Pacific Strategies and Assessments Inc
Understanding and Managing the
Philippines Political and Security
Risk Environment
Presented by:
Pete Troilo
Business Intelligence Director
Pacific Strategies & Assessments (PSA)
Pacific Strategies and Assessments Inc
Brief History
1930s-50s Large-scale mining begins with about 30 mostly American firms Sector is devastated by World War II
1972-1986 President Ferdinand Marcos nationalizes the mining sector Between 1971-1981 , 45 mines open By 1980, minerals represent over 20% of total exports
Post -Marcos Era Numerous mining mishaps Steady decline in global value of minerals 220 mines close By 1990, minerals represent less than 2% of total exports
1990’s Philippine Mining Act of 1995 Co-authored by Senator Gloria Arroyo Enacted into law in March 1995 by President Fidel Ramos Provides for 40% foreign ownership
Pacific Strategies and Assessments Inc
1995 Mining Act
Deregulated the mining sector and liberalized foreign ownership of
large mining projects
Regarded as a “first-class” and “very liberal” code
The 1996 Marcopper accident ignites nationwide environmental
consciousness and a review of the Act
The Indigenous Peoples Rights Act (IPRA) of 1997 exacerbates
resistance to mining
Debate drags on 8 long years in the Supreme Court – collapses
foreign mining efforts in the Philippines
January 2004, Executive Order (EO) No. 270 or the National Mining
Revitalization Order issued to attract foreign investment
December 2004, the Philippines Supreme Court legalizes 100%
foreign ownership of mining operations
Pacific Strategies and Assessments Inc
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05 06 07 08 09 10
Investment (in Billion US$)
Global Mineral Prices
Period
Trends: Global Mineral Prices & Philippine Mining Investments
Investment
Silver / oz
Copper / lb
Nickel / lb
Assessing the historic correlation between global
mineral prices and Philippine mining investments
Pacific Strategies and Assessments Inc
Socio-Political Challenges
Little genuine political capital spent on supporting foreign mining at the bureaucratic
and grass roots levels
Government processes riddled with corruption and proclivities to push foreign mining
operations into joint venture agreements with questionable local partners
Dominant feudal families control politics/business in every province and often obstruct
foreign mining initiatives
Radical segments of the Catholic Church, environmentalists, NGO’s with global
connections, and communist and Islamic insurgencies are major obstacles to progress
Manipulation of indigenous peoples’ (IP) groups to oppose foreign mining
Cumbersome bureaucratic processes designed to extort foreign companies under the
guise of smuggling prevention and other seemingly beneficial programs
Provincial governors can and have declared their domains no mining
zones in contravention of the Philippines constitution and superseding
national law
Malleable judges can issue Temporary Restraining Orders (TROs)
against foreign mines from any legal jurisdiction in the Philippines
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Aquino’s First Foreign Investment Test
A newly passed environmental code in Mindanao’s South
Cotabato Province that bans open pit mining
The Writ of Kalikasan that authorizes special
environmental courts to issue protection orders against
entities engaged in natural resources investment
Pacific Strategies and Assessments Inc
Characterizing the NPA Threat
PSA data shows that of the total
recorded NPA attacks in 2008 and 2009,
only about 20% targeted or involved
private businesses. Of this total, only
9% targeted foreign firms and a few of
their subcontractors.
PSA has recorded an average of
approximately 20 NPA attacks against
mining firms in 2008 and 2009 and that
appears to be on pace for 2010.
Failed NPA extortion bids, not strict
communist ideology, were the primary
motivation for attacks in all these cases.
BICOL
SOUTHERN MINDANAO
CARAGA
Pacific Strategies and Assessments Inc
Characterizing the NPA Threat
Causes:
Failed extortion or “revolutionary tax” collection bids
Fronts for community opposition
Ways and Means:
Pose as soldiers to gain entry
Community members provide intelligence to launch attacks
Brute force (NPA attacking force strength can range from 1 to 100
members)
Impacts:
Clashes with responding security forces
Burning of property and mining equipment
Theft off firearms, ammunition, and communication equipment
Kidnapping and murder (less common)
Pacific Strategies and Assessments Inc
Analyzing NPA Attacks and Ambushes
One common and predictable NPA tactic is to attack lightly guarded government outposts or remote businesses that have rejected extortion demands to lure responding military and police units to the scene; and then ambush them along the only tertiary road that leads to the original attack site.
The tactic forces the military and police units to respond cautiously or not at all and rarely results in any negative consequences for the NPA.
Philippine Army
58th Infantry Battalion
NPA raid and subsequent ambush on responding
government forces.
NPA attack on private vehicle and subsequent ambush on rescue unit.
National Highway
(paved)
Secondary Road (paved)
Pacific Strategies and Assessments Inc
Securing Operations
Political and security risk due diligence – should we be there or not?
Corporate due diligence on all JV partners and their leading officers/shareholders
Focused security and socio-political assessment of areas of operations down to the municipality level including detailed stakeholder mapping – identification of both immediate and potential risks
Consistent threat intelligence collection, vetting, and monitoring
Crisis management and contingency planning – scenario-based and in detail
Design comprehensive security systems “inside the fence” and robust community relations “outside the fence”
Sustained outreach, constructive relationship building, and consistent contact with community leaders
Pacific Strategies and Assessments Inc
Voluntary Principles on Security and
Human Rights
Main Categories:
Risk Assessment
Interactions: Companies + Public Security
Interactions: Companies + Private Security
Justifications:
Only human rights guidelines designed specifically for oil, gas,
and mining companies
Non-binding and non-prescriptive
Tool to collaborate and synchronize with other key stakeholders
Tool to facilitate and confirm compliance with global standards
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Thank You
Questions?
Pacific Strategies & Assessments Group Hong Kong Manila Bangkok Beijing
Shanghai Sydney
(632) 843-6853 [email protected]
www.psagroup.com