"."1' Bestavailable Copy Determination of Development Fees Fortelecomubroadcast Companies Operating on Mt.~Tangladrangenaturalpar~

DETERMINATION OF DEVELOPMENT FEES FORTELECOMUBROADCAST COMPANIES OPERATING ON l MT. KITANGLAD RANGE NATURAL PARK

Department of Environment and Natural Resources Philippine Economic - Environmental and Natural Resources Accounting System

Environmental and Natural Resources Accounting Project

Supported by the lmJD , ~ United States Agency for ~~[~ International Development II'tt*11"."1' BESTAVAILABLE COPY DETERMINATION OF DEVELOPMENT FEES FORTELECOMUBROADCAST COMPANIES OPERATING ON MT.~TANGLADRANGENATURALPAR~

ENRAP IV TECHNICAL PAPER

ENRAP-PAWB-PPSO Team2

September 1999

1 This document \\as made possible through a grant by the United States Agenc)' for International Development (USAID) under the terms and conditions ofContract No. 4924165-C.oo4042.oo. The opinions expressed herein are those ofthe authors and do not necessarily rellect the views of the USAID and collaborating institutions. This document may be reproduced or quoted in other pUblications as long as reference is made to the source.

'The ENRAI'-J'AWB-PPSO team is composed of: Jose E. Padilla, ENRAP Deputy Project Leader. Rina Maria P. Rosales, ENRAP Research Associate; T. Blastique, Sr. EMS. PAWB; S. Cabrera, CP II, PAWB; E. Corquero, Statistician L PAv,,"B; R. Buen, DMO IlL PPSO-DENR; and L Matubis, DMO II, PPSO-DENR.

I TABLE OF CONTENTS

Table ofContents List ofFigures and Tables Executive Surrunary 1 1. INTRODUCTION .••••..•.••.••.•..•.••••.••.••.•.••.••..•.•••••.••••..••••.•.•.•••....••••....•...•.•... 1 •••••••.•.••..•.•••...... ••.•..•.••.••.••.•.•••••••..•.•..••••...•.•••.• 2. OBJECTIVE OF THE STUDY 1 1 3. FRAMEWORK. '" ", .., Framework '" ", ..2 3.1 Legal ,. '" '" ,, _ 3.2 Proposed Fee System Guidelines .3 to Pay for Development Privileges 3.3 Economic Framework: Willingness , .4 3.4 Survey Approaches and Methods .5 4. STUDY OF THE RESULTS ofAgreement.. 5 Tenus and Conditions ofthe Memoranda 4.1 Valuation ofthe ._ '" '" '" "_ 6 Basis for Rental Fees '" 4.2 Commonwealth Act 141 as '" '" 6 '" " '" , .. , 4.3 Estimates ofExcess Profit ", 7 5. RECOMMENDATIONS

Endnotes References Appendices Fees for Access to and Guidelines and Principles in Determining Appendix A Draft DAO: Areas. Sustainable Use ofResources in Protected and between the Department ofEnvironment Appendix B Memorandum ofAgreement Park the CPPAP, Mt Kitanglad Range Natural Natural Resources through and (PAMB) and Philippine Telephone Protected Area Management Board Telegraph Corporation

ii List of Figures and Tables

Figure I Mt. Kitanglad Range Natural Park Political Boundary (taken t'rom the Mt. Kitanglad Range Natural Park Initial Protected Area Plan, prepared by the DENR Region X Office)

Figure ::: Existing Structures at the Summit ofMt. Kitanglad Range Natural Park. Department of Environment and Natural Resources Office X-4 (prepared by GMA Network Incorporated. April 2. 1997)

Table I Summar:' ofColltributiollS of Telecom Companies as Speeilied in Their Memnranda of Agreement (MOAs) with the PAMB

Table 2 Value of Contributions ofTelecom Com pan ies f3ased on MOA Terms and Conditions and Direct Payments to LGUs

Table 3 Computation of Rental Fees for Telecom Facilities Operating on Mt. Kitanglad Based on Commonwealth Act 141

Table 4 Estimates of Excess Protit of Telecom Companies Operating on tvIKRNP Fiscal Year 1997

Table 5 Comparison of the Value oftvlOA Contributions and Alternative Rental Estimates

iii F:xccutivc Summary

~,Il. Kitanglad Range Natural Park (~'IKRNP) is located in the province of Bukidnon. N,"th-Central rVlindamw. It has a total area of30.642 hcctares. with the highest peak measuring 2.938 meters ahtHC sea level. The second highest peak con~rs an area of 60 hectares and is designated as a special land lise zone. It is currently used by ninc telecommunication and broadcast companies for locatin!.!. their facilities that scn'e North and Central ivlindnnao. --

The slud,' estimated appropriate devd,'pmcnt fees for the use of the iVlKRNP summit. The hi!!h e1e\'ation~providcs a cnst-etTecti\"t,~ Incatit)l1 tor telecol11 and broadcast to\\"ers. The NIPAS Act ser\~d as the primary legal framework for thc imposition of the fees. However. it docs not contain specific guidelines ill estimating fees. In this connection. ENRAP and PA \VB drafted guidelines in estimating fees for the use of resources within protected areas, This study serves as a test case on the usc of these guidelines. An alternative basis used was the Commonwealth Act 1-11 of 1936. or the Land Code. which contains specitic provisions in determining rentals of government land leased to private entities.

The draft guidelines are. premised on the economic framework of willingness to pay (WTP) for the lise or non-market goods and services, In the case of land. WTP is determined by the excess profit companies enjoy li'om the use of the resource in question. For MKRNP. excess profit is attributable to its location and ,tltitude. The PAMB may opt not to collect total excess prolit as de,'elopmem fees. albdt its being a surplus. The portion or the surplus going to the dc\'e!opcrs serves as an inc-enti\ e fl,J!" technological and other innovations.

The ENRAP-PAWB-PPSO team conducted a survey of the companies owning facilities on top of MRKNP. It further reviewed the various Memoranda of Agreement (MOA) between each of the companies and the PAi'vIB/DENR. The terms and conditions of the MOAs. including all taxes and other fees paid by the tirms served as the benchmark for comparing the development fees based 011 t;\.(;CSS profit and 011 CA 141 provisions.

Results show that based on the MOf\ terms and conditions. companies are paying annually an average of PhP 6.872 to the PAMB. 60% of which represent reforestation commitments and cash cOlltributions. Using CA 141 as the basis for rental fees. companies should be paying the PAMB an average amount of PhP 30.239 per finn per year. Finally. excess profit estimates reveal an average amount of PhP 903.556. to PhP 1.036.124 being enjoyed by each finn per year. A fee of 10% of cxcess protit can amount to ,Ill average of PhP 90.356 per firm per year.

