Shovel and sickle

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Shovel and sickle

A bevy of Australian and other foreign mining companies moving into the poverty stricken but mineral-rich Philippines face a number of challenges, among them communist insurgents wielding extortion demands and hit and run raids.

A bevy of Australian and other foreign mining companies moving into the poverty stricken but mineral-rich Philippines face a number of challenges, among them communist insurgents wielding extortion demands and hit and run raids. The insurgents are mostly interested in revenue raising, but a number of mining operations which are refusing to pay-up, or are involved in disputes with local communities, are being opposed outright by the insurgents.

The backdrop is concerted attempts by the national Government of the Philippines to re-invigorate a once substantial mining industry, which largely collapsed in the 1980s. There is the tantalising prospect that tapping a phenomenal $US850 billion in estimated mineral reserves would help ease the pernicious hardship endured by millions of Filipinos.

The powerful Catholic Church of the Philippines has aligned itself with critics of foreign mining firms seeking gold, copper, nickel, silver and platinum. The Church’s complaints are aired peacefully. But in August last year, the Communist Party of the Philippines (CPP), the political wing of the 5000-strong New Peoples’ Army (NPA), said action against “plundering” foreign miners would be stepped-up.

On New Year’s Eve, and again on July 20, heavily armed NPA bands raided Australian-based Xstrata Copper’s mountain camp on the restive southern island of Mindanao. Buildings were burned and drilling equipment destroyed. The Philippine military says two of its soldiers were wounded while pursuing the attackers who carried out the second assault.

There have been seven attacks on mining operations within the past 12 months (see breakout). Of the latest raids on the Xstrata camp, Aotea Risk Consultancy’s Australian executive director, Graeme Campbell, told The Diplomat, “This is going to slow down any mining investment and increase the cost of exploration. People are going to want assurances it can be done in safety.”

There are regular clashes in far-flung parts of the country between NPA insurgents and security forces. In the 1990s, former President Fidel Ramos entered into dialogue with the CPP, but open conflict returned after the election of ex-movie star, Joseph Estrada, in 1998. His nemesis, President Gloria Macapagal Arroyo, has during the past eight years also mostly pursued military and police responses but neutralisation of the NPA seems as far off as ever.

“We are seeing certain belligerency about them at the moment that we have not seen for some time,” says Campbell. “A new generation is signing up.”

The top leaders of the 35 year insurgency are growing old and will have to be replaced. Other factors fuelling the growing membership of the NPA include entrenched poverty and inequality worsened by rising food and fuel prices, widespread official corruption and ruthless military extra-judicial killings of left-wing activists, often university graduates.

There has also been a decentralisation of power away from the CPP’s Central Committee to regional Front Committees and NPA insurgents in outlying areas. That can mean greater autonomy for younger stalwarts, including opportunities to extract funds from isolated and vulnerable exploration camps and mines.

Filipino companies often just meet extortion demands or negotiate a compromise amount. But larger foreign companies tend to fear public exposure for making any such protection payments because the United States has designated the NPA as a terrorist organisation. Industry sources say that it is mostly smaller foreign mining companies that are willing to hand over cash in response to threats. Alternatively, it can be done discreetly through Filipino partners or contacts.

While there is much secrecy on this issue, industry sources suggest some mining companies in Eastern Mindanao, which is dotted with NPA strongholds, pay as much a $US24,000 a month in protection money, resulting in annual proceeds to the NPA of some $US8 million. Insiders suggest this figure could quadruple as new mines come on stream.

In short, the CPP/NPA pledges to combat foreign mining on ideological and equity grounds while insurgents milk the industry for funds. The propaganda war exploits national and localised labour, environmental and other grievances. Higher revenue from extortion allows the NPA to arm recruits and cultivate a “Robin Hood” image with the county’s long-suffering poor. The mining companies compete for hearts and minds by offering jobs, training and other benefits to local communities.

Tom Green, the American executive director of Pacific Strategies & Assessments (PSA), which advises a number of large mining companies on security issues, sees a dangerous trend. “If all mining is going to be subject to extortion attempts in remote areas, it is a problem if the government is not going to provide adequate protection,” he says.

