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Leadership Lessons from President FVR
by Patricia A. O. Bunye - August 30, 2022
Allow me to take this opportunity to pay my respects to our 12th President, Fidel Valdez Ramos, who passed away on 31 July 2022. PFVR is credited with many things, including ushering a period of stability and creating an environment conducive for investments, but the mining industry is understandably most grateful to him for the passage during his term of Republic Act No. 7942 or the Philippine Mining Act.
The Mining Act was but one of the pieces of legislation that were part of “Steady Eddie’s” road to Philippines 2000, which included breaking Marcos Sr.-era monopolies. Surely no one misses the days when there was only one airline and one phone company, or when there were daily power outages.
While I never had the honor and privilege of working for him, I was always in awe of his leadership style. PFVR is well known for having institutionalized complete staff work or “CSW” in Malacanang which, simply put, admonishes all government agencies and his subordinates to “do their homework” before any document reaches his desk. Later administrations would follow his lead and further flesh out and provide details and timelines for more effective CSW.
If I am not mistaken, it was also PFVR’s administration which began using barcodes to track incoming documents.
Before the internet age, PFVR was already fond of clipping news articles and writing marginal notes on them in his legendary red pen which we would send to government officials very early in the morning by fax. These notes would either be reminders, action items or a simple pat on the back. An aide de camp who spoke at his wake ruefully recounted that his days were filled with collating news clippings for his workaholic boss from dawn until late evening. At the end of the day, “The Boss” would still ask, “wala na bang papel diyan?”, meaning he was still willing to work when others much younger than he were already exhausted.
Listening to other eulogists who shared their memories of PFVR, I was struck by several recurring themes of their years working with him. These were men who were not politicians, but who knew him as a military officer in the field, and who saw him face the challenges of both military and civilian life.
From their comments, I gleaned the following leadership lessons PFVR-style:
- Take care of your people. As a military commander, he would not leave checking on the troops to lower ranking officers. A subordinate recounts being surprised that a younger FVR would go to the field with a bag of medals both as a reward for the hard work of his men and a way of comforting them through their difficulties. According to Brig. Gen. Anthony Alcantara, one important lesson he learned from PFVR is: “(I)f you care enough for the nation you serve, act decisively on what needs to be done. There is no place far enough or isolated enough that cannot be reached if you wanted to. Honor every effort as soon as possible of those who sacrificed enough to fulfill their duties.”
- If you need something done well, put in the time and resources to make it happen. PFVR’s battlecry was “Let’s show them how to work” and work hard he did, spending long days which would often begin with running with the troops at 4am, which would allow him to hit several birds with one stone: meeting and discussing work concerns while bonding with his team.
- After the siege of the Manila Hotel on 05 July 1986, when those responsible were only meted pushups when they returned to their barracks, then-AFP Chief of Staff Ramos was severely criticized for the light treatment given to the putschists, ½ of whom belonged to the Constabulary, which he formerly headed. His aides say that lesson to be learned from that experience is: know your true intentions (in taking a course of action). PFVR then recognized the fragility of the new-post EDSA democracy. He knew then that his true objective was to unify the AFP which was severely politicized and that any punishment would further divide it. Keeping the organization intact, professional and strong was worth any criticism hurled at him.
- Make your organization function well.
- Be prepared. Anticipate all contingencies.
- Take every opportunity to improve yourself and serve others well
- Ask “are you part of the problem or part of the solution”?
- Strive for a win-win solution. One former aide recounted a PFVR trick of getting warring cabinet members to come to an agreement by asking them to meet in a small conference room and to revert to him only after they had a workable solution.
- Anything important needs to be written. Despite his famous photographic memory, he was a stickler for writing notes even on the golf course.
- Practice attentive listening. An aide recounts a gaffe when he only caught PFVR saying the word “barber” and, in his haste, called former Sen. Robert Barbers, when all PFVR wanted was a haircut. Lesson learned: don’t assume, but always seek clarification when in doubt.
- Throughout his six years as President, PFVR was always on-point and on-message with the direction he wanted to take (“Kaya Natin Ito!”). Whether or not you agreed with him, there was no equivocation about his position. He also effectively used wit and humor to defuse tense situations, including with the press.
Two thumbs up, Mr. President. Mabuhay!
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Fernando Penarroyo - August 30, 2022
Philippine Department of Mines and Energy?
