Commentary

Commentary

Philippine Resources - February 20, 2020

Diversity & Inclusion in the Workplace

By: Patricia A. O. Bunye“Diversity & Inclusion” are two buzzwords that I have taken for granted, but have been forced to think about, in the last few weeks. An international legal publication contacted me to ask whether our firm had a “Diversity Statement”, and of course I replied that we did, as most major law firms now do. I was also invited to attend a forum on the same topic, where I realized just how much I didn’t know and still had to learn about it.At least once a year, the members of Diwata-Women in Resource Development, Inc (“Diwata”) and I devote time to planning activities for International Women’s Month which is celebrated globally in March. This year, on March 31, Diwata is presenting a talk on women’s leadership in resources development headlined by Gloria Tan Climaco. Recognizing that, in the Philippines, although women are very well represented in various fields in the mining industry – including law, finance, geology, mining engineering, community relations, communications, among many others – there is still a very long way to go for many women before they reach the top of their respective fields. Based on data from Bloomberg, only one in 20 global mining firms headed by a woman. Hence, the need to present strong women role models who can share their stories.These days, however, “diversity” no longer just means giving equal access to men and women in the workplace, but to accommodating or accounting for the “collective mix of all human characteristics”, whether visible (such as race, gender and disability) or invisible (such as socio-economic status and SOGIE (Sexual Orientation and Gender Identity Expression).On the topic of SOGIE alone, I confess that I need to be educated on the ever-expanding spectrum of orientations and identities.Diversity must also be distinguished from “inclusion” which refers to getting the mix to work well together, particularly in the work environment, where all individuals are treated fairly and respectfully, have equal access to opportunities and resources, and can contribute fully to the organization’s success.As pointed out by one of the speakers, diversity is akin to inviting someone to a party and inclusion is asking that invited guest to dance.I am reminded of the story when Harvard Law School (HLS) first admitted women in 1953. While women were finally allowed to attend HLS, it appeared that they did not have restrooms for women and the female students had to walk a fair bit to reach the restrooms that were specially constructed for them. Similarly, in the 1960s, Katherine Coleman Goble Johnson, one of the first African American NASA scientists whose work was critical to the success of the first and subsequent U.S. crewed spaceflights, had to use restrooms that were separate from her white peers.These days, restrooms still exemplify these diversity and inclusion issues, though the circumstances may have changed. According to one diversity and inclusion advocate, there are three main diversity and inclusion issues in the workplace: “the right to pee, the right to dress and the right to a name”.Under the first, we must consider whether there are gender-neutral restrooms where a person of any sexual orientation or gender identification would feel safe using, without harassment by others (i.e., restrooms are available for gender non-conforming people). Related issues are: Are restrooms designated as lactation rooms? Are there diaper changing tables in the men's restrooms? Are the directional signs to the restrooms in Braille and other spoken languages of the community or only in English? Are there handicapped restrooms located in your building? How many restrooms have sufficient space for a person (adult or child) and a caregiver?The second right (the right to dress) is a little trickier in professions that are conservative like law or banking, or industries which may require certain safety gear, like mining, but certainly, gone are the days when a ‘one size fits all’ dress code may be applied.The third right, the right to a name, is also tricky, as it refers not only to the proper name a person wants to be identified by (which may be limited by the person’s legal name on official or government documents, but also the pronoun (“he” or “she” or the neutral “they”) that person prefers.For many years, I have tended to consider the issues of diversity and inclusion purely in terms of gender, race and perhaps socio-economic background. Until very recently, I did not consider what resource persons have pointed out: that there are many other differences in the workplace that we must be sensitive to. For example, the differences across generations (i.e. Baby Boomers vs. Gen X vs. Millennials vs. Gen Z) or the pace at which a person wants to grow in an organization (i.e., there may be individuals perfectly willing to take the “slow track” in order to have more time with the family) are other factors that must be considered when making decisions in a business.All these are quite overwhelming and it is a great comfort that an inclusion advocate told me that what matters most is not being afraid to ask questions and the willingness keep the conversation on these issues open.Patricia A. O. Bunye is a Senior Partner of Cruz Marcelo & Tenefrancia and heads its Mining and Natural Resources Department and the Energy practice group. She is the Founding President of Diwata-Women in Resource Development, Inc., a non-government organization that advocates responsible development of the Philippines’ wealth in resources.

Commentary

Philippine Resources - November 06, 2019

The New Face of Mining

By Fernando PenarroyoGlobal mineral exploration budget saw two consecutive years of growth in 2017 and 2018 despite the uncertainty of economic growth in mature economies and volatility of emerging markets, brought about by the US-China trade dispute. Junior mining companies who survived the previous years’ downtrend increased their exploration budget by thirty-five percent year over year but the majors continue to account for the majority of planned exploration spending. Metals prices were also trending upward and company market capitalization recovered from lows in 2015, resulting in many investors to include the mining sector in their investment portfolio. However, the industry continues to be risk averse though global exploration budget is expected to increase in 2019 particularly for late-stage exploration. Capital market support also financed renewed drilling of promising prospects in areas with stable political and regulatory systems. Drilling programs focused mainly on gold but exploration targeting base metal assets also rebounded in the second half of 2018, indicating a vibrant exploration sector activity not seen since early 2013. The bulk of exploration spending in 2018 went to Latin America which have a high geological prospectivity and relative political stability. Latin American countries accounted for 4 of the top 10 most popular destinations led by Peru, Mexico, and Chile. Meanwhile the Philippines is at number eight of the ten least attractive jurisdictions for mining investment according to the Fraser Institute’s 2017 survey of mining and exploration companies. The survey assessed how mineral endowments and public policy factors such as taxation and regulatory uncertainty affect exploration investment.By virtue of the initial tax reform package implemented by the Duterte administration, mining excise tax has been raised from 2% to 4%. Under the proposed second round of reforms, the Department of Finance wants a “comprehensive mining tax that will give the government a bigger share from miners’ revenues.” There are pending bills filed in both the Senate and House of Representatives that plan to impose 5% mineral royalties on all mining operations on top of the excise tax on minerals and other taxes. President Duterte continues to look at the possibility of imposing a ban on open-pit mining through an executive order (“EO”).The Mining Investment Coordinating Council is reportedly ready to propose the lifting of the open pit mining ban for as long as mining laws are strictly enforced. The Department of Environment and Natural Resources (“DENR”) will recommend the removal of the moratorium on new mining projects imposed under EO 79 and DENR Memorandum Order 2016-01, premised on the passage of a “legislation rationalizing existing revenue sharing schemes and mechanisms.” The DENR is also set to declare high mineral potential areas including all existing operating mines as mineral reservations. Further, the DENR seeks to promote the establishment of mineral processing plants and mandatory mineral processing of all nickel ore. It will finalize the national program and road map for the development of value-adding activities and downstream industries for strategic metallic ores while requiring all operating mines to have ISO certifications. In both houses of Congress there are pending mining bills requiring that mineral ores should be processed within the country and disallowing mining operations from exporting unprocessed mineral ores without a certification of compliance showing presence or lack of rare earth elements.It appears that the Philippine government is now looking at different strategies to extract a greater share of the value from mining operations, employing strategies to include increasing taxes and royalties, and requiring in-country processing or beneficiation prior to export. These are clear manifestations of resource nationalism that makes countries like the Philippines less attractive for mining investment.License to Operate Remains the Top RiskAccording to a 2019 Ernst and Young Report outlining the top ten business risks facing the mining and metals industry based on a survey of over 250 global mining sector participants, “license to operate” topped the list. This has been attributed to the rise of resource nationalism and digital transformation. License to operate has evolved beyond the narrow focus on social and environmental issues. The expectations of society have increased and stakeholder participation has moved beyond the confines of the local host communities. Social media and the internet brought about by the fast pace of progress in technology and digital capabilities, are now able to move information quickly. Resource nationalism has enabled society to examined its role as resources licensor. Society now expects more than just tax and employment opportunities from resource developers. New and strict disclosure laws have caused companies to rethink how value is being created for stakeholder communities including tax contributions, as investors now rely heavily on such disclosures. At the same time legal processes have enabled host communities and civil societies to resort to litigation to enforce environmental laws, enjoined potentially destructive operations, and seek damages for past violations and legacy mines. Any misstep on the part of resource developers can impact their ability to access capital or may even result in a total loss of their license to operate.Under the Mining Act of 1995 and its implementing rules and regulations, the following are the legal requirements for a company to have a license to operate:Technical and financial qualifications to engage in large-scale mining;The area being applied for is open and available for mining activities and is not located within any of the areas where mining is prohibited;An approved environmental compliance certificate, showing that the impacts of mining in the area can be mitigated and/or remediated through proper environmental protection measures;An approved Project Feasibility Study, showing that the mine has enough ore reserves to operate profitability, and can give government a fair share in revenues.The endorsement/approval of the local government units (province, municipality/city, and barangay) that will be impacted by the proposed mining activity; andFree and prior informed consent of the indigenous peoples, if the area being applied for is within their ancestral domains.New Digital TechnologyMiners are now recognizing the use of emerging digital technology to improve productivity. Mobile technology connectivity between workers and management facilitates communication in the mines, ensuring a safe and productive working environment. Mining companies are also revolutionizing data collection in the field with the help of the Internet of Things, which are smart data solutions that help management to relay important data such as water pressure, temperature, concentration of gases and other information. Cloud technology allows management and employees to quickly access and alter essential information, wherever and whenever needed.Robotics allow more autonomous vehicles and machinery to make operations smoother resulting in better safety, greater efficiency and cheaper running costs. In engineering industries which require hard labour intensive tasks, robots will be able to take over and do things faster and more efficiently than humans ever could. Predictive analytics is used currently to reduce maintenance costs and improve equipment availability.New WorkersWhile automation and data analytics technologies may increase efficiency, these will require a workforce that is skilled in data science, analytics, predictive modeling and mechatronics. However, recruiting and retaining this workforce will increase expenses as there is a limited pool of people with these skill sets. Current workforce will also need retraining as knowledge resources and will be required to possess a new set of skills needed to operate new machinery and technology, or work along-side and support automated systems.Universities and data science companies that develop innovations could gain an edge in exploration. Further, exploration innovation will not come only from engineering or geology; it will also emerge from biochemistry, bioengineering, and computer science—disciplines too complex for resources companies to manage in-house. Demand for new jobs such as data scientists, statisticians, and machine-learning specialists is already on the rise among resource developers. Within ten years, mining companies could employ more PhD-level data scientists than geologists. Mining organizations are also employing new tools including cloud-based human resources systems, data analysis of employee performance and real-time digital learning to manage and develop talent.New Energy SourcesFossil fuels are the conventional sources of energy to run mine equipment and electricity for processing, representing a significant part of mine operating costs. Companies are now opting for a mix of energy sources — fossil fuels, hydroelectricity and renewable energy. Mines, seeking to reduce costs and greenhouse gases, will be investigating ways to replace diesel-powered equipment with electric ones, as battery storage technology becomes more reliable and affordable. This will bring a number of benefits including the reduction of underground diesel emissions and ventilation costs.The integration of conventional and renewable sources is critical to ensure reliable and safe power for the mine. Such solutions will enable the mining industry to diversify its energy sources, reduce consumption of fossil fuels and carbon emissions, and cut operating costs.This will ultimately create a new generation of mines that will enhance the industry’s global competitiveness, long-term sustainability, and more importantly, public acceptance.New ThreatsWhile digital technologies will make mines more efficient, mining companies will have to allocate budgets for cybersecurity and devote additional resources to improve their defenses and work harder in embedding security-by-design due to the increasing potential of cyberthreat. As the digital transformation agenda forces organizations to embrace emerging technologies and new business models, cybersecurity is important because there is a heightened exposure to fraud, corruption and other related risks. Increased global connectivity means that anyone with access to company data especially those uploaded to cloud applications, can exploit weaknesses in data security. Companies’ critical digital and physical assets are therefore at a greater risk of theft, damage and manipulation than ever before.New World CommoditiesAt the same time, digital technologies have resulted in a change in commodity demand for critical minerals such as cobalt, lithium and copper. These minerals are required to manufacture energy conversion and storage equipment needed to supply the renewable energy industry which already is beginning to transform and disrupt global demand. The rise of electric vehicles and the production of an ever-growing variety of high tech and green technologies, from batteries, smart phones and laptops to advanced defense systems have also boosted demand and competition for new world commodities. The European Union, South Korea, Japan and US, are defining some minerals as ”critical” to ensure they are available for their supply security and future prosperity. Chinese state-owned enterprises are also already taking a significant proportion of the lithium-ion battery supply chain by purchasing and funding lithium and cobalt mines as well as downstream processing.New MinersWith the advent of digital technology and rising demand for new world commodities, the business of mineral exploration, development and production will not be conducted solely by traditional mining houses and junior companies. The mining and metals companies that will be the winners in the future will ultimately be those who have learned to adjust their business models and collaborate with other industries. Within their organizations, some miners are either using venture capital firms or setting up specialist internal teams to identify more specialized mining prospects as they seek to capture value beyond their core portfolios.The typical profile of a miner will also change. Technology companies may become direct or indirect investors as a way of shoring up and securing supply. With scarce new world commodities supply like cobalt and lithium and other rare earth minerals, cash-rich technology companies will venture into mining to ensure that they can continue to produce their products. Major metal consumers, such as tech giants, are moving to control whole value chains from raw material sourcing up to product delivery. Sovereign funds of rich economies, like Saudi Arabia and Norway will become major stakeholders in the sector as they look for investment opportunities for their petroleum revenue windfalls. On the other hand, state enterprises will wish to secure supply for national industries and protect jobs. Metal traders once again awash with cash because of recent strong commodity prices, are looking for opportunities and will reemerge as prominent players in the sector. Using blockchain technology, new technology entrants can engage in mining without owning any mines or distribution infrastructures in the same way that Uber does with no cars and Airbnb, with no real estate listings.ConclusionChange is the only certainty for today’s global mining industry. While the mining industry is currently benefitting from a positive outlook despite the ongoing trade war, the local industry is still facing a lot of uncertainty because of resource nationalism, regulatory issues, political risk, community relations and social license to operate. Mining companies will increasingly adopt emerging digital technologies to transform their operations in order to gain benefits such as reduced costs, improved health and safety of workers, minimized environmental impacts and a better understanding of the ore body. Innovative technologies will also facilitate the better management of operational costs, improve extraction methods, streamline distribution, and increase worker productivity. Companies will need to attract talents adept at emerging technology and adopt a level of flexibility in their business models by building partnerships with non-traditional, new technology “miners” for future growth.Fernando “Ronnie” S. Penarroyo specializes in Energy and Resources Law, Project Finance and Business Development. He may be contacted at fspenarroyo@gmail.com for any matters or inquiries in relation to the Philippine resources industry. Feel free to follow Atty. Penarroyo on LinkedIn (https://www.linkedin.com/in/fernando-s-penarroyo-2b8a7312/) ReferencesBeroe, Iniyakumar, Global Mining and Exploration Trends, 21 August 2019 https://www.beroeinc.com/article/global-mining-and-exploration-trends/Law, Jonathan, Changing the Face of Mining, Jonathan Law, CSIRO, 23 September 2019 https://www.csiro.au/en/Research/MRF/Areas/Resourceful-magazine/Issue-18/Changing-the-face-of-mining Risks and Opportunities for Mining: Outlook 2019, KPMG International, https://assets.kpmg/content/dam/kpmg/xx/pdf/2019/02/global-mining-risk-survey-2019.pdfTop Ten Business Mining Risks Facing Mining and Metals in 2019-20, Ernst and Young, 2018, https://assets.ey.com/content/dam/ey-sites/ey-com/en_gl/topics/mining-metals/mining-metals-pdfs/ey-top-10-business-risks-facing-mining-and-metals-in-2019-20_v2.pdfWorld Exploration Trends 2018, S&P Global Market Intelligence, March 2019, https://www.spglobal.com/marketintelligence/en/documents/world-exploration-trends-march-2019.pdf

