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The Philippines has achieved a moderate overall score in implementing the 2019 EITI Standard.

Outcome of the Validation of the Philippines

Decision number
2022-17
Decision basis
EITI Articles of Association 2019-2021, Article 12.1. ix)
17 February 2022

Board decision

The Philippines has achieved a moderate overall score in implementing the 2019 EITI Standard (80 points). The overall score reflects an average of the three component scores on "Stakeholder engagement", "Transparency" and "Outcomes and impact". The Board decided that the assessment of requirement 1.3 on civil society engagement is partly met. However, the Board did not reach a consensus on the enforcement of the safeguard mechanism in accordance with Article 5 of Chapter 4 of the EITI Standard. The Board encourages the Government of the Philippines and all stakeholders to take urgent actions to implement the corrective actions. The Board will closely monitor and review of progress in October 2022.

The Philippines achieved a fairly low component score also on "Stakeholder engagement" (68 points). The MSG is exercising its oversight role effectively. The government and extractive companies have mostly sustained a high level of commitment. However, weaknesses in the engagement of some government agencies are affecting the comprehensiveness of disclosures and the follow-up of recommendations.

The EITI Board finds that there have been breaches of the EITI Protocol: Participation of civil society related to freedoms of expression, operation and association in the period under review and finds that Requirement 1.3 on civil society engagement is partly met. However, despite the significance of these breaches, the Board did not reach consensus on the consequences of the assessment of Requirement 1.3 at this time and will revisit the issue in its review of progress in addressing corrective actions related to stakeholder engagement. The Board clarified that the safeguard requirements remain in force and this decision cannot constitute a precedent. Civil society is actively engaged in EITI implementation both through the MSG and as users of extractive sector data. However, the Board expresses its deep concern over the alleged intimidation and reported extra-judicial killings of a number of civil society activists and journalists possibly linked to their interventions or stated positions around the sites of extractive operations or on issues concerning extractive investments, as well as the apparent use of the 2020 Anti-Terrorism Act to justify attempts at police or judicial action or intimidation which may have interrupted or had a chilling effect on the exercise of rights guaranteed by the EITI’s civil society protocol. These breaches of freedom of expression, operation and association, in some regions of the country, have had an impact on civil society’s ability to work on EITI-related topics and undertake EITI-related activities as defined in the EITI Protocol: Participation of civil society. The Board strongly urges the Government to implement the prescribed corrective actions to address each of these issues and requires the MSG to closely monitor the environment for civil society participation in all aspects of EITI implementation. The MSG must ensure robust oversight of progress on all aspects of the corrective action related to the environment for civil society participation in the EITI process, by working with relevant government agencies. Failure to demonstrate progress on corrective actions related to government and civil society engagement during the Board’s review of progress in October 2022 would result in temporary suspension. The Board reserves the right to consider allegations of serious new breaches of the EITI Protocol: Participation of civil society ahead of the next Validation, which could result in suspension, and will track progress in addressing the corrective actions related to civil society engagement through its Implementation Committee.

On "Transparency", the Philippines reached a moderate score (76 points). The Philippines has made commendable efforts to strengthen data management systems for subnational transfers and payments, and to promote systematic disclosures. The comprehensiveness of publicly available information on, for example, licenses and contracts, beneficial owners and government revenues should be further improved.

The EITI Board commends the Philippines for achieving a very high score on "Outcomes and impact" (97 points). This reflects the MSG’s efforts to ensure that the EITI informs debates about nationally relevant topics, such as subnational transfers and social payments. The MSG has adapted its outreach activities in light of the COVID-19 pandemic and has strived to make data accessible. The Philippines was awarded three additional points for the effectiveness and sustainability of EITI implementation.

In addition to the Board’s review of progress on corrective actions related to government engagement (Requirement 1.1) and civil society engagement (Requirement 1.3) in October 2022, the Board has determined that the Philippines will have until the next Validation commencing on 1 April 2023 to carry out corrective actions regarding government engagement (Requirement 1.1), civil society engagement (Requirement 1.3), contract and license allocations (Requirement 2.2), register of licenses (Requirement 2.3), contracts (Requirement 2.4), beneficial ownership (Requirement 2.5), state participation (Requirement 2.6), comprehensiveness (Requirement 4.1), subnational transfers (Requirement 5.2), social expenditures (Requirement 6.1).

Failure to demonstrate progress on "Stakeholder engagement" and "Transparency" in the next Validation may result in temporary suspension in accordance with Article 6 of the EITI Standard. In accordance with the EITI Standard, the Philippines’ MSG may request an extension of this timeframe or request that Validation commences earlier than scheduled.

Background

In October 2017, the Board agreed that the Philippines had made “satisfactory progress” in implementing the 2016 EITI Standard.  The re-Validation of the Philippines was scheduled to commence on 5 October 2020. Due to the transition to the revised Validation model, the Board rescheduled the Validation to commence on 1 April 2021. The Philippines is the first country to undergo Validation under the revised approach.

The Philippines EITI collated documentation for Validation using the Board-agreed data collection templates on Stakeholder engagement, Transparency and Outcomes and impact. The files are available on the Philippines EITI website. The International Secretariat’s Validation team prepared an initial assessment following the Validation procedure and Validation Guide. In accordance with the Validation procedure, a public call for stakeholder views on EITI implementation was open from 4 March to 1 April. Virtual stakeholder consultations were undertaken primarily from 12 to 23 April.

The draft assessment was shared with the MSG for feedback on 17 May, with an initial deadline of 14 June. The MSG requested a two-week extension to the feedback period, which was granted by the International Secretariat on the basis of the Board-agreed approach to Validations during COVID-19. MSG comments were received on 28 June, after which the assessment was finalised for the Validation Committee’s review.

In accordance with Article 4.c of Section 4 of the 2019 EITI Standard, the overall assessment consists of component scores on Stakeholder engagement, Transparency and Outcomes and impact, as well as an overall numerical score. The component score represents an average of the points awarded for each applicable requirement. The points awarded on the effectiveness and sustainability indicators are added to the component score on Outcomes and impact. The overall score is the average of the three component scores.

