The two major mining municipalities of Mankayan (1995 pop. 34,699) and Itogon (47,781) collect more taxes than the 11 other municipalities, owing to the mines and the accompanying economic activity. Mankayan is dominated by the Kankanaey while Itogon has ancient Ibaloy settlements that accommodated Kankanaey and lowland settlers. The mines opened jobs, an oft-cited economic benefit, as well as downstream trade and businesses, which increased the migrant component of the local populations. The basic indicators of equity such as infrastructure, communication, health and educational services are sorely lacking both in quantity and quality. Residents of these municipalities are used to travelling on rough, dusty roads to the city of Baguio for proper medical attention. Both towns have centuries-old histories of small-scale lode mining and gold panning, its practitioners increasingly marginalized by the large corporations and stringent regulations. Indigenous residents of Benguet make up a relatively small fraction of the corporate mining workforce. In Mankayan, only 10% of the 2,700 workers of Lepanto in 1993 were from Benguet [Addan 79].
Local governments, as the closest level of governance within reach of the citizenry, are vested by communities to protect and advance common welfare, especially in the context of the age-old conflict of the periphery-versus-center [Lawson 424]. Since local government units (LGUs) usually act within constraints imposed by higher levels of government, it would serve the purpose of decentralization and community empowerment if the hindrances to the achievement of equitable and sound local governance.
Ultimately, this paper explores answers to the question: What factors hinder local governments from obtaining equity, in social and financial terms, from the large-scale exploitation of mining resources in their territories? It shows an overview of the enabling legal and political infrastructure during the authoritarian Marcos era and the succeeding transition governments of Presidents Corazon Aquino and Fidel Ramos (roughly covering the 70s to the present) that made -- and continues to make -- possible this lopsided exchange favoring corporation over community and, in the process, it adds the first-hand views of local government officials in the affected municipalities on the longtime problem of inequity. In doing so, it points out the experiences of the local executives of the municipalities of Mankayan and Itogon. By putting across an understanding of this condition, however limited, perhaps some solutions will come to light.
Local Governance
Local government in the Philippines is still in transit to a period of greater fiscal and administrative decentralization. The enactment of the Local Government Code of 1991 allowed provinces, cities, municipalities, and barangays to receive shares in national internal revenue tax collections, determined by considerations like population and land area (Secs. 284-5), with a corresponding guarantee for the automatic release of such shares (Sec. 286). Of significance to areas rich in natural resources is the section of the Code ensuring an additional 40% share of LGUs on the "gross collection derived by the national government from the preceding fiscal year from mining taxes, royalties, forestry and fishery charges, and such other taxes, fees, or charges, including related surcharges, interests, or fines, and from its share in any co-production, joint venture or production sharing agreement in the utilization and development of the national wealth within their territorial jurisdiction" (Sec. 290).
Prior to this major step, however, President Ferdinand Marcos ruled a centralized government setup under martial law. He abolished local elections and held the power to appoint and remove local officials, thereby keeping them under his thrall [Brillantes 198-200]. When he called for local elections in 1980, he formed the Kilusang Bagong Lipunan (KBL, or New Society Movement), a megalithic political party which outspent and harrassed its opponents. Not surprisingly, the KBL won a majority it kept until the 1986 people’s revolt. Thus the legal advantages of today’s LGU executives stand in stark contrast to their previously limited powers under the Marcos regime.
Local government in Benguet, as in most other provinces, developed along traditional lines, i.e., local elites establish themselves in political office. Historically, the founders of indigenous Ibaloy and Kankanaey settlements in the province were males of known wealth, influence or power, with their own group of followers [Gimenez] and this set the standard for decades of post-colonial politics until signs of changes in recent elections.
Mineral Extraction
Mining has been encouraged by Philippine laws giving the industry preferential status -- first as a "pioneer industry" and later as a major earner of export dollars – involving grants of tax incentives and subsidies, supposedly due to its capital-intensive nature and the fluctuations in world metal prices. The Spanish first noticed the potential mineral wealth of Benguet and used the Regalian Doctrine to claim that wealth, but a combination of mountainous terrain and people’s resistance prevented them from sustained mining. It was the Americans who begun full-scale mining exploration and extraction in the early decades of this century, backed by United States land titling and mining laws enforced in the Philippines as a colony, mining claims were staked freely with little or no regard for the indigenous population nor its unwritten laws on land ownership.
