The Philippines Experiences in improving transparency and management in mining sector

The Philippines Experiences in

improving transparency and management in mining sector

Hotel Borobudur, Jakarta, Indonesia

April 17, 2013

MINERAL RESOURCESMetallic• Gold• Copper • Nickel• Iron• Chromite

Non-Metallic• Sand & gravel• Limestone• Marble• Clay

Department of Environment and Natural ResourcesRepublic of the Philippines

Commodity Gold Copper Nickel Chromite

Volume (Metric Tons) 4,915,384,989 7,394,005,305 812,034,825 39,659,013

Grade 1.37 gm Au/MT 0.980% Cu 1.258% Ni 22.13% Cr

Recoverable Metal

138,676,162 Troy Ounces

46,353,971 Tons

8,173,712Tons

7,020,260Tons

Metal Price US$ 1,651.69 /Troy Ounce

US$8,069.00/Ton

US$18,387.00/ Ton

US$ 11,200.00 /Ton

Gross Value US$ 229 Billion

US$ 374 Billion

US$ 150 Billion

US$ 79 Billion ◄

Exploration Permit 53Mineral Production Sharing Agreement 339

Financial or Technical Assistance Agreement 6

Mineral Processing Permit 84Industrial Sand and Gravel Permit 235Mining Lease Contract 14TOTAL EXISTING/APPROVED MINING TENEMENTS 717

TOTAL HECTARAGE COVERED 942,710.97

approved Mining Tenements (As of february 2013)


• 3 Copper Mines (w/ Au & Ag)

• 1 Copper Mine (w/ Au, Ag & Zn)

• 6 Gold Mines • 3 Chromite Mines• 1 Iron Mine• 1 Magnetite Mine• 21 Nickel Mines• 1 Nickel Processing Plant• 1 Copper Processing

Plant 2000+ sand and gravel,

and other non-metallic small-scale operations

36 Operating Metallic Mines and

2 Processing Plants


55 Operating Non-Metallic Mines

INDUSTRY PERFORMANCE-GLOBAL RANKING-

NICKEL PRODUCTION (000 MT)COUNTRY Rank 2012 Rank 2011 RESERVES

Philippines 1 330,000 2 270,000 1,100,000Indonesia 2 320,000 1 290,000 3,900,000Russia 3 270,000 3 267,000 6,100,000Australia 4 230,000 5 215,000 20,000,000Canada 5 220,000 4 220,000 3,300,000Brazil 6 140,000 7 109,000 7,500,000China 7 91,000 8 89,800 3,000,000Colombia 8 80,000 9 76,000 1,100,000Cuba 9 72,000 10 71,000 5,500,000South Africa 10 42,000 3,700,000New Caledonia 6 131,000 12,000,000Other Countries 332,000 200,600 7,667,100TOTAL 2,127,00

0 1,939,400 74,867,100


MINING INDUSTRY

Current Violations & Malpractices

Politic

s

Propaganda (Advocacy Groups)

Lack of Benefits

Legac

y Mine

s

(hist

orica

l tra

ck

reco

rds)

Lack of

Information

CHALLENGES

STRONG ANTI MINING SENTIMENTS

Results of Anti-Mining SentimentS

LGUs issuing ordinances and resolutions against mining;

Congress passing resolutions and considering House Bills declaring mining free provinces and cities;

Government increasing regulatory requirements; and

Concerned groups/organizations/citizens filing complaints and cases.


MINING STUDY GROUP Created per instruction

of the President Tasked to finalize the

mining industry policies

Composed of the DENR Secretary, Presidential Assistants on Climate Change and on Environmental Protection, and Vice-Chair of the Climate Change CommissionDepartment of Environment and Natural ResourcesRepublic of the Philippines

Major Concerns identified thru series of consultations

• Government – Maximizing revenues; enforcement of laws; regulation

• Mining Industry – Protection of investments; stable policy

• CSO/NGOs/Church/Community – Destruction of the environment; human rights

• IPs– Right to ancestral lands; benefits from mining; validity

and transparency of the process undertaken• LGUs

– Local autonomy (for those who want mining); protection of the environment (for those against); profit sharing and speedy disbursement


Institutionalizing and implementing reforms in the Philippine mining sector, providing policies and guidelines to ensure environmental protection and responsible mining in the utilization of mineral resources