Commentary

Philippine Resources - November 06, 2019

Amb. Delia Domingo Albert named to Order of Rising Sun

By Patricia A. O. BunyeYet another distinction was bestowed upon Diwata’s Chairman, career diplomat and our country’s first woman Foreign Affairs Secretary, Ambassador Delia Domingo Albert, when the Government of Japan conferred on her The Order of the Rising Sun, Gold and Silver Star, in recognition of her contribution to strengthening the economic relations between Japan and the Philippines. It is one of the highest honors conferred by the Japanese Government, following only those given to heads of state and royalty. The actual conferment took place in Tokyo on 23 May 2013, with Ambassador Albert (or “DDA” as she also known) receiving the award from Prime Minister Shinzo Abe, followed by an audience with his Majesty Emperor Naruhito. On 25 September 2019, the Ambassador of Japan to the Philippines, Koji Haneda, hosted a celebration of the conferment at his residence which was attended by DDA’s many friends and admirers, including this writer.In her own remarks at the conferment celebration, DDA recounted her “Japan Story”, which began at the University of the Philippines where a Japan specialist professor inspired her to learn more about that country. Later, still as a student, she had the opportunity to participate in an international students seminar at Tsuda College in Tokyo, followed by a workcamp in Awajishima, where she and other students built a road to link a small fishing village to other places in the island. This experience became the subject of a speech in a competition that she won, leading to tv appearances and magazine covers that allowed her to promote the Philippines in Japan. Even before becoming a diplomat, she was already an ambassador for the Philippines.How she entered the world of diplomacy, she says, was a case of being in the right place, at the right time, with the right people and certainly with the right credentials.” Upon returning to the Philippines from Japan, she was invited to introduce then Secretary of Foreign Affairs Narciso Ramos (the father of President Fidel V. Ramos) at the annual "Soiree Diplomatique" of the University of the Philippines Foreign Service Corps. Because Secretary Ramos’ CV was too short, DDA introduced him in 3 languages: English, French and Japanese, prompting the Secretary to hire her on the spot as his Social and Appointments Secretary because, as he said, she could say "no" in different languages and qualify as his "cordon sanitaire".In my years of working closely with DDA on Diwata and mining industry matters, it is her ability to seize the opportunity to make the most of the “right place, right time, right people” to advance the advocacies that are closest to her heart that has struck me. Because she is single-minded about her objectives and what she would like to achieve for the country, for the mining industry and for women, every encounter is an opportunity to bring people and resources together towards the attainment of the larger goals. Truly, working with her is a master class in diligence, doing your homework, consistency in messaging and so much more.Not only is she passionate about serving the country, her energy for it is inexhaustible. Upon her retirement from the government, she could have opted for a leisurely life, but she continues to be in perpetual motion: speaking, writing, organizing people, creating jobs and businesses, and most of all inspiring others by her example. Diwata, which she founded seven years ago to be, among others, a platform for discussion of the many issues on the mining industry, is just one of the many organizations that look to her for guidance and mentorship. What all these organizations and its members agree on is that we all can’t say no to DDA who never runs out of ideas and constantly challenges us to do better and do more.