Green notes that the leadership of the Moro Islamic Liberation Front (MILF), based on Mindanao, appears to have lost control of some members within its ranks. With recent military engagements and spluttering peace negotiations centred on greater Muslim autonomy, armed forces holding up an Islamic banner could also get in on the mine extortion racket. “Down there, it is often hard to know just who is carrying guns,” says Green.

The Philippine Government has been facilitating the establishment of squads of local militias called Civilian Armed Forces Geographical Units. But poor arming and training was highlighted by their inability to defend the estimated $US80 billion Xstrata Tampakan project. If Australian and other foreign mining companies see fit to bankroll such militias, as the government apparently expects, there will be even more scope for them to become embroiled in violence, including human rights violations.

Meanwhile, Australian firm Pelican has been embroiled in controversy over the killing in October last year of 42-year-old father of five Arman Marin, allegedly by a company security guard. He was part of a picket against the majority Pelican-owned operation on the island of Sibuyan.

The security officer is still awaiting trial while environmental groups say mine management has filed counter charges of inciting violence against 75 demonstrators, including elementary school teachers. Reports that BHP Billiton intended to buy nickel ore from the Sibuyan Island, described as the Galapagos of the Philippines due to its  unique wildlife, led to BHP Billiton being branded an island-swallowing Godzilla.

Most of the criticism of BHP Billiton, however, has centred on its 2005 acquisition of a Western Mining Corporation proposed mine development on the Pujada Peninsula of Mindanao. Indigenous tribal leaders who were promised royalty payments signed an agreement with seven local mining companies and their “successors” back in 2002.

But now there are tribal divisions. BHP Billiton told The Diplomat that it strictly observes its global health, safety, environmental and community standards in the Philippines. Spokeswoman Samantha Evans added that the contemplated scope of mining on the Pujada Peninsula was reduced significantly to avoid any possible effect on environmentally sensitive areas or wildlife habitats.

In any event, the company had “suspended” the project as a result of a dispute with its local shareholder, Amcor, which is pushing for rapid development of the nickel deposit. The NPA is currently not active in the Pujada Bay area. But it seems highly likely, given national-level environmental debate over the proposal and the potential for community divisions, that the NPA will become involved if the project starts to move forward.

Whether NPA intervention takes the form of “revolutionary tax” extortion or all-out armed harassment could depend on the local NPA commanders involved. At the moment, nickel ore is being sucked out of the Philippines as fast as it is possible to do so, nearly all of it going directly by ship to China or to Queensland for processing by BHP Billiton.

As a customer of nickel ore, the Australian mining giant cannot be expected to be able to remain aloof from security threats to its suppliers as well as the potential for environmental, labour, land and other disputes.

From the third Century AD, Chinese traders referred to the Philippines, where heavy gold earrings still stretch the earlobes of elderly Igorot tribeswomen, as the Isles of Gold. Neighbouring China, hungry for metals and energy, is again on the prowl. The Arroyo Government is keen to do more businesses with China. But there has already been a scandal in the communications sector where politically well-connected figures allegedly sought more than $US130 million in kickbacks from a large Chinese corporation, ZTE.

ZTE has also expressed an interest in establishing mining and agricultural projects in the Philippines. But many Filipinos and much of the mainstream media are suspicious of Chinese tactics, not least those of attaching conditions like resource development rights to billions of dollars in aid.

The same goes for oil and gas exploration in the territorially disputed South China Sea. Passions have run high this year in the Philippines with Government opponents attacking a deal to allow joint Philippines/China/Vietnam seabed research work on the grounds of sovereignty.

On Friday August 8, President Arroyo, in Beijing for the Olympics, witnessed the signing of a cooperation agreement between two Filipino companies headed by her former chief of staff, Michael Defensor, and a Chinese mining company. The agreement was to allow the exploration of nickel and build a $US150 million processing plant north of the capital, Manila. Such political connections to new projects involving China continue to raise eyebrows and be the subject of Philippine media commentary.

As Chinese firms increasingly enter the mining sector – they don’t have any on-the-ground operations in the Philippines yet – the relationship unfolding with the NPA will be an interesting one. But mining industry old hands note that money tends to triumph over ideology. As the Chinese set up exploration bases and then start mining, you can bet they will have their hands out. And Chinese mining companies have something of a reputation for taking the pragmatic approach of paying to be left alone.