Mining industry supports easing of foreign ownership restrictions

By Beatriz Marie D. Cruz, Reporter

THE proposal to lift foreign ownership limits in the 1987 Constitution will help improve the mining industry’s technical capacity and lower costs, industry representatives said.

Chamber of Mines of the Philippines (CoMP) Chairman Michael T. Toledo said easing ownership restrictions will help attract foreign investment in mining.

“Mining and the government’s push for mineral processing are capital intensive and there are very few Filipino investors with the financial and technical capability to fund the development of such enterprises,” Mr. Toledo said in a Viber message.

Global Ferronickel Holdings, Inc. President Dante R. Bravo said amending the charter to allow more foreign equity could help unlock the Philippines’ mining potential.

“Foreign investors can access funds from overseas and bring them into the country, which the miners here (have little capacity to pull off),” Mr. Bravo said in a Viber chat.

Last week, the Department of Finance (DoF) asked the House of Representatives to ease foreign ownership limits in the Constitution for mining, public utilities, education, mass media and advertising.

“The DoF is proposing the insertion of the phrase ‘unless otherwise provided by law’ to the provision on public utilities as well as the nationality requirement for co-production, joint venture or production sharing for the exploration, development, and utilization of natural resources, as in the case of mineral resources,” Finance Undersecretary Zeno Ronald R. Abenoja told the House Committee of the Whole.

Constitutional change to ease foreign ownership limits would make the mining industry competitive, according to Mr. Toledo.

“Since investors, both foreign and local, bear huge risks when they venture into mining, the potential return on their investments should be attractive enough (to) convince them to invest in the Philippines. We must always remember that there are also other mineral-rich nations that want investments,” he said.

Former Finance Secretary Margarito B. Teves said easing foreign equity restrictions would add entrants to the industry and enhance the mining technology available in the Philippines.

“In the case of Indonesia for example, they have modified their policy (to) moving into mineral processing. They also have, like the Philippines, a lot of reserves,” he said via telephone.

“This can be processed into higher grades, (and) we will probably have more foreign exchange earnings so that (will probably help the industry) move up to a higher level of manufacturing or processing.”

The value of the Philippines’ metallic mineral reserves increased by 22% in 2022, according to the Philippine Statistics Authority (PSA).

Class A gold, copper, nickel, and chromite resources were valued at P491.19 billion, it said.

The Department of Environment and Natural Resources (DENR) has said that it will support exploration for “critical minerals” such as iron, cobalt, and rare earths.

Environment Secretary Maria Antonia Yulo-Loyzaga has also directed the Mines and Geosciences Bureau (MGB) to seek mineral exploration partnerships with foreign investors.

“Filipino capitalists alone can’t fund all possible mining projects, particularly minerals processing,” Calixto V. Chikiamco, Foundation for Economic Freedom (FEF) president, said in a Viber message.

CoMP’s Mr. Toledo also urged the government to offer fiscal incentives to ensure growth of foreign investment in the sector.

“Investors, particularly those who have interest in putting up extremely expensive domestic ore processing facilities… would also require investment incentives and the assurance of a steady ore supply so that they can justify such heavy investments,” he said.

Mr. Toledo pushed for the approval of the proposed mining fiscal regime, which has yet to be taken up by the Senate.

The bill, which the House of Representatives passed last year, seeks to impose a 4% royalty on the gross output of minerals or mineral products extracted in large-scale metallic mining operations within defined mineral reservations.

It also proposes a margin-based royalty subject to the income of metallic mining operations outside mineral reservations.

Small-scale mining operations would be charged a royalty equivalent to a tenth of 1% of gross output of minerals or mineral products extracted or produced. 

A margin-based windfall profits tax on mining operations will also be collected.

He called for the “inclusion of mining in Investment Priority Projects and the granting of fiscal incentives for mining projects, particularly those that will significantly improve employment or economy in the area.”

Mr. Toledo also asked Congress to streamline national and local mining and tax laws, as well as expedite ease of doing business initiatives for the industry.

Mr. Toledo also noted the need to destigmatize mining.

“In addition to the many technical requirements, earning social acceptance is increasingly recognized as a critical attribute to project planning and operations, and is emerging as one of the mining sector’s greatest challenges,” he said.