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Commentary

Philippine Resources - August 20, 2019

Chinese Investments - Quid Pro Quo and Debt Traps

When President Rodrigo Duterte was elected in 2016, he made a complete turn-around in the Philippines’ relation with China. He cultivated friendship with Beijing in contrast to former President Benigno Aquino's hard-line approach particularly on the South China Sea maritime dispute. In exchange for Duterte’s offer of the olive branch, he was able to secure China’s commitments in the form of official development assistance (“ODA”) and private investments to his infrastructure projects under his Build Build Build (“BBB”) initiative. Duterte was also able to create a Chinese market for the country’s fruit exports and lift China’s travel ban paving the way for the influx of Chinese tourists. Chinese foreign direct investments (“FDI”) were also sought for real estate projects and Philippine offshore gaming operations (“POGO”). Developments in the Philippines bode well for China’s belt and road initiative (“BRI”), an ambitious global development strategy involving infrastructure development and investments spanning 152 countries to improve connectivity and cooperation on a transcontinental scale.The rosy relations with China did not sit well with some sectors however. Manila's arbitration victory against China over the maritime dispute was set aside. Critics lambast Chinese development assistance as nothing more than massive foreign borrowings, which the country pays back at usurious contract rates at the expense of giving away sovereignty but creating jobs for Chinese workers. At the same time, China’s aggressive stance in the South China Sea, now considered as Asia’s most complex territorial dispute involving land reclamation and militarization, have increased tensions and undermined peace, security and stability in the region.InvestmentsDuterte's BBB initiative plans to inject USD160 billion to USD180 billion in new infrastructure improvements during his administration, which saw an infrastructure spending increase from 2.7 percent of gross domestic product (“GDP”) between 2011 and 2015 to 6.3 percent of GDP at the start of 2018. Duterte’s BBB program has a combined price tag of USD171 billion required to complete the 75 projects, half of which is expected to be funded by money from China. Data from the Bangko Sentral ng Pilipinas reveal that FDIs from China more than doubled to USD28.79 million in 2017 from USD10.77 million in 2016. In 2018, Chinese investments have ballooned to USD198.68 million, a whopping 590% increase from 2017.This means that in under three years, Chinese FDIs already amounted to USD232.24 million, greatly exceeding the inflows in the Arroyo and Aquino administrations combined.Five Key Areas of Cooperation1) Policy Coordination:Beijing and Manila signed a Six-Year Development Program for Trade and Economic Cooperation in March 2017, which aims to gradually harmonize mutual development goals and interests within the BRI framework. Complementing the program is the agreement of the Board of Investments and the Bank of China on the 2017-2019 Investment Priorities Plan for Chinese Companies, which is meant to facilitate business-matching activities and industrial linkages.2) Infrastructure development and connectivity:China has pledged $7.34 billion in soft loans or official development assistance and grants for large-scale Philippine infrastructure projects and flagship programs. This amount forms part of $24 billion worth of agreements Beijing committed to President Rodrigo Duterte on his first visit to China in 2016. The basket of loans through official development assistance programs in two tranches ($7.19 billion) includes dam and irrigation, railways, expressways and bridge projects, among others.3) Trade and investment:China became the Philippines’ largest trading partner in early 2017, marking an increase of $15.04 billion (16 percent) from 2016. Furthermore, investments approved by the Philippine Economic Zone Authority and the Board of Investments more than tripled for the first three quarters of 2017 to around $40 million (from $10.9 million in 2016). Private Chinese firms are also making headways in penetrating the Philippine consumer market through mobile firms such as Huawei, Xiaomi, Oppo, and Vivo. Even Alibaba Group is making its presence felt in promoting financial inclusion and digital payment services through strategic partnerships with local firms, such as Globe Fintech Innovations Inc. or Mint. Moreover, Alibaba’s Alipay and Tencent’s WeChat Pay have also signed licensing agreements with Asia United Bank, which favorably enables Chinese tourists to drive the growth of cashless payment systems in the Philippines.4) Financial integration and connectivity: The Bangko Central ng Pilipinas officially added the renminbi as part of its international reserves. It also approved the Peso-Yuan spot market, which will lower the transaction costs for Philippine and Chinese banks and businesses by reducing reliance on the dollar as the intermediate peg. The issuance of “panda bonds” or renminbi-denominated bonds worth $200 million began, which could pave the way for more access to Chinese assistance in Philippine financial requirements.5) People–to–people exchanges and connectivity: China has become the Philippines’ second-largest tourism market. As of November 2017, 14 new flights connect China and the Philippines, and the Philippine Bureau of Immigration initiated a Visa Upon Arrival scheme for Chinese tourists. In the area of media and communications, China Central Television and the Presidential Communications Operations Office have signed an MOU for the rebroadcasting of China Global Television Network programs.Source: Aaron Rabena, The Complex Interdependence of China’s BRI in the PhilippinesAccording to Trade Secretary Ramon Lopez, of the $24-billion investment and credit line pledges that the Philippine government secured from China, $15 billion worth of investment projects were signed and allocated as follows:Itemized list of PH projects covered by China’s $15-B investment pledges to DuterteSource: Amy R. Remo, Philippine Daily InquirerTourismWith the lifting of the travel ban to the Philippines by the Chinese government, 1.26 million Chinese visitors were recorded last year, nearly triple the number in 2015. There is aggressive development of two and three-star hotels in the Manila Bay area and the fringes of the Makati central business district mostly catering to Chinese tourists. Property developer Double Dragon is planning to build more Jinjiang hotels, a chain popular among Chinese tourists and business executives given its brand recall and convenient booking platform. Double Dragon intends to more than double its room count to about 2,000 by 2020 in the country’s capital and other urban areas. It also helped that the Philippine government implemented the visa-upon-arrival scheme for Chinese nationals. Justice Secretary Menardo I. Guevarra however said that his department and the Bureau of Immigration will tighten up the rules since the scheme was reportedly being abused by overstaying Chinese who ended up working in the Philippines. Development of Industrial ParksMemoranda of Understanding between the Philippine and Chinese governments on industrial park development were also signed as Chinese industrial park developers are aware of the rising demand for industrial space in the Philippines given the country’s expanding manufacturing and export base. Among the investment pledges signed worth USD9.5 billion that is seen benefitting the property sector are the following:USD3.46 billion project with Shanghai GeoHarbour Group that involves land reclamation and development projects;Development of large tourism projects and electronic industry parks with Zhongfa Group;Construction of China-Philippines International Techno-Industrial Zone with China National Heavy Machinery Corp; andDevelopment of infrastructure and construction projects with Haocheng Group.Philippine Offshore Gaming OperationsFifty-four (54) POGO licenses offered by the Philippine government that allow companies to set up internet-based casinos for overseas gamblers were bagged by China-linked companies, bringing with them dozens of companies providing information technology support and call center services manned by Mandarin-speaking mainlanders. POGOs have overtaken the Information Technology and Business Process Management (“IT-BPM”) industry in terms of office demand. Demand from Chinese-run firms in the first half of the year already exceeded 2018’s full-year take-up by 37%. In 2018, POGOs took up 229,000 square meters (sq. m.) of office space, while take-up as at June 30 this year was at 315,000 sq. m.Much of the growth in demand could be attributed to the growing acceptance of POGOs among Philippine landlords. From only three (3) local government units giving Letters of No Objection (“LONO”) to POGOs in 2016, there are now seven (7) cities in Metro Manila issuing this document required by the Philippine Amusement and Gaming Corporation for POGOs to operate in their areas. These cities include Makati, Pasay, Parañaque, Mandaluyong, Las Piñas, Muntinlupa, and recently Quezon City by way of Special Use Permits. To date, Taguig City has yet to issue LONOs to POGOs, but hosts the largest IT-BPM locators in the country and remains to be the preferred district.Higher demand from offshore gambling firms filled up the slack brought about by the decline in the IT-BPM sector, whose continued development are further dampened with the government-issued moratorium on economic zone proclamations in Metro Manila, as well as looming fears regarding the second package of the Duterte administration’s Comprehensive Tax Reform Program.POGOs are also driving residential condominium sales especially in the Manila Bay area where office buildings are developed alongside residential towers. The online gaming industry's revenue ballooned to PHP7.35 billion in 2018 from PHP657 million in 2016.Will the Philippines Fall into a Debt Trap?Chinese-funded infrastructure development associated with BRI in developing countries particularly in Asia and Africa has been hounded by fears of “debt traps”. Reports have highlighted that these Chinese investment and financing deals have in some cases involved predatory policies of high interest rates and unsustainable payment schemes for projects mostly identified as white elephants. These resulted in the debtor government unable to pay the loan and the project being acquired by the Chinese funder by virtue of debt-for-equity swaps. The same debt trap scenario has been hounding Chinese ODA in the Philippines with critics comparing China’s interest rates to that of Japan, which supplies a majority of the country’s overseas development aid. Even some officials in government are alarmed at Chinese investments considering their security implications that threatens our sovereignty not only because future debt burdens will result in an “economic invasion” but also at the proliferation of Chinese workers and their access to sensitive strategic geographic areas in our territory.There has been counter arguments that the Philippines will not fall into a Chinese debt trap. A debt trap usually occurs when debt obligations reach an unsustainable threshold of a country’s GDP creating a high debt-to-GDP ratio. Debt service will eventually lead to low growth because most economic output will be used to cover debt payments. However, the country’s economic managers maintain that the country possesses economic fundamentals that mitigate against the danger of excessive indebtedness. They noted that while Philippine debt increased, external debt-to-GDP ratio (in percentage) has actually decreased, indicating that less of the country’s GDP has been used for servicing debt. To avoid being debt trapped, Budget Secretary Benjamin Diokno highlighted that the current administration has pushed for a 75:25 debt mix, with the larger bulk falling on local financing.The government also banks on the successful implementation of the Tax Reform for Acceleration and Inclusion Act to pay off necessary finances related to the BBB plan.Critics warned that Chinese-funded infrastructure projects might end up like the Hambantota International Port in Sri Lanka that was doomed to fail because the port has seen very low levels of shipping traffic but at a high financing cost. The project was referred to by the New York Times as “one of the most vivid examples of China’s ambitious use of loans and aid to gain influence around the world — and of its willingness to play hardball to collect.”The government however believes that unlike the Sri Lankan port project, the local transportation projects lined up for Chinese financing generate internal demand and can successfully contribute to economic growth. The Philippine economy relies on domestic consumption, and there is a huge internal demand for transportation services. In addition, government economic managers argue that the BBB initiative taps a diverse range of development lenders making a debt trap and domination by a single lender highly unlikely, citing that more than half of developmental infrastructure projects in the country are funded by the Japanese International Corporation Agency and the Asian Development Bank. The National Economic Development Authority further clarified that the government will make use of an optimal mix of government domestic financing, aid, and private capital in funding infrastructure projects. Fear of Chinese WorkersAnother major cause of concern is the influx of Chinese workers brought about by offshore gaming operations and infrastructure construction activities. The number of Chinese nationals arriving in the country has nearly tripled since 2016. POGO workers filled hotel rooms and office towers previously intended for IT-BPM operations, snapped up residential condominiums and boosted retail sales. Despite the economic benefits, there has been a mounting opposition from locals who fear Chinese workers are taking away jobs from Filipinos and evading taxes aside from their unruly behavior.From 2016 to 2018, around 335,800 working visas and special work permits were issued to Chinese, representing over half the total number of permits issued to foreigners. More than half of them were for online gaming-related jobs, and the rest for sectors including construction, information, and communications. However many Chinese tourists who entered the Philippines reportedly ended up overstaying to find jobs while others bribed immigration officials to get working visas.To address the situation, the labor, finance and trade secretaries have joined the heads of the tax, immigration and gaming bureaus to form an "interagency committee on the influx of foreign nationals.” The committee seeks to stop tax avoidance by Chinese workers. Finance Secretary Carlos Dominguez estimated that the Bureau of Internal Revenue could collect at least PHP2 billion per month from an estimated 100,000 offshore gaming workers. The government is also planning to transfer Chinese POGO workers to “self-contained” communities or hubs that will limit their interaction with Filipinos. While clamping down on Chinese workers could appease local critics, the government was cautioned that the move would mar relations with China as harsh treatment of foreign workers could backfire on the roughly 30,000 Filipinos working in China excluding the more than 200,000 workers in Macao and Hong Kong.As the Philippine government embarks to tighten the regulation on POGOs, the Chinese embassy in Manila is asking the Philippines to stop hiring Chinese citizens in casinos and other gaming facilities in its efforts to stop the proliferation of cross-border gambling. China will also crack down on “underground banks” and online payment platforms that provide financial settlements for cross-border gambling, and wipe out domestic network operators and companies that provide technical support for such operations. China blames offshore gaming operations for increased crimes and other social problems in China.The Controversy Behind the Kaliwa River Dam ProjectThe Philippine government is seeking funding for a dam project which seeks to address the water crisis brought about by the unexpected demand from the construction industry, shortages in the primary water source, and delays to infrastructure projects designed to bring additional supply onstream. The New Centennial Water Source-Kaliwa Dam Project (“Kaliwa Dam”) comprises a series of three (3) dams in the nearby Sierra Madre mountains, which have been originally planned as a solution to Metro Manila’s water requirements since the Marcos administration.The Kaliwa Dam will add 2,400 million liters per day (“MLD”) to the existing 4,000 MLD supply that serves the 20 million people in Metro Manila and its surrounding regions. According to the Metropolitan Waterwork and Sewerage System (“MWSS”), the initial phase is slated to begin with a 60-meter concrete dam at Kaliwa, which straddles the boundary of Rizal and Quezon provinces, a 25-kilometer conveyance tunnel, and two water treatment plants. If built, the Kaliwa Dam will secure Manila’s water supply for the next 10 to 15 years. The conveyance tunnel, meant to serve the Kaliwa and Laiban dams will have a capacity of 2,400 MLD. The third dam in the series, at Kanan, will dwarf the first two with a potential capacity on its own of 3,720 MLD.Government officials have come out in support of the Kaliwa project, as the MWSS is working on the Environmental Impact Assessment. The road right of way has been secured while the Department of Public Works and Highways is reviewing the design of the dam. The target date for completion of the project is 2023. China Energy Engineering Corp, the company responsible for building the Three Gorges dam in China, has been contracted for construction utilizing Chinese workers. The Kaliwa Dam will be funded through a loan finance agreement signed on 20 November 2018 by the Export-Import Bank of China and the MWSS. The bank will make available a loan facility of up to USD 211.2 million, equivalent to 85 percent of the contracted cost of the dams, at an interest rate of 2 percent.Kaliwa Dam has been opposed on grounds it will lead to environmental destruction and the displacement of indigenous peoples in Sierra Madre. Previously, a Japanese contractor, Global Utility Development Corp. (“GUDC”) made an unsolicited bid to finance and build a far less environmentally impactful seven-meter dam at Kaliwa, only to have their proposal rejected by the Philippine government. The project was also criticized for the use of highly concessional ODA financing instead of the Public-Private Partnership (“PPP”) unsolicited proposal of GUDC.To answer the criticisms, the Department of Finance (“DOF”) explained that the use of ODA financing will benefit Filipino consumers more with cheaper project and financing costs rather than if the project were to go through the PPP route, which would entail additional charges to be passed on to water users by the private proponent to recoup its investments. The project cost went down from PHP 18.7 billion under a PPP scheme to PHP 12.2 billion under ODA. The DOF further explained that even if fees and interest payments were taken into account in completing the project through ODA, the cost would still be significantly lower at PHP 14.5 billion compared to the estimated price tag of PHP 18.7 billion under a PPP scheme.The DOF also clarified that the unsolicited proposal of GUDC only involved the construction of the 7-meter high weir, which is just a portion of the whole project. GUDC has been pushing its unsolicited proposal for a mere intake weir as early as 2008, but the government has, since 2013, opted for the construction of a complete dam. Unlike dams, weirs are dependent on the water flowing from the river source, and susceptible to the effects of both droughts and flooding. In contrast, the 60 meter-high Kaliwa Dam can provide adequate water even during low-flow seasons because it can store water. Unlike a weir where water has the possibility to overflow, a dam’s overflow is channeled into a spillway to prevent flooding.Moreover, the proposed Kaliwa Dam conforms to international safety standards, with its design able to withstand an earthquake of “probable maximum magnitude.”The loan finance agreement for the Kaliwa Dam, among other loan agreements with China, has also been heavily criticized for containing certain contractual provisions onerous to the Philippine government. The DOF addressed the issues as follows:There are no collaterals in any of the loan agreements signed by the Philippine governmentA waiver of immunity is standard across loan agreements the Philippines has signed, whether explicitly stated or implied via an agreement to arbitral proceedings. A waiver of immunity only allows the Philippines' counterparty in an agreement to take the country to arbitration, in the unlikely event that the Philippines defaults on its loans;Arbitral rulings are still subject to the Philippine Constitution, court system and public policy; andThe Philippine government is managing its debt responsibly.US-China Trade War and Geopolitical Risks in the South China SeaDiplomatic relations between the United States and China are on pins and needles as both countries are currently engaged in a trade war, which may lead to an economic slowdown in China and tilt the world towards a global recession. At the same time, the United States is concerned by reports of China's actions in the disputed waters of the South China Sea involving its interference with Vietnamese oil and gas drilling activities and a reported Chinese vessel colliding with a Philippine fishing trawler in the Reed Bank area. US State Department spokesperson Morgan Ortagus said in a statement that China's "repeated provocative actions aimed at the offshore oil and gas development of other claimant states threaten regional energy security and undermine the free and open Indo-Pacific energy market.” Chinese territorial claims over the South China Sea based on its nine-dash line boundary is its justification for its large-scale land reclamation activities on seven reefs (Fiery Cross Reef, Johnson South Reef, Cuarteron Reef, Gaven Reef, Hughes Reef, Mischief Reef and Subi Reef) in the disputed waters that are fully-equipped with military runways and outposts.In June, the People’s Liberation Army (“PLA”) Rocket Force conducted anti-ship ballistic missile tests in a disputed part of the South China Sea. Chinese state media also reported that pilots of the PLA Air Force tested the sea warfare capabilities of their advanced fighter jets over the South China Sea. Tensions in the area further increased as the US Navy carried out what Washington calls “freedom of navigation exercises” close to islands and reefs Beijing claims as its own.While analysts believe that President Donald Trump appeared uninterested in Southeast Asia compared with his predecessor Barack Obama whose “pivot to Asia”, meant to be a centerpiece of his foreign-policy legacy, was nonetheless never fully realized. The Trump administration however has increased the number of military operations in the South China Sea in its efforts to push back on China’s combativeness in the contested waters.The weapon of choice for the US is trade. The Trump administration criticizing the World Trade Organization regime and China’s trade practices, vowed to take action to ensure fair and equal market access for US products. Trump then investigated and issued tariffs targeting China’s industrial policies as a response to the alleged unfair trade practices of China over the years including theft of U.S. intellectual property. China responded by imposing tariffs on certain products it imports from America. Following China’s devaluation of the yuan after the Trump administration threatened to impose additional tariffs on just about every Chinese export, the US labeled China a "currency manipulator.” China has also stopped buying American crops and was reportedly considering more aggressive retaliatory options, including cutting off key parts of the global supply chain in rare earth minerals and flooding the financial system with US Treasury Bills.At home, while some of Philippine business group’s members are feeling pain from the prolonged trade battle, their greater worry is that the conflict will spill over into the volatile South China Sea where tensions are already high because of the maritime dispute between China and the Philippines. Existing companies are more concerned about keeping the sea lanes open and how it plays out in the context of Philippine politics. Though the Philippine government filed and won a case against China’s “nine-dash line” claims in an international tribunal in 2016, it still is reluctant to invoke the arbitral ruling as Duterte temporarily set it aside in pursuit of warmer economic relations with China. Nevertheless, he is expected to make the Hague ruling a central component of his administration’s foreign policy. Duterte said that he would not accept China’s claim on the whole of the South China Sea and would push for the completion of a Code of Conduct in the area. How this will fan out with existing Philippine-China trade relations remains to be seen.Joint development of the petroleum resources within the disputed of the West Philippine Sea is also on top of President Duterte’s agenda as he reportedly amenable to the 60-40 joint exploration deal with China in the West Philippine Sea. The ongoing dispute has certainly dampen the interest in petroleum exploration even as the Department of Energy is embarking on another contracting round for petroleum service contracts. In the meantime, in the absence of exploration activities in offshore Northwest Palawan and Reed Bank, there seems to be no viable upstream petroleum resource alternative to replace the near depleting Malampaya Gas field, a vital energy supply for the highly-industrialized Luzon island power grid.Meanwhile, Philippine military officials and the political opposition expressed grave concerns on the possible strategic maritime and security implications over reported plans of Chinese investors to develop three strategic islands into economic hubs. The islands — Fuga in Cagayan Province and adjacent Grande and Chiquita Islands in Subic Bay, Gambles province — play strategic roles in the country’s national security. Fuga Island is near where the country’s telecommunications cables pass, making it theoretically possible for someone based on this island to tap into these cables. Grande and Chiquita Islands, on the other hand, provide a strategic location to monitor activities in Subic, which is being eyed as a base for the Philippine Navy. There were also reports of Chinese warships passing through Philippine waters and oceanographic survey ships conducting research within the Philippine EEZ without permission from the government.Clearly, the Duterte administration is balancing the country’s economic interest by de-securitizing its approach to the South China Sea conflict in its cordial relations with China but at the same time recognizing the US as the only superpower in the world and sole defense treaty ally of the Philippines, as manifested in the Philippine National Security Policy 2017-2022. The Philippines will maintain the Visiting Forces Agreement and the Enhanced Defense Cooperation Agreement with the US. At the same time, Defense Secretary Delfin Lorenzana calls for the need to review the reassurance of mutual defense under the 1951 Mutual Defense Treaty with the US. ConclusionThe BRI has stoked fears that participating countries engaging China in large infrastructure projects and investments exposes these countries to debt risks giving China the legal cover to gain access to resources, forfeit assets, and impinge on sovereignty in pursuit of its geopolitical interests and world dominance. Chinese investments offer much potential to Philippine infrastructure projects ,which is playing catch up to our Asian peers, and failure to tap these would again cause the Philippines to miss the boat. The main concerns are both political and financial. By opening up to Chinese investments, is the Philippines opening itself not only to risks on commercial and operational viability, but most importantly to geopolitical risks and sovereignty issues? To address financial issues for Chinese-funded projects, government regulators must conduct thorough risk planning and feasibility studies, and for greater transparency involve the private sector, local government units, and other stakeholders. On the side of China, it must ensure that proposed projects are transparent, commercially viable, and participating Chinese contractors are of good standing and Chinese workers follow Philippine labor and immigration laws. So much is at stake because should these Chinese-funded projects fail, there are risks of legal action and nationalist backlash against the Duterte administration. These will damage China’s BRI program and standing in the international community. It will also not help in mending the reputation of Chinese firms operating abroad which are perceived as exploiters of natural resources and destroyers of the environment particularly in developing countries. More importantly, China must assure that its infrastructure loans will not violate the sovereignty of debtor countries lest it will only give credence to the “Yellow Peril” conspiracy theory that China intends to take over the world.Fernando “Ronnie” S. Penarroyo specializes in Energy and Resources Law, Project Finance and Business Development. He may be contacted at fspenarroyo@gmail.com for any matters or inquiries in relation to the Philippine resources industry. Feel free to follow Atty. Penarroyo on LinkedIn (https://www.linkedin.com/in/fernando-s-penarroyo-2b8a7312/) References:Beltran, Bjorn Biel M., “Offshore Gaming Firms’ Growth Drives Demand for Office Space”, BusinessWorld, 30 July 2019, https://www.bworldonline.com/offshore-gaming-firms-growth-drives-demand-for-office-space/ Camba, Alvin,“Inside Belt and Road 'Debt Trap' Projects in the Philippines”, The Jamestown Foundation’s China Brief, 01 February 2019, https://international.thenewslens.com/article/112937“China’s ‘One Belt One Road’ to Benefit Philippine Property”, Colliers Radar, 11 April 2018, https://www.colliers.com/en-gb/philippines/about/media/chinas_one_belt_one_road_to_benefit_philippine_property“China’s One Belt One Road: The Dragon Spreads Its Wings over Asia”, Colliers Radar, 06 March 2018, https://www.colliers.com/-/media/files/apac/asia/colliers-dragon-asia-obor.pdfEstrada, Darlene V., “China’s Belt and Road Initiative: Implications for the Philippines”, Foreign Service Institute, Vol. V, No. 3, March 2018, http://www.fsi.gov.ph/chinas-belt-and-road-initiative-implications-for-the-philippines/ Green, David, “The Philippines’ China Dam Controversy”, The Diplomat, 27 March 2019, https://thediplomat.com/2019/03/the-philippines-china-dam-controversy/ Katigbak, Jovito Jose P., “Bridging the Infrastructure Investment Gap Through Foreign Aid: A Briefer on Chinese ODA”, Center for International Relations and Strategic Studies of the Foreign Service Institute, Vol. V., No. 11, June 2018, http://www.fsi.gov.ph/bridging-the-infrastructure-investment-gap-through-foreign-aid-a-briefer-on-chinese-oda/ “National Security Policy for Change and Well Being of the Filipino People 2017-2022”, National Security Council, April 2017, http://www.nsc.gov.ph/attachments/article/NSP/NSP-2017-2022.pdf “ODA Financing on Kaliwa Dam Project to Benefit Consumers with Cheaper Project, Financing Costs”, Department of Finance, 26 March 2019, https://www.dof.gov.ph/index.php/oda-financing-on-kaliwa-dam-project-to-benefit-consumers-with-cheaper-project-financing-costs/Rabena, Aaron, “The Complex Interdependence of China’s BRI in the Philippines”, Brinknews, 30 October 2018, https://www.brinknews.com/the-complex-interdependence-of-chinas-bri-in-the-philippines/ Remo, Amy R., “Itemized List of PH Projects Covered by China’s $15-B Investment Pledges to Duterte", Philippine Daily Inquirer, October 23, 2016 https://business.inquirer.net/217269/itemized-list-ph-projects-covered-chinas-15-b-investment-pledges-duterteSalvador, Alma Maria O., “The New Cold War in the US-China Trade Wars: Application to the Philippine Foreign Policy”, Blueboard, http://ateneo.edu/ls/soss/political-science/news/research/‘new-cold-war’-us-china-trade-wars-application-philippineUy, Weslene, Rise of Chinese investments in Duterte’s Philippines: Some Consequences, 19 March 2019, https://www.philstar.com/other-sections/news-feature/2019/03/19/1902800/rise-chinese-investments-dutertes-philippines-some-consequencesVenzon, Cliff, “Duterte Under the Gun Over Chinese Influx into Philippines”, Nikkei Asia, 05 March 2019, https://asia.nikkei.com/Spotlight/Asia-Insight/Duterte-under-the-gun-over-Chinese-influx-into-PhilippinesZheng, Sarah, “Risk of US-China Clash in South China Sea Worries Philippine Firms More Than Trade War”, South China Morning Post, 23 Dec. 2018, https://www.scmp.com/news/china/diplomacy/article/2176793/us-china-clash-south-china-sea-not-trade-war-worries