Th~ study therdt)re recommends that the PAMB charge development fees against telecom and broadcast companies using either CA 141 or average estimated excess profit as basis. Based on tht: results. the PANIS is foregoing a considerable amount of potential rental income by as much as Phi> 23.367 to PhP 83.483 per tinn per year. on the average. Extending this to the duration of the MOAs. it is foregoing PhP 116.836 to PhP -117.417 per firm. or a total of PhP 701.014 to PhP 2.504.503 tor all tinns.

iv 1. Introduction portion ofthe Mt. Kitanglad Range Natural Park (MKRNP) is located in the North-Central in Bukidnon, namely: province ofBukidnon in the island of Mindanao. It covers eight municipalities Lantapan, and Impasug-ong. Talakag, Baungon, Libona, Manolo Fortich, Sumilao, Malaybalay, of approximately 42,755.: These municipalities are composed of 28 barangays with a population map ofthe protected area. Access to the area is through Cagayan de Oro City. Figure 1 shows a - (63 percent) are MKRNP has a total area of 30,642 hectares of which 25,259 hectares covered by lowland evergreen covered by lower montane forest and, 6,631 hectares (17 percent) are and other vegetation types forest. Mossy forest is found in 5 percent of the area, while grassland meters above sea level, and is cover the remaining open areas. The highest peak measures 2,938 in Davao. MKR,"",'P serves as proclaimed as the second highest peak in the country next to Mt. Apo North and Central Mindanao. the headwater catchment area of several major river systems draining percent of the population are Based on Host Non-Government Organization (HGNO) reports, 80 is farming, supplemented by indigenous, while 20 percent are migrants. The main livelihood activity river fishing, hunting, and gathering ofminor forest products. covering 60 hectares, MKRNP has several designated land uses. The peak ofMt. Kitanglad, and strategic location, this area is designated as a special land use zone. Due to its high altitude that could serve Northern and provides a unique site for broadcast and telecommunication facilities the MKRNP swnmit. There are Central Mindanao. Figure 2 shows the location ofthe towers within that use this area for beaming currently nine private, government, and government-owned companies service areas. However, only radio, television, and other communication signals to their respective telecommunication companies seven companies earn revenues from their facilities. Some of these Area Management Board of have signed Memoranda of Agreement (MOA) with the Protected the operation of the MKRNP. The MOAs specified the terms and conditions governing in cash and in kind telecommunication facilities within the summit. It also provides for compensation to be paid to the PAMB.

2. Objectives ofthe Study facilities This study aims to estimate appropriate development fees for telecommunication by the reported minimal fees that use the summit of MKRNP. This study was primarily motivated units despite the unique paid by telecommunication firms to the PAMB and local government summit provides a cost-effective location offered bythe MKRNP. The high elevation ofthe MKRNP North and Central Mindanao. location for tele communication and broadcast towers that could serve Guidelines drafted by the This study constitutes one ofthe pilot-testing activities for the Fee System ENRAP-PAWB-PPSO team (Appendix A).

3. Framework

3.1 Legal Framework the National In 1992, the Philippine Congress enacted Republic Act No. 7586 establishing The NIPAS law mandates the Integrated Protected Areas System (NIPAS) for the Philippines. provides for the establishment creation ofa system ofprotected areas to conserve biodiversity. It also the projects ofthe system. All ofan Integrated Protected Area Fund (IPAF) for purposes offinancing

1 ----_._------_..•------

I'unds !'enerated from the protected areas shall accrue to the IPAF, Seventy-live percent of IPAF accrl1~S to a sub-fund while the remaining 25 percent is accumulated in the central fund. The former is Fe)r the exclusive USe of the protected area generating the revenues.

The NII'AS law and its Implementin!, Rules and Re!,ulations outline the process in the ItmllUlalioll of economic instruments in protected areas to generate revenues for the IPAF. Th~ Secretary of the Dr.NR is empowered to ..... fix and prescribe reasonable NIPAS fees to be collected from gnn~rnl11ellt agellc'ies or any person. tinn or corporation deriving bene1its from the protected areas"- Further. he is also empowered to "accept in the name of the Philippine Government-and in behalf of NIPAS funds. gifts or bequests of money for immediate disbursement or other property in tht' interest of'the NIPAS. its activities. ~)r its services".

The NII'AS law. however. doc', not provide detailed guidelines in e1etermining rentals for the use ~)r g~)VernnH;nt land. including protected areas. On the other hand. Commonwealth Act 141 of 1936. more popularly known as the Land Coele, contains specilic provisions in determining rentals of g.~)\ emlllent land leased to private entities directly benefiting from the activity. Chapter IX. Section 6-1- states that:

"The leases e.,ecuted uneler this chapter by the Secretary of Agriculture and Natural Resoun.:es shall. among other conditions, contain the folJowing:

a) The rental shall not be less than three per centum of the appraised or reappraised valuc 01' the lanels plus one per centum of the appraised or reappraised value of im provements.

b) The lanel rented and the imprO\'ements thereon shall be reappraised el'ery ten years of

the term if the lease is ill excess of that period. II

Hence. it is very clear that the rAMB, which acts in behalfofthe DENR in protected areas. can legally charge a rental ree tlll' the use ofgovernment Jane!. The rental tee should not be less than three percent of the reappraised value ofthe land plus one percent of the value of improvements. Such improvements are defined in Section 64 (d) of the same Code, which states that "the lessee shall Cllnstruct permanent improvements appropriate for the purpose lor which the lease is granted .... " Hence, the value of any development made on the land, which directly contribuks to the operations of the company, can be used as basis for the rental fee.

3.2 Propo.\'ed Fee Systel11 Guidelines

To implement the provisions of the NIPAS law, guidelines tor setting fees in protected areas were dmtied. The types of use of protected areas and its resources were identilied. More importantly, it developed a typology of fees that may be charged for the difIerent types ofuse. The development fee is applicable to the operations of telecommunication companies in MKRNP. The development of land and space includes, among others, shops lor rental or rccreational equipment such as boats, fishpens and lishcages, tapping 01' geothermal encrgy, impounding of water tor electric power generation and Il)r any other purpose, construction oflodging facilities for tourism, and construction of highways and relay stations. Commercial development activities are categorized in terms of

2 the Department ofTrade capital investment ofeach development project in accordance with and Industry (DTT) guidelines. outlined by the Based on the above, it is proposed that a fee should be assessed as following guidelines and principles: or the privilege of a) Development fees shall cover the use of land or other resources in protected undertaking small-scale, medium-scale and other bigger scale development and for a specific areas for whatever purpose. The fee is for a specified period of time nature ofdevelopmeIit. The privilege is granted to a person or entity. shall not alter the b) Any development of land and other resources in a protected area and processes. landscape and shall not significantly disrupt normal ecological functions joint venture or c) The PAt\1B shall, to the extent feasible, enter into co-production, extraction production-sharing agreements with interested parties in the commercial and/or development ofresources in protected areas. ofthe excess d) The government share in these agreements shall be a reasonable proportion profits derived from the commercial extraction ofthese resources. by PD 1586 and e) All types of development are required to undergo an ETA as prescribed other pertinent laws and regulations. within protected The guidelines are anchored on the principle of sustainable use of resources lower than either tI,e rate of areas. Sustainable use is defined as the rate of extraction that is protected area. Hence, in regeneration or the rate that shall not endanger life forms inside the is within the carrying capacity implementing a development fee, it is implicit that the use in question precludes any environmental ofthe area, as determined earlier bythe proper authorities. The fee thus damages that should be included in its estimation.

