NEO-NATIONALISM’S PREMISES & CONTENTIONS / Reform the international financial system

NEO-NATIONALISM’S PREMISES & CONTENTIONS / Reform the international financial system

 

Erle Frayne D. Argonza

 

The global financial system is indubitably a homestead of predatory financiers. Usury and global speculation, the masterpieces of financiers, are the enemies of nations. Usury in international finance is at an all-time high, raising questions about the legality and moral propriety of   current lending practices. Incidentally, the said financiers are the ones who exercise the clout within the International Monetary Fund and the World Bank, whose chiefs have always been CEOs from the bank headquarters of the financiers. The said banks have always acted out as the marketing agents of financial cartels, even as many nations that have followed the austere ‘structural adjustments’ imposed by them have been reduced to paupers.

 

It is high time for ‘white knights’ to appear in global finance, lending money accordingly for developmental and investment purposes at very low interest rates (lower than 1.5% annually) and at very long-term payments (25-50 years). Such institutions are now beginning to appear, but creditors remain cautious about their moves. Such institutions are autonomous from the power orbits of the Western financial cartels, are well niched in Asia (e.g. China), and appear to be creditor-friendly.

The reform though should go beyond the ‘white knight’ route. We must actively participate in Asia’s establishment of its own monetary fund and a single-currency regime, and take a leading role if opportunities allow. It may prove beneficial yet to re-institute a regime of gold reserve standard, which should back up the Asian currency. This same monetary fund will then serve as the regional ‘white knight’ that will provide credit to nations in need in the region and continent. The actions will also accelerate the economic cum political integration of the ASEAN and the economic integration for the entire East Asia, steps that will further stabilize the national economies and continuously sustain their respective growth. Meanwhile, a regional currency can stabilize soon enough upon its launching, that it would be a difficult job for criminal financiers to manipulate it, such as the success of the ‘Euro’ now exhibits to the globe.

 

Still another key intervention measure is the control of predatory speculation through a ‘Tobin tax’ on cross-border currency and related purchases (J. Tobin’s proposal in the early 70s). A tax of 0.75% alone on the current cross-border exchanges, which amounts to $300 Trillions annually, would generate $2.25 Trillions. The said money will then be used to fund the operations of international organizations such as the United Nations, UNDP and authentic international NGOs for social development purposes. The money can also be used by ‘white knight’ financing institutions of international scale. This set of actions will then induce reforms in the other institutions, with chain reaction effects leading to declining speculation in the long run, as the oligarchic bankers/financiers adjust their rates to more competitive rates in the face of challenges coming from global ‘white knights’.

[From: Erle Frayne D. Argonza, “New Nationalism: Grandeur and Glory at Work!”. August 2004. For the Office of External Affairs – Political Cabinet Cluster, Office of the President, Malacaňan Palace.]

NEO-NATIONALISM’S PREMISES & CONTENTIONS / Strengthen national banking and the monetary system

NEO-NATIONALISM’S PREMISES & CONTENTIONS / Strengthen national banking and the monetary system

 

Erle Frayne D. Argonza

 

 

Economic stability at all levels demands the strengthening of a national banking system, and concomitantly the strengthening of monetary system with sovereignty-backed parameters and rules. First and foremost of monetary missions is the re-assertion of the powers of the Constitution of the Republic over the Bangko Sentral ng Pilipinas. Needless to say, the country today faces a weak national bank, and necessarily a weak monetary system engendered by it. Sovereignty questions impede the effective operations of national banking in the country, as indicated by the excessive meddling of the International Monetary Fund, acting as agent of the global financial cartels, in the Bangko Sentral’s operations. The first step should be a thorough investigation by the Congress of the Republic to determine precisely who owns and controls the Bangko Sentral, and conduct related oversight functions to assess the entire consolidated assets of the said bank inclusive of unaccounted precious metals.