Commentary

Philippine Resources - August 20, 2019

Meeting the Sustainable Development Goals in Mining

Patricia A. O. Bunye In September 2015, the United Nations member states adopted the 2030 Agenda for Sustainable Development, which includes a set of Sustainable Development Goals (SDGs) for 2015-2030 and represents a comprehensive plan of action for social inclusion, environmental sustainability and economic development. Mining, as an industry employing millions of people, often in the remotest and least developed countries, is viewed as having the opportunity and potential to positively contribute to all 17 SDGs. Conversely, it is also seen as the culprit for many of the challenges that the SDGs are precisely trying to address – environmental degradation, displacement of populations, worsening economic and social inequality, armed conflicts, gender-based violence, tax evasion and corruption, increased risk for many health problems, and the violation of human rights. What are the 17 SDGs and how are they relevant to mining and metals? SDG 1: No PovertyMining can help reduce poverty through direct employment, sourcing goods and services locally and the payment of taxes and royalties which enable the development of essential social and economic infrastructure. Where companies operate in remote areas, poverty levels can be significant. Mining’s presence can either alleviate poverty through job creation and skills development, or exacerbate poverty if traditional livelihoods and ways of life are adversely affected.SDG 2: Zero HungerWhere mining companies operate in traditionally agricultural areas, the impact of mining on water, land and biodiversity resources can be a concern to farmers and local communities and can become a potential source of social conflict. Mining companies may also operate in areas with chronic malnutrition, especially among children. Companies can manage their impacts on natural resources, through limiting the amount of land they use and enabling access by communities to lands they manage which may provide important sources of food. They can also collaborate with development agencies to help eliminate hunger.SDG 3: Good Health and Well-beingMine workers may be exposed to increased occupational health risks such as cardiovascular and respiratory diseases, as well as communicable diseases like tuberculosis and HIV/AIDS. Certain working arrangements such as fly-in/fly-out have been linked to mental illness, substance abuse and domestic violence. Community health can also be of concern where mining takes place in poorer areas with limited healthcare facilities, making communities more vulnerable to disease. SDG 4: Quality EducationInvestments of mining companies in education improve local capacity, build the future workforce and strengthen relationships with host communities.SDG 5: Gender EqualityMining companies have a responsibility to build inclusive access to jobs and economic opportunities.SDG 6: Clean Water and SanitationWater is essential at every stage in a mine’s life cycle. Mining and metals operations are significant users of water and can also negatively impact water access and quality if sound water management practices are not applied.SDG 7: Affordable and Clean EnergyMining is energy intensive and accounts for almost 2% of global energy use. As a major energy user, the industry can cut carbon emissions through accelerating energy efficiency measures and deploying renewable technologies.SDG 8: Decent Work and Economic GrowthWhere mining is significant in the economic life of a country, it can boost GDP by a number of percentage points. For growth to be fully inclusive, it requires government to effectively manage revenues from mining and encourage linkages to the broader economy.SDG 9: Industry, Innovation, and InfrastructureMining requires significant infrastructure investments in order to develop, operate and export mined products. SDG 10 Reducing InequalityWhile governments are primarily responsible for reducing inequality through policies and redistributive mechanisms, mining companies can actively promote inclusion through local employment and procurement and through supporting livelihood diversification. They can also embrace an inclusive approach to community consultation and participation in decision-making.SDG 11 Sustainable Cities and CommunitiesThe products of mining such as steel, copper and aluminum play a vital role in the construction of cities. They also help connect cities physically and virtually by supporting road, rail and air transport networks as well as ICT infrastructure. SDG 12 Responsible Consumption and ProductionWhile mining produces the materials essential for modern society, it also generates large quantities of waste. Concerted collaborative action is required to increase recycling rates. SDG 13 Climate ActionMining companies can contribute to addressing climate change by reducing their carbon footprint and by engaging in dialogue with stakeholders to enhance adaptive capacities and integrate climate change measures into policies and strategies. SDG 14 Life Below WaterMining companies can contribute to ocean sustainability by identifying marine-related impacts and mitigation strategies, understanding the dependence of local communities on marine resources that may be adversely impacted by mining and contributing to the protection and conservation of the oceans and seas.SDG 15 Life On LandMining companies have a potentially important role to play in biodiversity and conservation management.SDG 16 Peace, Justice, and Strong InstitutionsMining companies can contribute to peaceful societies by respecting human rights, providing access to information, supporting representative decision-making, working to avoid company-community conflict and carefully managing their security approaches to ensure they decrease rather than increase the likelihood of conflict. Companies can also commit to transparency across the scope of their activities that impact society, from transparency of mineral revenues and payments to transparency in commitments made to local communities. SDG 17 Partnerships for the Goals.The 2030 Agenda, particularly SDG17 (Partnerships for the Goals) emphasizes that building a sustainable world is a multi-stakeholder endeavor.First, governments are responsible for the laws, rules and policies on mineral extraction and all areas covered by the SDGs, including social services, public health, education, public infrastructure, economic policies and setting environmental performance standards. Second, companies are responsible for undertaking their core business operations in a responsible manner that respects human rights, complies with government regulations, maximizes positive contributions to society, and avoids or minimizes negative economic, social, cultural and environmental impacts. Companies also pay taxes and royalties, engage in responsible policy dialogue and can collaborate to leverage resources and make social investments, ensuring that these are aligned with local development priorities.Third, non-government organizations are responsible for working alongside governments and companies to address gaps and ensure governments and companies are fulfilling their responsibilities to society. Fourth, development partners including multilateral institutions and bilateral donors can support in many ways: from providing project finance conditioned on adherence to sustainability standards to providing technical expertise and capacity-building support to governments, communities and local enterprises. They can also contribute to sharing cross-country best practices and promoting greater alignment between mining sector policies, practices and sustainable development. In ensuring the attainment of the SDGs in the Philippines, the National Economic and Development Authority (“NEDA”) performs oversight and monitoring to ensure coordination among the various stakeholders. Specifically, it is NEDA which chairs the Multi-Sectoral Committee on International Human Development Commitments (“MC-IHDC”), which is composed of national government agencies and non-government organizations, and ensures the mainstreaming of the SDGs into policies of the government. On the other hand, the Department of Interior and Local Government is in charge of the localization of SDGs within local government units.Other government agencies involved in mapping mining into the attainment of SDGs in the Philippines include the Department of Environment and Natural Resources, specifically the Mines and Geosciences Bureau (“MGB”) and the Environmental Management Bureau, the Department of Energy, the Climate Change Commission, the Department of Labor and Employment, the Department of Health and the National Commission on Indigenous Peoples. The SDGs have been integrated into the Philippine Development Plan (“PDP”) 2017-2022 and in our various sectoral development plans, and are measured and reported annually through the Socioeconomic Report. To support the monitoring of the SDGs and the PDP, NEDA introduced the SDG Annex in the formulation of the 2018 Socioeconomic Report. Since the PDP is the de facto implementation mechanism of the SDGs and the PDP is assessed through the SER, each chapter of the PDP and SER is used to assess the contributions and consistency of the Philippines’ actions with the global commitments of the SDGs. The SDG Annex of the SER identifies the Philippine policies, programs, activities, and projects (“PPAPs”) that are implemented to meet our SDG targets. The MGB’s role in implementing SDG 13 on Climate Action, for example, is covered by the PPAPs for “Geological Assessment for Risk Reduction and Resiliency”.While each of the SDGs sounds lofty and difficult to achieve, there are concrete ways for these to be integrated by mining companies into their core business. Further, it is imperative for these companies, along with the mining industry as a whole, to collaborate with other stakeholders – particularly the government, civil society, and communities - to leverage their resources to achieve the SDGs.Patricia A. O. Bunye is a Senior Partner at Cruz Marcelo & Tenefrancia where she heads its Mining & Natural Resources Department and Energy practice group. She is also an intellectual property lawyer and has served as President of the Licensing Executives Society International (www.lesi.org), the first Filipino and Southeast Asian to hold this position.

Commentary

Philippine Resources - May 29, 2019

Innovation in Mining

Patricia A. O. BunyeIn the last few months, I’ve had the pleasure of attending presentations of the Philippine Council for Industry Energy and Emerging Technology Research and Development (PCIEERD) of the Department of Science and Technology (DOST) before the mining industry. In March, at the 1st quarter mining lecture series which it co-hosted with the Chamber of Mines of the Philippines, PCIEERD presented “A Roadmap for Value-Adding in the Mining Industry”. In April, at the 1st Philippine Natural Resources Development Forum, PCIEERD presented its Mining & Minerals Program, where it highlighted programs for value-adding of both metallic and non-metallic minerals, as well as programs for the rehabilitation of mined-out areas. In particular, PCIEERD discussed a technical and economic pre-feasibility study to determine the most ironmaking technology for the value adding of Philippine magnetite resources.PCIEERD is one of the three sectoral planning councils of the DOST and is mandated to serve as the central agency in the formulation of policies, plans, and programs, as well as in the implementation of strategies in the industry, energy, and emerging technology sectors through the following science and technology programs: (1) support for research and development; (2) human resource and institution development; (3) science and technology (S&T) information dissemination and promotion; (4) support for technology transfer and commercialization; and (4) policy development and advocacy.It covers the following industries: electronics and semiconductors; mining and minerals; metals and engineering; and food processing. Under emerging technologies, it covers: materials science/nanotechnology; genomics/biotechnology; information and communications technology; space technology applications; photonics; artificial intelligence; data science and creative industries.PCIEERD’s mandate has always fascinated me as I see it as the intersection of two of my main practice areas: mining and intellectual property. Ordinarily, there would be very few instances when I would be able to apply both mining and intellectual property law to the same matter or assignment. Further, given that the local mining industry is often more focused on regulatory (and often existential) challenges, technological innovation is often not at the forefront of the operations of local mining companies. Nevertheless, as PCIEERRD’s recent presentations have shown, there are a number of opportunities, including to fund projects that have commercial potential and to push further research that will benefit the mining industry.In more advanced mining jurisdictions like Australia, for example, mining and engineering companies are using intellectual property rights to create new revenue streams, maintain a competitive edge, boost their assets and secure new finance. For these companies, intellectual property is not just about preventing others from copying their products, but also leveraging or exploiting intellectual property to create new revenue streams. We typically think of intellectual property in terms of trademarks or protecting names or brands, or literary or artistic works which are copyrightable. Certainly, industry leaders should safeguard their ability to assert and protect their fairly won competitive edge.Patent protection for their innovations, whether it be a new type of machine, a new way of doing something, or a new chemical composition, should also be considered. While much of the research and development may be occurring outside the Philippines, it is inevitable that certain improvements are made locally owing to our unique conditions and the innate ingenuity of Pinoys. The mining, energy, and engineering sectors are highly competitive so even small improvements in efficiency or reliability can yield significant returns. Whether the improvements result in a greater output or time efficiency, or simply improve health and safety, it is worth considering protecting the intellectual property underlying those improvements. Codelco, Chile’s state owned mining company, is an example of a mining company with a well-developed IP strategy, which involves transferring and adapting existing technologies and developing new ones to address the challenges confronting each of the company’s eight mining and processing operations (Andina, Chuquicamata, El Teniente, Gabriela Mistral, Ministro Hales, Radomiro Tomic, Salvador and Ventanas). In recent years, Codelco has been focusing on developing smart mining technologies for use at every stage of the production process, from extraction at the mine site to the production of cathodes used in a wide variety of electrical and electronic goods and systems. These technologies are helping Codelco to improve productivity and operational efficiency and to make significant cost savings. Tele-robotic mining, for example, using remote-controlled robotic machinery to extract minerals, is reducing the risks for miners. The company’s intellectual property strategy is applied in three main areas: (1) intellectual property plays a role in the development of prototype mining equipment. Codelco establishes agreements with commercial suppliers to build prototypes which, once validated, are incorporated into its production processes. Within the framework of these agreements, Codelco transfers its intellectual property to its commercial partner(s) to optimize product development.(2) Codelco protects the technologies that it develops with patents. It has filed at least 250 patent applications, of which 134 have been granted in Chile and 21 in other countries. The company is among the top Chilean mining companies in its use of the patent system. Codelco’s first patent, granted in 1978, was for the Teniente Converter, an energy-efficient furnace that is capable of melting and converting copper concentrate. It also holds patents on many mining processes, including for bioleaching, where micro-organisms are used for low-cost and efficient extraction of copper from low-grade sulfide minerals.(3) Intellectual property plays an important role in the context of the network of alliances Codelco is building with different companies, research centers and universities to develop innovative, high-performance solutions in line with its strategic goals. While Codelco has led the way, studies conducted by firms such as Deloitte on innovation in the mining industry tend to show that, in most other companies, the innovation that is occurring remains focused on achieving short-term returns rather than creating long-term sustainable benefits. Many mining companies are still struggling to drive organization-wide change by setting a clear vision for, or adopting a culture of, innovation. Most initiatives remain funded by operating or capital budgets, leaving innovation to be pursued rather haphazardly, rather than as an integral part of the employees’ day-to-day jobs. Nevertheless, there are bright spots. Africa is one of the regions trying to lead the way as a hub for mining technology by building an ecosystem that includes not just the mining companies, but also the government, universities, incubators, IT companies and community leaders to provide an environment that supports and encourages collaboration and the development of new mining technologies and networks. As PCIEERD and the Chamber of Mines regularly bring together experts from different disciplines through the “Digging Deeper” series, it is hoped that their ongoing interaction on science and policy-related issues affecting the industry bears similar fruit.Patricia A. O. Bunye is a Senior Partner at Cruz Marcelo & Tenefrancia where she heads its Mining & Natural Resources Department and Energy practice group. She is also an intellectual property lawyer and has served as President of the Licensing Executives Society International (www.lesi.org), the first Filipino and Southeast Asian to hold this position.