Signed on 06 July 2012

Guiding Principles• Ensure responsible mining’s contribution to the

country’s sustainable development• Adopt international best practices to promote

good governance and integrity in the sector • Ensure the protection of the environment by

adopting technically and scientifically sound and generally accepted methods as well as indigenous best practices

• Ensure consistency of national laws and local issuances, and harmonize laws, policies, and regulation

• Ensure a fair, adequate, and equitably shared economic benefit for the country and the people

• Deliver efficient and effective management of the mining sector, both large and small scale

EO PROVISIONS TO ENSURE RESPONSIBLE MINING

Areas Closed to Mining ApplicationsFull Enforcement of Environmental

StandardsReview of the Performance of Existing

Mining Operations and Cleansing of Non-Moving Mining Rights Holders

Opening of Areas for Mining Through Competitive Public Bidding

Value-Adding Activities and the Development of Downstream Industries for the Mineral Sector

Constituting the Climate Change Adaptation and Mitigation and Economic Development Cabinet Clusters as the Mining Industry Coordinating Council (MICC)

Creating a One-Stop Shop for All Mining Applications and Procedures

Measures to Improve Small-Scale Mining Activities


Creation of a Centralized Database for the Mining Industry

Integrated Map System to Include Mining Related Maps

Improving Transparency in the industry by Joining the Extractive Industries Transparency Initiative


PRESIDENT AQUINO’s SOCIAL CONTRACT

with the Filipino people

• Reduce poverty!• Promote “daang

matuwid!” (anti- corruption)

• 3.5 billion people live in countries rich in oil, gas and minerals

• With good governance, the exploitation of these resources can generate large revenues to foster economic growth and reduce poverty

• When governance is weak, such resource revenues may result in poverty, corruption and conflict

The Extractive Industries Transparency Initiative (EITI) aims to strengthen governance by improving transparency and accountability in the extractives sector.

What is EITI?• A global standard ensuring

transparency of revenues from natural resources…

What is EITI?• … reforms via a multi-

stakeholder coalition

EITI Criteria• Regular publication of all extractives payments by

companies and all extractives revenues received by government in a publicly accessible, and comprehensible manner

• Payments and revenues are the subject of a credible, independent audit under international audit standards

• Payments and revenues are reconciled by a credible, independent administrator, including opinion on discrepancies

• Approach extended to all firms, including GOCCs• CSOs actively engaged as a participant in the

design, monitoring & evaluation of process, & contributes to public debate

• A public, financially sustainable work plan for the above is developed by the host government, including measurable targets, a timetable and an assessment of capacity constraints

EITI BENEFITS

• Governments benefit from following an internationally

recognised transparency standard that demonstrates

commitment to reform and anti-corruption, leading to

improvements to the tax collection process and enhanced

trust and stability in a volatile sector.

EITI BENEFITS

• Companies benefit from a level playing field in which all

companies are required to disclose the same information.

• They also benefit from an improved and more stable

investment climate in which they can better engage with citizens

and civil society.

EITI BENEFITS

• Citizens and civil society benefit from receiving reliable information about the sector and a multi-stakeholder platform where they can better hold the government and companies to account.

Updates & Actions Taken• Visits by EITI Int’l Secretariat, Revenue

Watch Inst. & Indonesian Parliamentary Center to express support for PH implementation of EITI.

• Exploratory meetings held with Bantay Kita on 27 July & 3 Aug; exploratory meeting with Chamber of Mines of the Philippines on August 14.

• Agreement reached to set up an Interim MSG with Bantay Kita and COMP representing civil society & business sectors.

The EITI Compliance Process

EITISIGN-UP

EITI CANDIDATE(1.5 years)

EITI COMPLIANT

Requirements:

1. Issue public statement

2. Commit to work w/ stakeholders

3. Appoint EITI lead official

4. Form MSG5. Craft EITI

Work Plan

Preparation of EITI Report

(8 Requirements)

Review & Validation(2 Requirements)

Disclosure & Dissemination

(5 Requirements)

Retaining Compliance:

Maintain adherence

to all requirement

s…

else…Suspension

The government is required to issue an unequivocal public statement of its intention to implement EITI

• EO 79, Section 14. Improving Transparency in the Industry by Joining the Extractive Industries Transparency Initiative

EITI Candidacy Checklist

The government is required to appoint a senior individual to lead on the implementation of EITI

• Secretary Elisea Gozun was identified in the first MICC meeting last July 25, 2012, to lead the process of complying the EITI


Designation of the Lead

Senior Official of PH-EITI

The government is required to commit to work with civil society and companies on the implementation of EITI

• met with Bantay Kita , the Chamber of Mines and other large scale mining companies that are not members of the Chamber & reps of the Petroleum Assn of the Phil

• Regional CSO consultative Workshops held

• The EITI Rulebook states that “Civil society and companies must be substantially engaged in the design, implementation, monitoring and evaluation of the EITI process, contributing to public debate.”