Every time there is a change in administration, the mineral industry always anticipate with bated breath the identity of the Department of Environment and Natural Resources (“DENR”) secretary. The presidential appointee is scrutinized whether he or she is either sympathetic to the mining industry or a staunch environmental advocate. This can be attributed to the ambiguous nature and function of the DENR. Under the present setup of the DENR, it is mandated to promote investments in the minerals industry through the Mines and Geosciences Bureau and at the same time, enforce national environmental laws through the Environmental Management Bureau. In many jurisdictions, the environment protection agency is totally independent from the administrative body regulating extractive industries. Perhaps it is now high time for Philippine legislators to remove the mining regulation function from the DENR and attach it to a super regulatory body called the Department of Mines and Energy. A reinvigorated Department of Mines and Energy (“Department”) will serve as the foundation for regulating, promoting, and developing Philippine resource-based industries, which represent one main prospect for economic growth. However, this new Department will certainly face challenges, including multiple regulations, inter-institutional conflicts, dearth in the capacity of regulators, and the threat of political interference. The Department should be tasked to provide clear policy direction for the extractive sector and deliver improved industry regulations through a strengthened institutional capacity. It should also introduce reforms in state-owned petroleum and mining companies. More importantly, the Department should create a National Geological Survey Agency to collect a comprehensive geological information system and manage a National Mineral and Energy Database. The Department must implement a transparent and accountable governance framework, and improve effective interactions with other regulatory bodies, private companies, development agencies, and stakeholders. Strengthening Institutional Capacity Institutional capacity requires highly skilled specialists to provide effective regulatory functions to identify, design, implement, and manage a comprehensive regulatory system. Because the mineral and energy industries are so highly specialized with many technical dimensions, the skills available to the Department should ideally match with those from the private companies it regulates. In order to pursue this, the Department must conduct an organizational and capacity needs assessment. It must craft a plan to deliver the human resources necessary to develop and retain the staff required and implement organizational reforms so that the Department is properly structured to fully deliver its mandate in the areas of policy, regulation, and investment promotion. High standards of transparency and good governance are essential to tackle corruption and ensure the sector delivers benefits to the stakeholders. These include accountable mechanisms for the allocation of mineral and petroleum rights through improved processes in licensing and contract management. It also involves transparent management of non-tax revenue collection like funds for social development and environment rehabilitation. Complementing contract management is improved oversight and compliance. Regulations must provide the structure for the enforcement of laws and the terms and conditions of the contracts and licenses. Inconsistent regulatory decisions brought about by ‘regulator uncertainty’ that occurs in the aftermath of political transition create uncertainty for investors. This justifies the creation of an ‘independent’ regulator composed of tenured civil servants based on professional merits and technical expertise working in an organizational structure shielded from political patronage. Improving the Role of State-Owned Resource Companies Organizational reforms also require consolidating and strengthening ownership in resource companies owned by the state and providing a degree of effective government control and involvement in decision making. Especially for strategic projects, state-owned resource companies can benefit from preferential financing, low hurdle rate expectations, sovereign guarantees, grants, direct government subsidies, tax concessions, preferential treatment in public procurement, and other forms of public support. With this support system, state-owned resource companies should be encouraged to conduct initial exploration work in frontier areas to mitigate geologic risks. Take the case of the Philippine National Oil Company-Exploration Corporation (“PNOC-EC”). The low capacity of technical personnel and lack of modern equipment are among some of the issues identified with the company. PNOC-EC could have acquired the interests of the divesting companies in the Malampaya natural gas project if it utilized its ability as a national oil company to access capital, human resources and technical services directly from oil field service companies (“OFSC”). OFSCs have been offering national oil companies services, specialized operations, and outsourcing needs with their high technical experience. Their services cover virtually all areas of exploration and production including facilities and reservoir-related services. With the Malampaya acquisition, PNOC-EC can aggressively track new opportunities for growth through access to capital markets, increased profits, and greater participation in technology advancements. Further, it is better able to mitigate political risks through government-to-government relationships and negotiation strategies using the political muscle of the Philippine government. PNOC-EC has the ability to take greater risks, with strategic and geopolitical goals factored into investment decisions rather than being purely based on commercial