COMMENTARY — Philippine mining struggles

The glitter is fast fading from the Philippines’ once-thriving mining industry, which is slowly being strangled by excessive taxation, ambiguous policies and sagging prices abroad.

“The death bell is tolling for the mining industry,” said Joel Muyco, director of the government Bureau of Mines. “It’s in bad shape. In fact it’s about to collapse.”

Mining contributed a meagre 6% of total export earnings in 1992, compared with 26% in the 1970s, in a country ranked second in the world in terms of gold reserves, third in copper and sixth in chromite, Agence France Presse reports.

Industry officials complain that the sector is among the highest taxed in the world and that unless congress passes a new law reducing the levies, the country may soon see the death of what used be one of its main export earners. A version of a bill passed by the House of Representatives, and which is generally acceptable to mining firms, gradually cuts a 5% excise tax on metal products to 2% within five years.

But industry sources fear that an emerging Senate version will be more conservative and that wrangling in both chambers will delay passage of a final bill.

Analysts say trimming taxes is the best way to reduce expenses and maintain profitability despite depressed international metal prices.

Deogracias Conteras, executive vice president of the Chamber of Mines, cited an example in 1992 when the mining sector paid 1.79 billion pesos (US$64 million) in taxes despite losing 1.71 billion pesos.

He warned that Philippine mining is already being left behind by its Asian neighbors whose taxes are lower or even down to nothing.

Describing the situation as “alarming”, Muyco said 29 major firms have shut down in the last two decades, leaving only six in operation. Some 20,000 employees have been laid off.

Of the six firms, most are heavily in debt, including the country’s largest gold miner, Benguet Consolidated. Two more are in danger of closing shop next year if the taxes remain, he said.

Philippine copper production slipped 52% from 1981 to 1991 as Manila dropped in world rankings from number seven to 13th place. It was eased out of the top ten gold-producing countries list from fifth place in 1981, Conteras said. Muyco said the proposed act also aims to fine-tune ambiguous mining policies that have turned off potential foreign investors who can help the struggling industry.