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Mining in South-East Asia: Sitting on a goldmine(The Economist Via Thomson Dialog NewsEdge) Can the region exploit its hidden treasures and keep locals happy, too? METALS prices are sky-high, and countries with well developed mining industries are coining it. A new official forecast says Australia's export earnings from minerals will rise by 22% this year, to about A$62 billion ($47 billion). Its big, poor South-East Asian neighbours would also be earning billions if they had been quicker to exploit their vast, untapped reserves of ores. Mining firms, straining to meet soaring demand, are keen to invest heavily in the region. Governments in the Philippines, Indonesia and even isolationist Myanmar want them to come. But locals' doubts about mining, and their suspicion of foreign mining firms, run deep. Opponents say mines often pollute nearby rivers and seas, damaging the livelihoods of farmers and fishermen; and local communities' rewards for running such risks are paltry, because most tax revenues from mining go to distant national capitals, and the profits disappear abroad. Such ill feelings erupted recently in Indonesia's Papua province, where police and troops were killed in clashes with protesters demanding the closure of a copper mine run by Freeport-McMoRan of America. The protests have damaged Indonesia's drive to attract more foreign investment. Similarly, the Philippine government's ambitious plan to bring in billions of dollars to develop 24 "priority" mining projects is under attack from environmentalists and the country's influential Catholic bishops. The metals boom has recently been raging ()see page 79 An official inquiry led by Arturo Bastes, another anti-mining bishop, said all mineral exploitation at Rapu-Rapu should be stopped until a detailed ecological study was completed. The mine's backer, Lafayette Mining of Australia, was already struggling financially, so any long delay in reopening risked causing its collapse. This would have alarmed the multinational companies preparing to invest heavily in the Philippines, including South Africa's Thistle Mining, Japan's Sumitomo, and BHP Billiton, an Anglo-Australian firm. Determined both to push ahead with mining and to appease the greens and clerics, the Philippine government is letting Rapu-Rapu run for a 30-day trial period. It will be monitored by inspectors and will get its permanent licence back only if it shows it can operate without more spills. The environment ministry says it will put full-time inspectors into all big mines, tighten licensing and punish polluters more severely. Nelia Halcon of the Philippines' Chamber of Mines says the country's environmental rules meet international standards--but must be enforced. What of the critics' other charge, that locals will not benefit? In fact, some locals are grateful for the well paid jobs that mining brings. As with the environmental worries, the way to maximise the benefits to locals is through better government. Mines, like other businesses in the Philippines, are granted tax breaks by various agencies that give little thought to their effect on government revenues. Corruption and inefficiency mean that tax compliance is poor. And the national government sometimes fails to give local authorities the 40% share of mining taxes they are due. Philippine lawmakers are now proposing bills to increase this share to 60% and to ensure the money is not held up in Manila. The government is trying to rein in the over-generous granting of tax breaks. It also hopes to increase revenues through competitive bidding for mining licences. But to encourage bidders, it needs some examples of profitable new mines. Mining firms must also try harder to respond to public concern. Lafayette's boss, David Baker, acknowledges that his firm failed to win the necessary "social licence" from locals, and that Rapu-Rapu's managers, then mostly foreigners, handled the pollution alerts badly, making it easier for activists to exaggerate the damage. A new, Filipino manager now runs the project. Official estimates put the value of the Philippines' mineral reserves at $840 billion in 2002--almost double the country's GDP, and a conservative figure given today's inflated prices. To make the most of these riches, the government and the mining firms need to demonstrate that things have changed, and quickly--otherwise, by the time their new mines open, today's boom might well have turned to bust. |