considerations. A strong PNOC-EC could also have better leveraged in explorating in the disputed West Philippine Sea. In the case of the Philippine Mining and Development Corporation (“PMDC”), direct mining operations may be out of reach for the company at present. PMDC was designated as the implementing arm of the DENR in undertaking the mining and mineral processing operations in the 8,100 hectare Diwalwal Mineral Reservation. However, PMDC can gradually develop capability through knowledge transfer by working in partnership with private companies thereby increasing in-house technical capability. Managing the state’s equity in mineral projects is technically easier than operating mines, but it also requires dedicated professional skills to ensure that the state’s shares yield an appropriate return. In particular, board membership should be filled by skilled professionals who can dedicate substantial time to these tasks. Commercial efficiency is the best way of achieving PMDC’s goals over the long term. Detailed laws and rules on how PMDC is structured and how it interacts with state institutions and private investments, are necessary. The PMDC should also be able to manage itself with sufficient autonomy to make relevant and timely decisions. However, public accounts should be maintained in accordance with international standards and subject to independent audits. Establishing a National Geological Survey Agency Too often, regulators are bogged down by the sheer volume of monitoring, inspections, and extension work required. Also, the workload spent by technical personnel in contract monitoring results in insufficient time to assess the resource potential of the country, which is primarily the mandate of a Department handling the mineral and energy industries. Under the present set-up, technical personnel must also engage in the inspection of small-scale operations and geo-hazards aside from contract compliance duties. The mineral and energy industries are capital and technology-intensive, which means that the country will need to attract significant private sector investment. One method to attract investment is by providing modern geological information to investors and this can be adequately fulfilled by a National Geological Survey Agency (“NGSA’). The Department shall be solely responsible for the establishment and control of an NGSA whose task is to conduct a comprehensive geologic survey and provide reliable scientific information on how to manage energy and mineral resources. The survey will contribute important data to the Department and other agencies and compile assessments of minerals, energy, and other resource potential. The NGSA shall also provide services on geological mapping, geotechnical investigation, hydrogeological mapping, geophysical and geochemical mapping as well as basin analysis. It shall also engage in mineral and petroleum resources exploration and evaluation. By building technical capacity in the NGSA, the Department will improve the understanding of the country’s resource endowment and provide geoscientific information to investors. National Mineral and Energy Database Ease of access to a mineral and energy database facilitates investment into the extractive industries of a country. As such, having the digital infrastructure to host this data administered by the NGSA, is important for attracting new investments. The database will serve as a central depository for resource data and will be made available to the public on a centralized web and cloud platform for easy information access. The availability of additional information reduces uncertainty and increases investor confidence. Information and knowledge increase resource certainty and reduce risk, which allows better access to risk capital for further exploration as well as a more accessible and manageable base from which to develop a portfolio of resource projects. The digital platform to be used for access to the data bank can also be utilized in the submission of information to regulators for monitoring and compliance purposes. The Department should also continue to adapt to a standard global classification system that addresses the probability of risk based on a set of resource criteria and attributes. This classification system would provide developers and potential investors with more information, and as a tool for resource valuation, allowing for the development of risk-balanced portfolios. Such standardization is critical to make informed decisions on development opportunities. The implementation of the resource classification system would provide the industry a clearly defined framework to evaluate prospects and establish a common industry language for resource and risks assessments. The Department and private industry should aim for the recognition by financial institutions and stock exchanges of the resource classification system to facilitate access to capital. Enhancing Government Collaboration and Economic Linkages While the Department shall have the primary responsibility for developing extractive industries, it also recognizes that many of its activities will require collaboration and linkages with other institutions. Inter-institution coordination among other resource-regulating agencies not directly under the supervision of the Department like local government units, the National Commission on Indigenous Peoples, Energy Regulation Commission and other agencies will lower the transaction costs of developers. Regulation of the extractive industries requires all responsible government agencies to work together and collaborate to strengthen regulation. As the main government agency for the extractive industries, the Department will take a leadership role in institutional collaboration to improve information flow and regulation, and streamline economic development. The Department should manage the effective coordination