3.3 Economic Framework: Willingness-ta-Pay for Development Privileges (WTP) as The draft Fee System Guidelines for protected areas recommend willingness-to-pay is primarily determined by the basis ofall fees for resource users. For recreational users their ViTP WTP is estimated through the recreational benefits derived from visits to the protected area. The ofland and space such as contingent valuation or travel cost surveys. In the case ofthe development net benefits derived by the for telecommunication facilities, the WfP may be determined by the excess profit. In the case of companies from their operations. An indicator ofthe net benefits is the to its location and MKRNP, excess profit (also called rent) realized by the £'inns is attributable match in these respects. Such altitude. Initial investigations showthat the summit ofMKRNP has no or from a hypothetical firm information may either be based on surveys oftelecommunication :!inns that is operating at an efficient level. resource rent or excess Hartwick and Olewiler (1998) provide a good definition ofeconomic! good produced using a natural profit. "Rent is a surplus - the difference between the price of the The unit costs include the resource and the unit costs ofturning that natural resource into the good. the natural resource into a value of labor, capital, materials, and energy inputs used to convert value ofthe natural resource product. What remains after these factor inputs are netted out is the such as air and water." itself-the land, water... fish, minerals, forests, and environmental resources

3 ------

The above definition of excess profit is estimated from production costs and earnings using the following formula:

EP=GR-CP (1)

CP = W + RM + TrC + L K; (0, + r) + r'WC (2)

where: EP = economic rent GR = gross revenues CP = costs ofproduction W =wages RM = raw materials TrC = transport costs K; = fixed capital investments

0, = depreciation rate ofKi r = discount rate WC = working capital

The depreciation rate is specific to each type ofinvestment and depends on the economic life of that particular fixed investment being measured_ On the other hand, the discount rate can be represented by the official social discount rate used in government project evaluation procedures_ At present, this rate is 12 percent to 15 percent. Finally, working capital refers to the variable expenses borne by the producer, i.e., wages, raw material expenditures, and operating and maintenance expenses. Of relevance to the telecommunication facilities, however, are primarily fixed capital investments and maintenance costs associated with the facilities. Working capital are associated with the overall operations ofthe finns and not specific to the facilities at MKRNP.

It is recommended in the draft guidelines that the PAMB allot some portion ofthe Surplus to the developers as an incentive for technological and other innovations. Hence, they should not collect the entire excess profit, although it is by nature, a surplus.

3.4 Survey Approaches andMethods

The team composed ofENRAP, PAWB and PPSO representatives first made a presentation ofthe study proposal to the PN\1B ofMt. Kitanglad on May, 1998. The companies covered by th() study were interviewed on-site as well as in their Manila offices. A matrix was provided for them to fill out. This included questions on the acquisition and maintenance costs oftheir MKRNP facilities, communication traffic handled by the facilities, and other parameters for computing excess profit.

The Memorandum ofAgreement (MOA) between each company and the PAMBIDENR were also gathered. The terms and conditions in the MOA and other taxes, charges and fees already paid by the finns to LGUs and other government entities serve as the benchmark for comparing the appropriate fees based on the excess profit and on the provisions ofCommonwealth Act (CA) 141.

The on-site interview was conducted in May 1998. At that time, most companies declined to provide the data requested for in the survey; instead, they referred the team to their respective Manila offices. It took the team almost a year to get the companies to supply

4 the needed data on revenues and costs. An endorsement letter from PASU Mirasol was requested sometime in February, 1999 to facilitate the survey. Still, not all companies complied. Only one company provided the team with the complete set ofdata requirements. With respect to data on the cost ofthe facility, five companies complied while one company could not provide such data because their facility was under construction at that time. Only one company gave figures on revenues generated by the facility. Two scenarios were used for the other firms. First, the revenue share ofthe company with complete information was applied to the nationwide revenues ofall other firms. The second scenario used the estimates oftheir revenue shares gathered by phone interviews from their key personnel at their Manila offices.

4. Study Results

4.1 Valuation ofthe Terms and Conditions ofthe Memoranda ofAgreement

Five ofthe seven privately owned companies have existing MOA with the PAMB, while one has an agreement with the Central Office of DENR. Appendix B contains the typical MOA entered into by the PAMB ofMKRNP with the private fmns. Table 1 summarizes the terms and conditions specified in the various MOA between DENR and the firms. Five out ofsix ofthese MOAs required reforestation of denuded areas within MKRNP with endemic tree species. However, only fuur have complied so far. Nevertheless, the valuation exercise was conducted for all five companies, on the assumption that all ofthem will comply with the MOA provisions eventually. In lieu of reforestation, one company paid for the rehabilitation ofthe visitors' quarters at 1Y1KRNP.

As shown in Table 1, the terms and conditions of the MOA vary across companies. One MOA stipulated the establishment ofa communication network to assist PAMB's administration and management functions. On the other hand, three conditions, i.e., reforestation, initiation of a community-based project, and assignment of company employees to serve as forest protection volunteers, were found to be common to five MOAs. Only the payment of administrative fees and hiring ofindigenous peoples (IPs) for construction oftelecommunication towers were included in all six MOAs.

The valuation ofthe terms and conditions of the MOA focused on aspects where data are available. Required information for valuation includes degree of compliance and cost parameters. The costs ofhiring IPs in the construction ofthe facilities are not included in the valuation as these are normal building costs. Labor costs form part ofthe acquisition costs ofthe facilities.

The cost of reforestation was based on the ceiling -- PhP 18, 145 per hectsre, prescribed by the Forest Management Bureau (FMB). Also included were the monitoring costs in maintaining the reforestation project. It is assumed that one person monitors the project once a month and spends 40 percent of the time at the site (as verified by the FMB). This amount was no longer pro-rated according to the size ofthe reforestation project because monitoring time may not differ significantly fur projects one hectare or smaller.

'As mentioned earlier, there is one MOA that does not require reforestation, rather, the company was asked to contribnte in cash for the rehabilitation ofthe visitors' quarters on the sununit. The annual value oftbis commitment was computed based on the estimated 25-year economic life of the visitors' quarters, rather than the duration ofthe MOA. It may be unrealistic to assume that every

5 ------~-,--=------

be vastly diften::nt from the n:Il~\\"nl of the [\:IOA \\ould requin: tilL' same commitment as this would usual payments made by' the oth!..:!' l..:ompanies.

of PhP5.0QO each. while one Five companies were also required to pay an administrative tee Natural Resource Office (CENROl, paid an amount of PhI'l ,205 to the Community Environment and of the MOA, These anl\lunts were included in imputing value to the provisions to the Municipality of Finally, four companics malic a onc-time payment of PhP60,OOO the basis of the averag.e ~5-year llllpnsug-ong. as business fees. This amount was pro-rated on the results of the valuation of th~ ('collomic life of their towers on iVlt. Kitanglacl. Table 2 contains 09,621 per company for the duration pl'llvisions of thc MOA, The av'cruge total contribution is PhI'l and LGU payments is PhI'6,872, 01' the MOA, while the average annual value of the MOA percent of the average total Reforestation commitments and cash contributions account for 60 contribution of each tinn.

