EARLIER this year, when the Philippine government announced its intention to review mining regulations in an attempt to gain a greater share of mining profits, the move triggered a storm of criticism from industry players.

Referring to a proposal to convert mining operations into mining reservations, the Chamber of Mines of the Philippines said the move was “tantamount to expropriation or nationalisation of the mining industry”.

The government, on the other hand, said it wants its fair share. According to Finance Secretary Cesar Purisima, the mining industry has got away with too much for too long. The government, he said, collected a mere 2 billion pesos (S$59 million) from the industry in taxes last year. He wants a major revamp of the mining sector, including a review of resource contracts, tightened regulations and a reversal of tax breaks.

Echoing rhetoric most recently heard from politicians in places as far apart as Zambia and Australia, President Benigno Aquino has also been quoted as saying that “mining should be done in a manner that doesn’t destroy the environment, in a way that benefits are properly shared between the companies and the country”.

At one level, all this makes sense. The Philippine mining industry has long been known for the lack of clarity regarding the rights and obligations of companies working in the sector.

Not surprisingly, disputes between mining companies, environmentalists and local communities are a regular occurrence. In March, for example, the Department of Justice asked for murder charges to be filed against former Palawan governor Joel Reyes. Reyes stands accused of killing a local radio broadcaster who campaigned for a ban on mining on the island over environmental concerns.

Controversies last month included complaints by the Philippine Eagle Foundation that mining activities in Surigao del Sur are endangering the habitat of the country’s national bird. Reports so far this month have involved moves to get the Supreme Court to stop the large- scale mining operations of magnetite ore in the black sands along the Ilocos-Pangasinan coastline.

Environmental protection is just one issue. Another concerns what delegates from various international human rights and labour organisations last month described as “rampant” labour abuse. The International Solidarity Mission on Mining said in its report released ahead of the May Day holiday that the government should raise the wages of mine workers and impose stricter regulations on mining companies to make the safety of miners paramount.

For decades, a strong anti-mining movement has combined with poor infrastructure and security issues to prevent the industry from taking off. In theory, greater clarity could reduce the number of such controversies, leading to greater predictability and therefore greater investment in the sector.

Even so, it is difficult to avoid the conclusion that the real target of the government is increased revenue rather than better or more transparent mining management practices. This is indicated by the official focus on the allegedly low tax rate and the failure of officials to respond to mining industry counter-arguments.

In a press statement released earlier this month, the Chamber of Mines of the Philippines claimed that existing regulations already ensure that the government obtains 60 per cent of mine revenues before income tax is even considered.

Since coming to power in June 2010, Mr Aquino has made a great deal of progress in getting the Philippines’ fiscal problems under control. The budget deficit as a percentage of gross domestic product (GDP) declined to just 1 per cent last year, from 3.7 per cent in 2009.

Reflecting such achievements, Moody’s Investors Service lifted the country’s credit rating to just two notches below investment grade in June last year.

But with revenues equal to just 14 per cent of GDP – one of the lowest in Asean – Manila needs to work hard at strengthening its revenue base if Mr Aquino is to realise his ambition of achieving an investment grade rating for the country by 2016.

The issue has become more pressing in recent months with the expectation that improved execution of government spending plans will lead to a higher deficit this year. Fitch Ratings released a report last month saying it expected the deficit to reach 3.2 per cent of GDP.

In this context, the unpopular mining companies look like easy targets.

Mining may never be a favoured industry in the Philippines, but those who wish to attack existing players should at least be armed with the facts. Mr Peter Wallace, a prominent adviser for foreign investors, asserted during a nationally televised forum on mining in March that the Philippines already had some of the highest taxes on mining in the Asia-Pacific.

If government spokesmen are unable or unwilling to contradict such statements, perhaps the government should start looking elsewhere for additional revenue. Overtaxing a largely undeveloped economic sector does not make sense.

(C) Singapore Press Holdings Limited