Commentary

Philippine Resources - May 29, 2019

Mining and Sexual Identity - Is Our Industry Ready for Gay Workers?

By Fernando “Ronnie” S. Penarroyo The Philippines prides itself as a gay-friendly nation where consensual homosexual relations, homosexuality, and transgenderism are not illegal. The country’s legislative history reached a milestone when Geraldine Roman from Bataan was elected as the first transwoman member of Congress. Meanwhile, seventy-three countries still criminalize consensual same sex relationships while only a few legally recognize the identity of transpeople and protect the rights of intersex people. The mining industry in the Philippines has been traditionally dominated by men with its macho culture and homophobic tendencies. In the past, even women were banned from entering underground mines or working in offshore drilling rigs. I remember my days in the university when geology majors were considered campus “barakos” (studs) and effeminate students were often silently scorned if not treated as outcasts. Since we spent a lot of our academic time doing research in the field, who would want to share a tent or bunk with someone whose sexual orientation was rather ambiguous? Those with gender identity issues were thus discouraged to work in the mine sites and if there were a few, they were prevented from coming out because the industry’s culture discouraged complainants from speaking out as they may be subjected to further abuse by co-workers. For many employees, coming out may be a very affirming experience, but for those working in the mining industry, it can be really difficult.On numerous occasions when I have been invited as resource speaker before geology and mining engineering majors in various universities all over the country, I noticed through the years that the number of students who belong to the lesbian, gay, bisexual, transgender and intersex (“LGBTI” in this article but collectively referred to as “LGBTQIAP+”) community is increasing. I often wonder if there will be a place for them in the resources industry or will they end up working in call centers and customer services. When these post-millennials join the resources industry workforce, will they have enough legal protection against discrimination based on their sexual orientation and gender identity?Background on LGBTI RightsSignificant progress in LGBTI rights have been achieved on account of legal reforms and transformation in social attitudes despite setbacks and reversals in some countries which opted to adhere to strict religious fundamentalism. In 2000, the United Nations launched the UN Global Compact, the world’s largest corporate responsibility initiative, to encourage companies to respect universal principles and contribute to a more sustainable and inclusive global economy. The UN Guiding Principles on Business and Human Rights, endorsed by the UN Human Rights Council in June 2011, are the global standards for preventing and addressing the risk of adverse impacts on human rights linked to business activity. The UN Guiding Principles do not constitute an international instrument that creates legal obligations for companies; the corporate responsibility to respect is a norm of expected conduct based on existing international law and conventions.In September 2017, the Office of the High Commissioner for Human Rights published a guide on tackling discrimination against LGBTI as set out in “Tackling Discrimination against Lesbian, Gay, Bi, Trans, & Intersex People: Standard of Conduct for Business.” Under the guide, companies have a responsibility to respect international human rights standards including the rights of LGBTI people, regardless of the company size, structure, sector, or location.The standards offer practical guidance to companies on how to respect and support the rights of LGBTI people in the workplace, marketplace and community. The standards were developed in partnership with the Institute for Human Rights and Business, and built on the outcome of a series of regional consultations held in 2016 and 2017 in Mumbai, New York, Kampala and Brussels. They were designed to support companies in reviewing existing policies and practices, and establishing new ones to respect and promote the human rights of LGBTI people. They were also intended to support rights-affirming interactions between companies and a wide range of stakeholders from staff to customers, suppliers, shareholders, communities, governments, lawmakers, and trade unions.The Five StandardsAt All Times1 RESPECT HUMAN RIGHTS. All businesses have a responsibility to respect human rights — including the rights of LGBTI people — in their operations and business relationships.In the Workplace2 ELIMINATE DISCRIMINATION. Employees and other people with whom the business engages are entitled to freedom from discrimination. Businesses should ensure that there is no discrimination in their recruitment, employment, working conditions, benefits, respect for privacy, or treatment of harassment.3 PROVIDE SUPPORT. Businesses are expected to provide a positive, affirmative environment within their organization so that LGBTI employees can work with dignity and without stigma. This standard requires businesses to go beyond equal benefits and take steps to ensure inclusion, including addressing the specific workplace needs of LGBTI people.In the Marketplace4 PREVENT OTHER HUMAN RIGHTS VIOLATIONS. Businesses should ensure that they do not discriminate against LGBTI suppliers or distributors, or against LGBTI customers in accessing the company’s products and/or services. In their business relationships, businesses should also ensure that business partners do not discriminate.In the Community5 ACT IN THE PUBLIC SPHERE. Businesses are encouraged to use their leverage to contribute to stopping human rights abuses in the countries in which they operate. In doing so, they should consult closely with local communities and organizations to identify what constructive approaches businesses can take in contexts where legal frameworks and existing practices violate the human rights of LGBTI people. Such steps can include public advocacy, collective action, social dialogue, financial, and in-kind support for organizations advancing LGBTI rights and challenging the validity or implementation of abusive government actions. LGBTI Rights in the PhilippinesArticle II Section 11 of the Constitution declares an existing state policy to value the dignity of every human person and to guarantee full respect for human rights. However, there is no comprehensive anti-discrimination law to date or, code of ethics or legitimate guidelines to protect the rights of LGBTI persons though there are occasional ordinances and policies at the local level.While the Labor Code of the Philippines (1974) mandates that it is the duty of the State to afford “protection to labor, promote full employment, ensure equal work opportunities regardless of sex, race or creed and regulate the relations between workers and employers” (Article 3) and declares it to be “unlawful for any employer to discriminate against any woman employee with respect to terms and conditions of employment solely on account of her sex,” (Article 135), there is no clear reference to LGBTI rights.Philippine laws define sex as being biologically male or female and the Supreme Court, in the absence of contrary legal definitions, follows the construction of sex as such. Republic Act (“RA”) No. 9048, “The Clerical Error Law of 2001”, as amended by RA 10172, “An Act Further Authorizing the City or Municipal Civil Registrar or the Consul General to Correct Clerical or Typographical Errors in the Day and Month in the Date of Birth or Sex of a Person Appearing in the Civil Registrar Without Need of a Judicial Order”, prohibits transsexual persons to change their first name and sex on their birth certificates, and strictly provides that:No petition for correction of erroneous entry concerning the sex of a person shall be entertained ………… except if the petition is accompanied by a certification issued by an accredited government physician attesting to the fact that the petitioner has not undergone sex change or sex transplant.In Republic vs. Cagandahan (G.R. No. 166676, 12 September 2008), the Supreme Court however decided in favor of changing the name and sex of an intersex person on the claims that he had Congenital Adrenal Hyperplasia, which caused him to manifest female biological characteristics. The SC held that:Ultimately, we are of the view that where the person is biologically or naturally intersex the determining factor in his gender classification would be what the individual, like respondent, having reached the age of majority, with good reason thinks of his/her sex. Respondent here thinks of himself as a male and considering that his body produces high levels of male hormones (androgen) there is preponderant biological support for considering him as being male. Sexual development in cases of intersex persons makes the gender classification at birth inconclusive. It is at maturity that the gender of such persons, like respondent, is fixed.The Court nevertheless denied transgender persons from legally changing their name and sex by virtue of RA 9048 Section 2 where “no correction must involve the change of nationality, age, status or sex of the petitioner”, when it ruled that “a change of name is not a matter of right but of judicial discretion, to be exercised in the light of the reasons adduced and the consequences that will follow.”Sexual Orientation and Gender Identity and Expression (“SOGIE”) Equality BillAn anti-discrimination bill is currently being deliberated in Congress to address LGBTI rights. The SOGIE Equality Bill is intended to prevent various economic and public accommodation-related acts of discrimination against people based on their sexual orientation, gender identity or expression. The current versions of the bill are sponsored by Kaka Bag-ao, Geraldine Roman, and Tom Villarin in the House of Representatives, and Risa Hontiveros in the Senate. The version in the House of Representative (H.B. 4982) passed its final reading on 20 September 2017. On the other hand, the the Senate version (S.B.N. 1271) is still under interpolation with Senate President Vicente Sotto III, and Senators Manny Pacquiao and Joel Villanueva, opposing it on religious grounds.The current draft includes, among others, seven (7) prohibited acts that refer to discriminative processes against the LGBTI in employment or in the labor market: 1. inclusion of SOGIE, or its disclosure in the criteria for hiring, promotion, transfer, designation, re-assignment, dismissal, performance review, training, incentives, benefits or allowances, privileges, and other terms or conditions of employment; 2. evoking or refusing the accreditation, recognition, or registration to organize in the workplace; 3. publishing information that intends to “out” or reveal the SOGIE of a person without their consent; 4. engaging in public speech that is meant to shame, insult, or normalize discrimination against LGBTIs which intimidates them; 5. subjecting persons or groups of persons to harassment in the form of unwanted conduct, or patterns of conduct, or series of acts which annoys, bullies, demeans, offends, threatens, intimidates, or creates a distressing environment for the LGBTI which is motivated by the offended party’s SOGIE, which may manifest in the form of assault, stalking, derogatory comments, lewd propositions, and may be conducted in various mediums, including but not limited to visual representation, broadcast communication, communication through mail or any telecommunication device, or through the internet; 6. subjecting any person to gender profiling, degrading investigatory searches including recording or analyzing a person to make a generalization about their SOGIE; and 7. subjecting a person to analogous acts that impairs their enjoyment, or recognition of their rights and freedoms. However, the bill has been criticized for not clearly stating how it plans to address issues regarding benefits that heterosexual people enjoy, as well as the issue of being called for hazardous tasks, or tasks beyond official office hours. The bill also fails to address or recognize the structures of heteronormativity that assumes that the LGBTI, unlike heterosexual employees, do not have families, or partners that equally deserve their time and attention. The bill does not clearly encourage public or private organizations to allot benefits that the LGBTI may also want to claim such as parental leaves for those who have legally, or taken responsibility for other younger relatives and act as their parents, or domestic partner benefits such as insurance, and the transfer of benefits of an employee upon death to their partners. The sponsors mentioned that the bill will not cover same-sex marriage. However, social protection is linked to marriage equality and civil partnerships, because it is through legally recognizing same-sex relationships that LGBTI workers and their partners and children become entitled to medical care, pensions, adoption rights, and parental leave and child benefits on the same terms as heterosexual couples. The bill is also silent on the the rights of the children of LGBTI persons as these children continue to experience discrimination, social stigmatization, and a general climate of intolerance and negative public attitudes. In addition, access to health services provided through workplaces also presents an obstacle for many LBGTI workers as, due to stigma, many refrain from accessing needed and critical prevention, treatment and support services. The difficulty also lies in how discriminated workers access legal redress as the process may entail costs in the form of economic loss from the prolonged legal procedure. Even where legal protection is in place, many LGBTI workers still face considerable discrimination and harassment, leading many to conceal their sexual orientation or transfer to industries with a more tolerant working environment. Nonetheless, the passing of anti-discrimination legislation against LGBTI people in the workplace can influence the public toward greater tolerance, and support from both workers’ and employers’ organizations will lead to an effective implementation of the law. LGBTI in Philippine Labor MarketIn 2014 the UNDP and USAID came out with a report, “Being LGBT in Asia: The Philippines Country Report, A Participatory Review and Analysis of the Legal and Social Environment for Lesbian, Gay, Bisexual and Transgender (LGBT) Persons and Civil Society”, which contained a compilation and presentation of studies and documents from the Philippine National LGBTI Community dialogue held in Manila on June 2013. The report reviewed the legal and social environment that the LGBTIs face, which was discussed by fifty (50) LGBTI organizations from around the country regarding eight themes which included education, health, employment, family affairs, community, religion, media, and politics. The report noted that because of the absence of any statistics, the extent of employment related-SOGIE discrimination was hidden, and government agencies in charge of issues regarding SOGIE discrimination did not report on LGBTI discrimination. The report also mentioned how discrimination in the labor market can occur during the process of hiring, assigning wages, granting promotions and benefits, as well as with regard to retention. Dismissals also occurred based on a person’s SOGIE as companies were unwilling to destroy their reputation by hiring LGBTIs who act and present themselves according to their SOGIE.Participants of the dialogue also reported how LGBTIs were hired in order to be abused or taken advantage of because of their unable to legally marry which leads to less benefits costs for the company in the absence of maternity or paternity leaves. LGBTI employees were also forced to take graveyard shifts or overtime work as they have no families to go home to, as well as assigning stereotypical jobs because of their gender identity. Sexual harassment on the workplace was another issue that the LGBTIs face because of their SOGIE. To deal with issues with regards to LGBTI employment, the participants of the dialogue created a list of recommendations as follows: (1) pushing for legislation focus in on LGBTI people in the workplace; (2) auditing existing employment related policies in relation to LGBTI issues; (3) working with existing government projects to include LGBTI people such as SOGIE inclusion in poverty reduction strategies; (4) provide for psychosocial and paralegal support to the LGBTI in the workplace; (5) strengthening LGBTIs by forming an LGBTI group, or labor union; and (6) pushing for SOGIE sensitivity trainings.In another study done by Patricia Angela Luzano Enriquez, “How Discrimination Happens - Being LGBT and the Experience of Discrimination in Access to Employment, and the Labour Market in the Philippines” (2017), the research paper noted that twenty-five percent (25%) of respondents have experienced harassment from their employers or superior officers, thirty-three percent (33%) have experienced harassment from co-workers, and sixty percent (60%) have been the subject of slurs and jokes in the workplace.Prior to the publication of Enriquez’s paper, research on SOGIE-based discrimination and related incidents in the work setting were usually qualitative in the form of case studies and in-depth interviews compiled by advocacy and human rights organizations, which monitored and documented these incidents while providing legal aid, counseling, and other services to victims. The first ever “Philippine Corporate SOGIE Diversity and Inclusiveness (CSDI) Index”, a study conducted by the Philippine LGBT Chamber of Commerce and research firm Cogencia Consulting, Inc., and supported by the Netherlands Embassy in Manila, surveyed one hundred (100) companies on their anti-discrimination and equal opportunity employment policies. The study revealed that only seventeen percent (17%) of the respondents — all foreign headquartered companies in the business process outsourcing sector — have anti-discrimination policies explicitly referencing measures to counteract gender discrimination. These policies refer to explicitly prohibiting specific actions such as misgendering, “outing” (publicizing an employee’s SOGIE without their consent), and making use of slurs against LGBTQIAP+ employees. Moreover, only ten (10) out of the seventeen (17) companies have a structure for tracking SOGIE inclusiveness, and only six have actually conducted educational discussions or SOGIE trainings. Eleven (11) out of the seventeen (17) companies explicitly use the terms “sexual orientation,” “gender identity,” and “gender expression” in their anti-discrimination policies, and only three (3) companies have policies against discrimination on the basis of sexual orientation. More than half of the companies surveyed have no plans of creating any SOGIE-based anti-discrimination policies.Definition of TermsSOGIE – stands for Sexual Orientation, Gender Identity and Gender Expression. Sexual orientation is the direction of emotional, sexual attraction, or conduct toward people of the same sex (homosexual orientation) or towards people of both sexes (bisexual orientation), or towards people of the opposite sex (heterosexual orientation), or to the absence of sexual attraction (asexual orientation). Gender Identity, on the other hand, refers to the personal sense of identity as characterized, among others, by lifestyle, manner of clothing, inclinations, and behavior in relation to masculine or feminine conventions. Gender expression are the various ways a person communicates gender identity to others through behavior, clothing, hairstyles, communication or speech pattern, or body characteristics.LGBTQIAP+ – the collective of persons who are lesbian, gay, bisexual, transgender, queer, intersex, asexual, pansexual, and the plus (+) stands to incorporate other marginalized and minority sexuality/gender identities.Heteronormativity – of, relating to, or based on the attitude that heterosexuality is the only normal and natural expression of sexuality.Misgendering – referring to someone (especially a transgender person) using a word, usually a pronoun or form of address that does not correctly reflect the gender with which they identify.Pinkwashing – using a variety of marketing and political strategies to promote brands or products by appealing to LGBTQIAP+-friendliness, in order to be perceived as progressive, modern and tolerant.SOGIE-based Discrimination – refers to any distinction, exclusion, restriction, or preference which is based on any ground such as sex, sexual orientation, gender identity or expression, and which has the purpose or effect of nullifying or impairing the recognition, access to, enjoyment, or exercise by all persons on an equal footing of all rights and freedoms.Equal employment opportunity – policies that help ensure that people are hired, retained and promoted on the basis of their ability to perform a job, rather than discriminated against on the basis of factors such as race, color, age, gender, national origin, sexual orientation, veteran status, religion, marital status, or mental or physical disability.LGBTI in the Mining Industry The Human Rights Campaign (“HCR”) annually compiles and updates its Corporate Equality Index (“CEI”), a list of companies meeting criteria identifying them as LGBTI-inclusive. The index ranks companies based on a number of indicators, such as access to benefits for same-sex partners, transgender inclusive health insurance, existence of resource groups and diversity councils, and positive external relationships with the LGBTI community, among others. The coveted distinction of “Best Places to Work for LGBT Equality” reflects true inclusion of the transgender workforce, from non-discrimination protections, to inclusive benefits and diversity practices, to respectful gender transition guidelines, allowing employees to self-identity based on gender identity, and engaging the broader transgender community. Previous CEI showed that the mining industry lagged behind other male-dominated industries, such as oil and gas, aerospace and defense, and automotive. It even lagged professional sports, if measured by the media coverage of well-known athletes announcing themselves as gay or lesbian. In the 2018 CEI, Alcoa Corp. and Newmont Mining Corp. qualified under Mining and Metals, while Chevron Corp., ConocoPhillips, and Shell Oil Co. qualified under Oil and Gas.The mining and metals industry is one of the worst in terms of engagement on LGBTI issues, according to Deena Fidas, Director of the Workplace Equality Program at HRC. One of the reasons the industry is doing so poorly is attributed to mining companies’ lack of interaction with the public.In Australia, LGBTI mineworkers participating in a study felt that because of their sexual orientation and gender identity they couldn’t relate to their heterosexual counterparts at the workplace. Fear of discrimination and prejudice was a common issue among the sampled group of participants with most claiming to have experienced or witnessed acts of racism, discrimination and prejudice either directly at them or towards others like them, thus reducing their desire to socialize with other employees while on-site. One individual in particular, found that many of the younger and newer LGBTI employees entering into fly-in, fly-out employment struggle to adjust to the attitude and behavior exhibited by those around them and as a result end up leaving. This was commonly attributed to the work environment which fostered a group mentality that lead to most LGBTI participating in the study to perceive the mining industry as being backwards and homophobic. People from LGBTI backgrounds were in a regular state of fear each day due to discrimination thus, socialization was kept at a minimal and mainly professional level to avoid confrontation and discrimination. The Business Case for Recognizing LGBTI RightsTo combat stereotypes and prejudices against LGBTI workers, many forward-thinking workplaces are implementing diversity policies, usually as part of a framework to promote equality and diversity. While primarily a matter of workers’ rights, such an approach also makes business sense. This awareness makes sense from a business perspective because laws are constantly changing, which puts companies at risk of costly legal liabilities, as in the case of a gay coal miner who sued and entered into a settlement with Spartan Mining Co., a subsidiary of Massey Energy Co., alleging the company’s management didn’t protect him from abusive co-workers.Mining companies are also likely to see their talent pools shrink the longer they ignore LGBTI issues. Prejudice on account of sexual orientation and gender identity, can impede the recruitment or promotion of the best candidate for the job. When employers pass over talented individuals based on characteristics with no bearing or relevance for the job, such as their sexual orientation, gender identity and sex characteristics, businesses are left with a sub-optimal workforce, diminishing their ability to deliver. Discrimination forces otherwise qualified LGBTI employees to quit their jobs, creating unnecessary turnover-related costs and loss of talent. Discrimination and prejudice in the workplace impair productivity, contribute to absenteeism, and undercut motivation, entrepreneurship, and company loyalty. LGBTI people are unlikely to apply for jobs in a hostile industry, and so are their parents, friends and allies.In fact, the LGBTI community was a useful ally of the mining industry during the United Kingdom Miners’ Strike in 1984, which was known as one of the bitterest industrial disputes in UK history. To support the miners, many activist groups were formed to aid in the strike efforts, one of which was the “Lesbians and Gays Support the Miners”, a London-based activist group who formed a relationship with the mining community in Wales’ Dulais Valley.Moreover, a diverse workforce brings with it different ideas and ways of doing things that can propel innovation and appeal to additional markets. An analysis by the Harvard Business Review (2014) also showed that companies with a high level of diversity perform better. Employees at more diverse companies in the US were forty-five percent (45%) more likely to report that their firm’s market share grew over the previous year and seventy percent (70%) more likely to report that the firm had entered a new market. A Credit Suisse study (2014) also showed that companies that embraced LBGTI employees outperformed in average return on equity, cash flow return on investment, and an increase in profit.Discrimination, including against LGBTI people, affects productivity and undermines social and economic development, with negative consequences for both companies and communities. It also leads to loss of market share. In a study done by the Harvard Business Review (2016), diversity and inclusion is associated with business success.The CEI shows that the majority of Fortune 500 companies offer extensive protections and equal benefits for LGBTI employees. It’s no surprise that many CEI top-scoring businesses are also top-performing businesses. They know that creating inclusive workplaces and communities where their employees can thrive is an investment in their own competitive edge. That’s why LGBTI-inclusive workplace policies are becoming the norm in the U.S., and having an impact around the globe. Today, more than ninety percent (90%) of CEI-rated businesses have embraced both sexual orientation and gender identity employment protections for their U.S. and global operations.ConclusionLabor rights recognition of LGBTI persons is now becoming the norm as many countries are now adopting anti-discrimination laws based on sexual orientation or gender identity. It is also clear that countries with strong laws and policies promoting equality for LGBTI workers, and companies that implement such laws and policies fare better, which provide a business and economic case for inclusion and diversity. An inclusive, diverse, and non-discriminatory industry would not be hard put to find allies from the LGBTI community especially for a much-maligned and misunderstood sector like mining.Fernando “Ronnie” S. Penarroyo specializes in Energy and Resources Law, Project Finance and Business Development. He may be contacted at fspenarroyo@gmail.com for any matters or inquiries in relation to the Philippine resources industry. Feel free to follow Atty. Penarroyo on LinkedIn (https://www.linkedin.com/in/fernando-s-penarroyo-2b8a7312/)References:Alicias, Maria Dolores, The Socially-Excluded Groups in the Philippines: A Context Analysis for the Voice Program, January 2017, https://knowledge.hivos.org/sites/default/files/voice-phl-baseline-report-2017_0.pdfBahtic, Mirsad, “FIFO Employment and its Impact on LGBT FIFO Workers and Partners”, Curtin University, http://www.aomevents.com/media/files/AIRAANZ%2016/55.pdfBeing LGBT in Asia: The Philippines Country Report, A Participatory Review and Analysis of the Legal and Social Environment for Lesbian, Gay, Bisexual and Transgender (LGBT) Persons and Civil Society, USAID UNDP, 2014, https://www.usaid.gov/sites/default/files/documents/1861/2014%20UNDP-USAID%20Philippines%20LGBT%20Country%20Report%20-%20FINAL.pdfBerger, Eric and Doillet, Nicole, “What’s the effect of pro- LGBT policies on stock Price?”, Harvard Business Review, July 2014, https://hbr.org/2014/07/whats-the-effect-ofpro-lgbt-policies-on-stock-price.Corporate Equality Index 2019: Rating Workplaces on Lesbian, Gay, Bisexual, Transgender, and Queer Equality, Human Rights Campaign, https://assets2.hrc.org/files/assets/resources/CEI-2019-FullReport.pdf?_ga=2.182396199.1824982299.1557286736-994957363.1553496100Enriquez, Patricia Angela Luzano, “How Discrimination Happens Being LGBT and the Experience of Discrimination in Access to Employment, and the Labour Market in the Philippines”, Social Policy for Development, 15 December 2017, Retrieved from the Erasmus University Thesis Repository website: https://thesis.eur.nl/pub/41669/Enriquez-Patricia-Angela-Luzano-.pdf Gaynor, Carla Elizabeth, “Affect, Coalitional Politics, and Pride: Imagining Activism through Lesbians and Gays Support the Miners and the United Kingdom Miners’ Strike of 1984-5”, Syracuse University, January 2017, https://surface.syr.edu/cgi/viewcontent.cgi?article=1124&context=thesisILO Declaration on Social Justice for a Fair Globalization, International Labor Organization, 10 June 2008, http://www.ilo.org/wcmsp5/groups/public/---dgreports/---cabinet/documents/genericdocument/wcms_371208.pdf.Kwentong Bebot: Lived Experiences of Lesbians, Bisexual and Transgender Women in the Philippines, Rainbow Rights Project, https://www.outrightinternational.org/sites/default/files/PhilippinesCC.pdfPhilippine Corporate SOGIE Diversity & Inclusiveness Index 2018, A project of the Philippine LGBT Chamber of Commerce with research undertaken by Cogencia Consulting Inc., Supported by the Kingdom of the Netherlands, http://lgbtph.org/wp-content/uploads/2018/11/LGBTChamber-CSDIindex2018.pdfRenders, Ashley, “Homophobic Culture Permeates Mining Industry”, The Corporate Knights, 06 February 2015, https://www.corporateknights.com/channels/mining/lgbt-employees-14232150/Rock, David and Grant, Heidi, “Why Diverse Teams Are Smarter,” Harvard Business Review, November 2016, https://hbr.org/2016/11/why-diverse-teams-are-smarter.Tackling Discrimination against Lesbian, Gay, Bi, Trans, & Intersex People: Standards of Conduct for Business, Office of the UN High Commissioner for Human Rights, September 2017, https://www.unfe.org/wp-content/uploads/2017/09/UN-Standards-of-Conduct.pdf“United Nations Reports,” The Office of the United Nations High Commissioner of Human Rights, accessed August 2, 2017, http://www.ohchr.org/EN/Issues/Discrimination/Pages/LGBTUNReports.aspx.Vara, Vauhini, “It’s Still Hard to Come Out at Work”, The New Yorker, 31 October 2014, https://www.newyorker.com/business/currency/still-hard-come-work