Should there be a need to institute maximum monetary controls, the national bank should be mandated by the Congress precisely to exercise such controls through a regime of currency controls, where found warranted. In no way should our national currency be subjected to attacks by predatory financier speculators, as what the latter have been doing from the mid-1997 onwards. Money is the lifeblood of the economy, and rendering our money under a regime of free exchange rates and free trade leaves us extremely vulnerable to the machinations of such greedy forces, further weakening our national economy. Monetary controls are the best antidotes to the ailment of a weak currency. Were it possible to revive a system of gold reserve standard, then let such a strategy be studied and enforced, to ensure stability in monetary concerns and the currency markets.

The interest rate controls should likewise continue, but the state must see to it that the rate regimes are within the bounds of sovereignty parameters, representing thereof the national interest and the subsidiary interests of the various social sectors. And, should conditions warrant, our national bank should be among the key initiators for constituting new supra-national institutions, such as an Asian Monetary Fund, thus signaling our participation in reforming the entire financial & monetary system (see below). Our involvement in an Asian Monetary Fund could be a fitful strategy to finally exit from the International Monetary Fund, further strengthening our national banking and monetary system.

 

[From: Erle Frayne D. Argonza, “New Nationalism: Grandeur and Glory at Work!”. August 2004. For the Office of External Affairs – Political Cabinet Cluster, Office of the President, Malacaňan Palace.]

NEO-NATIONALISM’S PREMISES & CONTENTIONS / Concur co-stewardships with communities affected by extractive industries

NEO-NATIONALISM’S PREMISES & CONTENTIONS / Concur co-stewardships with communities affected by extractive industries

 

Erle Frayne D. Argonza

Our mining sector had been in the doldrums for quite some time now. The production levels of both (a) base metals and (b) precious metals have surely been at lackluster levels. Meantime, logging has been totally banned to arrest further deforestration and its accompanying desertification and soil erosion. It is only in the energy sector where extraction has been impressively high, and the sector is appreciably a very dynamic one even in terms of R&D considerations. We are now at the crossroads concerning such sectors as mining and forest resources, where a revivified extraction is in the pipelines but couldn’t move because of constitutional and/or statutory constraints.

Note that most of the country’s natural resources for extraction are habituated by (a) tribal peoples and (b) migratory slash & burn peasants. Such populations have long ‘guarded’ the resource-rich habitats. It would surely be a faulty policy to drive them away—hidden under the euphemism of ‘relocation’—in order to give way to a mining concessionaire. Likewise would it be unsound to merely integrate some of their members as wage laborers for the extraction operations. Such actions, derived from regarding the people as ‘high disutility’ entities, are plain reactionary, even as they push the populations to the limits, leading to the folks to constitute hostile millennial movements and rebel separatists. The moves are reactionary as they contribute to the weakening of the nation, to the fragmentation of the national community.

The most pro-active path to address the concerned issue is to design and concur stewardship arrangements with the said populations. Three things are addressed by the stewardship: (1) the people will stay in the area, with better housing and amenities, who in turn will monitor and safeguard the entire operational sites; (2) where necessary, the same folks will be employed in the operations and administrative jobs where applicable, on a first priority basis; and, (3) the people will be co-owners of the firm, with equity/stock participation derived through a calibration of their productivity potency, historical role in stewardship of the area, and other variables. It is argued that this stewardship path is the win/win formula for the state, investors (market), and the communities concerned (‘social capital’/civil society). Consequently, the contribution to the GDP through resource extraction jumps up to a historic high level.

 

[From: Erle Frayne D. Argonza, “New Nationalism: Grandeur and Glory at Work!”. August 2004. For the Office of External Affairs – Political Cabinet Cluster, Office of the President, Malacaňan Palace.]

