Wednesday, July 31, 2013

Mining 28: Markets, Government and Rule of Law

Of all sectors or industries in the Philippine economy, among the most heavily regulated, taxed and intervened by the government are the mining, pharmaceutical and petroleum industries. One proof if an industry is heavily regulated is the existence of high black market presence in that sector.

In the case of mining, it is the so-called “small-scale” gold and other metallic mining. In pharmaceuticals, it is the presence of many counterfeit, substandard or simply unregistered medicines and food supplements. In the case of petroleum, it is the existence of huge volume of oil smuggling.

So it is a case where as government intervenes more, supposedly to protect public interest, public health and interest is even more jeopardized for certain sectors of society. There is a universal law to explain this phenomenon and it is not created by Congress or any government department. It is called the “Law of Unintended Consequences.”

Minimal Government Thinkers, Inc., the free market think tank that I head, is advocating less government, less taxes, rule of law and free market. We have been around since 2004, formally since 2008, and we saw instances and quantitative data of such unintended consequences to the public.

Large metallic mining in particular is pummeled and heavily regulated not only by the national government – MGB-DENR and BIR-DOF in particular -- but also by municipal, city and provincial governments. And the very vocal and militant NGOs, media, the church and other civil society organizations (CSOs) advocating further regulation if not a ban on large scale mining, they can be eerily silent on the environmental abuses and non-tax payment of many “small scale” metallic mining.

Exposing this double standard by those government agencies and CSOs is among our cup of tea. We believe that the main function of civil society is to keep reminding government that its main function in society, its “raison d’etre” or reason for existence, is to promulgate the rule of law, to protect the citizens’ private property rights, right to life and liberty, and freedom from aggression by lawless elements in society.

So if government imposes various environmental and health standards, multiple taxes and fees, punitive penalties for violators, then those regulations and taxation should apply to all players, big and small, corporate and individual, multinationals and local. Rule of law means no exception, the law applies equally to unequal people, no one is exempted and no one can grant an exemption to the penalties of the law.

If rule of law is strictly observed and implemented in the country, we should see dynamic markets and responsible mining companies, big or small, foreign or local, complying with various regulations, and government regulations would be simple and practical enough, and not assume that only angels, not humans, can do responsible mining.

It is a big disservice to society therefore, if many CSOs will only lobby for strict implementation of those regulations and taxation to large mining and multinational companies, but are silent on the violations on environmental laws and taxes of small-scale metallic mining companies and individuals. Thus, while large-scale metallic mining have paid about P12 billion in taxes, fees and royalties in 2010, excluding various community and corporate society responsibility (CSR) projects, small scale mining paid zero that year to the BIR and the CSOs are nowhere to hear complaining this big discrepancy in tax payment.

One myth in mining that persists in many sectors, government and private, is that mineral resources are non-renewable and hence, should be kept untapped whenever possible. A review of Earth Science subject in our undergrad years would show that magma or molten rock from the Earth’s core keep finding their way to the mantle and then to the crust, where our land and sea surfaces are located. That is why we have volcanic eruptions and huge earthquakes until now in many parts of the planet.

This movement of magma and super-hot gases from the core to the crust mineralizes ordinary rocks and soil. And since such movement is endless and forever, then the creation of mineral products is also endless and forever, especially in the Pacific Rim of Fire where about 80 percent of all volcanic and earthquake activities occur.

Thus, for technical purposes, the term “non-renewable” mineral resource is wrong. But since such processes take thousands of years, for practical purposes, that term is considered correct. But banning or strictly limiting mining is a non-option. All materials in modern society – cars and buses, knives and spoon, hammer and nails, planes and boats, cell phones and computers, TV and DVD players, and so on – come from mining. Not one of them came from farming, forestry or fishery. Things that cannot be grown must be mined.

The militant opposition to metallic mining therefore, is illogical.

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