4,2 CA /4/as Basi.v'JiJr Rental Fees

fees would be Commonwealth As mentioned earlier. an alternative basis in charging rental that can be charged against the Act 141. Tahle 3 shows the average annual rental fee provisions ofCA 14L The 3 percent tclecommunication facilities located on Mt Kitanglad using the basis for valuation. Hence. rental reappraised valUe of the land was not computed. given the lack 01" land improvements. Nevertheless. the resuhs l"ees were computed only on the basis of the value of charge a ma:-.;imulll of PhP30.239 as warrant further discussion. On the average, the government can in the earlier discussion, this rClllal lecs per linn pCI' year for the use of the summit As mentioned paying the PAMB per their respective amount is Illuch higher than '""Ilat tilt..: companies are actually i'vIOA,

4,3 EstiJ1lntes ,,(Exce,\',\' Profits profit generated by the scven The third part of the study deals with the estimation of exccss of excess profit Howeyer, companies, The eh'all tee system guidelines provide for the computation profit. the relevant revenues ancl costs tlJ be able to cOllle up with accurate measurements of excess facilities within MKRNP, used in computing for such should be directly attributable to the

Mt Kitanglad facilities could Except I"l' one ~ompany, revenues from the operations of their published in annual reports 01' lH\t be determined, The available dam are usually financial statements the MKRNP facilities such as client C

gross profits. the data from To derive the parameters to compute for revenues. costs. und facility compared to its nationwide company A is used, The share of income from its MKRNP companies as well in estimating the income \Vas computed. This tigure was then used for the other first scenario, A second revenue prolils directly attributable to MKRNI', This represented the made by technical personnel of the allocation procedure (scenario 2) makes use of rough estimates and the interviewees based their companics' Manila onices, Interviews were done by telephone, responses on their knowledge of the companies' operations nationwide. equivalent to 30 percent of III computing for excess prolit. a margin for profit and risk (MPR) MPR provided for in the draft the companies' production costs was allocated, The maximum excess protit. Production costs were guidelines \vas used to arrive at conservative estimates of

6 included as these are incurred by represented by the cost ofthe tower alone. Working capital was not MKRNP summit. the companies' operations and not specifically bythe facilities at the earn PhP1,832,375 Table 4 shows the estimates of excess profit. On the average, companies 1. Using the second set of from the operations of their Mt. Kitanglad facility, under Scenario of PhP1,942,849 per firm. After assumptions, annual MKR..1\lP incomes are even bigger at an average excess profit of PhP903,556 a deducting their respective MPRs, companies on the average enjoy an year under Scenario 1, and PhP1,036,124 under Scenario 2. relative to the The attribution of net income to MKRNP facilities was done conservatively earlier, MKfu'\fP has no close advantages offered by its strategic location and altitude. As mentioned them very vital links in the substitute for locating these towers as gateways to Mindanao, making nationwide operations ofthese firms. profit was substantial, The results in Table 4 further show that although the average excess 1997. In particular, Companies almost halfofthe firms had negative excess profits for the fiscal year costs had already exceeded B, C and G had negative excess profits. For Company B, nationwide start with. This is because the nationwide revenues, hence net income was already negative to part ofits costs were start-up company had just started to expand its operations in Mindanao. A large for the analysis. Revenues are expenses, and should be annualized to reflect the appropriate costs For Company C, its public ex-pected to increase enormously once their operations normalize. have been due to an expansion statement showed a huge amount attributed to fixed charges. This may these companies may have been ofthe company during the year in question. Hence, excess profit for underestimated.

5. Recommendations development The draft fee system guidelines recommend WTP as the basis for determining is indicated by the excess profit fees in the use ofresources within protected areas. WTP, in this case, not deter the PAMB from ofthe telecommunication companies. The negative excess profits should of net income and the normal charging development fees given the very conservative estimates expansion outcomes that businesses usually undergo. fees against the The study therefore recommends that the PAMB charge development estimated excess profit as basis. telecommunication companies using either CA 141 or the average year. In using the guidelines, it Using CA 141, the PAMB can charge at least PhP30,239 per firm per if a 10 percent ofthe estimated can charge even higher at an average ofPhP90,356 per year per firm, average excess profit is applied. the provisions ofthe Indeed, the PAMB foregoes considerable potential rental income with basis, the PAMB is foregoing MOA signed with the telecommunication companies. On a yearly (Table 5). Extending this to revenues by as much as PhP23,367 to PhP83,483 per firm on the average as PhP116,836 to PhP417,417 the duration ofthe MOA, the PAMB is foregoing revenues by as much foregone rental revenues reach per firm. For all firms that have existing MOA with the PA.1\1B, the that can be generated by PhP701,014 to PhP2,504,503. Needless to say, the potential revenues for better management and charging development fees can be substantial enough to allow maintenance ofthe MKRNP.

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REFERENCES

Bureau ofAgricultural Statistics (BAS). 1999. Palay: Estimated Production, Area Harvested and Yield per Hectare, by Crop type. Department ofAgriculture.

Buenaventura" A.M.S., M.C.M Ebarvia, and A. Juinio-Menez. 1996. "Environmental Damages from Water Pollution: 1988 Refinements and 1992 Estimates". ENRAP Phase ill Refinement ofAccounts. Volume IV, Section 5, ENRAP ill Technical Appendices. ENRAP, Blue Ridge, Quezon City.

Ebarvia, M.C.M., 1994. "Estimation ofEnvironmental Damages." Technical Appendices of the Philippine Environmental and Natural Resources Accounting Project (ENRAP, Phase ll). Department of Environment and Natural Resources (DE1'-.TR) and United States Agency for International Development (USA.ID), Philippines.

-----,---,--. 1997. Guidebook for Environmental and Natural Resources Accounting.

______. 1999. "Status ofIrrigated Area." National Irrigation Authority (NIA).

National Statistical Coordination Board (NSCB). Philippine Statistical Yearbook 1999.

