BWorld 204, Mining attractiveness index and the Philippines

* This is my column in BusinessWorld last April 12, 2018.

There are two similarities between the mining industry and Boracay.

The first is that both have small contributions to GDP, and the second is that both can be closed by the Duterte government for six months without any compensation to affected enterprises including environment-compliant ones. Mining companies and Boracay establishments show the face of business uncertainties in the country.

Mining production is 0.6% of GDP while Boracay production of services is 0.1% of GDP, an amount that is “very insignificant” according to the National Economic and Development Authority (NEDA).

By extension, the six-month closure Boracay island will adversely affect only a few number of businesses and jobs. That’s a very flawed argument.

Meanwhile, last April 9, President Duterte told mining companies: “I’m going to give you six months from now. Six months. I do not want to see any bald [areas]. I want [to see] the trees as tall as me by six months. Without the replacement of those trees, consider your permit revoked. Better pack up your things. You can go and that would be closed permanently.”

In early 2017, the former DENR secretary who was rejected by the Commission on Appointment (CA) issued a ban on open pit mining. That ban has not been lifted until now even though the Mining Industry Coordinating Council (MICC) has already recommended ending the ban.

The continuing investment uncertainties in Philippine mining are partly discussed by the Fraser Institute’s “Survey of Mining Companies 2017” report. Fraser is a famous free market think tank in Canada while the survey is an annual study of mining and exploration companies around the world with the goal of assessing how mineral endowments and public policies like taxation and regulations affect exploration and extraction investment.

In the 2016 Report, 104 jurisdictions were covered while it was 91 for 2017.

These 91 jurisdictions are: 13 states in the US, 12 states in Canada, 9 states in Argentina, 7 states in Australia; 15 countries each in Africa and Latin America/Caribbean, 12 countries in Europe, and 8 countries in Asia-Oceania.

These numbers show the investment attractiveness of the 91 places. The index is constructed by combining the Best Practices Mineral Potential index (which rates regions based on their geologic attractiveness) and the Policy Perception Index (which measures the effects of government policies like taxation and regulations on exploration investment (see table).

Fraser noted that “The 10 least attractive jurisdictions for investment based on the PPI rankings are (starting with the worst) Venezuela, Chubut, Zimbabwe, Guatemala, Democratic Republic of Congo (DRC), China, Philippines, Indonesia, Bolivia, and Ecuador.”

While rich countries in the world like Ireland, Finland, Sweden, Canada, USA, and Australia have business-friendly mining policies as indicated in the table, poorer countries like the Philippines have business-unfriendly policies in the sector. And this can be a good explanation among many other factors why many poor countries remain poor.

Nature has given the Philippines and other now poor countries good natural and mineral endowments. Their governments though have given these countries bad policies and extortionary regulations. All the fears of “mineral depletion,” “unmitigated surface soil destruction” and other concerns did not happen in these rich countries. Why?

The rule of law. Investments and environmental laws are strictly enforced and followed by all players, big and small, local and foreign.

It is not “nature preservation and environmental conservation” that determine sustainable mining and job creation. Rather, it is the rule of law. This is the essence of government raison d’etre or reason for existence.

------------------

See also:
BWorld 192, Cobalt mining and TRAIN, March 16, 2018
BWorld 196, Mining tax and TRAIN, March 20, 2018
BWorld 201, Expanded environmental rights and anti-coal drama, April 05, 2018 
BWorld 202, Tourism, casinos, and Boracay, April 08, 2018 
BWorld 203, TRAIN, inflation and PPP, April 10, 2018

On Duterte's closure of Boracay for 6 months

"Boracay island is state property. Thus, the state may decide what to do with it, close it down or take it over."

What is wrong, or correct, with this statement?

In the wall of Rotary PDG Jimmy A. Cura who defends the total closure of Boracay for 6 months, Bobi Tiglao commented there and posted his paper and asked me if he is correct or wrong in his arguments, http://www.manilatimes.net/supreme-court-2008-decision-boracay-state-property/381678/

My comment:

"Boracay is state property." Tiglao is correct. Maybe as it is a legal issue and I am no lawyer to comment on the legal technicalities of it.

"state which has ownership of this once paradisiacal island. It therefore may decide what to do with it, close it down or take it over." Tiglao is partly correct and party wrong.

There is a difference between ownership of the land and ownership of the structures and development above the land. Like public forest land, owned by the state through the DENR but industrial forestry/ mature trees are owned by private individuals or an NGO or corporate entity that was authorized by the DENR to do tree planting, growing and harvesting, subject to taxes and charges upon harvest.