The government is required to establish a multi-stakeholder group (MSG) to oversee the implementation of EITI

• The interim Multi-Stakeholder group was

convened on August 21, 2012, composed of 9 members.

* Final members of the MSG selected by CSOs on Jan 17, industry reps from Chamber of Mines of the Phil, Petroleum Association of the Phil, and large scale miners that are not members of the Chamber; govt reps. inlcude OP, DENR, DOF, DOE & ULAP.


ACTIONS TAKEN• Mobilized support for CSO

outreach:

- October 18-19 Training of Trainors - Regional Consultations: * Baguio Nov 26-27 * NCR Nov 29-30 * Davao Dec 3-4 * Pagadian Dec 6-7 * Cebu Dec 10-11

Updates & Actions Taken

• Technical Working Group (TWG) established and actively working

• Meetings held on: - August 10 - August 17

- November 6 - December 5

The EITI TWG • Sec. Gozun

– EITI Lead Official + TWG chair

• DENR (MGB)– general mining data,

regulation & linkages• DoF (BIR, BoC, BLGF)

– mining revenues (nat’l – BIR & BoC; local – BLGF)

• DILG– small mining revenues

& regulation by LGUs

• DoE– oil industry regulation,

revenues & other data• NEDA

– MICC Secretariat– internal communication

• DBM (RIU, SPIB, BMB-G)– LGU rev shares (BMB-G)– regulation organizations

& systems review (SPIB)– Governance Cluster

Secretariat (RIU)

* Interim MSG convened (9 members):

- September 6 - September 24 - October 5 - December 18

* Final MSG met on January 29

PH-EITI MultiStakeholder Group (15 members)

• 5 from Government: Sec. Gozun, Dept of Finance (DOF), Dept of Environment and Natural Resources (DENR), Dept of Energy (DoE) , Union of Loal Authorities of the Philippines (ULAP)

• 5 from Industry: 3 from Chamber of Mines of the Philippines, 1 from large scale mining companies that are not members of the Chamber 1 from the oil and gas sector

• 5 from Civil Society: convened by Bantay Kita CSO networks, IP networks, academe, Peoples Organizations, etc.

EITI Implementation Structure

EITI TWG

Mining Industry Coordination Council

(Jt. Econ & Climate Clusters)

Cabinet Cluster onGood Governance

and Anti-Corruption

Implementation of EITI;Policy Consultation & Feedback Mechanism

EITI Philippines(Multi-Stakeholder Group)

ACTIONS TAKEN

• Decided on initial scope: - large scale metallic mining - oil & gas

• Drafted the TOR & sought comments

• Drafted the Work Plan & sought comments

The multi-stakeholder group, in consultation with key EITI stake-holders, should agree and publish a fully costed work plan, containing measurable targets, and a timetable for implementation and incorporating an assessment of capacity constraints.

• Governance Secretariat & EITI TWG & Interim MSG drafted an initial work plan, for discussion and fleshing-out

• The EITI Secretariat has kindly provided us sample work plans by Timor Leste and the Solomon Islands

• The work plan should be updated on an annual basis


PH-EITI Work PlanWork Plan Objectives:

1. Establish Commitment and Support to Implement EITI2. Form MSG, Develop and Publish Its Terms of Reference

and the EITI Work Plan3. Institutionalize PH-EITI4. Prepare to Implement and Monitor PH-EITI5. Audit/Reconcile and Report on Revenue Flows

between Philippine Government and Extractive Industries

6. Communicate, Build Knowledge, and Engage Citizens in the PH-EITI Program

OUTREACH – Stakeholders

• Mobilized support for CSO outreach:

- October 18-19 Training of Trainors - Regional Consultations: * Baguio Nov 26-27 * NCR Nov 29-30 * Davao Dec 3-4 * Pagadian Dec 6-7 * Cebu Dec 10-11