NEO-NATIONALISM’S PREMISES & CONTENTIONS / Continuously open the market to external investors

NEO-NATIONALISM’S PREMISES & CONTENTIONS / Continuously open the market to external investors

 

Erle Frayne D. Argonza

 

National savings continue to hover at a pathetically low rate of seventeen percent (17%), which is significant but is way below the minimum of thirty percent (30%) to render it as ‘critical mass’, like that of our neighbors’. The problem cannot be addressed sufficiently than through a continuing inflow of capital from external investors. Note that in today’s global context, the term ‘foreign capital’ has already lost its meaning, as the boundary between ‘domestic’ and ‘foreign’ has been effectively erased. The cross-country partnering cum out-sourcing arrangements among diverse firms have become the norm of today’s business, rendering obsolete the previously sacrosanct notions of ‘domestic’ capital and ‘foreign’ direct investments. Not only that. Latest researches have verified that transnational corporations or TNCs now tend to create more values within their host countries and reinvest the profits locally than remit them back to their ‘home country’ (a term that has also begun to lost meaning).

This doesn’t mean though that such investors should be served ‘free lunch’, through very long regimes of tax havens or through spurious ‘strike-free zones’ (read: haven for wage freeze) which makes our laborers appear like wild jackals who need to be perpetually gagged. Some forms of valves (capital controls) should also be instituted, so that the capital investments and profits wouldn’t just flow out like hemorrhage the moment that the economy hits cyclical crisis. Surely, pro-active measures can be devised to let the said investors stay, more so for those that truly re-invest their ROI for their original and diversified business concerns, as well as to those that conduct dynamic R&D and truly transfer technology.

 

In today’s globalizing context, corporate ‘national champions’ have become obsolete. The bygone era of ‘national champions’ can still be observed in the names of certain firms, such as in the names Philippine Airlines, Philippine Long Distance Telephone, or in Bank of America, American Express. Asset re-structuring is the norm, and large corporations are becoming rapidly globalized. Mergers and de-mergers are happening at rapidly ‘chaotic’ paces. The circumstances challenge investors/stockholders to quickly grasp the lesson of   ‘thriving on chaos’ or else their ventures would face bankruptcies and foreclosures as what befell many former large ventures, inclusive of former ‘national champions’.

The thought that “foreign capital might harm national interest” is simply passé and out-of-context, in as much as the term ‘foreign’ has lost its meaning save for the antiquarian Old Nationalists who regard foreign things as essentially dangerous (but are they not using foreign frameworks in their perceptions of foreign things?). Let the investors come in, recombine their assets with our domestic investors’, extend their stock participation beyond the forty percent (40%) constitutional limit. Note that “our very own” big corporations are participating in ‘foreign’ countries, and their levels of investment participation go beyond forty percent (40%). It is high time that we readjust our thinking about the matter.

[From: Erle Frayne D. Argonza, “New Nationalism: Grandeur and Glory at Work!”. August 2004. For the Office of External Affairs – Political Cabinet Cluster, Office of the President, Malacaňan Palace.]

NEO-NATIONALISM’S PREMISES & CONTENTIONS / Evolve from ‘capitalist markets’ to ‘social markets’

NEO-NATIONALISM’S PREMISES & CONTENTIONS / Evolve from ‘capitalist markets’ to ‘social markets’

 

Erle Frayne D. Argonza

 

 

The ‘capitalist market’ (or simply ‘market’) is the haven of financial predators and market sharks, while the absence of market is the homestead of the rent-seeker and exclusively-privileged partocrat (single party bureaucrat). As the cases of the ‘mixed economies’ and that of China’s have demonstrated, the market impeccably performs a   pivotal role in stimulating growth & development, and should not be wished away too soon. Rather, we should evolve a market that is not a ‘pure market’ in the classical sense.

As experiences world-wide have transparently indicated, leaving everything to the market redounds to: (a) diminished welfare, as indicated by low wages, low accessibility to social services, high unemployment, and massive exploitation of labor; (b) ecological disaster, indicated by environmental degradation, depleted natural resource base, destruction of indigenous communities and their natural habitats; (c) speculation in the capital and realty markets, leading to further instabilities and proneness to shocks, both internal and external; and, (d) lackluster product innovation due to low value given to S&T development, in societies where there is a lack of entrepreneurs, such as the Philippine case demonstrates.