The same way in Boracay, the land maybe owned by the state but the structures, hotels, restaurants, shops on top of it are owned by private individuals and enterprises. These entities were recognized and allowed by various govt agencies -- LGUs (barangay, municipal, provincial), SEC, DTI, BIR, DOT, DENR, DOH, BFP-DILG, etc -- to put up businesses there. 

If the state via the Du30 government decides to "close it down or take over", the state may do so -- ONLY upon proper compensation of the costs and investments made by private enterprises.

If one will insist on zero compensation, just close it down or take over, that is dictatorship and large-scale state robbery.

In quotation are additional points from Gov. Jimmy A. Cura:

"Bobi’s point in his well-written article is meritorious"

--> No. There was nothing in Bobi's article considering compensation for private enterprises, especially compliant ones. Hence, Bobi's paper just supports dictatorial closure, no justice to private enterprises.

"those who put up structures in complete disregard of the law are hardly entitled to invoke the protection of the very same law"

--> Then by extension, those govt agencies that allowed the building of those structures, that gave permits and renewed permits annually, that collected taxes, fees and charges year in and year out, should also be closed, if not abolished.

From JJ Soriano the other day:

"To set aside all fears about the real motives for the Boracay closure I move to ask the government to appoint Former Environment Secretary Gina Lopez to be the private sector co-Chair of the Boracay Rehabilitation Committee"

I commented that there should be just compensation for the affected businesses and jobs, short- or long-term displacement.

JJ countered that "it should be net of their payment for their contribution to the damage of Boracay."

Weird. People think that ALL enterprises there have negative externalities to Boracay, no one contributed positive externalities? Millions of people who went there and been coming back again and again only "enjoyed" negative externalities?

Now see these news reports -- that Boracay is an agri land, not a tourism-hotels-bars-golf course land. And there are many farmers there, not hotel workers, boatmen, traders and vendors.

http://newsinfo.inquirer.net/981162/duterte-boracay-to-be-a-land-reform-area-for-farmers-after-closure

https://www.philstar.com/headlines/2018/04/10/1804530/land-reform-eyed-boracay-casinos-banned

For those who support the total closure for 6 months with little or zero compensation, something to clap and celebrate for you and Digong.

http://newsinfo.inquirer.net/980950/news-boracay-business-employment-aklan-closure-shutdown

  

Meanwhile, an id... Jojo Estrada posted this in Gov. Jimmy's wall...

No discussion, only name-calling. If this is posted in my wall, I will reprimand the person or delete the comment. I expect Gov Jimmy A. Cura to do something about name calling in his wall but he did nothing, kept silent and retained it. "Is it fair to all concerned?" Oh well...

Finally, posted by Yendor Aloid today -- transcript of PRRD press con on boracay:

TRACTORS FOR BORACAY

PRRD: Now if you are asking of a financial help, we are—I’m going to sign the proclamation of calamity and we can make available about 2 billion of assistance. But these are only for the poor Filipinos. I will not spend any single centavo for those inns there, hotel owners or motels. At iyong magagandang bahay, do not expect me to pay anything. That money is only intended for the Filipino. Iyong mga foreigners neither reparations or renumerations. Eh sila iyong pumasok diyan, they should know na bawal. Iyong 2 billion diyan and the other help of—each department has its own contingency plan. So mayroon magtulungan kami.

But master plan wala akong master plan diyan, linisin ko muna iyan kasi agricultural iyan. So maybe after that, I’ll give the farmers—i-land reform ko na iyan mas mabuti pa. I’ll tell you now. I-land reform ko lahat iyan then I’ll give it to the farmers. Me, I’ll give them the tractors, iyong ano—agricultural eh. Eh ‘di ibigay ko muna sa—bago ano iyang—well sabihin ninyo, how about the business? Well, I’m sorry but that is the law. The law says it is forestal/agricultural. Why would I deviate from that? Do I have a good reason to do the what? What? Mga casino? Who owns the casino? Hotels? Big ones. Who owns them? Eh mga mayaman pati iyong mga dayo. Eh agricultural man kaya iyan, eh ‘di ibigay ko sa farmers.

You want to know now? I’m going to read the announcement. It is going to be a land reform area for the Filipinos. Now, if they want to build something there, they can build in a floating—unahin ko iyon, lilinisin ko lang naman, ibalik ko sa Filipino iyong lupa nila.

---

PRRD: Walang akong plano diyang casino-casino. Tama na iyan kasi sobra na. May casino dito, casino doon. Give it to the people who need it most. That is an announcement: It will be a land reform area, period.

