The Impact of the Philippine Elections on the Mining Industry
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THE IMPACT OF THE PHILIPPINE ELECTIONS ON THE MINING INDUSTRY Assessment of the implications of the 10 May elections for the mining sector Philippines Snapshot • The Philippines is one of the world’s greatest mining provinces, and one the hardest for foreign mining companies to access and thrive in. • The country’s underexploited mineral wealth has an estimated value of more than US$840 billion, an amount if realised and well-invested in hard and soft infrastructure that could help transform the Philippines and act as catalyst for a national renaissance. • In order to achieve anything approaching such an outcome, the state and much of the population will have to demonstrate a willingness to encourage and retain the foreign investment and technology required to exploit and eventually process the nation’s mineral bounty. • The outcome of the election has major implications for the Philippines economy and all its component sectors, in particular the country’s mining industry. Allan and Associates has assessed the implications for the mining industry according on the basis of the known policies and priorities of an administration led respectively by any one of the three leading contenders. Political risks facing the Philippines mining sector There are nine candidates in the Philippine presidential elections. The three leading contenders are Senator Benigno “Noynoy” Aquino III of the Liberal Party; Senator Manuel Villar of the Nacionalista Party and former President Joseph Estrada of the Puwersang Masa Party (PMP). Former Defence Secretary Gilberto Teodoro, the standard bearer of outgoing President Gloria Macapagal-Arroyo’s party, Partido Lakas-Kampi, is a distant fourth. Five other candidates - Senator Richard Gordon of Bagumbayan, Senator Jamby Madrigal (independent), evangelist Eddie Villanueva of Bangon Pilipinas, Olongapo City Councillor JC De los Reyes of Ang Kapatiran, and environmental activist Nicanor Perlas of Pangmasa - are all considered distant outsiders. As of 11 May the elections appeared to have been generally well conducted, barring some violent incidents and a number of other poll related disruptions and offences. The speed of the count and its outcome is the next phase that could lead to instability, particularly if the early results suggest that Aquino’s status as the most favoured candidate to win the presidency is under threat. A clear indication of the outcome should be ready by 15-16 May, though speculation over and expectations of the winner will be evident immediately. 1 Allan & Associates Press Release 11 May 2010 Aquino presidency Senator Benigno “Noynoy” Aquino III, 50, is the son of the murdered national hero Benigno ‘Ninoy’ Aquino and the recently deceased former president Corazon Aquino. He lived with his mother until her death and is unmarried. He is the favourite to win the presidential election. In 1998, ‘Noynoy’ Aquino ran for a seat in the House of Representatives and won, serving as Congressman of the second district of Tarlac until 2007. He served on numerous committees as a member of Congress and as deputy speaker from November 2004 to February 2006. In May 2007, he won a seat in the Senate and was placed sixth in the national elections. At the Senate, he chairs the Committee on Local Government and is also the vice-chair of the Committee on Justice and Human Rights. Aquino had a relatively poor track record as a legislator in his three terms as a congressman and one term as a senator. He has authored only nine bills, two of which remain pending. However, he is extremely popular among the electorate, heading almost all the credible opinion polls. The public perceives him as an extension of his parents, an honest official and a fighter against corruption, if not nepotism. Aquino’s popularity contrasts with his lack of a political hinterland that can translate his policy agenda into material reality. This raises the prospect that an Aquino presidency would rely heavily on popular support – echoes perhaps of the 1986 ‘People Power’ revolt that toppled the authoritarian leader Ferdinand Marcos from power and propelled his mother Corazon into the presidency – rather than pursuing coherent strategies intended to provide long term economic and social stability. This perception is reinforced by the close links Aquino has with ‘progressive’ elements within the Catholic Church and civil society groups, such as non- governmental organisations (NGOs). There is some concern his links within the more radical members of either group can result in an anti-mining administration that would pass laws hostile to foreign businesses. According to a Green Electoral Initiative (GEI) survey led by EcoWaste Coalition and Greenpeace in February 2010, Aquino was quoted as saying: “We should review the Mining Act and its implementation, particularly the fiscal incentives, in order for us to maximize the economic benefits of the extractive industry.” 