Santos, V., S. Salandanan, and D. Tolentino. 1985. "Extent of Water Pollution and Effectiveness of Its Control in National and Communal Irrigation Systems." Philippine Council for Agricultural Resources Research and Development. Table 1 Su·mmary uf Cuntributions of Telecom Companies as Specified in theil- Memuranda of Agreement (MOAs) with the PA\oIB

Natun' of Contribution Percent ofTotal Compliance Finns Required

I. Reforestation and maintenance 8""0/._, ·0 80~;' Designation or assigned ldecom employees as 83~/o 100% forest PI\1tcctiol1 n1!untccrs 3. Pn.wide garbage receptacles. sanitary facilities at the summit 67~/o 100% 4. Payment of administrative fees 100% 100% 5. Assistance to PAMB in the establishment ofcomlTIunication 170/0 0°",·0 network for better park administration and management 6. Initiate a commullity-based project 83% O~O ... "'OJ.: 7. Assist in the construction'of steel stairs hnvards the summit ,,> ..LO 100% 8. Emph.lyment orlPs in the construction IJrte!ccom towers. etc. 100% 100% OI 9. Support rehabilitation or visitors' quarters wI specified amount r"J /0 100~';)

:"'111":" I;,..:..:pl li.>r il..::ms 1.4 amI\). 1110.." lllh..:r l;Ulllrihulilll\S \\1.:1..... 11(>\ llhlllclized beC;'\ll:;": \lfJal.:k Ill' inli,rlll

an.: lIl'l ;l\:lil;lhJ,:. h'r il":lI1 X. Ih..:: ":Ilsl \'fthis b <.:mbcdlkd inlhc a..:qui"ilipllCllS.!S lllthe towers.

77R

7.744 6,872

2.622

7.7-\-1

7.7-14

1-1.WO

Valuc

Annualil.cd

13.11~

10.-1-18

86,7'21

86.7:"1

86.7]

109,621

365.000

Tnl

COlltrihulion

p-snlll

60,1100

60.000

n/a n/a

IlIa

LGUs

1.<;\

LUIll

Payment

LGUs

pa'ln":lll

1.205

).000

),000 4,368

).000

5.000

;tlld

Fees

inistrati\'c

III

f\H):\

l'Olllriblliioll

Payments

l';lsh

S.II~

Companies

fur

18.243

65,253

21,721

21.72

21.721

dlll

300.000

Direct

S-nh-Tota1 ;lIld

lmwrs

and

PhP)

Telecom

llwll-da.\

3.576 6,437

of 3.)76

3.~76

::"576

likspalll)(

17.880

p.:r

(PhI')

I·j\)

Tahle

Imputed

;1\'..:r;IlJ"·

PhI'

Maintenance

Conditions

b.'

Costs

(amonnt

~'()SIS

\1.'

;tlld

ion

and

I<':,,:s.

Contrihntion

Illulliplied

300,000

Commitments

I.(lt)

rdlll·~·stUl

ltl

Terms

lil,-

1;lIld.

'n\

Contribution

---Cl.lsh

Valne

lldlllilliSllath..:

pa\

ceiling

~'I()A

363

.:136

;llld

rdilf,:sled

18,145

lIt"

11,867 I~U-k\

18.14)

Reforestation

cOSls

nlll'-lim

glln:rnlllcn[

alld

Ik'~'lar('

(PhI')

....

Based

Reforestation

kl's

Oil

finplitcdCOsts-,

18.145

r..:rnr..:slalillil

I'm

prol~'l'l

til..:

f\IOA

(hHS.)

adlniniSlrali\<:

nla

nia

0.65

0.25 of

0.02

lllaill!;lilli

plus

based

ArCH

;''':;lr

Juralion

per

computed

(yrs.)

)

l'ommiull..:1ll

I.(jU.

8.3

nla

\\"I;'r.:

Ji\'ilkJ

mall-d;I;'S

MOA

Duration

·statioll

('osts

m I

raym.:nl

ol'rdhr

G B

Firm!

Eslimal..:d

Valu.:

Totall'\utlribtltioll

On.:-tilil': RdiHcStatiOl1

Ave."age

~ No!es'

Company 1 Table 3 COlllputation of Rental Fees for Telecom Facilities Operating on i\'lt. Kitanglad Based on COllllllonwealth Aet loll

Finnl Reappraised Vallie Valoc of Relltal Fcc 21 Company of Laod Improvcmcnts 11 (PhP) (PhP)

A n/d 1.675.000 16.750 13 n/d 2.459.800 2-1.598 e- nid 10.290.758 102.908 I) nft! 125.000 1.250 E n/d n/d IIld F n/d 3.223.01-1 32.230 G n/d 370.000 3.700

Average 3,023.929 30,239

nit! ~ 11\1 daw :\\ail'1hlc

~ Valu ..: \JrilllpHl\":1ll~nh == Imcslm":lll CI' ... I \lfh.:k"(llllll:ldlilil,.'S at MKRS!' ~ \':qllal to 1"" \-altt..: ofilllpw"..mclIIs

;

)

L33

(95.652)

464.758

(75\.·135

1,U36,12"1

8.3

(2.821.386)

SccnarIo

Pronto

.1.15)

Exccss

33.821

(110.564)

(7-10

8.38~.336

(3.0-19.-178)

Sccnario

Ii,r

and

.17.500

111,000

737.9-10 966,904

502.500

'lDT,T79---'f(13,:>:>6

Risk

3'()87.227

Profit

IVIKRNP

M,trgin

15,348

(13.495)

265.84\

502.258

2.000,304

8.886.836

"1,942,8"49

Opcrating

Scenano

KRNPtO

)

Income

ofM

.121

436 I .195

Nct

.17.7-19

PhI')

1997

2,000.30-1

8,8X6,S36

COll\panics

Sha,'c

-r,83"2-;375

car

Scenano

Tahlc-l

Tclccoll\

.180)

Fiscal

(Amount

7.000

T,lhk

61,393

(.137

5.3\6.8\9

\0.045.\64

listed

E8,OllD,91J3

281,732.963

Income

Profit

1.251.66

Nationwide

i'I'1KRNP

Exccss

lit

nrms

95.000

fm:ilily

\.364.03

1.105.255

3,533,148

l1/d

,II'

\llher

Costs

953.695.076

"II

cost

1.258.975.339

-1.39.1.\

Nationwide

-r,3'>6,9T7;9TS-

the

F:stimatcs

(11'

30";,:,

u'"

5'~!o

SCI

.~hme

767.875

A's

3,594.541

I1ld

15(~,;,

-t~iJ

Rbk

421.409.195

shnrcs

shmcs

Rc"enncs

1.26-1.292.\57

1,595,O:>gy6S--

2,235,428,039

5.6-1-1.862.000

and

Nationwide

E's

D's

COlllpnny

shan:

Prolit

tlnlililbk

Il's.

O's

A's

C's

for

data

puny

pan)'

G C

llll

Scell

('olHpnny Com

Company

('ompilny

Firml

tvlargin

Sc~n:lrio

Fur

Average n/d

~; Com Tahle 5 COlllp'\I'ison of the Value ofMOA Contributions and Alternative Rental Estimates

Description Average Amount

A. Value or MOA Contribution (PhP/year per firm) 6.872

R. Alternati\'~ Rental Estimates I. Common\\""hh Act 1-11 (PhP/year per firm) 30.239 2. Excess Prolit (Ill% of I\)\\er estimate) (PhP/year per tinn) 90.356

C. Rental Foregone PCI' Year If I. Based on CA 1-11 (Phl':)ear per linn) 23.367 2. Based on Excess Profit (Phl'/year per firm) 83.483

D. Rental Foregone for Duration or MOA 21 I. Based on CA 1-11 (PhI' per Ii nn) 116.836 2. Based on Excess I'rotit (PhI' per finn) -117.-117

E. Rental Foregone for all Firms 1<". Duration ofMOA 31 I. Based on CA 1-11 (PhI'l 701.01-1 o Based on Excess Prolit (PhI'l 2.504.503

\; :\J11\l(IIl(S in B k:-:- alll,llllH in .'\ 1. :\lII\ltlllh ill (- multiplkd h~ ;l\,,;ra~,,; dur:ni'1I1IlP"·!O.'\. i.c.. :; yrs.