The balance lies in developing a ‘social market’, where concern for private initiatives as well as for welfare are harmonized and balanced, while at the same time controlling speculation and optimizing conditions that induce innovations. Within the context of a social market, there should increasingly evolve ‘social enterprises’ or collectively-owned enterprises: cooperatives, people’s corporations, grammin, and other related types that are rising though still at an experimental phase. While private enterprises should continue to prevail, large-scale enterprises should begin to innovate on new physical asset-ownership schemes that would eventually see a large portion of the assets co-owned by ordinary folks and corporate employees. In the long run, the ‘social market’ will be a terrain where both wealth gaining and welfare providing functions will be fused exquisitely, signifying the end of state-induced welfare and the return of welfare functions to communities.

[From: Erle Frayne D. Argonza, “New Nationalism: Grandeur and Glory at Work!”. August 2004. For the Office of External Affairs – Political Cabinet Cluster, Office of the President, Malacaňan Palace.]

NEO-NATIONALISM’S PREMISES & CONTENTIONS / People are the most important assets, revise accounting systems!

NEO-NATIONALISM’S PREMISES & CONTENTIONS / People are the most important assets, revise accounting systems!

 

Erle Frayne D. Argonza

 

 

The prevailing mindset perceives assets in terms of physical assets (estates, chattel, monies). Ownership is then defined in terms of right to control and dispose of such assets. Wealth is computed in terms of the values, calibrated through price, created through the utilization of the physical assets. For a while, the classicists introduced the notion of ‘labor theory’ of value, premised upon the value-producing powers of labor. But the efforts of the classicists failed to get translated into acceptable accounting systems, as such systems have always been based on physical assets and prices.

Look at what is happening among various agencies, especially business firms: there is a lot of ‘pirating’ of people going on among them! Likewise are there efforts to retrieve those same people ‘pirated’ by competing agencies. The same event holds true for the state and NGO sectors: ‘piracy’ on grand scales! This phenomenon is a clear manifestation that people, not physical assets, are the most important of all in an organization. When an agency loses good personnel, the effect is instantly debilitating, a debilitation that can be offset only through the timely arrival of replacements who are as good as the ones who left. The converse is also true: when an agency needs people to shore up its output levels, ‘pirate’ high-achievers from other agencies most especially those who have “made a name” in the sector concerned. The piracy of people in the entertainment world is even more instructive in indicating to us the central import of people, not physicals, as value producers. We need not belabor the point that the ‘piracy’ strategy comes often in the form of higher pay scales and incentives.

That is why it pays so much to manage people well, and to design new organizational principles that would bring out the maximum potencies of people most specially the highly talented ones. Bureaucracies have become outdated dinosaurs, as ‘flat organizations’ have become the wave of the present: the new organizations make plenty of room for self-initiatives, resourcefulness and innovativeness by good staff. Bureaucracies, which follow from only two principles—vertical (hierarchy) and horizontal—can stifle innovativeness, as experiences have shown. The ‘task master’ mindset and ‘boss mentality’, as well as the excessive stress on routinary processes, have turned off many achiever personnel most specially the highly talented ones whose nature of work is ‘symbolic/analytic’ (to use Reich’s term). Today, new principles are emerging that are leading to a massive ‘re-engineering of the organization’, such as Total Quality Management or TQM, web organizational structure, team work principles and ‘human resource empowerment’.

Yet inspite of such revolutionary changes and explosion of amazingly appropriate principles about organizations and human resources, no changes are happening in the accounting systems that can correspondingly reproduce the organizational principles taking place. The only appreciable concept is that of GDP Purchasing Power Parity or PPP, which computes total income on the basis of purchasing power of local consumers relative to those of the world’s strongest economy. Using the GDP-PPP, the Philippines’ GDP stood at $379 Billions as of the end of 2003, with GDP-PPP per capita at around $4,600 more or less. (See The World Factbook, 2004, for such index reports.) But this indexing does not in any way address the accounting question raised here.