BWorld 202, Tourism, casinos, and Boracay

* This is my article in BusinessWorld last April 5, 2018.

“Every man has a property in his own person. This nobody has a right to, but himself.”

— John Locke (1632-1704, considered the father of classical liberalism)

The forced closure for several months by the Duterte government of all resorts, hotels, restaurants and shops in Boracay, both errant and compliant enterprises, raises the question of private property protection and compensation for the affected private owners.

NEDA has announced that the closure of the entire island from tourism is “very insignificant, only 0.1% of GDP.”

On Twitter, I asked NEDA, DoT, DENR, and Malacañang if they will compensate the losses of the environment-compliant enterprises, especially since the amount is “very insignificant” anyway. Or would the Duterte government not care because this is just tourism in Boracay and not in Davao? As expected, the response I got from the government was the sound of silence.

In 2017, at least 3.7 million people visited the island, less than a million of which came from abroad.

There was also a surge in tourist arrivals in the first quarter of 2018 partly due to cruise ships that visited Boracay. For this year, 27 cruise ships were set to visit the island and some have already canceled.

Tourism is an important revenue earner for an economy or a country. The Philippines being an archipelago with lots of beautiful islands and white sand beaches is unable to optimize this potential yet. For instance, tourism receipts in 2016 was only one-third (⅓) that of Malaysia and Singapore and one-eighth (⅛) that of Thailand.

In terms of visitor arrivals, the nearly six million visitors in 2016 was good enough but at the rate Cambodia is attracting visitors, it might overtake the Philippines in about three years (see table 1).

A rising tourism earner in the Philippines is the gaming sector. Huge hotels and casino resorts have sprouted in Metro Manila and more are poised to come in.

A friend who works in one of the big hotels at the Entertainment City told me that the minimum bet at the casino is P2,000; the maximum bet of course is the stratosphere. Only rich locals and foreigners would have the resources to make that kind of bet. The extent of job creation in the casino is very high with lots of workers and security officers being employed.

Revenues for the big hotels and the government-owned gaming regulator and operator at the same time, PAGCOR, are huge (see table 2).

Based on these numbers, one thing is noticeable — revenues from Philippine Offshore Gaming Operations (POGO). These are Philippines-based online gaming outfits that exclusively serve foreign markets and players (which means people in the Philippines cannot access their games). The same friend told me that the bulk of gamers in this new trend are from China.

In terms of installed capacity, Pagcor has the biggest number of electronic gaming machines with 9,751 in 2017 vs. Okada’s 2,914, Solaire’s 1,926, City of Dream’s 1,781, and Resorts World’s 1,381.

Two big hotel-casinos are coming to Boracay soon. The timing of their planned entry has added suspicion to the wholesale closure of the island from tourism. It is possible that the forced closure with no government compensation will drive many resorts to bankruptcy and this will open up new space for new players like these two big hotel-casinos.

The Duterte administration’s wholesale closure of Boracay for months is tantamount to indirect expropriation of private businesses. This sends bad economic signals to local and foreign investors. It also sends a bad political signal to the federalism push. The central government purports to give more power to the provinces and regions then it moves to totally disempower them. However you look at it, the move is bad for Philippine business, bad for ordinary Filipinos.

--------------

See also:
BWorld 199, Charity and giving should not be legislated, March 27, 2018 
BWorld 200, IPR in the ASEAN and plain packaging in the West, April 03, 2018 
BWorld 201, Expanded environmental rights and anti-coal drama, April 05, 2018

Post-Holy week penitence

Belated holy week penitencia. High taxes and politics never fail to inflict pain on the public. At least five instances here. 

(this photo I got from SunStar)

(1) Economist sees nearly 6% inflation in May-June

Czeriza Valencia (The Philippine Star) - March 28, 2018

https://www.philstar.com/business/2018/03/28/1800911/economist-sees-nearly-6-inflation-may-june

“(Alvin) Ang said inflation for 2018 is expected to peak in May to June which coincides with the opening of the new school year and the financial preparations for such, during which inflation is expected to peak “close to six percent.”

“The effect of TRAIN (Tax Reform for Acceleration and Inclusion) is still not fully felt, so this is a continuing impact of TRAIN. The full-blown impact of TRAIN will be in May to June so  there will be two more months of adjustments,” he said.

Malacanang horror-comedy...

(2) 'Apostle' Andanar likens Duterte to Jesus

Updated as of Oct 06 2016 11:42 PM

http://news.abs-cbn.com/news/10/06/16/apostle-andanar-likens-duterte-to-jesus

And the "Jesus of the Philippines" has this mouth....