OUTREACH – CSOs

National CSO CongressJanuary 17, 2013

- Selected the CSO permanent and alternate

representatives to the MSG

PH-EITI Work Plan Key Milestones

• Q1 2013: Fulfill requirements for EITI Candidacy, including MSG, Work Plan & PH-EITI Launch; Set-up PH-EITI Unit, conduct studies on materiality, capacity assessment & set-up PH-EITI website

• Q2 2013: Finalize reporting policies, mechanisms & templates, hire independent validator & procure publishing requirements

• H2 2013: Design and production of the 2011-2012 PH-EITI Report, w/ continuous consultation

• H1 2014: Independent validation

Outreach • Business Sector: - Chamber of Mines of the Philippines - non-members of the Chamber - oil & gas companies

•

Outreach • Indigenous Peoples & National

Commission on Indigenous Peoples – Feb 20

Outreach• Academe – Feb 21co- convened with the Ateneo School of

Government

Outreach • Different religious groups- Feb 26

Outreach - GovernmentDifferent National Government

Agencies:

Department of FinanceDepartment of Environment and Natural Resources/ Mines and Geosciences BureauNational Economic and Development AuthorityDepartment of EnergyDepartment of Budget and ManagementDepartment of Interior and Local GovernmentBureau of Internal RevenueBureau of Customs

Local Government Units: Provinces Cities Municipalities

Provincial Environment and Natural Resources Officers in areas with active mining

Recent Milestones

• Public launching of PH-EITI April 4, 2013

• Submission of the PH - EITI Application to the EITI International Secretariat

April 5, 2013

Presidential Statement

on EITI

• Continue to fully engage industry , civil society and local governments

• Study legal and administrative obstacles to implementation and remove them

• Agree on Materiality - getting TA for Materiality Study from World Bank

• Develop reporting templates

• Ensure company and government accounts are properly audited to international standards

Next Steps

Next Steps• Draft a disclosure policy, including flow-

charting of revenue data

• Determine other areas for transparency & participation in extractive industries,

• Support and closely monitor sub-national EITI implementation

• Secure support from national and int’l partners

Philippine participation in EITI part of

Government’s Reform Agenda

Commitment to Good Governance

Open Government Partnership

Good Governance and Anti-Corruption Framework

Good Governance & Anti-Corruption

Corruption CurbedBusiness

Environment Enhanced

Delivery of Public Services Improved

Accountability Citizens’ EngagementTransparency

Anti-Corruption Efforts

Performance Management

PROPOSED TARGET OUTCOMES

Corruption Curbed Business Environment Enhanced

Delivery of Public Services Improved

• More open and transparent procurement process

• More effective detection and prosecution of corrupt officials, tax evaders and smugglers

• Improved public financial and expenditure management

• Improved M&E and performance management systems, especially for frontline services

• Simplify business registration process

• Promote integrity in the public and private sector

• Improve the predictability of government policies

• Improve revenue transparency in Extractive Industries

TRANSPARENCY PARTICIPATION ACCOUNTABILITY

OGP and GGAC Action Plans

PH OGP Action Plan

19 initiatives

GGAC Action Plan

19 OGP + 14 non OGPinitiatives (33)

Cabinet Cluster onGood Governance andAnti-Corruption

Consultations in Crafting the Plan

• Consultations with Business Leaders– Primarily Integrity Initiative and private sector-side of

National Competitiveness Council– 18 and 26 August 2011 for the OGP Action Plan– 24 November 2011 for the GGAC Plan

• Consultations with Civil Society Organizations– 10++ National Civil Society Organization Networks– 19 and 26 August 2011 for the OGP Action Plan– 25 November 2011 for the GGAC Plan

• Consultation with Development Partners– Via Phl Development Forum Governance Working Group– 22 November 2011

GREEN

ORANGE

RED

FULFILLED2012 Targets Accomplished

PARTIALLY FULFILLEDSubstantial Accomplishment of 2012 Targets

IN PROGRESSDelay in implementation

PROJECT STATUS

Based on accomplishment of identified targets in the GGAC/OGP

Action Plans

PROJECT STATUS

OGP Commitments

Legend:

Key Lessons of Good Governance

• provide a venue for all the stakeholders to discuss issues and collaborate towards a common goal of promoting good governance

• participatory process provides everyone a wider perspective and a better understanding of the issues of the different stakeholders

• potential of providing data to increase transparency and accountability

• venue to discuss potential policy reforms

SHARED

RESPONSIBILITY

Documents

The Philippines Experiences in improving transparency and management in mining sector