When the United States granted the Philippines self-rule in 1946, Americans negotiated for the Philippine Trade Act* which allowed them to have 100% ownership of monopolies and natural-resource exploiting enterprises until 1974. Furthermore, Congress enacted more incentives for mining like rebates to help offset production costs. A 1971 gold subsidy law granted a rebate of at least P60 on every ounce of newly-mined gold plus 70% the positive difference between the cost of production and the official price. Underscoring the "policy of encouragement and attraction" for mining and other preferred investment areas, two major investment laws in force since the late 1960s state that foreign investors must have the opportunity to recoup their investments and repatriate profits [Santos 123]. The current Omnibus Investment Code still considers mining ventures a "pioneer enterprise" (Art. 17) which entitles new mines a 6-year income tax holiday, tax-free importation of capital equipment, and income tax-deductible wage payments for the first 5 years.
The Marcos-era mining law, known as Presidential Decree 463 or the Mineral Development Act of 1974, allowed companies to be exempted from:
- All taxes except income tax for five years from the date of commercial production (Sec. 53)
- All taxes except income tax for the same five year period on all mining claims, improvements thereon and mineral products derived therefrom (Sec. 53).
- All taxes, fees, charges that may be imposed by any local governing body such as cities and provinces (Sec. 52).
The latter exemption, though repeatedly called unfair by residents and officials of Benguet, remained in force until the passage of said 1991 Local Government Code.
P.D. 463 eased the way for the Philippines to maintain its position as a one of the top ten gold and copper producers in the world, slipping only as metal prices declined in the 1990s. For many decades until the current slump, the country’s biggest mining company, Benguet Corporation of Itogon, remained in the list of the Philippines’ top twenty corporations. Two other mining companies, Philex and Lepanto, were listed among the top fifty.
In 1995, Congress enacted the industry-friendly Philippine Mining Code, or Republic Act 7942, which was welcomed by the Philippine Chamber of Mines. The new law offer several modes of mineral extraction for new companies such as the Mineral Production Sharing Agreement (MPSA), Joint Venture Agreement (JVA), Co-Production Agreement (CPA), or a Financial and Technical Assistance Agreement (FTAA). The FTAA allows a 100% foreign-owned company to conduct mining, financed solely by overseas capital.
RA 7942 lowered excise taxes from 5% on gross output to varying rates of 1% to 2%, as the chamber president himself noted [Contreras 24]. It retained many of the incentives long granted to the mining sector, such as tax holidays during the initial years of operation, income tax carry-forward of losses, income tax-accelerated depreciation, and full repatriation of investments. Environmentalist groups, people’s organizations, the clergy and media aired protests against the Code’s liberal provisions and its expected effect of displacing indigenous populations.
The same law confirms the tax-sharing arrangement with local governments but does not extend the power of LGUs over the mines, aside from the indirect participation of local executives in approving the environmental impact assessment (EIA) required for the full operations of a mine. The mines remain regulated by and large by the national government in the person of the Department of Environment and Natural Resources (DENR) and its Mines and Geosciences Bureau (MGB).
The old Mining Law contains one provision (Sec. 91) for the rehabilitation of mined areas for agriculture and habitation, the fostering of industries other than mining to ensure the economic viability of the locality, and the performance of reforestation work. The enforcement of this provision has been visibly spotty and weak, which has led to doubts over the enforcement of the new code’s equivalent provisions. The present head of the MGB himself confirmed the shameful record before a scholarly group by citing a 1994 study of Dr. Allen Clark on the mineral sector in the Philippines.
"In our experience we have never seen a mining industry with such a poor environment record. Interestingly, the industry has historically seemed content simply to react to unfavorable environmental publicity rather than put forth its position on environmental questions," Clark wrote. The report agreed the industry’s negative public image came about due to "past abuses and partly a consequence of the fact that a modern mine has not been developed in the country in the last decade" ["Foreign"]. Thus it is not surprising that the pro-environment and pro-community provisions of the new Code, nine of them directly addressing the issue of community relations and environmental health, have been met with skepticism by the protesting organizations.
Since the mid-70s to 1995, a penalty of P5,000 per day was charged for the infraction of any ruling or regulation of the government anti-pollution authority under the Pollution Control Law (Sec. 9). This was changed by the mining code to a one-time P50,000 to P250,000 in fines, or 6 months up to 6 years of imprisonment, or both (Sec. 108) for violation of the environmental compliance certificate issued by the DENR.