Should the notion of ‘human capital’ become popular, the accounting system should consequently follow. The notions of ownership would then change, indicating the revolutionary implications of the paradigm shift. Those pretending ‘radicals’ of the day, many of whom are steeped in 19^th century socialist thought, tend to view the asset realm from the focal lenses of antiquated Victorian-era ownership concepts, and are no less conservative than the oligarchs they sordidly hate. They offer no radical solutions beyond changing (antiquated) asset ownership, strategies that eventually stifle innovativeness and human expression, as criminal Stalinist regimes have shown. New Nationalism must take on the challenge of presenting a far more revolutionary concept that can, in the end, contribute to evolving a strong base of ‘human capital’, ‘social capital’ and ‘strong nation’.

[From: Erle Frayne D. Argonza, “New Nationalism: Grandeur and Glory at Work!”. August 2004. For the Office of External Affairs – Political Cabinet Cluster, Office of the President, Malacaňan Palace.]

NEO-NATIONALISM’S PREMISES & CONTENTIONS / Promote synergy with civil society in the development path

 

NEO-NATIONALISM’S PREMISES & CONTENTIONS / Promote synergy with civil society in the development path

 

Erle Frayne D. Argonza

In the old formulations, development was an exclusive endeavor of state and market players. That is, the directions of development were largely the handiworks of political, bureaucratic and corporate elites. There should be an admission that this structural formulation was a factor in generating the crisis-level ailments of mass poverty, large-scale unemployment, low wages, sluggish growth and dependence. So why retain a formula that had failed us miserably?

The current context, where a dynamic and colossal civil society operates, points to the ever-growing recognition of the potent role of civil society in co-determining the compass of development. At the grassroots level, development efforts will be accelerated to a great extent by involving civil society formations acting as ‘social capital’ base, as studies have positively demonstrated (citations from Peter Evans’ works on ‘state-society synergy’). Insulating the state from grassroots folks, as the same studies have shown, have produced dismal if not tragic effects, e.g. India’s non-involvement of ‘social capital’ in the erection and maintenance of irrigation facilities resulted to program failure in the end.

Building and maintaining ecologically sound, clean cities can likewise be effected through the tri-partnership of state, civil society and market, as demonstrated by the Puerto Princesa case. Under the stewardship of the dynamic city mayor (Mr. Hagedorn), the tri-partnership was galvanized. Businesses have since been conscious of operating on clean technologies and environmental responsibilities, city streets sustain hygienic images, traffic is well managed as motorists exude discipline, and civil society groups constantly monitor the initiatives that saw their hands dipped into their (initiatives) making. All we need to do is replicate this same Puerto Princesan trilateral partnering at all level and in all communities to ensure better results for our development efforts.

The ‘state-society synergy’ in our country had just recently been appreciated and grasped by many state players. Being at its ‘take-off’ phase, it is understandable that synergy is only a lip-service among many state players, notably the local officials. State players still regard civil society groups with ambivalence, while civil society groups are suspicious of state players whose sincerity can only be as low as their Machiavellian propensities would dictate. Such local state players desire to subordinate civil society groups, and many politicians have constituted ‘government-initiated NGOs’ or GRINGOS as cases of non-authentic subordinated groups. On the other hand, local-level volunteer groups can at best perceive domestic politicians as ‘Santa Claus’ providers, and utilize them largely as gift-giving patrons. Strengthening state-society synergy has a long way to yet, but it is not exactly starting at ground zero in this country. It is, by and large, a core variable in developing citizenry and constituencies, and must be advanced beyond its current take-off phase.

 

 

[From: Erle Frayne D. Argonza, “New Nationalism: Grandeur and Glory at Work!”. August 2004. For the Office of External Affairs – Political Cabinet Cluster, Office of the President, Malacaňan Palace.]