Corrective actions and strategic recommendations

The EITI Board agreed the following corrective actions to be undertaken by the Philippines. Progress in addressing these corrective actions will be assessed in the next Validation commencing on 1 April 2023:

  1. In accordance with Requirement 1.1, the government should exert all possible efforts to ensure comprehensive engagement in EITI implementation by all companies making material payments to government, including companies like Semirara Mining and Power Corporation in the coal sector. The Department of Energy is expected to engage with the EITI on a senior level and to ensure consistent and comprehensive disclosures regarding the oil, gas and coal sectors. 

  2. In accordance with Requirement 1.3, the Government of the Philippines is required to ensure that there are no obstacles to civil society participation in the EITI process[1], including expressing views related to natural resource governance. The government must refrain from actions which result in narrowing or restricting public debate in relation to implementation of the EITI. The government should ensure that there are no obstacles for civil society to organise EITI-related activities, such as events and meetings. The government should ensure that the implementation of laws and regulatory policies, such as the 2020 Anti-Terrorism Act and the enhanced system of registration and monitoring of non-profit organizations, does not result in the violation or curtailment of civil society’s fundamental rights and freedoms, by undertaking due consultation, review, and reform. Extractive companies engaged in the EITI process are encouraged to express their support for civil society’s freedom of expression and operation, also when engaging with local government officials. The government should ensure that the MSG establishes a working group with representation from all constituencies on the MSG to develop an action plan and implement a monitoring mechanism to ensure that these corrective actions are met. The working group should also include representatives from civil society organisations impacted by breaches of the EITI Protocol: Participation of civil society. The working group is expected to monitor the following through reports from various agencies involved in the EITI process.

    • The Department of the Interior and Local Government (DILG) should monitor, in consultation with impacted civil society organizations, the environment for civil society engagement in all aspects of the EITI process, including at the subnational level. In its role as MSG member with oversight over local authorities including law enforcement agencies, the DILG should ensure that there are no obstacles to civil society participation in the EITI process, reporting back to the MSG at regular six-month intervals.
       
    • Drawing on their multi-stakeholder forums, the Mines and Geosciences Bureau (MGB), the National Commission on Indigenous Peoples (NCIP), and the Union of Local Authorities of the Philippines (ULAP) should regularly report to the MSG on civil society’s participation in existing public consultation and participation mechanisms related to extractive industry governance.

The MSG should document civil society participation in subnational EITI activities including regional implementation, outreach and dissemination events. The MSG may wish to engage with relevant human rights organisations such as the Commission on Human Rights, Social Action Centres and non-governmental organisations in its monitoring. In accordance with the EITI protocol: Participation of civil society, civil society MSG members are encouraged to bring any ad hoc restrictions that could constitute a breach of the protocol to the attention of the MSG. The MSG is expected to document how it addresses these concerns, including referral to the EITI Board in serious cases that have not been resolved through the MSG.

The government is required to undertake measures to prevent civil society actors from being red-tagged for expressing views related to extractive industry governance. In the event that civil society actors engaged in the EITI process experience threats or harassment in the course of their work on the EITI process, the government is expected to provide accessible, urgent, and effective remedies to protect these actors and their freedom of expression. The government is required to ensure that any existing restrictions affecting civil society’s engagement in the EITI process, including as a result of the red-tagging, be lifted as a matter of urgency. The government, in collaboration with the MSG, should consider practical solutions for ensuring that civil society can engage in the EITI process freely in all regions of the country.

  1. In accordance with Requirement 2.2.a.i-ii, the Philippines should ensure that information on the process for awarding and transferring licenses and contracts in the mining, coal, oil and gas sectors is publicly accessible, including the detailed technical and financial criteria assessed and any weighting applied to the criteria. A clear list of all licenses and contracts awarded or transferred in the mining, coal, oil and gas sectors should be publicly available on an annual basis, including any transfers of participating interests in contracted parties in accordance with Requirement 2.2.a.iii. The Philippines should use its EITI to conduct an annual review of any material deviations from the applicable legal and regulatory framework governing license transfers and awards, in accordance with Requirement 2.2.a.iv. In cases where contracts have been awarded through competitive bidding, the full list of bidders should be publicly disclosed in accordance with Requirement 2.2.c. The Philippines may wish to expand its use of EITI reporting to assess the efficiency of license and contract awards and transfers, with a view to providing input to policy-making and public debate on license management, a topic of high public interest in the country.
     
  2. In accordance with Requirement 2.3.b, the Philippines should maintain a publicly available register or cadastre system(s) with timely and comprehensive information regarding each of the licenses pertaining to companies within the agreed scope of EITI implementation. Where such registers or cadastres do not exist or are incomplete, any gaps in the publicly available information should be disclosed and efforts strengthen these systems documented, in accordance with Requirement 2.3.c. It is expected that the Philippines maintain a license register or cadastre that includes information about licenses held by all entities, including companies and individuals or groups that are outside the agreed scope of EITI implementation.
     
  3. In accordance with Requirement 2.4, the Philippines should ensure that any contracts and licenses in the extractive industries, including in the coal, oil and gas sectors, that are granted, entered into or amended from 1 January 2021 are publicly disclosed in their entirety. If all licenses have standard stipulations as mandated by law and there are no deviations from such provisions in practice, the onus is on the Philippines to substantiate such claims. In accordance with Requirement 2.4.c.ii, the Philippines is required to publish a list of all active contracts and licenses, indicating which are publicly available and which are not. In accordance with Requirement 2.4.c.iii, the Philippines should publish an explanation for any deviations between disclosure practices and legislative or government policy requirements concerning the disclosure of contracts and licenses. The Philippines is encouraged to publicly disclose all contracts awarded by PMDC for mining on mineral reservations, and is required to disclose any new such contracts awarded or amended from 2021 onwards, given that these contracts include different fiscal terms to conventional mining contracts.

