laterite and the AmericanTunnels copper/gold project mines, both in Surigao, North-eastern Mindanao. Bothare only three kilometers from the ocean. 69 The Environmental Compliance Certificate(ECC) for Agata was signed by DENR Secretary Atienza in May 2008.The reasons given for IFC’s new interest in mining are startling. IFC’s ManilaRepresentative, Jesse Ang, is reported as claiming that mining opens opportunities forthe poor to improve their economic status, 70 a statement that contradicts practically allrecent experiences of mining worldwide. Aspirations of poverty reduction frommining are also contrary to the findings of the IFC itself (Weber-Fahr 2002) and the2004 World Bank Group’s Extractives Industry Review (EIR 2004). 71 This renewedinterest in mining follows IFC’s 2006 investment in Australia’s Asian Lion Fund,through which the IFC has already invested in Mindoro Resources, which is partowned by Lion Selection Ltd. 7269 business.inquirer.net/money/breakingnews/view/20080928-163455/IFC70 www.mb.com.ph/BSNS2008 0808131906.html71 http://www.ifc.org/eir72 www.ifc.org/ifcext/spiwebsite1.nsf/1ca07340e47a35cd85256efb00700cee/FAA17B5F34BA03EB852574CE0055CACB71

8.2 International Development Assistance to DENRPineda-Ofreneo (1993) showed the linkages between debt and intensifiedenvironment extraction. Since then, environmental abuse has accelerated. Accordingto the European Commission (2005), concern about the Department of Environmentand Natural Resources (DENR) as an institution has reduced the number ofinternational cooperation projects in the environment sector. Confronted with thePhilippine Government’s own lack of commitment and its weakness in effectivelyimplementing environmental laws and programs, various donors have been cuttingback their funding allocations to the environment sector. Most of the aid that does goto the environmental sector now by-passes the DENR, instead being channeleddirectly to non-governmental organizations from the major donors – the AsianDevelopment Bank, the World Bank Group, US AID, Japan’s development agencies,the European Community, Germany and Sweden (EC 2005).Despite considerable effort, resources and time, most environment-related actionshave managed to produce only a temporary or localized reduction in the rates ofnatural resource depletion (EC 2005). This, plus the low level of local ownership andthe lack of political will on the part of the Philippine Government, justifies notpursuing traditional bilateral co-directed site-based projects in the environmentalsector in the short and medium term. The conditions required for this kind ofinternational financing are not in place at this stage.The European Commission (2005) concludes that DENR is reluctant to conductinternal reforms, or to fight its corner in terms of arguing the need for more funds topromote sustainable development. In addition, DENR has shied away frommodernizing its internal capacity, introducing new ways of boosting its internalrevenues, devolving certain responsibilities to the Local Government Units (LGUs),improving its enforcement, regulation and control capacity, and introducing internalcontrols to curb corruption. This has left the DENR relatively isolated and ineffectivein influencing or collaborating with key government departments such as NationalEconomic and Development Authority (NEDA), Department of Finance, and lineagencies closely associated with environmental matters, including the DevelopmentAuthority, National Commission on Indigenous People (NCIP), or the LocalGovernment Units (EC 2005)72

ANNEX Entire Report Table of Contents (sections included in this document inItalics)Foreword to Second Mining ReportviiMessage from Senator Aquilino Pimentel Jr . viiiMessage from Bishop. Zacarias C. Jimenez, DDixEXECUTIVE SUMMARY AND RECOMMENDATIONSSummary recommendations to the Philippine GovernmentSummary recommendations to Mining CorporationsSummary recommendations to Development Agencies, NGOs, World BankSummary recommendations to the Investor CommunitySummary recommendations to Mining-Impacted CommunitiesxixvixxixxiiixxvxxviiINTRODUCTION 1Chapter 1: Mining and Food Security 4Chapter 2: Mining and Forests 11Chapter 3: Mining and Marine Resources 15Chapter 4: Flawed Government Policy 18Chapter 5: Indigenous Peoples 36Chapter 6: Human Rights, Militarization and Mining 44Chapter 7: Philippine Mining Economics 53Chapter 8: The Position of the International Agencies 70FIELD TRIP CASE STUDIES 73Case Study 1: Iron Ore & other Minerals, Midsalip, Zamboanga del Sur - MindanaoIsland 75Background 75Water, Food and Livelihoods 77The Threat of Mining in Midsalip 79Potential Impacts and Opposition 82Midsalip Visit 84Midsalip Conclusion, Recommendation and Map 85Case Study 2: Copper and Gold Mining Zamboanga del Norte - Mindanao Island 94Background 94Mining damage 95Future plans? 98Sibutad and Libay Visit 99Sibutad and Libay Conclusion, Recommendation and Map 1001