2 Allan & Associates Press Release 11 May 2010 He also noted that mining can be sustainable and that the law should guarantee the exploration, development and utilization of mineral resources primarily benefit the Filipino people. Mining, Aquino continued, should also provide viable and sustainable livelihood options for communities, ensure gains are maximised for the benefit of the nation without compromising the environment and that local communities are actively involved in decision-making regarding site development while being protected under human rights legislation. This response belies the fact that Aquino has no history of involvement in the anti- mining movement. Further, the Catholic Bishop Conference of the Philippines (CBCP’s) Matrix Of Presidentiables on Key Issues issued on 2 May 2010 (see below) indicates Aquino is against a review of the Philippine Mining Act of 1995, which the CBCP and some NGOs have sought to repeal. Aquino’s stance on mining may also be evident in the support his campaign has received from the Makati Business Club - which includes major mining interests - on the basis of his supposedly pro-business economic platform. Estrada presidency Joseph Estrada, 72, is a popular movie actor whose political career began with his election as the mayor of San Juan before becoming a senator, vice president and finally national president. As senator Estrada opposed the presence of US military bases in the Philippines, while as vice-president he served as chairman of the Presidential Anti-Crime Commission (PACC). During his short tenure as president (1998-2001) Estrada sought, and failed, to inflict a military defeat the Moro Islamic Liberation Front (MILF) in Mindanao. After being accused of involvement in an illegal gambling scandal, he was toppled from power by a further display of ‘People Power’ in 2001 and detained until his trial in 2007, when he was sentenced to life imprisonment – only to be pardoned by President Arroyo a few days after being convicted. Estrada claims adherence to the political, economic and social platforms of his political party, which emphasises social and economic policies intended to benefit the poor majority and bring peace and stability to country. An election victory by Estrada could represent the beginning of a new wave of populist and nationalistic sentiment. This would almost certainly have a negative impact on foreign mining interests as it would represent a radical realignment of political forces and increase the political, regulatory, social and environmental risks for companies looking to explore, invest and operate in the Philippines. 3 Allan & Associates Press Release 11 May 2010 Although Estrada did not responded to the GEI survey, while president in 1999 he began the process of cancelling 1995 Mining Act and recalling the Presidential Administrative Orders that had permitted mining firms to operate in tribal domains. As Estrada was ousted from office before any attempt to reverse mining legislation was brought before parliament, it is unclear whether his moves represented a determined effort to curtail the country’s mining industry or was political theatre intended to boost popular support when under growing pressure from his opponents. Villar presidency Born in Manila’s working-class district of Tondo, self-made billionaire Manuel Villar, 61, made his fortune in property development and his company, Vista Land, is one of the country’s leading house builders, Villar was elected to Congress in 1992 as representative for Las Pinas City and Muntinlupa and served for three consecutive three-year terms. In 1998, he was chosen to become the Speaker of the House of Representatives and had a major role in the impeachment of President Joseph Estrada on corruption allegations in November 2000. In July 2006, he was chosen to become Senate President, a position he held until November 2008 when he resigned after having been accused of involvement in an alleged fraudulent land scheme. Villar’s impressive track record as a legislator, business manager, political pragmatist and alliance builder – he has brought together individuals from the left and right of the political spectrum on to his ticket - makes him the most tested pro-business candidate among the three leading presidential contenders. Villar’s political programmes to promote poverty alleviation and entrepreneurship - and such radical advocacies as support for the re-opening of the mothballed Bataan Nuclear Power Plant, could provide a dynamic economic boost to business, including the extractive sector. However, Villar’s extensive business interests and involvement in alleged legal anomalies could present conflicts of interest. Some observers are also concerned that he may choose to use his presidential powers in support of his own commercial advantage or that of his allies and supporters. Although Villar is independently wealthy, he has spent heavily on the elections and has developed extensive and high-maintenance commercial and political alliances. A Senate Committee Report that claims Villar had failed to avoid conflict-of-interest accusations by not divesting himself of his shareholdings or interest in Adelfa Properties Inc adds to this perception.