  4. In accordance with Requirement 2.5 and to prepare for the second phase of Validation of Requirement 2.5 from January 2022 onwards, the Philippines is required to establish an enabling legal environment for the public disclosure of beneficial ownership information and to publicly disclose the legal and beneficial owners of all companies holding or applying for extractive licenses and contracts. Information about the identity of the beneficial owner should include the name of the beneficial owner, the nationality, and the country of residence, as well as identifying any politically exposed persons, in accordance with Requirement 2.5.d. Publicly listed companies, including wholly-owned subsidiaries of companies listed on stock exchanges outside of the Philippines, are required to disclose the name of the stock exchange and include a link to the stock exchange filings where they are listed, in accordance with Requirement 2.5.f.iii. The Philippines could consider expanding beneficial ownership disclosures to other segments of the extractive industries value chain, for instance from extractive-industry service providers.

  5. In accordance with Requirement 2.6.a.ii, the Philippines should disclose details regarding the terms attached to PNOC-EC’s interests in extractives companies and projects, including its level of responsibility for covering expenses at various phases of the project cycle (e.g. full-paid equity, free equity or carried interest). In accordance with Requirement 2.6.a.i, the Philippines should ensure public disclosure of the prevailing rules and practices regarding the financial relationship between the government and SOEs, including disclosures of third-party equity financing of SOEs. Where the government or SOE(s) have provided loans or loan guarantees to mining, oil and gas companies or projects, details on these transactions should be disclosed, including loan tenor and terms (i.e., repayment schedule and interest rate) in accordance with Requirement 2.6.a.ii.
     
  6. In accordance with Requirement 4.1.b-c, the Philippines should ensure that the materiality decisions related to the scope of disclosures of company payments and government revenues are publicly disclosed, with reference to the size of the sub-sectors, revenue streams and companies relative to total government revenues from the extractive industries. Where it is not possible to secure confirmation that all payments and revenues whose omission or misstatement could significantly affect the comprehensiveness of the disclosures have been included in the scope of disclosures, due to taxpayer confidentiality constraints, appropriate assurances from relevant government entities such as the Bureau of Internal Revenue (BIR) should be secured and published either as part of the MSG’s materiality discussions or after the completion of data collection, confirming that the MSG’s materiality decisions did not omit any material payments and revenues. In accordance with Requirement 4.1.d, the Philippines should ensure that all extractive companies making material payments to the government comprehensively disclose these payments in accordance with the agreed scope. In accordance with Requirement 4.1.d, the government is additionally required to provide aggregate information about the amount of total revenues received from each of the benefit streams agreed in the scope of EITI implementation, including revenues that fall below agreed materiality thresholds. Where this data is not available, the Independent Administrator should draw on any relevant data and estimates from other sources in order to provide a comprehensive account of the total government revenues.
     
  7. In accordance with Requirement 4.6, the Philippines should ensure that all direct subnational payments collected by subnational government entities, where considered material by the MSG, are comprehensively and reliably disclosed to the public.
     
  8. In accordance with Requirement 5.2.a, the Philippines should ensure public disclosure of all subnational transfers of extractive revenues, including all extractive revenues regardless of the materiality of companies from which the revenues are collected. These disclosures should include the transfer amount calculated in accordance with the relevant revenue-sharing formula and the actual amount that was transferred between the central government and each relevant subnational entity entitled to receive subnational transfers of extractive revenues in the year(s) under review. The Philippines may wish to undertake a comprehensive scoping of all local government units entitled to receive subnational transfers (shares of national wealth) from mineral taxes and from royalties on mineral reservations, to ensure that PH-EITI disclosures of subnational transfers are comprehensive of all transfers of extractive revenues to local governments.

[1] In accordance with the EITI Protocol: Participation of civil society, references to the "EITI process" include activities related to preparing for EITI sign-up; MSG meetings; CSO constituency side-meetings on EITI, including interactions with MSG representatives; producing EITI Reports; producing materials or conducting analysis on EITI Reports; expressing views related to EITI activities; and expressing views related to natural resource governance.

The Philippines is encouraged to consider the following recommendations to strengthen EITI implementation:

Outcomes and impact

  1. To strengthen the accessibility and usability of data, MGB and DOE are encouraged to disclose data on oil, gas and mineral production in open format. The Philippines is encouraged to disclose in open format all data points related to the extractive sector’s contribution to the economy (Requirement 6.3).

  2. To strengthen public debate and the EITI’s impact, the Philippines is encouraged to tailor outreach and communications to specific stakeholders, such as indigenous communities. The MSG is encouraged to further consider the information needs of stakeholders to inform the scope of the EITI’s work.

  3. To strengthen the EITI’s contribution to policy-making, the MSG is encouraged to reflect in its work plan objectives and activities related to the follow-up on recommendations and the scope of disclosures that can improve extractive sector governance. The MSG is encouraged to establish a systematic approach to follow-up on recommendations.

Stakeholder engagement

  1. To strengthen implementation, the MSG is encouraged to engage with NCIP to ensure improved oversight of royalty payments to indigenous peoples and consultation processes.

  2. To enhance the impact of EITI implementation on extractive sector governance, government agencies are encouraged to actively follow up on recommendations from EITI reporting, Validation and other EITI studies, in particular on issues considered as priorities by the MSG.

Transparency

  1. The Philippines may wish to expand its use of EITI reporting to track ongoing or planned exploration activities in the coal sector, to match the quality of its disclosures in mining, oil and gas. The Philippines is encouraged to pursue its plans to expand coverage of artisanal and small-scale mining in future PH-EITI Reports, given strong industry and civil society interest in greater transparency on these areas and the MSG’s efforts to develop decentralised EITI implementation.

  2. To strengthen implementation in accordance with Requirement 6.3, the Philippines is urged to include more comprehensive estimates, in absolute and relative terms, of government revenues from the extractive industries in future PH-EITI reporting, including extractive sub-sectors not considered material for EITI reconciliation. The Philippines may wish to expand its coverage of employment in the extractive industries to present more granular gender-disaggregated employment data (e.g., by role and remuneration).

  3. To strengthen implementation in accordance with Requirement 6.4, the Philippines could consider using annual EITI reporting to provide information on the government’s environmental sanctioning of extractive companies, with a view to addressing public demands for information on the regulatory oversight of companies’ environmental impacts. The Philippines is encouraged to consider the publication of monitoring reports on the management of environmental funds, given the level of public interest in the environmental impacts of mining.