Commentary

Philippine Resources - March 07, 2019

Solar Lolas on the way to financial literacy

By Patricia A. O. BunyeI have written frequently about the journey of our “Solar Lolas”, seven Aeta women who trained at the Barefoot College in Tilonia, India under the “Tanging Tanglaw: Turning IP Grandmothers into Solar Engineers” project of Diwata-Women in Resource Development, Inc. and its project partners, the Land Rover Club of the Philippines and the Philippine Mine Safety and Environment Association. Five years after we first launched this project in 2014, we remain as excited and committed as we see the Solar Lolas making great strides.At the Barefoot College, where rheir training was made possible by the support of the Government of India through its Indian Technical and Economic Program, they learned how to assemble, repair and maintain solar panels for installation in their respective communities in Bamban, Tarlac and Gala, Zambales. The first batch trained from September 2014 to March 2015, while the second batch trained from April to September 2018. The first installation of solar panels in Bamban took place in 2016, with the installation in Gala following soon after. Rural Electrification Workshops (REW) where the Solar Lolas do their work, and which serve as community activity centers, have also been constructed. During typhoons, these REW have served as emergency shelters as well.In each community, “Lupong Solar”, or committees composed of 7 members (3 IP chieftains, 2 Solar Lolas, a lupon secretary and a collector) have been organized. The Lupong Solar is tasked with managing the funds collected from the users of the solar panels for future use when the panels would need to be repaired or replaced. The Solar Lolas who undertake the installation, maintenance and repair of these panels are also paid a modest stipend from these funds.One major milestone is that the Lupong Solar of Bamban has opened, with the assistance of Diwata, its own bank account with Chinabank’s Bamban Branch, in which they are now depositing their monthly collections. The whole process of opening their accounts took more than half a day, but it was an accomplishment that the Solar Lolas can be proud of.The Tanging Tanglaw Project also receives tremendous support from FWD Insurance which has designed a Financial Sustainability Training Program for Solar Lolas. The first formal training session, which was facilitated by trainors from Bayan Academy, was held on 04 December 2018 at Diwata’s training room at the Clark Skills and Training Center (formerly known as the “Clark Polytechnic College”). [Pursuant to a Memorandum of Agreement with the Bases Conversion Development Authority and the Clark Development Corporation, the Tanging Tanglaw Project is allowed the use of a training room formally known as the “BCDA Group Women’s Center” and a storage facility for its solar equipment.One activity during the training session was to construct a model community by using pictures, drawings and cut outs. Although the participants were divided into different groups, their envisioned model communities contained the same features: water, schools and concrete homes. In this regard, Diwata has been looking into how it may assist the Bamban community in improving its water supply. Volunteers from the UP National Institute of Geological Sciences have conducted the necessary studies, but the actual funding and implementation of the water project will have to be deferred.Although the training session was conducted informally, a number of more sensitive or serious concerns were elicited from the discussions, including the participants’ thoughts on family, government and even discrimination. They also expressed the desire to implement culturally appropriate conservation and development programs. The discussions were a good starting point for further engagement with them, particularly on short, medium and long term developmental interventions. To make the program more meaningful and impactful, there is a need to calibrate their expectations versus the actual programs that can be delivered. Moving forward, we will have to focus on the need for livelihood projects for the communities. Currently, majority of the community members are farmers. They produce root crops, vegetables and raise poultry. Other sources of income come from charcoal production and wild animal hunting. Other tribe members also work in the lowlands as construction workers.While Diwata has been engaged with these communities for five years now, there is still so much to learn about them, particularly their dynamics and cultural norms. It is a continuing lesson in being open and patient, and most importantly, not imposing our ways on them. It never ceases to amaze me how far our Solar Lolas have come and how they have been transformed by the Tanging Tanglaw Project. It will certainly be exciting to accompany them further on this journey to financial self sufficiency. Patricia A. O. Bunye is a senior partner at Cruz Marcelo & Tenefrancia and head of its mining and energy practice. She is also President of Diwata-Women in Resource Development, Inc. Questions and comments are welcome at po.bunye@cruzmarcelo.com.