(3) Duterte: Yan mga NPA naglalaway sa mga baril natin, tayo sa babae lang

https://tnt.abante.com.ph/duterte-yan-mga-npa-naglalaway-sa-mga-baril-natin-tayo-sa-babae-lang/

(4) DOTR horror-comedy. Sec. Tugade, nagpapara ng bus to lecture the driver of his violation – bus overloading. But the bus is near empty (March 30, 2018)

https://www.facebook.com/kodphilippines/videos/414552702326281/?hc_ref=ART18Y7J9xObNm7gPF0cQSAHrFycVLQkWxc5DOGck4Jf-40e43EJHmb2vAC6I3L6xKM

(5) As recommended closure nears, fate of almost 30k Boracay workers hangs in balance

Published March 30, 2018 4:10pm

http://www.gmanetwork.com/news/news/specialreports/648347/as-recommended-closure-nears-fate-of-almost-30k-boracay-workers-hangs-in-balance/story/

Boracay closure for 6-12 months, I think there is plan by Duterte business cronies to force the bankruptcy of some or many resorts there, the non-chain hotels especially, then local cronies + China Communist Party cronies will come in big swoop, gobble up the fledgling and losing resorts, then Boracay will be "open to the world" again.

On rising inflation, this comedy is not from Malacanang but from TRAIN rah-rah boys Action for Economic Reforms (AER). Governmentt and NGO, they speak and argue the same language, blurred difference bet govt and "non-govt", jokers. http://bworldonline.com/inflation-become-bogeyman/

Notice that this rising inflation does not include yet fare adjustments by jeepneys, bus lines, truckers, shipping lines, airlines. I think Malacanang and LTFRB/MARINA/CAB will not grant those fare hikes this year, "CSR" na lang daw ng oil companies. Then by January 2019, another oil price hikes by TRAIN law, then rah-rah boys will produce again another article of "inflation bogeyman", ayos. Govt and "non-govt", they speak the same.

Ateneo Economics Department should produce more Alvin Ang who can objectively see the inflationary pressure of energy tax hikes. Another Ateneo economist and former NEDA chief has been pushing hard for higher electricity price hikes via huge coal tax, P600/ton (vs P50/ton in 2018, P100 in 2019, P150 in 2020). Make coal power become expensive, silent on natgas which is another fossil fuel, because he is a Board of Director of FirstGen and silent about it, does not disclose it when he writes. Unlike Romeo Bernardo who honestly and transparently discloses his affiliations with Ayala, Aboitiz Power, Phinma Energy, before he opens his mind about energy policies.

Duterte's planned disrespect of private property in Boracay

The Duterte government shows once more its penchant to disrespect private property with pronouncements like "Bomb/blow up illegal structures" or "Totally close all Boracay resorts." See these news headlines yesterday and the other day.

“The government would not hesitate to send the Marines and” blow up” illegal structures in the shores of Boracay if resort owners would continue to defy orders to clean up the famous island, a Palace official said.”

http://newsinfo.inquirer.net/975607/palace-duterte-boracay-marines-illegal-structures-government-environment-clean-up

Whether Duterte-Roque are serious or palusot "joke only" in making that statement of using the marines, they are idiotic. 

Illegal structures, resorts with no sufficient business permits, improper disposal of solid and liquid wastes -- these are local government and police concerns, not military concerns. West PH Sea/SCS militarization by the China Communist Party is a military and foreign affairs concern.

The military/AFP's main mandate is external defense, not internal police function. Roque-Duterte cannot distinguish between internal vs external concerns for the military.

Now see this from PhilStar:

'Total closure

If she would have her way, Tourism Secretary Wanda Teo would rather go for the full closure of Boracay to speed up the cleaning operations there.

“I think it will depend on Secretary Cimatu (partial or full closure) but, for me, I think it should be total because work will be done faster. If it is partial, it will take time and we only have six months to do (the cleanup),” she told reporters.'

https://www.philstar.com/headlines/2018/03/16/1797145/duterte-bomb-illegal-boracay-structures

Closure of Boracay businesses, whether partial or total, is against respect of private property. People and business enterprises there have a contract with the state via DOT, SEC, DENR, DTI, BIR, DOLE, DOH, LGUs, etc. Businesses will abide by the corporate, environmental, health and sanitation, labor protection, other regulations by the government and private enterprises have the freedom to do business, to provide various goods and services to the people, local and foreign.

Now there are unconfirmed stories that mainland Chinese businesses and casino operators are rushing to go to Boracay. Worth watching if this is true or fake news.