Philippines Update

Aquino Riding High

President Benigno Aquino is riding a wave of popularity generated by very positive economic data and advances in the battle against official corruption, and his strong support will help his allies at mid-term elections scheduled for May 2013. Aquino’s LP has formed a formidable alliance with the Nacionalista Party and the Nationalist People’s Coalition, and as long as the coalition partners stand to benefit politically from cooperation with the administration, there is every reason to expect that they will continue to do so.
The president has used this favorable political environment to push divisive measures through the legislature, including a “sin tax” on cigarettes and alcohol that has been delayed for 15 years by resistance from industry lobbies. The government is currently pushing a reproductive health bill that faces strong opposition from Catholic groups.
However, with the Congress set to adjourn in February for the election campaign, debate on a tax measure for the mining sector is likely to be put off until the second half of the year, leading to a further delay in on progress on key projects. Aquino has proposed raising the tax on revenues from 2% to 5%–7%, as well as the introduction of a 5% royalty. However, the government-led panel tasked with drafting the new mining bill has yet to reach agreement on the final figures, amid warning from industry leaders that investors will flee if the levies are too onerous.
This puts in question the feasibility of government plans to attract $12 billion in mining investment through 2016, as the president has conditioned the go-ahead for the Tampakan project in South Cotabato province on final passage of the mining bill. Developer Sagittarius Mines, which has been stymied by a provincial ban on open-pit mining, has already pushed the timeline for commencing production back to 2018. Moreover, some operators have announced plans to take legal action if the government abandons the current system of automatic renewal of mining deals.

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