.'i .\mounb in [) lllllilipti..:d b~ (I linll:- ({} "lll 1l(7 linns Ita\'..: MOAs with DE\iRI

12 FIGURE I

Mt. Kitanglad Range Natural Park Political Boundary

taken from the Mt. Kitanglad Range Natural Park luitial Protected Area 1'''11I prepared hy the DENR Region X Office

13 ~ 0 w ~ i u" ~ "~ ~

14 FIGURE 2

E.\istilll:! Structures at the Summit of Mt. Kitanglad Range Natural Park

Department of Environment and Natural Resources Ortiee X-4

Prepared by GiVIA Network Incorpon\tcd GMA Complex EDSA corner Timog Avenue, Diliman, Quezon City

April 2, 1997

15 -- References

Commonwealth Act N,;' 1-11, as Aml'lllled, 1975. "An Ad/o AII/elld ",,,I ('oil/pile Ihe Laws Re/alil'e 10 LOlld, oI'llie f'lIhli" DOII/uin··. Chapkr IX. Section 64 (a) and (d).

Department of Environment and Natural Resources (DENR) Region X. MI. Kihll1glad RUlige SUfur,,1 Park llli/iut Frolecled Ar('(/ Plull. DENR-X, Cagayall de Oro City',

DEXR Region X and Philippine Telegraph & Telephone Co. (1'1'&1'). ,January 1996. Cagayan de Oro City.

CiVIA Network, Inc. 1997, Exis!illg SlrlldlireS al the .)lI1l1l1/il ol.WI. Killlnglad Rill1gc Na/liral Park. (i.\l..j Ne/H'ork. 11Ic.. DiJiman. Quezon City.

i\'lemorandum of Agreement bctwct'll Department of Environment and Natural Resources (DENR) and ABS-CBN Broadcasting Corporation, April 1991. Quezon City.

J!e/J/orCI/Ullllll (~lAg"f.!(,llJell{ he/wcen DejJu,., menl ofEnvironment ({/1(/ Na/llral Resources. j 996

Nordic Agency for Deyclopment and Ecology (NORDECO) and Department of Environment and Natural ResoUl'ccs (DENR) 1998. Technical Report. 1J1le~,.atillg Conservation (lml DI!\'c/ojJll1f.!n! ill Profected Area Alwwgemenl in lyf()lfJ1/ Kiwng!aL! Runge Natllra! Park. The f'liilippines. NORDEC(), Copenhagen. and DENR, Manila.

Republic Act No. 7586. "N"liOiIUI IlIh'gmled Prolec/ed Areas Srs/c/II .'lei olI992". Section 10 (t).

Hartwicl" .J. M. and N. D. Olcwiler. 1998. The Ecol1omics (~l ,Valura! Resource U"ie. Second Edition. Reading. Massachusetts: Addison- Wesley

16 End Notes

I. Most infonnation was taken from Mt. Kitanglad Range Natural Park Initial Protected Area Plan prepared by the Department ofEnvironment and Natural Resources (DENR) Region X Office, except where otherwise indicated.

2. Nordic Agency for Development and Ecology. Integrating Conservation and Development in Protected Area Management, Mount Kitanglad Range Natural Park, Quezon City. 1998

2. Ibid.

3. Ibid. Appendix A

DENR ADMINISTRATIVE ORDER No. 99-

SUBJECT Guidelines and Principles in Determining Fees for Access to and Sustainable lise of Resources in Protected Areas.

Pursuant to the provisions of R~ptlblic Act 7586 othenvise known as the National Integrated I'rntcctcd Arcos System (NII'AS) Act 01" 1992 and its Implementing Rules and Regulations. and in order to provide guidelines and principles in accessing and stlstainably lIsing resources in protected areas. thi:\ Order is hereby issued for the guidance of all concerned.

SECTION I TITLE

This Order shall be known as "Guidelines and Principle.\' ill Determi/lillK Fees/or Access to lIllt! Sustainahle lj'ie (~f Resource.\' ill Protected Areas".

SECTION 2 OVERRIDING PRINCIPLES IN THE UTILIZATION OF RESOURCES IN PROTECTED AREAS

2.1 Sustainability is the overriding consideration in determining all types and rates of lise of all resources in protected areas. Sustainable use shall be operationalized as follows:

2.1.1 For the extraction 01' renewable resources such as forest tlora and fauna and other forest p;·oc!ucts. surface and ground water. tisheries, geothermal energy and sirnilar resources. sustainablc use shall be the rate of extraction that is lower than either the rate of regeneration or the rate that shall endanger life forms inside the protected area. The rate of lise shall be \vithin the carrying capacity of the protected area and its immediate surrounding.s when taken individually or collectively or in relation to other uses of the area and that any' form of use shall maintain the socia-economic and cultunll aspect ot'the area.

2.1.2 Any development 01' land and other resources in a protected area shall not alter the landscape and shall not significantly disrupt normal ecological functions and processes.

2.1.3 The recreational use of resources for tourism. for filming or photography. shall preserve the natuml landscape and not put significant stress 011 living resources hy considering the carrying capacity ofthe area.

, 1.4 In the process of re",urce utilization, the introduction of substances or chemicals hannfurto the environment shall not be allowed.

17 Subsistt::l1cl.: ust:: of resources by IPs and tenured migrants shall be exempt from the payment or USCI' f\?es.

2.3 Pending the issuance of certillC

2.-l Prior to the I'ull implemcntatilHlillperation of the IPRA Law. li·ee and infonned prior consent from indig~nous people shall be sought in the gathering of biological and other resources \\"ithin prol~cled an:as.

2.5 The colkction and research of biological and genetic resources in protected areas It)!" scientific and/or related purposl.:s shall be governed by the provisions of Executive Order 0:0. 247 (Prescribing Guidelines and Establishing a Regulatory Framework of Biological and Genetic Resources. their By-Products and Derivatives) and its implementing rules and regulations. ifapplicable.

SECTION 3 OB.JECTIVES

It shall be the ohjective of this Order to set fonl,. the procedure which DENR through the Protected Areas ",1<1 Wildlife Bureau (I'AWB) and the Protected Area Management Boards (PAMBs) :-;hall follnw in dl2'rennining fees for ;:ll':I;~SS to and sustainable use of resources loeared in protected arL'as for subsistence. recreational. extractive. commercial. and all other purposes.

SECTION -1 SCOPE

This Order shall cn\·~r idcnti tied major uses of all resources and facilities in areas comprising thc Nationallntcgratod Protccted .. \ro:ls system (NIPAS).