Commentary

Philippine Resources - February 28, 2019

How Do You Solve a Problem Like Malampaya?

The Malampaya Deepwater Gas-to-Power project (“Malampaya”) located in Northwest Palawan, employs deepwater technology to draw natural gas that fuels three gas-fired power plants and provides 30% of Luzon's power generation requirements. Operating under Service Contract (“SC”) No. 39, the project is a joint undertaking by the Department of Energy (“DOE”) and Shell Philippines Exploration B.V. on behalf of joint venture partners Chevron Malampaya LLC and the Philippine National Oil Corporation Exploration Corporation. Malampaya delivers through six (6) Gas Sales and Purchase Agreements and fuels 2,700 MW of power stations as baseload plants and an additional 500+ MW operating as mid-merit and peaking plants. It produces an average of 380 million standard cubic feet per day. Data from the DOE indicated that given the present production level and continuous decrease in reservoir pressure, drop in supply is expected by 2022. Recoverable reserves at the end of field life is 3.08 to 3.29 trillion cubic feet. SC 39 will expire in 2024 with no certainty in an extension and while it may have enough gas, this may not be sufficient to last beyond five years. This comes as domestic electricity consumption is likely to reach 50 million kilowatts in 2040. The Philippines in 2017 produced half its power from coal, a quarter from renewable energy and 22% from natural gas. It is imperative then that the country urgently finds a replacement through new petroleum discoveries once the Malampaya gas field is depleted.Liquified Natural GasThere are currently no sufficient remaining resources from the Malampaya field or other potential upstream developments to justify new natural gas infrastructure development. The only reliable source of new gas would be imported liquefied natural gas (“LNG”) ensuring supply security and sustainability. As there are no existing infrastructure for importing LNG, the Philippines cannot access the gas market for industrial, commercial, and transportation. In anticipation of the Malampaya field depletion, the government is pursuing LNG projects and several foreign companies in partnership with domestic entities have committed investments in LNG importation facilities. Leading the pack is Energy World Corporation (“EWC”), which reported that the DOE has issued to affiliate, Energy World Gas Operations Philippines, Inc. a permit to construct, own and operate an LNG import terminal and re-gasification facility in Pagbilao Grande island in Quezon province. EWC said the permit would enable the completion date for the first tank of the LNG hub to be aligned to the commercial operation date of the associated 650 MW power plant and the National Grid Corporation of the Philippines switchyard expansion, and the construction of the second tank. The 650 MW plant has been recognized as the anchor off-taker of the LNG project which consists of two 130,000 bcm LNG tanks, a dedicated jetty and marine infrastructure as well as re-gasification and other ancillary facilities. Fitch Solutions earlier reported that the start up of LNG import terminal has been delayed due to difficulty in obtaining access to existing local transmission infrastructure, most of which is dominated by coal-fired power generators.The state-owned Philippine National Oil Company (“PNOC”) is developing a USD 600 million facility to be used to receive, store, re-gasify and distribute LNG. PNOC announced that it will start its tendering process for its LNG import facility. PNOC will be assuming minority stake in the project – as referenced on the joint venture rules set forth by the National Economic and Development Authority, in which the company can assume equity of not more than 50-percent. The technology preference will be a floating storage re-gasification unit and its capacity will be initially at 3.0 million tons per annum. PNOC has requested the DOE to declare the project as an Energy Project of National Significance under Executive Order (“EO”) No. 30.Meanwhile, the Philippines has become a new front in China and Japan's infrastructure rivalry as companies from both countries bid to build the country's first LNG terminal. Both Tokyo Gas and the state-owned China National Offshore Oil Corp. (“CNOOC”) have partnered with domestic companies.FGEN LNG Corp, a wholly-owned unit of First Gen Corp. of the Lopez conglomerate, signed a Joint Development Agreement with Tokyo Gas to build LNG terminals. The project will be located in Batangas Province, where First Gen operates four (4) gas-fired power plants that have a total capacity of 2,000 megawatts. The plan calls for building a terminal that will re-gasify and supply 3 to 5 million tons of LNG imports annually to the power facilities. The project is expected to cost more than $700 million, with First Gen taking an 80% stake in the operating company. FGEN recently filed with the DOE a notice to proceed with the construction of its proposed Batangas LNG terminal project in the First Gen Clean Energy Complex in Batangas City. The Japan Bank for International Cooperation is likely to fund the Tokyo Gas project if it is approved. It would be the first Japanese-built LNG terminal overseas, a core part of Japan's effort to boost infrastructure exports.On the other hand, CNOOC, a pioneer of China's LNG industry having built its country's first terminal in 2006, formed a consortium with Phoenix Petroleum Philippines and submitted a proposal for an LNG facility on November 2018. Phoenix Petroleum recently announced that the DOE granted Tanglawan Philippines LNG Inc. the notice to proceed to build the facility. Tanglawan plans to break ground by 2019 and aims to start commercial operations by 2023. The CNOOC consortium is thought to have the political edge since Phoenix Petroleum is owned by Dennis Uy who is perceived to be close to President Rodrigo Duterte. Petroleum Geopolitics in the South China SeaDue to the geologic fact that most of the Philippines’ most prospective petroleum acreage lie in Northwest Palawan and the disputed waters in the South China Sea, improving bilateral relations with China remains key for the Philippines to improve its hydrocarbon reserves and production growth outlook.According to The Diplomat, China’s assertion of sovereignty over the disputed areas and entering into joint oil and gas exploration with other claimant states in the latter’s exclusive economic zones somewhat legitimizes China’s nine-dash line claim. China is adopting a carrot and stick approach in addressing this diplomatic issue. On one hand, Vietnam was threatened with force over its unilateral exploration activities in waters claimed by China. Conversely, offers of joint exploration with Brunei and the Philippines, which opted for pragmatism and seem willing to skirt contentious sovereignty issues, are framed as partnership with promises of technical support, capital, and wider investment. Prof. Jay Batongbacal, a maritime law expert postulates that to make any joint exploration deal work, the Philippines must overcome two major legal problems: 1) internationally, how to justify its acceptance that China contingently shares the petroleum resources within its continental shelf after an international arbitration award clearly declared that no plausible claim exists; and (2) domestically, how to accommodate any petroleum development not under its sole jurisdiction, control, and supervision but rather on a shared, co-equal basis with another state.MOU Between the Philippines and ChinaIn pursuit of an acceptable legal framework, the Philippines signed a Memorandum of Understanding (“MOU”) with China against the backdrop of brewing energy security concerns, years of negligible offshore exploration, declining upstream investment, and depleting resources in the Malampaya gas field.The MOU on oil and gas development in the West Philippine Sea signed during President Xi Jinping’s visit to Manila, creates a body that will study how the two countries can pursue joint exploration and development. The MOU does not mean the immediate conduct of joint exploration or joint development of marine resources. However, it paves the way for the crafting of a program on how such joint ventures can happen in the future. Department of Foreign Affairs (“DFA”) Secretary Teodoro Locsin, Jr. described the MOU as a "non-legally binding framework.” As to the geographic coverage of the framework, Locsin states that the agreement is designed to "govern an area once that area has been agreed upon according to the framework.” Supreme Court Senior Associate Justice Antonio Carpio, the leading advocate of Philippine rights in the West Philippine Sea, believes that the MOU allows only “cooperation in oil and gas activities” and is not violative of the Constitution. Carpio also assumed that the service contracts to be entered by CNOOC will exactly follow the model service contract of the DOE where the natural resources covered by the contract belong to the Philippines and the contractor must comply with Philippine laws, rules, and regulations. If such regulations are followed, CNOOC would be merely a subcontractor of the Philippine service contractor or an equity holder of the Philippine service contractor. “Clearly, under the signed MOU, there is compliance with the Philippine Constitution and there is no waiver of Philippine sovereign rights under the arbitral ruling,” said Carpio. The real test according to Carpio will be if the “cooperation agreements” to be finalized in twelve months, will involve service contracts in which Philippine law will govern the oil and gas activities with China. The answer lies with the working group and intergovernmental committee formed by the MOU composed of officials from the DFA, Chinese Foreign Ministry, DOE, and Chinese Energy Ministry, which will work out a program of cooperation that could lead to joint exploration.Unlocking the Petroleum Potential of the Disputed Areas Following these developments, the DOE has indicated that it is recommending to the DFA the lifting of the force majeure imposed in 2014 on Service Contract 72 in Recto Bank (Reed Bank) in response to the request of PXP Energy Corp./Forum Energy.SC 72’s Sampaguita Gas Field holds substantial volume of potential gas reserves, according to PXP, citing verified data from seismic surveys originally conducted in 2011. “The interpretation of these surveys was carried out by Weatherford Petroleum Consultants in 2012. The report indicated the Sampaguita Gas Field to contain contingent resources of 2.6 trillion cubic feet (TCF) of gas in place,” the company said. “The 2D seismic data were reprocessed in 2013 and were subsequently interpreted, aided by gravity-magnetics data by Fugro (2012) and Cosine Ltd. (2015). In 2015, Arex Energy produced a report on the north bank area and estimated prospective resources to be 3.1 trillion cubic feet.” PXP cautioned however, that the development of SC 72 must commence not later than 2027 as it would take at least six years from start to first gas. The contractor is committed to spend at least $80 to $100 million to fully appraise the Sampaguita gas field and other identified prospects within its contract area. The Philippines began exploring the area in 1970 and discovered natural gas in 1976. U.K.-based Forum Energy acquired the concession in 2005 and became its operator. PXP holds a 78.98 percent interest in Forum Energy, which in turn has a 70 percent stake in SC 72. In October 2018, PXP announced that Dennison Holdings, another company owned by Dennis Uy, would subscribe to 340,000,000 PXP shares bringing its stake to 14.78% of PXP after the transaction. PXP, which is also negotiating with CNOOC for another potential joint exploration in the South China Sea, will use the proceeds from the share sale to fund its exploration activities and other oil assets within the Philippines. Manuel V. Pangilinan, Chair of PXP remarked that the company is "interested to participate" in Dennis Uy's Tanglawan LNG project with CNOOC.The US Energy Information Administration (2013) estimates the region around the Spratly Islands to have virtually no proved or probable oil reserves. Industry sources suggest less than 100 billion cubic feet in currently economically-viable natural gas reserves exist in surrounding fields. However, the Spratly Island territory may contain significant deposits of undiscovered hydrocarbons. US Geological Survey assessments estimate anywhere between 0.8 and 5.4 (mean 2.5) billion barrels of oil and between 7.6 and 55.1 (mean 25.5) trillion cubic feet of natural gas in undiscovered resources. Expiring Coal Operating ContractsCompounding the Malampaya depletion are expiring coal operating contracts (“COC“) under Presidential Decree No. 972 known as “Promulgating an Act to Promote an Accelerated Exploration, Development, Exploitation, Production of Coal” (1976), that currently are producing and with existing proven reserves lasting beyond expiration. The fifty-year term limit for contracts involving coal exploration and production is enshrined in the Constitution. The Philippine Conventional Energy Contracting Program (“PCECP”) for coal established under DOE Department Circular (“DC”) No. 2017-09-0010 mandates the issuance of new COCs over these “open” areas upon expiration of the 50-year term. Under the current guidelines, the COC contractors will be required to prematurely cease production operations, relinquish the COC area to be qualified for re-application and/or nomination, and hope that they will be awarded with new COCs over their previously-held contract area. However, the COC contractors if they have to undergo the present PCECP process, do not have the certainty of getting the COC awarded to them. This will result in the premature cessation of continued profitable production operations.Some COC contractors have existing proven reserves lasting beyond the expiration of their COCs, and from a technical and economic perspective, they recognize the feasibility and the potential need to continue and extend operations of their COCs beyond the 50-year term limit. The extended period of operation on these COCs will allow continued coal production and maximum utilization of existing production assets and facilities giving rise to uninterrupted revenue to both COC contractors and government. Further, since the present COC contractors have a good understanding of the geological conditions and mining processes involved in their operations, these proprietary information will generate additional reserves and potential resources as determined from advance exploration, a clear advantage over a new COC contractor.The cessation in production operations will certainly result in premature mine abandonment and rehabilitation as there will be no subsisting contract with the government that will allow COC contractors to continue its operations. While the COC contractors are undergoing the process set by present guidelines, they will be hesitant in allocating funds and resources for the care and maintenance of idle facilities without commercial confidence that there will be an award of a new contract over the same COC area. Consequently, for areas with plan of developments that will exceed the 50-year term limit, aggressive production strategies within the remaining term of the COC will need to be adopted to ensure the recoupment of investment costs, as opposed to a deliberate and well-planned production operations strategy to better manage coal reserves that would ultimately yield a fully optimized coal production.More importantly, coal mines are major suppliers of downstream power facilities. Off-taking power plants need stability of supply from coal mines. Off-takers will not enter into long-term fuel supply agreements from COC contractors whose COCs are expiring. Also, in the absence of stable coal supply agreements, project and loan financing of new power plants are difficult to obtain. Coal mines are potential energy projects of national significance under EO 30 in light of the expected depletion of the Malampaya natural gas field.Nuclear Energy OptionNuclear energy can also be a viable alternative power source as a substitute for Malampaya with the proper legal and regulatory framework in place. In January of this year, the House of Representatives has approved on third and final reading a bill that provides for a comprehensive regulatory framework in harnessing the peaceful uses of nuclear energy. Consolidating eight related administrative proposals, House Bill No. 8733 provides for the creation of the Philippine Nuclear Regulatory Commission (“PNRC”) as an independent central nuclear regulatory body. The measure aims among others to harness the peaceful and beneficial uses of nuclear energy in power generation establishing a legal and regulatory framework for the regulation and control of the peaceful uses of nuclear resources; manage radioactive waste; and establish a legal and regulatory framework to prevent, detect, and respond to unauthorized activities involving nuclear materials. PNRC will ensure consistency with the nation’s obligations under relevant international instruments and modernize the nuclear civil liability and compensation regime in line with internationally-accepted standards.Among PNRC’s other functions are to: (a) issue regulations on financial capability of operators to cover liability for nuclear damage; (b) inspect, assess, and monitor activities to ensure compliance; (c) coordinate with other agencies on health and safety, environmental protection, security, and transportation of nuclear and related dangerous goods; and (d) act as the national authority on nuclear safety, security, and regulatory matters relative to the International Atomic Energy Agency. PNRC will also establish a Nuclear Waste Management Fund and set aside a portion of the payment for the electricity generated from the nuclear energy use which shall only be utilized for the safe disposal of nuclear waste, to include site research, transport, and final geological disposal. PNRC shall be headed by a Commissioner, appointed by the President and shall be assisted by four Deputy Commissioners and an Executive Director who will assist them in the discharge of executive, administrative and planning functions of the body. PNRC shall likewise have an Advisory Board chaired by the Department of Science and Technology Secretary, with the Secretary of the Department of Health as vice chair, and the Secretaries of the Departments of Energy, of Environment and Natural Resources, of National Defense, of Trade and Industry, and of Agriculture as members, as well as some five members from the academe or non-government organizations. All powers, duties, records, files, and assets pertaining to nuclear and radioactive materials and facilities of the Philippine Nuclear Research Institute shall be transferred to PNRC.Geothermal EnergyAnother viable alternative is putting on stream the untapped geothermal fields in the country. Recently the Philippines has dropped down to number three in the global ranking of geothermal energy producers. Based on the report of Climate Policy Initiative (2015), 45% of all renewable energy projects in Asia are either marginally bankable or not bankable at all due in part, to the lengthy process of securing required permits, licences and land access agreements. Another issue is grid connectivity. The amount of effort required for all the different aspects of the process means it can take years to achieve a bankable solution. Geothermal development’s high costs of field development, coupled with the high risks associated with resource exploration and drilling, pose a significant barrier to private sector financing.Despite the ambitious deployment targets set by the DOE that recognize the potential of geothermal to contribute to the energy mix, there is a need to balance the need to reduce private sector risks and incentivize investment while minimizing costs to the public sector. Needless to say, streamlining the permit process by government regulators will have an impact on geothermal development, as shorter project periods would reduce uncertainty for policy and market dynamics when modeling economic returns. Geothermal projects are characterized by significant upfront capital investment for exploration, well drilling, and the installation of plant and equipment. But once the geothermal projects are placed in commercial operation the fuel source is secure for the tens of years of expected lifetime with a steady revenue stream.Investment Opportunities and ChallengesInvestment opportunities abound in the power sector as there is a need to supply the natural gas requirement of the existing gas-fired plants when the Malampaya field shuts down. According to the Philippine Energy Plan prepared by the DOE, the country will need 43,765 MW by 2040; 14,500 MW will be for mid-merit and 4,000 MW for peaking. Renewable energy capacity is poised to increase from its 2010 level of 5,000 MW to 2030 level of 15,000 MW and due to its intermittent nature, natural gas-fired power plants can complement when these plants will not be running. Additional potential demand for LNG will come from off-grid or missionary islands in replacement of existing diesel-fired power plants. LNG will primarily be consumed in the power sector, but will soon cover non-power applications such as in the industrial processes, transportation, commercial and residential sectors.More incentives should be given to upstream natural gas exploration so as to have a viable and stable replacement to the Malampaya gas field and enhance the economic feasibility of marginal deposits. While the backbone of the upstream natural gas industry is now in place, it was brought about by a lack of a comprehensive regulatory framework to guide natural gas industry operations in the Philippines. This gap was addressed through contractual agreements in service contracts and ad hoc arrangements between the regulators and service contractors. The Philippines does not have a separate Natural Gas Act that establishes administrative authority and accountability for the gas sector in a single agency. Although the DOE has legislative authority to promulgate regulations, broader issues regarding access and pricing have not gone beyond expressions of policy intent. The DOE has addressed issues affecting Malampaya through amendments or interpretation of service contracts. As a result, gas sector policy is largely driven by upstream considerations according to issues on which the service contractors have sought clarification as amendments to the original contract. In reality, the present regulatory regime for gas exploration and development is seen to limit the competitiveness of gas to replace oil products except for high cost products such as liquefied petroleum gas and diesel in industry and even residential electricity. This may not necessarily apply to other lower cost gas field developments than Malampaya, which has a deepwater occurrence. Royalty and taxes account for about half of the gas price. Reducing these components will transfer the benefits of developing natural gas directly from the government to the consumers through lower electricity prices. Increased use of natural gas will, in turn, provide economic benefits through foreign exchange savings from foregone oil importation and reduced environmental impact of the country’s overall energy balance.ConclusionThere is an urgent need for more energy sources with the depletion of the Malampaya field. Unless the government acts with dispatch, the power situation does not look good as the import facilities for LNG to replace the indigenous gas must be operational by 2024. Fortunately, Philippine energy regulators have taken a technology-neutral stand on possible solutions to the country’s growing demand for energy by looking at all available options. Investments in energy infrastructure will always be driven by the combination of a strong energy supply imperative, increasingly liberalized energy sector, ambitious capacity targets and a relatively stable off-take mechanism. Petroleum exploration and development resources particularly in the Northwest Palawan basin and disputed areas of the West Philippine Sea are fraught with technical operational complexities, cost enormous sums of money, and certainly dictated by externalities arising from the country’s relation with China. The two countries’ cooperation has taken a broader energy partnership narrative in light of the present administration’s more conciliatory stance toward China.Fernando “Ronnie” S. Penarroyo specializes in Energy and Resources Law, Project Finance and Business Development. He may be contacted at fspenarroyo@gmail.com for any matters or inquiries in relation to the Philippine resources industry. Feel free to follow Atty. Penarroyo on LinkedIn (https://www.linkedin.com/in/fernando-s-penarroyo-2b8a7312/)References:Batongbacal, Jay, Philippine-ChinaJoint Development Talks Still at an Impasse, Despite Green Light, 13 April 2018, https://amti.csis.org/philippine-china-joint-development-impasse/DOE Now Amenable to Lifting Reed Bank Oil Exploration Ban, 04 December 2018, https://www.doe.gov.ph/energist/doe-now-amenable-lifting-reed-bank-oil-exploration-banEndo, Jun; Tabeta, Shunsuke; Sugiura, Yuta, Philippines’ First LNG terminal Sought by China and Japan, Nikkei Asian Review, 18 December 2018, https://asia.nikkei.com/Business/Business-Trends/Philippines-first-LNG-terminal-sought-by-China-and-JapanJacob, Don Honor, Development Plans in the Emerging Downstream Natural Gas Industry, Department of Energy, Prepared for the E-POWER MO! Communicating Efficiency Across Energy Sector, 24 April 2018, https://www.doe.gov.ph/e-power-mo-communicating-efficiency-across-energy-sector-baguio-cityKuo, Mercy A., The Geopolitics of Oil and Gas in the South China Sea, Insights from Eufracia Taylor and Hugo Brennan of Risk Consultancy Verisk Maplecroft, The Diplomat, 12 December 2018, https://thediplomat.com/2018/12/the-geopolitics-of-oil-and-gas-in-the-south-china-sea/Philippines Oil and Gas Report, Fitch Solutions, 01 January 2018Ranada, Pia, Oil Deal with China May Be Solution to Sea Dispute – Carpio, Rappler, 07 December 2018, https://www.rappler.com/nation/218431-carpio-says-oil-deal-with-china-may-be-solution-west-philippine-sea-disputeRanada, Pia, PH-China Deal on Oil, Gas Dev't Creates Body to Study Joint Exploration, 21 November 2018, https://www.rappler.com/nation/217185-philippines-china-deal-oil-gas-development-creates-body-study-joint-explorationRosario, Ben, House OKs on Third and Final Reading Bill on Use and Regulation of Nuclear Energy, Manila Bulletin, 18 January 2019, https://news.mb.com.ph/2019/01/18/house-oks-on-third-and-final-reading-bill-on-use-and-regulation-of-nuclear-energy/South China Sea - International - Analysis; U.S. Energy Information Administration, 07 February 2013, https://www.eia.gov/beta/international/regions-topics.php?RegionTopicID=SCSValerio Micale; Padraig Oliver, Lessons on the Role of Public Finance in Deploying Geothermal Energy in Developing Countries, Climate Policy Initiatives, August 2015, https://climatepolicyinitiative.org/publication/lessons-role-public-finance-deploying-geothermal-energy-developing-countries/Velasco, M. M., PNOC Kicks Off Tender Process for $600-M LNG Terminal, Manila Bulletin, 10 September 2018, https://business.mb.com.ph/2018/09/10/pnoc-kicks-off-tender-process-for-600-m-lng-terminal/