  4. To strengthen implementation in accordance with Requirements 2.6 and 4.5, the Philippines is encouraged to reconsider the materiality of state participation in the extractive industries on an annual basis, to ensure that any material SOE transactions are comprehensively and reliably disclosed, and that stakeholders’ demands for information on extractive SOEs are addressed. In particular, the MSG should assess the materiality of government revenues collected by PMDC on an annual basis, given the separate fiscal regime in mineral reservations, to ensure that any material revenues collected by PMDC derived from operations in minerals reservations are comprehensively and reliably publicly disclosed.

  5. To strengthen implementation in accordance with Requirement 6.2, the Philippines is encouraged to reconsider the existence of quasi-fiscal expenditures undertaken by state-owned enterprises on an annual basis, to ensure that any such expenditures are comprehensively disclosed.

  6. To strengthen implementation in accordance with Requirements 3.2 and 3.3, the Philippines is encouraged to consider using its EITI reporting to explain the methods for calculating export and production volumes and values.

  7. To strengthen implementation, the Philippines is encouraged to reconsider the existence of infrastructure provisions and barter-type arrangements on an annual basis, to ensure that any such agreements are comprehensively addressed through EITI reporting in accordance with Requirement 4.3.

  8. The Philippines is encouraged to reconsider the existence of government transportation revenues from the extractive industries on an annual basis, to ensure that any such revenues, where material, are comprehensively disclosed in accordance with Requirement 4.4.

  9. The Philippines is encouraged to implement its plans to improve the timeliness of PH-EITI reporting by building on systematic disclosures and the PH-EITI online reporting for the extractives (ORE) tool, as encouraged under Requirement 4.8.

  10. To strengthen implementation in accordance with Requirement 4.9, the Philippines may wish to use EITI reporting as an annual diagnostic of audit and assurance procedures and practices in government and companies in the extractive industries, with a view to making recommendations for reforms.

  11. To strengthen implementation in accordance with Requirement 5.3, the Philippines could consider using its EITI disclosures to ensure greater transparency in the management of extractive revenues earmarked for specific programmes or geographic regions. In particular, to respond to public interest, the Philippines is encouraged to use its EITI disclosures to publicly clarify the methods for ensuring accountability and efficiency in the use of earmarked revenues such as those managed through the Malampaya Fund. The Philippines may wish to use its EITI disclosures to clarify the reasons for discrepancies in records of company payments to indigenous peoples (IPs) and propose reforms to improve record-keeping and reduce discrepancies in the recording of these company payments.

  12. The Philippines is urged to reconsider the existence and materiality of environmental payments to government on an annual basis, to ensure that any material environmental payments to government are comprehensively and reliably disclosed in accordance with Requirement 6.1.b.

The government and the MSG are encouraged to consider these recommendations, and to document the MSG’s responses to these recommendations in the next annual review of outcomes and impact of EITI implementation.

Scorecard for Philippines: 2022

Assessment of EITI requirements

  • Not met
  • Partly met
  • Mostly met
  • Fully met
  • Exceeded
Component View more
Score

The three components of Validation each receive a score out of 100, as follows:

Low 0-49
Fairly low 50-69
Moderate 70-84
High 85-92
Very high 93-100
View more

Outcomes and impact

97 Very high
Scorecard by requirement
Assessment
Assessment of EITI Requirements

Validation assesses the extent to which each EITI Requirement is met, using five categories. The component score is an average of the points awarded for each requirement that falls within the component.

Outcomes and impact

Effectiveness and sustainability indicators

3

1.5 Work plan

90

The 2021 work plan is informed by the PH-EITI’s strategic objectives for 2020-2022. While these objectives are relatively general, the planned outcomes for 2021 are more specific and address nationally relevant topics, such as the participation of indigenous communities, gender and anti-corruption. The work plan establishes an effective tool for planning and monitoring activities, and it’s structured following results-based management principles. Indicators are included to enable monitoring. The plan addresses systematic disclosures, as well as beneficial ownership and contract transparency. It includes activities to build stakeholders’ capacity and engagement, as well as legislative advocacy. However, the plan does not clearly address the scope of EITI disclosures or the policy changes that the MSG wishes to see result from the EITI. The plan has an overall budget, but individual activities are not costed. Due to budget cuts, activities will be undertaken online without separate funds allocated. The overall objective of the work plan serving as a key accountability document for the MSG vis-à-vis broader constituencies and the public is met. The MSG argued in its feedback on the draft assessment that the requirement had been exceeded. The Secretariat finds that while all aspects of the requirement have been addressed, there is not sufficient evidence to suggest an assessment of “exceeded”.

7.1 Public debate

100

PH-EITI has undertaken active and innovative communication efforts that enable evidence-based public debate on extractive industry governance, in line with the objective of the requirement. EITI Reports and other PH-EITI documents are comprehensible and actively promoted through regular national conferences, Extractive Transparency Weeks and roadshows. The language of activities varies according to regional needs, and PH-EITI has innovated to ensure that data is accessible to different groups (see e.g. community bulletin board). PH-EITI has successfully adapted its outreach efforts to the Covid-19 pandemic, organising its 2020 roadshow virtually. PH-EITI and Bantay Kita have produced communications materials in English and Tagalog, including infographics. Key materials are printed and distributed at events. PH-EITI has increased the media’s awareness of EITI data and its capacity to use it through a partnership with the Philippine Press Institute. Stakeholder consultations and the Outcomes and impact file demonstrate that EITI data is used to inform decision-making in the Congress.

7.2 Data accessibility and open data

90

PH-EITI has agreed an open data policy and EITI data on payments is available in csv format through the EDGE portal. Reconciliation report tables for 2018 are available in xlxs format. Monthly export data is published in open format by PSA. Data on production (Requirement 3.2)or contribution to the economy (Requirement 6.3) does not appear to be available in open format, beyond the EITI summary data files. DBM is launching an online portal with information on subnational transfers. Summary data files have been submitted to the International Secretariat, but feedback on the 2017 and 2018 files is yet to be addressed by PH-EITI. Consulted civil society actors noted that using the data for analysis regarding the proposed new mining fiscal regime was challenging as older data was not available in open format. The overall objective to enable the broader use and analysis of information on the extractive industries has been addressed. The MSG argued in its feedback on the draft assessment that the requirement has been exceeded. However, there is no indication that the encouraged aspects of the requirement (7.2.d) have been addressed.