SECTION 5 DEFINITION OF TERMS

5.1 Carryillg capaci~I' - rders t,) the ability of the natural or environmental resource to ahsorh stress withollt experiencing unacceptable instability and degradation.

5.2 COl1l1uereial Use - is the lise of resources in excess of suosistence use.

5.3 Cottage-Scale De.'e/opmellt - any development that requires an investment of PhI' 150.000 to 1.5 million.

5.-1 Developmellt of Lalltl alltl Other Resources iuvolves all forms of improvement ur cllhalH.:cmenl of land and other resources within a protected area for any purpose.

18 5.5 E.'(tradh'e Use '- is the lise or resources involving gathering. tapping. diverting. or any form or remo\al of resources within the designated l1lultiple use zone. sustainable use zone and buffer zone.

5.6 Final CO/lsumptio/l - refers to use of resources where the reSOurce IS no longer used as input to proclu(:tion of other gouds or services.

5.7 Fishing - is the tnking or fishery species from their wild state or hnbitat. with or \vithout the lise of tishing vessels.

5.S lJuli1{e/lous Cultural CO/llmllllitiesllndigenOll,\' People (lCCsIIP.\) - refer to a group of people or homogcnous societies identitied by self-ascription and ascription by others. who have cOlltinllollsly lived as organized community on communally boulldecland defined territory. and who have. under claims of ownership since time immemorial. occupied. possessed ancl utilized such territories, sharing common bonds of language. customs, traditions and other distillctin: cultural traits, or who have. through resistance to political, social and cultural inroads of colonization, non-indigenous religions and cultures. became historically differentiated from the majority of Filipinos. ICCs/IPs shall likewise include peoples \vho are regarded as indigenous on account of their descent from the populations which inhabited the country. at the time of conquest or colonization. or at the time of inroads of non-indigenous religions and cultures, or the establishment of present state boundaries. who retain some or all of their O\\i11 social, economic. cultural and political institutio11s. but who may have been c1ispli.lced II'om their traditiol1~ll domains or who may have resettled olltside their ancestral domains (Section 3(h), RA 8371).

5.9 iVlediuJu-Scale DevelojJment - any development that requires an investment of above PhP 1.5 million to 60 million.

5. 10 iY/arketed Resources are resources which use entails voluntary exchange involving monetary transaction or non-monetary transaction as in the cuse of barter.

5.11 Micro-Sca!e Developmellt any development that requires an investment of PhP 150.000 and below.

5.12 NOll-marketed Resources - are resources which use does not entail market transaction.

5.13 RecreatioJlal Use - is the use of resources for the primary purpose of personal enjoyment but which does not entail any form of extraction. except. t<'1I" exnmple, in recreational or sports fishing where a regulated number offish may be taken.

5.14 Resources - refer to all living and non-living, renewable or non-renewable. including but not limited to terrestrial. aquatic or both. surface or subsoil resourCes found within protected areas.

5.15 Smllll-Scl/le Developmellt - any development that requires an investment of above PhP 1.5 million to 15 million.

5.16 Subsistellce Use - is the use of resources to satisfy the minimum basic requirements of households of indigenous cultural communities and tenured migrants including but not limiteel to tooel. dwelling. clothing. medical assistance and recreation.

19 5.17 Sustaillahle U....e - is the lISC of components of biological din~rsity in a way and at a rate that does not lead to the decline in the species lIsed. thus. maintaining its potential to meet the neecb and a:spirations of the present and future Filipino generations.

5.1 S Tellured :lligrallt - or COlllllltlllities within protected areas arc those \\ho have actuall~ and cOlltinll{Hlsly occupied arca li\!..: (5) years before the designation orslich as protected area in accordance with the NI PAS ;\...::l and are solely dependent on the resource for subsistence ( Sec. .J( I ). RA 7586).

SECTION 6 TYPES OF USES

The follo\\ ing are the types or uses of resources in protect~d areas on which fe~s shall he assc.:.:ssed or Illay bL' applied.

6.1 Subsistence use shall includc but not limited to hunting of wildlife tor household consumption. gathering of forL'st products for house construction. agriculture or fish culture to raise crops or tish for household consumption. Subsistence use shall be for the bendit of indigenous cultural c0111111unilit.:s and tenured migrants only.

6.2 Recreational use shall include but not limited to land. water-based actIVItIes such as snorkeling. SCUBA diving. swimming. boating. mountain climbing. trekking. picnicking. and bird watching. filming and photography: and all other similar activities as may be determined and allowed by the Protected Area Management I~oard (PAMS).

6.3 Extractive use shall indude but not limited to: a) extraction or diversion of water for irrigation or domestic uses: h) collection or gathering of forest products such as vines. rattan. bamboo. resin. ornamenlal plants. hirers nest, guano. honey: c) collection of wildlife such as Illonkeys. \\ild pigs. buuerlly.: d) extraction of !lora and fauna and its by-products. pal1s and deriyatiws. including. but not limited to leaves. blood and samples: e) tishing either in slllall or commercial scale.

6.-1 Commercial use shall rerer to the development of land and other resources such as construction of kiosks ti..1!" vending food and souvenir items: construction of tourist and lodging facilities: shops t~)r rental of recreational equipment stich as boats. and such other activities as may be allowed 11: lhe ivlanagement Plan and in accordance with Depal1ment of Tradl.: and Industry (DTt) guidelines.

Further. it shall also include existing activities relating to the us~ of geothermal energ.y. water resources for electric power generation. use of fish pens and Iishcages. use of highways. relay stations and similar communication or transportation stntctllrc.

20 SECTION 7 TYPES OF FEES

7.1 Pro/ected Area Ell/rance Fee - is a fee paid to enter a protected area.

7.2 Facilities User Fee - is a ft.'c paid for the privilege' of lIsing mall-made facilities inside a protected are~l.

7.3 Resource User Fee - is a fec paid 1'01' the sustainable cOlllmercial use of a specified quantity l)f resources \\ ithin protected area n\'cr a specified period oftimt:.

7..1 COl/cessiol/ Fee - is a fee paid lor the use of land or other resources for the privilege of llllCkrtaking micr(l and cottage-scale development for a specitied period of time and for a spccilied nature of development.

7.5 Del,e/0pl1lent Fee - is a fee paid for the lise 'of land or other resources for the privilege of undertaking small. medium and other bigger scale development in protected areas to the extent as may be allo\\ed by PAMS and in accordance with the Management Plan for a specitied period of time and for a specific nature of development.

7.6 R0J'llIZr may be cletined as a fee paid based 011 the gross Olltput value or gross sales from products out of resmlrces derived from a protected area.