and collaboration of regulatory activities across the wide range of agencies that ideally should be involved in different aspects of extractives regulations. Many downstream activities like the processing of minerals require access to low-cost power in order to be competitive. This is where coordination within the Department of Mines and Energy can easily facilitate this major hurdle in developing a viable mineral processing industry. International markets for processed mineral are highly-competitive and it is difficult to compete without relying on a facility where a major cost of production is electricity. Another instance where the mining and energy function can be coordinated by the Department is the setting up of the regulatory frameworks for hybrid micro-grids. A key advantage of off-grid power plants is that it can power the energy needs of mining operations in remote areas, where the cost of building the infrastructure required to hook the mine up to the grid network or building a conventional power station will be significant. By having a dedicated off-grid power source, a mining operation can meet all its energy requirements and make significant cost savings in the price it pays for electricity. Micro-grids involve a combination of power sources, usually diesel or natural gas generators combined with some renewable energy resources. In addition, given the significant involvement of the donor community in the extractive sector, the Department shall also establish a donor coordination forum for extractive sector activities. The economic linkages spearheaded by the Department will maximize the economic impact of extractive industries. Such linkages will also improve the efficiency and effectiveness of donor funding. Inclusion in Conflict Resolution Petroleum and minerals development has often been cited as a key factor in triggering and escalating violent civil conflicts. It is most likely to occur where local communities have been systematically excluded from decision-making processes, when the economic benefits are concentrated in the hands of a few, and when extractive industries clash with social and environmental concerns of local communities. Unwillingness to address these issues in peace agreements becomes a potential source of conflict in the future. The Department through an active involvement in the peace negotiations can articulate the natural resource issue into the process. Another instance where the involvement of the Department and the national oil company can be put into good use is in the assertion of the country’s sovereignty over petroleum resources in the West Philippine Sea. Conclusion Combining the Mines and Geosciences Bureau with the Department of Energy to form a strengthened Department of Mines and Energy will ensure economic growth and sustainable development in the mining and energy sectors. The strengthened Department will provide a stable regulatory framework able to manage the country’s resources and better respond to the strategic objectives espoused in the country’s development objective. Fernando “Ronnie” S. Penarroyo specializes in Energy and Resources Law, Project Finance and Business Development. He is also currently the Chair of the Professional Regulatory Board of Geology. He may be contacted at email@example.com for any matters or inquiries in relation to the Philippine resources industry and suggested topics for commentaries. Atty. Penarroyo’s commentaries are also archived at his professional blogsite at www.penarroyo.com Additional Readings Addison, Tony and Roe, Alan, Extractive Industries - the Management of Resources as a Driver of Sustainable Development, UNU-Wider Studies in Development Economics, 2018, https://www.wider.unu.edu/publication/extractive-industries Al-Fattah, Saud L., National Oil Companies: Business Models, Challenges, and Emerging Trends, March 2014, https://www.researchgate.net/publication/261696989_National_Oil_Companies_Business_Models_Challenges_and_Emerging_Trends Copper Giants: Lessons from State-Owned Mining Companies in the DRC and Zambia, Natural Resource Governance Institute, 2014, https://www.resourcedata.org/dataset/rgi-copper-giants-lessons-from-state-owned-mining-companies-in-the-drc-and-zambia
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Philippine Resources - January 30, 2023
PHILEX MINING GEARS UP FOR EXPANSION, SIGNIFIES INTEREST IN MACAWIWILI
In photo at the signing of the term sheet between PMC and MGMDCI were: (seated, left to right) Felicisimo A. Feria, Jose Ma. S. Lopez, and Michael L. Escaler, all representing MGMDCI; Manuel V. Pangilinan, Philex Chairman; and Eulalio B. Austin Jr., Philex President and CEO; (standing, left to right) Atty. Katrina Janine Sta. Ana, Associate, Migallos & Luna Law Offices; Atty. Bryan George Manzano, Associate, Migallos & Luna Law Offices; Atty. Michelle Carisse Balois, Partner, Feria Tantoco Daos Law Offices; Atty. Daneia Isabelle Palad, Partner, Migallos & Luna Law Offices; Atty. Winston Cruz, Vice-President and General Counsel, Philex Mining Corporation; Romeo B. Bachoco, Senior Vice-President and Chief Finance Officer, Philex Mining Corporation; Atty. Marilyn A. Victorio-Aquino, Director, Philex Mining Corporation; Atty. Barbara Anne C. Migallos, Director and Corporate Secretary, Philex Mining Corporation and Partner, Migallos & Luna Law Offices; Atty. Raymond Francis Jamora, Associate, Feria Tantoco Daos Law Offices; and Atty. Michael John Tantoco, Jr., Associate, Feria Tantoco Daos Law Offices. (PMC photo) Philex Mining Corporation, one of the oldest and largest copper and gold producers in Southeast Asia, recently set into motion its plans for expansion with the signing of a Term Sheet with Macawiwili Gold Mining and Development Co., Inc. (“MGMDCI”) in simple ceremonies in Makati City. Macawiwili Gold Mining and Development Co., Inc. is a 90-year old company engaged in