7.3 Follow up on recommendations

90

The MSG has made efforts to strengthen the impact of EITI implementation by acting upon lessons learnt. The MSG does not appear to have a systematic approach to following up on recommendations from EITI reporting or Validation, although progress is documented in annual progress reports and PH-EITI has indicated it discusses the recommendations with the inter-agency Mining Industry Coordinating Council. Some civil society stakeholders noted that government agencies were not undertaking sufficient efforts to implement recommendations. Weaknesses in the monitoring and evaluation of IP royalties, timeliness of subnational transfers and the non-reporting of Semirara are examples of outstanding issues that have been identified in several EITI Reports. These issues appear to be occasionally discussed at MSG meetings, but not systematically tracked. It In the period under review PH-EITI has undertaken scoping studies on gender and mainstreaming. The 2021 EITI work plan demonstrates that the MSG has planned activities to follow up on recommendations from these studies. The Philippines has met the requirement’s overall objective, which is to ensure that EITI implementation is a continuous learning process that contributes to policy-making. The MSG feedback on the draft assessment noted that the civil society constituency questioned whether the requirement had been fully met. The Secretariat recognises that the assessment of this requirement is borderline between “mostly met” and “fully met”. On balance and in line with previous Validations, the Secretariat finds that the MSG has undertaken reasonable efforts to ensure follow-up of recommendations and lessons learnt. The requirement does not include an assessment of whether the government implements EITI recommendations.

7.4 Review of outcomes and impact of implementation

100

The MSG has undertaken efforts to review the outcomes and impact of the EITI that exceed the requirement. In addition to publishing annual progress reports, the MSG commissioned an impact study in 2018 that sought views from different stakeholders. The 2020 annual progress report captures PH-EITI’s efforts to take gender considerations and inclusiveness into account. Progress in implementing planned activities is captured in the 2020 Work Plan Progress Matrix. Stakeholders are able to provide feedback on the EITI process through outreach events. The requirement’s overall objective of regular public monitoring and evaluation of implementation that ensures the EITI’s accountability, has been addressed.

Stakeholder engagement

67.5 Fairly low
Scorecard by requirement
Assessment
Assessment of EITI Requirements

Validation assesses the extent to which each EITI Requirement is met, using five categories. The component score is an average of the points awarded for each requirement that falls within the component.

Multi-stakeholder oversight

1.1 Government engagement

60

Senior government officials, including President Duterte, have publicly expressed support to the EITI. EITI is also featured in the Philippines’ OGP action plan. The national secretariat is hosted within the Department of Finance (DOF), which also chairs the MSG. PH-EITI lacked a national coordinator from July 2019 to March 2021, when an interim coordinator was appointed. The secretariat has high capacity and commitment. DOF is providing a full, active and effective government lead for EITI implementation. The government funds EITI implementation, although funding was significantly decreased due to the Covid-19 pandemic. According to some stakeholders, efforts to seek additional funding have been limited. Some civil society stakeholders noted that the government’s commitment to addressing shortcomings identified in EITI Reports was limited. The government does not appear to be utilising the MSG as a platform to engage with stakeholders on planned policy reforms. However, government agencies use EITI data to inform their decision-making. Government agencies are also providing requested information for EITI reporting, where available. Concerns related to data availability appear to be mostly related to weaknesses in technical systems, and government agencies have undertaken efforts to improve data management systems. DENR has also implemented an administrative order that compels mining companies to participate in EITI reporting. Consulted stakeholders noted weaknesses in the engagement of the Department of Energy (DOE). Its participation at MSG meetings was at a level that does not seem adequate to initiate reforms within the ministry or to ensure comprehensive disclosures. For example, it is yet to pass an administrative order that would compel coal producing Semirara Mining and Power Corporation to disclose information despite this issue being repeatedly discussed by the MSG. Engagement of other agencies is at a more senior level. Weaknesses in NCIP’s monitoring of IP royalties were also mentioned as a challenge. As weaknesses in DOE’s engagement are affecting the comprehensiveness of disclosures and the wider impact of the EITI in the coal sector, the Secretariat’s assessment is that the objective of the government’s operational engagement, as a means of facilitating all aspects of EITI implementation, is not fully met. The MSG argued in its feedback on the draft assessment that the requirement has been fully met. The feedback cites plans to finalise an administrative order that would compel oil, gas and coal companies to participate in EITI reporting. The Secretariat welcomes these plans but notes that measures to ensure comprehensive disclosures are yet to be implemented.

1.2 Industry engagement

90

The extractive industry is engaged in EITI implementation. Particularly MSG members from the Chamber of Mines (COMP) actively participate in the MSG’s work, including technical working groups and outreach events. Consulted stakeholders and MSG meeting minutes suggest that the engagement of oil and gas companies has been less consistent than that of mining companies representing COMP. However, only five oil and gas companies made material payments in 2018. The engagement of mining companies that are not members of COMP is limited, and there is no mechanism for liaison between COMP and these companies on EITI matters. The MSG seat reserved for non-chamber companies remains unfilled. This is a concern particularly as the scope of EITI reporting has extended to cover non-metallic mining. However, the 2021 work plan includes activities to engage further with non-metallic mining companies. The MSG also noted in its feedback on the draft assessment that it was challenging to engage with companies that were not members of industry associations. Consultations suggest that most companies primarily view EITI as a compliance exercise. EITI Reports help demonstrate the extractive sector’s contribution to the economy. Oil and gas companies proposed that the EITI could contribute more to a public discussion about the future of the sector. Some civil society stakeholders noted that companies should engage with the EITI and local stakeholders more actively in regions where exploration and extraction takes place. Most material companies (62/73 in 2018) participated in EITI reporting, although companies commented that the exercise was considered to be heavy. A long-standing issue is the non-reporting of Semirara Mining and Power Corporation (SMPC). The MSG argued in its feedback on the draft assessment that the lack of engagement by SMPC should not affect the assessment of industry engagement in the EITI. The Secretariat recognises the efforts undertaken by the MSG to engage with SMPC and notes that the company’s non-participation is reflected under Requirements 1.1 and 4.1. Tax information is confidential in the Philippines, but PH-EITI collects waivers from companies that enable the disclosure of information on revenues, as well as beneficial owners. The approach has helped overcome barriers to EITI reporting, but it makes disclosures reliant on companies’ willingness to disclose data, as the government cannot make unilateral disclosures of tax or beneficial ownership data. For the mining sector, DENR has introduced an administrative order that compels companies to disclose information to the EITI or face sanctions.