Commentary

Philippine Resources - February 22, 2019

Continuing the dialogue on gender diversity in mining

By Patricia A. O. Bunye For the second year in a row, I had the privilege of participating in the Women in Mining Day at Mining Investment Asia, which was held on 26- 28 March 2018 in Singapore.This year, I moderated the panel which focused on what should be done to attract more women to mining as a genderless industry.The members of my panel were: (1) Tim Duffy, the President Director and Managing Director of PT Agincourt Resources; (2) Dr Gaomai Trench, Acting Assistant Director and Senior Manager for Mineral Promotion of the Department of Mines, Government of Western Australia; (3) Jade Devenish, Director and Managing Director of Geomysore Services India; and (4) Kash Sirinanda, a mining futurist, mathematician, engineer and a “serial entrepreneur”.Gender parity is a goal for the mining industry considering that several studies have shown that, by improving women’s participation in the labor force, the world economy could add US$12 trillion in growth over the next 10 years.Corollary to this, companies with more female directors tend to outperform those with less.Fortune 500 companies with three or more women as directors had an average return on equity of 15.3% for the five years ended 2008 as compared to 10.5% for companies with no female board members.Gender diversity is also 5th among the 17 Sustainable Development Goals (“SDG”) adopted by the United Nations in 2015.Since gender diversity underpins the other 16 SDGs, it is by achieving gender equality and women’s empowerment that we, in turn, hope to achieve justice and inclusion, economies that work for all, and sustaining our shared environment now and for future generations.Notwithstanding this, based on the World Economic Forum’s 10th Global Gender Gap Report in 2016, at the current rate of change, it will still take 170 years to achieve gender parity.The panel identified several ways to address the current gap, including, but not limited to: (1) helping women acquire the education and develop the skills to encourage them to go into science and technology jobs; (2) mentoring/providing good role models; and (3) “blind” recruitment and hiring the person with the right skills for the job.Jade Devenish opined that, even having a proper dialogue about the subject of gender parity is difficult since many people remain uncomfortable talking about it.According to her, we must realize that, although men and women are both equally capable, they are also very different in terms of their skills and attributes, and necessarily have different roles.One obvious difference is that women bear children and, in many societies, are still expected to be primarily responsible for child-rearing.In this regard, the panel acknowledged that mining companies must institute policies, particularly for women who work onsite and who need to be away from their families, which recognize and respect the role of women in the home, while ensuring that the same policies do not discriminate against men.Among these policies, according to Kash Sirinanda, would be allowing flexible shift hours for women to allow them to come to work and still do other things.Among the objectives for improving gender diversity in the industry is to have a bigger pool of talent to draw upon and benefit from the unique qualities and attributes that women bring to the table.The panel agreed that women are typically a lot more empathetic, which gives women in leadership roles the ability, from a strategic point of view, to see many sides of the same situation.According to Jade Devenish, because women have a natural ability to put themselves in other people’s shoes, this helps with better decision making in terms of understanding a collective solution.Tim Duffy shared that, based on his own experience, in more senior roles where supervision and management are involved, women are more participatory and more collaborative, whereas men by nature tend to be “more directive and a bit more controlling.”He has also observed that women pay greater attention to detail.He also gave the example of women truck drivers, who unlike their male counterparts who would “have the macho-testosterone cowboy attitude and treat the gear disrespectfully,” would be more concerned about conserving company resources and maintaining the trucks properly.Gaomai Trench expressed that the very fact that women and men are different by nature, even in terms of teamwork and group decision, dictates that a healthy organization should have room for different points of view.The panel likewise agreed that gender diversity does not only entail increasing the number of women in mining, but also enabling them to advance through the ranks.Tim Duffy explained that it is critical that anyone promoted to leadership positions, whether men or women, should be followed up, mentored, and encouraged so that management would know how they’re progressing and provide the required support.Nevertheless, while there are many studies about how the general performance of a company increases with the number of women on their boards, the panel was not keen on the idea of setting minimum percentages of women on boards.Since the companies themselves are different, i.e.large, small, publicly-listed non-profit, Tim Duffy says that minimum percentages would be aspirational, but would be difficult to implement.Jade Devenish concurs that the focus should not be on numbers, but always making informed decisions about filling positions, whether or the board or operations, with the people who have the right skills set.Gaomai Trench seconded this and warned about the possibility of discriminating against men as the goal would always be the select the best people for the job.The problem, says Tim Duffy, is who determines the criteria for “the best.”In his experience, if the person recruiting for the job is male, the “best person for the job” would be a male, owing to the recruiter’s reference point.He says the challenge is to keep challenging people to constantly ask “why,” and it is in this constant challenging and questioning that old opinions or biases would fall away.It has been most interesting keeping this conversation on gender diversity running for two years in a row, and I look forward to seeing how the discussion evolves in the years to come.Patricia A. O. Bunye is a senior partner at Cruz Marcelo & Tenefrancia and head of its mining and energy practice. She is also President of Diwata-Women in Resource Development, Inc. Questions and comments are welcome at po.bunye@cruzmarcelo.com.

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