The Philippines is a leading producer of nickel and a significant producer of gold and copper. The country also exports iron ore, chromium, zinc and silver, and produces some oil and gas. The extractive sector makes a relatively small contribution to the national economy, accounting for less than 1% of the country’s GDP and 7% of total exports in 2019.
There is considerable anti-mining sentiment in the country, especially in communities affected by the environmental impacts and displacement of indigenous peoples caused by mining operations. There are also debates about whether local governments are getting their equitable share of natural resource revenues.
The EITI has been used as a platform to show the direct and indirect contributions of the extractive sector to the economy, improve public understanding of the management of natural resources and public availability of data, and create opportunities for stakeholder dialogue and constructive engagement in natural resources management. Philippines EITI (PH-EITI) aims to strengthen systematic disclosures, beneficial ownership and contract transparency, and to expand EITI reporting to cover non-metallic mines, royalty payments to indigenous communities, gender and small-scale mining.
PH-EITI identified the formulation of policy proposals – including processes and mechanisms of natural resources governance – as one of its strategic objectives for 2020-2022.
In 2020, PH-EITI published a scoping study on Women and Large-Scale Mining in the Philippines. The study presents several recommendations for addressing key issues and policy gaps, including amendments to the Philippine Mining Act of 1995 to incorporate gender-sensitive provisions. It also suggests measures for mining companies and local governments on how mining can be more responsive to women and gender issues.
PH-EITI carried out a study on beneficial ownership and politically exposed persons related to extractive companies to examine current disclosure practices, gaps and barriers.
PH-EITI conducted a mainstreaming feasibility study, which aims to inform EITI implementing agencies on how extractives information can be systematically disclosed.
The extractive sector is mainly regulated by the Mining and Geosciences Bureau and Environmental Management Bureau under the Department of Environment and Natural Resources (DENR) and the Department of Energy (DOE). Subject to the President’s approval, the latter departments may enter into petroleum service contracts and coal operating contracts with qualified operators. The Department of Finance (DOF) and its bureaus, such as the Bureau of Internal Revenue (BIR), manage all revenue-related issues.
License and contracts
Mining contracts are negotiated by the Department of Environment and Natural Resources (DENR) with permit holders or mining contractors. Major contract types include exploration permits (EPs), mineral production sharing agreements (MPSAs) and financial and technical assistance agreements (FTAAs) with foreign-owned corporations for large-scale exploration, development and use of mineral resources.
Petroleum service contracts and coal operating contracts are awarded through competitive bidding and negotiations by the Department of Energy. The DOE secretary endorses the awardees to the President for final approval.
In 2019, the Philippines’ Securities and Exchange Commision (SEC) mandated corporations to declare their beneficial owners and their information, including complete name, residential address, nationality, tax identification number, and percentage of ownership or voting rights. The SEC further clarified that this applies to foreign corporations in the Philippines. In 2021, it provided further guidelines on beneficial ownership transparency.
In 2021, PH-EITI launched an online beneficial ownership registry of extractives companies based on company declarations submitted to the SEC and PH-EITI. While many companies partially or fully disclosed beneficial ownership information, the registry is not yet comprehensive.
In 2021, the Philippines became a participating country in Opening Extractives, a global five-year programme delivered by the EITI and Open Ownership to strengthen the availability and use beneficial ownership data.
The Philippines’ Constitution and Local Government Code stipulate that local government units should have an equitable share in the proceeds derived from natural resources developed in their respective areas, and that these should benefit the inhabitants of those jurisdictions.
Local government units are entitled to a 40% share of the national government receipts from the preceding fiscal year from mining taxes, royalties, forestry and fishery charges, and other taxes, fees or charges, and from its share in any co-production, joint venture, or production sharing agreement.
Under the Local Government Code (Sections 289 to 292), shares of natural resource revenues are to be distributed to provinces (20%), municipalities (45%) and districts or barangays (35%), where the natural resources are developed in the respective provinces. Where they are developed in a highly urbanised or independent component city, they are distributed to municipalities (65%) and barangays (35%).
PH-EITI is administered by the Philippines’ Multi-Stakeholder Group (MSG). The MSG is is hosted by the Department of Finance (DOF) and chaired by the DOF Undersecretary Bayani H. Agabin and DOF Assistant Secretary Valery Joy A. Brion (as Alternate Chairperson). It is composed of representatives from government, industry and civil society.
Philippines achieved a moderate overall score (80 points) in implementing the 2019 EITI Standard, following its second Validation. Corrective actions relating to “Stakeholder Engagement” will be reviewed in October 2022. The next Validation is expected to commence in April 2023.