1.3 Civil society engagement

30

Civil society is actively engaged in the EITI, particularly through the Bantay Kita coalition. Civil society influences the scope of the EITI, uses EITI data for advocacy and analysis and actively participates in the MSG’s work. However, Validation identified obstacles related to civil society’s freedom to express views, operate and associate on issues related to the EITI, in particular on the subnational level. The objective of ensuring an enabling environment for civil society engagement in the EITI is therefore not fully met.

1.4 MSG governance

90

The MSG appears to be functioning in an effective and equitable manner, in accordance with the MSG ToRs. The objective of having an independent MSG that can exercise active and meaningful oversight of all aspects of EITI implementation in a way that balances the interests of stakeholders, has been fulfilled. Documentation on the process for nomination civil society and industry MSG members and PH-EITI internal rules are available on the PH-EITI website. Nominations appear to have been open and inclusive, and the MSG includes appropriate stakeholders. However, the seat reserved for non-Chamber mining companies remains unfilled (see Requirement 1.2). Including a representative from NCIP was recommended by both government and civil society stakeholders. MSG members liaise with their broader constituencies. The MSG’s meeting minutes, as well as a register of MSG decisions is available online. The MSG has technical working groups on gender and legislative advocacy. Some civil society representatives noted that government and industry were unwilling to discuss social and environmental concerns at the MSG. However, MSG meeting minutes suggest that civil society has been able to raise concerns at the MSG. Stakeholders from all constituencies were supportive of gearing the MSG’s work more towards analysis and impact. The MSG argued in its feedback on the draft assessment that the requirement has been exceeded. The Secretariat recognises the MSG’s efforts to extend the scope of EITI implementation and to adapt to Covid-19. However, the Secretariat does not consider there to be grounds to assess the requirement as “exceeded” for the reasons stated in the above assessment, as well as weaknesses identified in government and civil society engagement.

Transparency

76 Moderate
Scorecard by requirement
Assessment
Assessment of EITI Requirements

Validation assesses the extent to which each EITI Requirement is met, using five categories. The component score is an average of the points awarded for each requirement that falls within the component.

Overview of the extractive industries

3.1 Exploration data

90

The Philippines has ensured that an overview of the extractive sector in the country and its potential, including recent, ongoing and planned significant exploration activities, is accessible to the public. Systematic disclosures of this information on the DOE and MGB websites are sufficient to address all aspects of this requirement, although these are also summarised in successive PH-EITI Reports.

6.3 Contribution of the extractive sector to the economy

90

The Philippines has addressed most aspects of this requirement by publishing the extractive industries’ contribution, in absolute and relative terms, to GDP (including informal activities), exports and employment. Public disclosures on the government’s extractive industry revenues are limited to the four sub-sectors considered material (metallic and non-metallic mining, coal, oil and gas), not for other extractive sub-sectors. However, PH-EITI reporting has been transparent about some of the constraints hindering disclosure of a figure on total government revenues from the extractive industries, including legal taxpayer confidentiality provisions. The issue of full government disclosure of all extractive revenues is covered in more detail under comprehensiveness (see Requirement 4.1).

Legal and fiscal framework

2.1 Legal framework

100

The Philippines has addressed all aspects of this requirement by ensuring that PH-EITI reporting summarises descriptions of the legal environment and fiscal regime for mining, coal, oil and gas, including the roles of government entities, the level of fiscal devolution and ongoing of planned reforms in mining, not oil and gas. Government websites provide much of this information in a dispersed manner, including updates on ongoing reforms in the petroleum sector. The Philippines has exceeded the minimum of this requirement by ensuring systematic disclosures of the information mandated under Requirement 2.1, ensuring timely public disclosures.

2.4 Contracts

60

The Philippines has made progress on most aspects of this requirement, including in clarifying the government's policy on contract disclosure and documenting actual practice. In practice, most mining contracts are published, and the three oil and gas contracts in production are published. While the MSG’s comments noted that contracts of coal had been published on the PH-EITI Contracts portal, the comprehensiveness of contract publications remains unclear (with the material company Semirara’s contract not appearing on the portal for instance). The MSG has included plans to assess the comprehensiveness of contact disclosure to date in its 2021 work plan. The recent publication of PMDC’s joint operating agreements (JOAs) with its operators, referenced in the MSG’s comments, is commendable. The MGB and DOE have confirmed that no operating contract has been awarded or amended in the 1 January - 31 March 2021 period. However, the 6th PH-EITI Report’s reference to the DOE’s inability to publish contracts whose project terms are still active is a concern, as it raises questions about the prospects for the systematic publication of new coal, oil and gas contracts and amendments in future. Nonetheless, government officials consulted did not raise any barriers to the publication of all operating contracts in the coal, oil and gas sectors, evidenced by the recent publication of some contracts. Of more immediate concern, there does not appear to be a comprehensive list of active contracts and licenses (including exploration licenses) indicating which contracts are publicly accessible and which are not. In addition, the full text of licenses does not appear to be published and it is unclear whether there are significant variations between licenses (permits).

6.4 Environmental impact

Not assessed

The Philippines’s 6th EITI Report provides a basis for stakeholders to assess the adequacy of the regulatory framework and monitoring efforts to manage the environmental impact of extractive industries, and to assess extractive companies’ adherence to environmental obligations. Indeed, it provides company disclosures of their contributions to environmental funds.