Case Study 3: Copper and Gold Mining in Tampakan, South Cotabato – MindanaoIsland 106Background 106Threat of a huge open-pit copper and gold mine 108Uncertainty Raising Fears 113Visit to South Cotabato 118South Cotabo Conclusion, Recommendation and Map 121Case Study 4: Nickel and Cobalt in Davao Oriental – Mindanao. The HallmarkProject 126Background 126Proposed Mining 127Environmental and Social Impacts 129Opposition and Deficiencies in Consultation 31Visit to Pujada Bay / Mt Hamiguitan 134Pujada Bay Conclusion, Recommendation and Map 135Case Study 5: Nickel Mining – Mindoro Island 142Background 142Mining Proposal 143Opposition 144Indigenous opposition 145Visit to Mindoro 148Company continues to plan 149Governor Issues Order to Stop Mining Activities 156Mindoro Conclusion, Recommendation and Map 161Case Study 6: Gold and Nickel Mining - Sibuyan Island 172Background 172Forest Resources Already Threatened 173Proposed Industrial Mining 173Opposition 175Visit to Sibuyan 176Sibuyan Island Conclusion, Recommendation and Map 177Recommendations to the Philippine Government 181Recommendations to Mining Corporations 191Recommendations to Development Agencies, NGOs & the World Bank Group 196Recommendations to the Investor Community 199Recommendations to Mining-Impacted Communities 202Annex A: Church Declarations and Position Papers on Mining 206Annex B: Civil Society Reports on Human Rights Violations 212Annex C: Strategic Environmental Assessment (SEA) 213Annex D: Health Impact Assessment (HIA) 217Annex E: Literature Cited and Guide to Further Information 221Annex F: Mines and Communities (MAC): The London Mining Declaration. 246Annex G: Geohazards and Earthquakes in the Philippines 251Annex H: Philippine Biodiversity Conservation Priorities 2602

About the AuthorsRobert Goodland is an environmental scientist specializing in economic development.He advised the World Bank Group from 1978 through 2001. He then became thetechnical director to H.E. Dr. Emil Salim’s independent Extractive Industry Review(eir.org) of the World Bank Group’s portfolio of oil, gas and mining projects. He waselected president of the International Association of Impact Assessment, andMetropolitan Chair of the Ecological Society of America. He was awarded the WorldConservation Union’s Coolidge medal in October 2008. (RbtGoodland@aol.com)Clive Wicks has 48 years of experience of working in engineering, agriculture andenvironment, specializing in the impact of extractive industries on the environment. Heis a vice chair of IUCN-CEESP (IUCN’s Commission on Environmental, Economic andSocial Policy) and co-chairs SEAPRISE (IUCN-CEESP’s Working Group on the Socialand Environmental Accountability of the Private Sector). He worked in the internationalenvironmental movement for the last 24 years, mainly with WWF UK. He headed WWFUK’s African, Asian and Latin American programs, and represented WWF at G8, WorldBank, International Finance Corporation, UNEP and UNDP meetings on extractiveindustries. (Clivewicks@googlemail.com).. Perhaps reluctantly we come to acknowledge that there are also scars which mark the surface of ourearth: erosion, deforestation, the squandering of the world’s mineral and ocean resources in order to fuelan insatiable consumption. Some of you come from island nations whose very existence is threatened byrising water levels; others from nations suffering the effects of devastating drought. God’s wondrouscreation is sometimes experienced as almost hostile to its stewards, even something dangerous. How canwhat is “good” appear so threatening? ...My dear friends, God’s creation is one and it is good. Theconcerns for non-violence, sustainable development, justice and peace, and care for our environment areof vital importance for humanity.His Holiness Pope Benedict XVI, 23rd World Youth Day, Sydney, Australia, July 12-21, 2008Photos if the fact-finding trip can be found on:http://workinggrouponmininginthephilippines.blogspot.comWorking Group on Mining in the Philippines(WGMP)28 Redington Road, London, NW3 7RBwgmpuk@tiscali.co.uk1