SECTION 8 SPECIFIC GUIDELINES AND PRINCIPLES IN DETERMINING FEES

One or more guidelines and/or principles may be employed in determining fees based on the f()lInwing: a) capability to approximale closely the correct fee: b) availability of data as basis for cnmplltations: and c) costs to be incurred in estimating the fee.

g.1 Protected Area Entrance Fees and User Fees

Specific Principles

8. I. I Cost-recovery principle - For Protected Area Entrance Fees. collected revenues shall cover. as mllch as possible. a reasonable proportion of all costs incurred in protecting. maintaining and enhancing the natural attractions of the protected area. For Facilities User Fees. collected revenues shall cover. as much as possible. a reasonable proportion of all costs incurred in providing and maintaining the man-made facilities in the protected area.

8.1.2 Willingness-to-pay principle - For Protected Area Entrance Fees. these shall be based on the willingness-to-pay estimates of the visitors based on appropriat~ surveys.

21 Guideliues

X.I.3 Protected Area Entrance Fees shall cover access to lh~ prol~eted area. If applicable. all additional Facilities Us~r Fee shall cover acce~s t~) and the lise of man-made ra~iliries in th...: pn)te(t~d an~a.

X.I A For Protected Area Fnlranee Fees. the "illingness-to-pay principle shall be the primary basis for ClHnputing fees. However. if information is not m"ailable. the Clht- r...:con~ry principle shall be the basis of computation. .

S.I.5 For Facilities User Fees 011 man-made facilities managed by pri\"ate entities. rates shall be determined by the private entity but shall be comparable to fees charged lor the use of similar "leilil;oS in a comparable locat;on. All Facilities User Fees shall be determined in conslllt~l!inil with the PArviS.

8.1.6 For Fadlities User Fees l)1l man-made facilities managed by the go\"ernment. these shall be determined using the cost-recovery principle and shall be comparable to the fees for the use of privalely managed facilities with similar characteristics.

8.1.7 A three-tiered system of Protected Area Entrance Fees shall be developed: I,mer rates for f-ilipino studClllS and senior citizens: normal rates for other Filipino visitors: lo\\er rates for minors: higher rates for all foreign visitors.

8.2 Resource User Fees. Dl;Vl,;.'lopment Fees and Concession Charges

Guidelilles {Il1d Prillciples

X.2.\ The PAMS shall. to the extent feasible. enter into co-production. joint venture or production-sharing. agr~emel1ts with interested parti~s in th~ commercial extraction andlor development of resources in protected areas.

8.2.2 The government share "r the protected area through the Integrated Protected Areas Fund (lrAF) in these agreements shall be a reasonable proportion of the excess protits derived from lhc (.;oml11crcial extraction of resources.

8.2.3 All types ()r developmcnt are required to underg.o EIA System as prescribed under I'D 1586 and other pertinent laws and regulations.

8.3 Royalty

Gllidelille {IJ1(1 Priuciple

For an:y lise of resources that result in the sale of goods or services where the value of lI,)tal sales can be easily moniwn.::d. the resource fee may be based on royalty.

22 SECTION 9 OTHER PROVISIONS l).1 The computation of the exccss protits shall be guided by the formula specitied in Allnex A. The corresponding government share from tbe eXt:ess profit shall be determined (;ollsistent \vith the appropriate instrument agreed upon by the cOlltracting parties.

9.2 The rate of subsistence use shall be specitied for each resource and where possible. for each household of indigenous people and tenured migrants. Such rate shall not exceed the rural annual capita threshold income by region as Illay be determined by the National Economic and De\'elopmenl Authority (N EDA ),

9,] The classilication of developmclH projects in protected areas III terms of investments shall be regularly updated in accordance wilh D1'I guidelines.

9A The guidelines and principles enumerated herein shall be elaborated and operationalized 111 a handbook that shall be developcd alicr pilot-testing in a sutlicient number of protected areas,

SECTION 10 RESPONSIBILITIES OF PAWB AND PAMB

10.1 PAW8 shall:

In, I, I Take the lead in pilot-testing these guidelines and principles in key resources and uses in collaboration with the PAMBs and DENR Ficld Oftices:

10, I,2 Develop a manual to bc used by PAMBs in the implementation of the guidelines and prinCiples alter pilot lcsting in a sufficient number of areas:

10.1.3 Assist the PAMBs to opcrationalize the manual: and

10,1,4 Assist in prm'iding experts required by the PAMBs 111 the implementation of the g.uidelines and principles.

10,2 PAMB shall:

10,2, I Collabornte with PAW13 in the pilot testing of the guidelines and principles:

10,2,2 Be guided by the manual developed by PAWB in implementing the guidelines and principles:

10.2,] Approve all types of uses of resources in a protected area through a Memorandum of Agreement with the concerned entity~

IO.2A Conduct public consultations/dialogues with interested parties on proposed fees:

10,2,5 Formulate and pass all rcsolutions required to enable and facilitate the collection of fees: and

23 10.2.6 Detcrmi.llc through cI.)llsultations with indigenous people the traditional ust:s of r~sourccs \\ithin pn.)tcclcd areas.

This Order shall take effect rineen (15) days alier publication and re\okes. supersedes. and amends any (wder and/l)f inslruclillils inconsistent herewith.

ANTONIO H. CERILLES Secretary

24 TECHNICAL ANNEX

A. Computation ofExcess Profit

The excess profit per year that arises from a natural resource-based activity shall be computed using the following formula.

Excess Profit = gross sales (GS) ofnatural resource-based product or service Less cost ofproduction Less margin for profit Less margin for risk

where: GS =(quantity ofproduct or service) x (farm-gate price) Cost ofProduction includes: payment for wages; material cost, e.g., gasoline; rentals for equipment, buildings, etc.; depreciation; and payments for taxes normally paid by any business enterprise (e.g., income taxes, permit fees, etc.) Margin for Profit =normal return to entrepreneurial capita, usually determined through prevailing conditions in the financial market Margin for Risk = a premium to cover losses from natural calamities and other causes

The margin for profit and risk shall be set at a maximum 000 percent ofthe total cost of production.

Information to be used in computing for excess profits shall be based on a hypothetical company operating at an efficient level. Such information may be supplemented with data on the cost of the next-best-altemative. The cost of the next-best-altemative is the cost of providing equivalent goods and! or services for the same market without using the resources of or derived from the protected area.

B. Computation of Willingness-to-Pay

The willingness-to-pay for a natural resource good or service shall be computed from appropriate surveys employing accepted economic tools such as travel cost method or the contingent valuation method. These surveys shall arrive at an estimate ofthe willingness-to-pay for a natural resource good or service taking into account factors such as income, occupation, and nationality, among others. .·\PPE:\DIX B

Mcmorandum ofAgreemcnt

between

the Departlllcni or Environment and Natural Resources throngh thc CI'PAP, Mt. Kitanglad Range Natural Park Protected Area Management Board (PAMB)

and

Philippine Telcphone & Telegraph Corporation

Jan. 14, 1996

BEST AVAILABLf COpy

25 Thi;;:i .~~tr(;t:n~€:nt in lI'6·.h~ r.~~11d B:<:~,::t::":'-~!.l [ •. T.. ':~'~1, j (iiiO"(;. .. PhiLlf'pine8 t·j.·' (")..!'t'] (]~:'~J!:::-:;;~i:

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