Natural Resources Revenue-Sharing Arrangements: Platforms for Climate Change Adaptation, Security and Peace in Mindanao

AUTHOR/S: Lourdes R. Simpol, Perpy C. Tio, Nelson Enano, Ryan Olarte

DATE COMPLETED: October 1, 2016

KEYWORDS: Natural Resources Revenue, Climate Change Adaptation




The allocation and sharing of the benefits, burdens, and risks of mineral resources development is a critical political question in ensuring and sustaining peace and security in Mindanao. Mindanao’s vast mineral areas have been major sources of revenues for the national central Philippines government. Yet, the asymmetric sharing of and control over the benefits of the development of these resources have been the underpinnings of conflict and instability in the region, among others.

As part of the government’s effort to improve its economic and environmental policies in mining, the Aquino administration released the much-awaited Executive Order Number 79 on 06 July 2012, entitled: 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. One of its more salient provision is provided in Section 14 entitled, Improving Transparency in the industry by joining the Extractive Industries Transparency Initiative (EITI) lays out government’s support and commitment in the participation in the EITI in order to improve transparency, accountability governance in the mining sector.

Situating the transparency effort of the government in TVI Resource Development’s (TVIRD) mining operation in the Municipality of Siocon in Zamboanga del Norte, the study compares the revenue sources (excise taxes and internal revenue allotments) of the municipality and it also looks into some significant conflict-events as a result of its operation.

The study aims to explore how the new transparency efforts in the mineral revenue sharing in the context of the new policy espoused by EO 79 can potentially act as catalyst for peace, as a means for conflict prevention, and as a way of responding to environmental challenges, such as climate change.

Mining in the Philippines has always been controversial and contentious since it has become large, owned by multinationals and employed bug equipment; way beyond the traditional system of gold panning. When the Philippine government adopted the policy of ranking in revenues through this extractive industry via the Philippine Mining Act of 1995; it has not considered the layers of conflicts that it could bring.

These conflicts stem from large scale mining’s destructive character where its most damaging effects are always felt at the local communities. Adding to this nature is apparent lack of transparency-from start to finish- of its operations. Almost always, the residents are left to deal with far and insecurity of its effects to the environment and to the local industries. These in turn lead to conflicts at various level of the mining operations.

The operation of TVIRD Philippine in Siocon is a case in point where the lack of transparency during its entry resulted in conflict between the company and all the sectors in the municipality. TVIRD ‘s MPSA is a transfer agreement (deed of assignment) from previous owners (Bosque and Benguet Corp.) that was facilitated by the MGB, a national agency. This apparent exclusion of the local governments in the approval of the permits is an issue in transparency and centralized decision in the approvals and/ or transfer of permits and licenses.

The revenue-sharing scheme (60% and 40%) that flows from the excise tax favors the national treasury than the local coffers is a lopsided arrangement considering the burdens and insecurities that the local government bears. The municipality of Siocon that gets its maximum total of 32 percent share from the excise tax translates this share to an average of 20% in portion to its internal revenue allotment. This excise tax share may have become a relevant revenue source at both the municipality and barangay levels, considering that it had been a third class municipality, but this revenue diminishes its importance at the province level.

The excise taxes of Siocon had been at the heart of contention and legal suit that are tied to transparency issues-accusation of inaccuracy of amount due and ambiguous timing of its releases- that resulted to conflicts as consequences to policy of non-disclosure and bureaucratic procedural delays. These conflicts went on for some time even during the height of TVIRD’s production stage.

As it is still in its initials stages, much room for possible expansion of the EITI should be considered for while EITI focuses on the revenue transparency in mining; transparency is needed at every stage of the mining value chain to mitigate, to avert, if not to eradicate conflict. For a country like the Philippines, which is resource-dependent for its revenue generation, mining’s contribution to the national and local coffers should not only be treated as additional revenue source for the government.

The acceptability of mining at its various stages and to its stakeholders should become primordial concerns. Policy reforms on transparency should go beyond revenues. Transparency should be prerequisites in the following:

  1. Inclusive decision-making in the release of permits and licenses for mining operation. Local government should not be consulted after the fact that permits and licenses have already been awarded to mining companies. The national government should do away with its top to bottom policy of unilaterally accepting mining applications. In its eagerness to bag bagging these mining investment deals; he national government has failed to recognize the importance of seeking the concurrence of the local governments and communities.
  2. Respecting the integrity of cultural practices in ancestral domains where mining operations are to be conducted. Policy reforms should give due respect to the true will of the traditional leaders of the indigenous peoples, who are entrusted to decide through their traditional governance on the right to determine the projects that operate in their ancestral domains.
  3. Disclosure of contracts. Policy reforms should not only focus on the revenue paid and received but should also extend to the various contracts made by mining companies to various stakeholders, including agreements with the indigenous people.
  4. Credible multi-stakeholder monitoring. Independent parties should be welcomed as part of a multi-group party to monitor impacts of mining at the community level. This includes impacts on the socio-cultural and environmental of mining. Fund used by the monitoring team should not come from mining companies, as the current practice is.
  5. Expansion of EITI coverage up to budget transparency. EITI-PH should expand its scope not just on transparency on revenues but should also ensure to what and to where these revenues are spent. The civil society in the multi-stakeholder group should make certain that money is allocated to improve the lives of the residents.
  6. Passing of freedom of information (FoI) law. To enable the environment of full disclosure and transparency; the FoI law should be passed. This law strengthened the transparency efforts in Indonesia and it may do well in the Philippine.