Licenses

2.2 Contract and license allocations

60

The Philippines has made progress in addressing the objective of this requirement, but a number of technical gaps mean the overall objective of transparency in license and contract allocations cannot yet be considered to be fully achieved. Mining: The 6th PH-EITI Report lists the licenses and contracts awarded in 2018, describes the statutory procedure for awards and transfers and the MSG has undertaken a review of non-trivial deviations from statutory procedures in practice in 2018, although stakeholders expressed concerns that consultation processes were not always followed in practice. However, as confirmed in the MSG’s comments on the draft assessment, the MGB has confirmed the lack of new mining license contract and license awards in 2018. The technical and financial criteria assessed for mining license and contract awards and transfers are described in the public domain and government officials confirm that there is no weighting applied to the criteria, even if this is not explicitly stated in disclosures on the MGB website. None of the mining licenses and contracts appear to have been awarded through bidding in 2018. Coal, oil and gas: The 6th PH-EITI Report and online government sources list the one new oil and gas contract award in 2018, while the MSG’s comments refer to a published letter from the DOE confirming the lack of any new coal contract awards or transfers in this period. The minutes of MSG meetings indicate that the DOE was expected to subsequently confirm whether there were any transfers of interests in oil and gas contracts in 2018, although there is no public record (nor reference in the MSG’s comments) of the DOE's clarification of the number of transfers in oil and gas contracts in 2018. The general procedures for awarding and transferring coal, oil and gas contracts are described, including an assessment of non-trivial deviations in practice. Public sources define the technical and financial criteria assessed for coal, oil and gas contract awards and transfers, but do not clarify whether any weightings are applied to criteria assessed in transfers. The bid criteria for awarding the oil and gas contract granted through bidding in 2018, and the full list of bidders was published on the PH-EITI Contracts portal and referenced in the MSG’s comments.

2.3 Register of licenses

30

There is no single license register that is publicly accessible for licenses and contracts in mining, coal, oil and gas in the Philippines. It is unclear whether the 6th PH-EITI Report lists all licenses and contracts held by material companies, or only those that gave rise to material payments to government in 2018 (i.e. producing licenses and contracts). While some of the information listed under Requirement 2.3.b is accessible for the mining, oil and gas licenses, there are significant gaps in dates of application, coordinates and commodity(ies) covered. In its comments, the MSG referenced the new publication of Contracts of Coal and oil and gas Service Contracts through the PH-EITI Contracts portal, albeit with gaps in dates of application and coordinates. While the DOE’s question about the relevance of dates of application is noted, the lack of coordinates is a broader concern, notwithstanding the West Philippine Sea contracts whose coordinates remain confidential for national security considerations. The lack of publicly accessible cadastral portals with key data such as coordinates constitutes a significant gap. The Philippines is therefore far from the objective of ensuring the public accessibility of comprehensive information on property rights related to extractive deposits and projects.

Ownership

2.5 Beneficial ownership

60

The Philippines has agreed appropriate definitions for the terms “beneficial owner” and “politically exposed person” (PEP), and established an enabling legal environment for beneficial ownership disclosure. While the 6th PH-EITI Report highlighted gaps in requirements for foreign companies to disclose their BO, a new SEC Memorandum Circular in 2020 effectively expanded BO disclosure requirements to foreign companies. While the SEC has started collecting BO data from all extractive companies, including foreign and companies applying for licenses, there are regulatory constraints hindering the publication of BO data given the lack of legal requirements to publish BO data and provisions of the Data Privacy Act. Information on legal owners of companies is available upon request from the SEC’s new platform (SEC Express) at a reasonable fee. Given confidentiality constraints, PH-EITI has worked with companies in the scope of EITI reporting to conclude waivers allowing for the publication of BO data. The 6th PH-EITI Report’s review of BO disclosures lists only 81 extractive companies that had been requested to report this data as of end 2020. The Philippines has established appropriate data quality assurances for BO disclosures. The MSG has published an assessment of the comprehensiveness and reliability of disclosures to date. Yet while information on the filings of companies publicly listed in the Philippines appears to be available online, the MSG does not appear to have published a comprehensive list of all extractive companies that are subsidiaries of companies publicly listed overseas, including references to their statutory filings at their respective stock exchange. Therefore, while the MSG has addressed most aspects of the initial criteria for the Validation of this requirement, there are key gaps related to the lack of an enabling legal environment for the disclosure of beneficial ownership information and the lack of systematic public disclosure of all extractive companies’ BO data given that disclosure consent forms were only requested from the 73 companies in the scope of EITI reporting in 2018.

State participation

2.6 State participation

60

The 6th PH-EITI Report, together with the SOEs' websites, addresses almost all aspects of the requirement, although there are a number of technical gaps such as the lack of information on the terms attached to state equity and participating interests in extractives projects and the lack of consideration of direct state loans and guarantees to extractive companies. Transparency in state participation is an area where SOE disclosures have been mainstreamed from the start, given the quality of SOEs' existing disclosures. While the MSG comments’ clarification of the terms of loans involving PMDC is welcome, they did not clarify the terms of any outstanding loans from the state to any extractive companies. The list of PNOC-EC participating interests in coal, oil and gas projects referenced in the MSG’s comments do not include the terms attached to PNOC-EC’s interest, including its level of responsibility for covering expenses at various phases of the project cycle (e.g. full-paid equity, free equity or carried interest).

4.2 In-kind revenues

Not applicable

The MSG appears to have considered the applicability of Requirement 4.2 based on 2018 data and has publicly documented its conclusions that the requirement was not applicable in 2018.

4.5 SOE transactions

Not applicable

As confirmed in the MSG's comments, the figures for 2018 dividends from SOEs in the 6th PH-EITI Report are related to dividend payments actually made in 2018. It can therefore be concluded that the MSG has adequately demonstrated that the requirement is not applicable in 2018 given that SOE dividends were below the materiality threshold of 2% of sector revenues.

6.2 SOE quasi-fiscal expenditures

Not applicable

It appears that this requirement was not applicable in 2018. While the MSG’s comments only referred to its review of PNOC-EC and PMDC’s financial statements as a basis for assessing the existence of quasi-fiscal expenditures in 2018, there is no evidence or allegations of any quasi-fiscal expenditures in the year under review.