mineral exploration and production in Itogon, Benguet. With over 800 hectares of contract area under its Mineral Production Sharing Agreement, the Company has been exploring various mineral deposits, including gold and copper, for several decades. The Term Sheet outlines the parties’ clear intentions to explore commercial, financial, and technical avenues in preparation for possible shares acquisition by the Company in MGMDCI. Activities to kick off this partnership will include conduct of due diligence and scout drilling activities on the property of MGMDCI covered by Mineral Production Sharing Agreement (MPSA) in Itogon, Benguet Province., located adjacent to the existing Padcal Mine of the Company. Signing the Term Sheet on behalf of the Company were Manuel V. Pangilinan, Chairman, and Eulalio B. Austin Jr., President and CEO; while representing the shareholders of MGMDCI were Michael G. Escaler, Jose Ma. S. Lopez, and Felicisimo A. Feria. The signing was also witnessed by directors and officers of the Company as well as counsel for both parties. “Our interest to pursue investments in the Macawiwili property” according to Eulalio B. Austin, Jr., President and CEO, “is part of our business direction for this year to broaden interest in ‘green metals’ through mergers and acquisitions.” “We need to hit the ground with this at the soonest possible time,” Austin adds, “considering that this property is adjacent to our Padcal mine and would go a long way in fulfilling company plans for expansion and extension of the life-of-mine of Padcal. “This is a good addition or extension to the Padcal Mine,” according to Manuel V. Pangilinan, Philex Chairman. “I hope that this is the start of something good and that it would ride the wave of higher metal prices in gold and copper.” Pangilinan emphasized that “any addition, expansion, or extension to the Padcal Mine would greatly benefit not just our employees and their families, but also our host and neighboring communities, and our nation as a whole.” Article courtesy of the Philippine Stock Exchange
Philippine Resources - January 30, 2023
DMCI Holdings, SMPC among best governed PLCs
Photo caption (left to right): SMPC Corporate Governance and Compliance Manager Joseph D. Susa, DMCI Holdings Board Advisor and SMPC Independent Director Honorio O. Reyes-Lao and SMPC SVP, Chief Risk, Compliance and Performance Officer Junalina S. Tabor. Diversified engineering conglomerate DMCI Holdings and its energy subsidiary Semirara Mining and Power Corporation (SMPC) were among the Philippine listed companies recognized for their corporate governance performance by the Institute of Corporate Directors (ICD). DMCI Holdings received the 2 Golden Arrow recognition while SMPC was awarded the 3 Golden Arrow recognition. Both have been ASEAN Corporate Governance Scorecard (ACGS) Golden Arrow awardees since 2019. The awards were conferred after the two companies exhibited observable conformance with the Philippine Code of Corporate Governance and internationally recommended corporate governance practices as espoused by the ACGS. The ACGS measures the performance of the companies in the areas of facilitating the rights and the equitable treatment of shareholders, how they relate to their different stakeholders, ensuring transparency and accountability through timely disclosure of material information, and how the board guides the company strategically, monitors the management, and ensures the board’s accountability to the company and the shareholders. Over 80 Philippine listed companies were feted during the in-person awarding ceremony in Sheraton Manila Hotel last January 20. Article courtesy of the Philippine Stock Exchange
Philippine Resources - January 30, 2023
DOTr to prevent more delays in PNR Clark Phase 2 project
Photo credit: DOTr The Department of Transportation (DOTr) will work closely with the contractor of the Philippine National Railways (PNR) Clark Phase 2 project to ensure that issues are addressed after its projected completion date was delayed by eight months. In a statement on Monday, the DOTr said the project, initially slated for completion in June 2024, has been delayed until June 2025 due to the delay in the turnover of the land to project contractor POSCO Engineering & Construction. “Before the 36-hectare site was turned over by the government to POSCO, several fruit-bearing trees were cut down, causing the delay,” it said. About 48 buildings and facilities are expected to be built by POSCO at the project site, meant to be the Clark Depot of the North-South Commuter Railway (NSCR). “As of December 31, 2022, more than 33% of the planned construction has been completed,” it said. In addition to buildings and facilities, the Clark Depot will have 33 stabling tracks to serve as the parking areas for the trains and 12 other tracks to access maintenance facilities. During a site visit at the project site, DOTr Secretary Jaime Bautista said the Clark Depot is where the operations control center will be located which will serve as the “heart of operations” of the rail service. “It is important that we complete this as planned and on time. I know that there are issues that need to be resolved. The DOTr will work closely with [the contractor], so we can fix problems and address issues,” Bautista said. The 53-kilometer PNR Clark Phase 2 is the second leg of the NSCR and will link multiple cities and municipalities in Central Luzon with Metro Manila. Funded by the Asian Development Bank, the project is seen to cut travel time between Malolos City in Bulacan province and Clark, Pampanga province from 1.5 hours to 30 minutes. This part of the NSCR also includes the Airport Railway Express Service that will connect Makati to the Clark International Airport through a 55-minute train ride. Article courtesy of the Philippine News Agency
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