Production and exports

3.2 Production data

90

The Philippines had addressed all aspects of this requirement aside from the publication of production values for crude oil, natural gas, condensate and coal at the start of Validation. However, the MSG has since published estimates of average commodity prices for coal, oil and gas, and related estimates of production values and referenced these in its comments.

3.3 Export data

90

All of the information listed under Requirement 3.3 is publicly available in the Philippines. The MSG’s comments noted that the data had been published with HS code numbers and the associated commodity names, aside from non-metallic minerals. Export information is provided in the Transparency template and since republished in the public summary data file in open data format on the PH-EITI website.

Revenue collection

4.1 Comprehensiveness

60

The Philippines has made progress in addressing the objective of this requirement, but there are gaps in the comprehensiveness of the disclosures of government revenues, particularly from the coal sector. The MSG's approach to materiality remains somewhat unclear and the value of the government's total revenues from the extractive industries, including from industries considered non-material, is not yet public. While the MSG’s comments justified the lack of review of materiality thresholds ahead of EITI reporting for 2018 on the basis that the structure of revenue streams has not changed over the years and that all of the largest producing extractive companies were included in the scope of reporting, the lack of justification for the scope of 2018 reporting on quantitative grounds based on 2018 data is problematic given the potential for non-producing companies to make material payments to government. The lack of reporting by a material companies accounting for a large share of government revenues from the coal sector is a concern. While the 6th PH-EITI Report and MSG’s comments describe the MSG and government's efforts to follow up with the non-reporting companies, there are stakeholder concerns among those consulted over whether the government has undertaken sufficient efforts to ensure participation in EITI reporting by all material companies selected to report. The lack of participation in EITI reporting by the sole material coal company after six years of EITI reporting is a concern, given estimates that the coal sector accounted for 7% of government revenues in 2018. Therefore, the broader objective of comprehensive disclosures cannot yet be considered fulfilled.

4.3 Infrastructure provisions and barter arrangements

Not applicable

The MSG appears to have considered the applicability of Requirement 4.3 based on 2018 data and has publicly documented its conclusions that the requirement was not applicable in 2018.

4.4 Transportation revenues

Not applicable

The MSG appears to have considered the applicability of Requirement 4.4 based on 2018 data and has publicly documented its conclusions that the requirement was not applicable in 2018.

4.7 Level of disaggregation

90

The 6th PH-EITI Report describes the MSG's definition of project and presents reconciled financial data disaggregated by government entity, revenue stream, company and (where relevant) project.

4.8 Data timeliness

90

PH-EITI financial data has been published in a sufficiently timely manner and the MSG has approved the period for reporting, although more information on the MSG's plans to improve the timeliness of reporting would be welcome.

4.9 Data quality and assurance

90

The Philippines has fulfilled the overall objective and has addressed all aspects of the requirement, ensuring that appropriate measures have been taken to ensure the reliability of disclosures of company payments and government revenues from oil, gas and mining. PH-EITI could do more to develop recommendations for the EITI to contribute to strengthening routine government and company audit and assurance systems and practices.

Revenue management

5.1 Distribution of revenues

90

While the 6th PH-EITI Report does not comment on whether all extractive revenues are recorded in the national budget, previous PH-EITI Reports had confirmed that this was the case in previous years. The MSG’s comments referenced assurances from the MGB, DOE and DBM at the MSG’s 70th meeting in June 2021 that this was still the case in 2018 and that no new extra-budgetary extractive industry revenues existed in 2018. It can therefore be assessed that the broader objective of the requirement of ensuring the traceability of extractive revenues to the national budget has been fulfilled.

5.3 Revenue management and expenditures

Not assessed

The MSG has addressed all aspects of this requirement, through PH-EITI reporting as well as relevant government websites. However, there is relatively little information in the public domain about the management of earmarked revenues, such as the Malampaya Fund, aside from a COA audit of the Fund in 2018.

Subnational contributions

4.6 Subnational payments

60

The Philippines has made progress in addressing most aspects of this requirement, but the large number of non-reporting LGUs due to challenges in the ENRDMT system means that the objective of transparency in direct subnational payments cannot yet be considered fulfilled. The ENRDMT system represents an example of best practice in government systematic disclosure of direct subnational payments, which should provide disaggregated data on all subnational revenue flows once technical challenges in the system are addressed.

5.2 Subnational transfers

60

The Philippines has addressed most aspects of this requirement, although the relatively small number of local government units for which subnational transfers are disclosed raises concerns about the comprehensiveness of disclosures of subnational transfers of mining revenues in the 6th PH-EITI Report. Indeed, subnational transfer data was only disclosed for 11 LGUs receiving shares of royalties from mineral reservations and 36 LGUs receiving shares of mineral taxes, which appears low relative to the number of LGUs entitled to receive shares of mineral revenues. While the MSG’s comments noted that the 6th PH-EITI Report’s disclosures of subnational transfers were comprehensive of all LGUs that actually received such transfers in 2018, it does not comment on whether these disclosures are comprehensive of all LGUs that should have received subnational transfers according to the statutory revenue-sharing formula. It would have been necessary to disclose the notional amount of subnational transfers that should have been transferred in 2018, including to LGUs that did not receive their share in 2018. Therefore, the broader objective of enabling stakeholders at the local level to assess whether the transfer and management of subnational transfers of extractive revenues are in line with statutory entitlements cannot yet be considered to be fulfilled.

6.1 Social and environmental expenditures

100

The Philippines has addressed all aspects of this requirement by disclosing mandatory social expenditures as part of mining companies’ SDMP. The MSG's comments confirmed that Annex 20 is comprehensive of all mandatory social expenditures by reporting companies in 2018, and the description of in-kind expenditures and identity of non-government beneficiaries is provided in Annex 20 to the 6th PH-EITI Report. There do not appear to be any mandatory environmental payments to government in 2018. While there are gaps in company reporting due to 11 material companies’ failure to participate in the 6th PH-EITI Report, these gaps are covered under Requirement 4.1 given that they relate to overall company reporting. Therefore, the overall objective of providing a basis for assessing extractive companies’ compliance with their legal and contractual obligations to undertake social and environmental expenditures can be considered fulfilled.

Countries
Philippines