 

NEO-NATIONALISM’S PREMISES & CONTENTIONS / Go back to basic needs

NEO-NATIONALISM’S PREMISES & CONTENTIONS / Go back to basic needs

 

Erle Frayne D. Argonza

 

 

“Spend for your needs but save as much as you can!” would be an apt idiom that could encapsulate the need to build up national savings within the context of an increasingly consumer-driven economy. It is argued that moderate consumption would be a most fitting behavior in today’s context, while under-consumption and over-consumption are out as they could burn us all out in the process. Consumption saved the day for us in the aftermath of the Asian crisis in 1997, so there is no reason to be morally repulsive about consumerism—provided that it should be a moderated consumerism. Low consumerism brings us back to export-driven strategies, our aggregated wealth production subjected to the vagaries of external markets that are beyond our control; high consumerism, contributing further to high debt levels, as the credit card culture entice people to acquire more articles of consumption through debts, perennially driving our economy to ‘bubble bursts’.

The emerging situation should have taught our market players the appropriate lessons at this time. The era of omnipresent and omnipotent markets—for goods of relatively ageless utility, stored in large inventories—is now a foregone era. What we have now is fragmented markets (chaos economics explains this well; see Tom Peters’ works), so the adjustment would be in the form of market niches. Market players should veer away from storing large inventories of a broad array of products, as obsolescence and changing consumer taste undermine the profit-gaining side of such a practice. Rather, they should be sensitive to emerging demands, and customize services and/or tangible goods based on such demands. We Filipinos particularly change taste so often, “madaling magsawa” as we say it in the vernacular. Which means that fixed products, based on fixed ideas, are simply out of context and out-of-date, and must be reformulated towards more flexible product mixes matrixed with constantly emerging ideas.

On a macro-scale, there is the continuing need to ensure ‘food security’ and its expression in other sectors as well. We should continue to be sensitive to the needs of the larger economy, such as the need for capital goods. We should design ‘vital & strategic commodity security’ frameworks and policies through a combination of domestic production of such goods as well as importation strategies. The continuing absence of strategic industries such as integrated steel could prove degenerative for development efforts such as it has done to our country, while completely shutting us off the international markets for some other goods could likewise be deleterious in the long run since domestic producers would be exercising rent-seeking, pricing articles way beyond five hundred percent (500%) of their opportunity costs as amply demonstrated by industrial chemicals (before the country began importing from China). As current experiments in grain & livestock management show, with appreciable success, the strategy should be to combine domestically produced goods with imported articles, the proper mix of which should be the subject of continuing eco-scanning and constant studies. In the end, all of our individual, community and national needs will be met, building stability and security amid a ‘chaotic’ or turbulent global condition.

[From: Erle Frayne D. Argonza, “New Nationalism: Grandeur and Glory at Work!”. August 2004. For the Office of External Affairs – Political Cabinet Cluster, Office of the President, Malacaňan Palace.]

NEO-NATIONALISM’S PREMISES & CONTENTIONS / Make room for value-based & integrated frameworks

NEO-NATIONALISM’S PREMISES & CONTENTIONS / Make room for value-based & integrated frameworks

 

Erle Frayne D. Argonza

 

 

Not only should we look up to the West for paradigms with which to construct frameworks and models of growth & development. We should also welcome the initiatives of our emerging thinkers and practitioner-gurus to integrate the Eastern paradigms in their conceptualizations, system designs and related matters. These efforts will fortify our understanding of economics, Philippine-style, in as much as we are a people forged in the cultural smelters of both Eastern and Western civilizations.

Among civil society groups, the modeling of entrepreneurship and social enterprises based on integrated East-West paradigms have been demonstrated with success and clarity. We should welcome such perspectives, and do our share of the task to transport such frameworks from the margins to the mainstream of national consciousness. The resultant frameworks are often value-based in form, though they do not necessarily shun scientistic/empiricist treatment of economic problems. The common theme among such frameworks is synergy: an interconnection among various ‘social enterprises’ and NGOs reaching a far broader scale, resulting to a broad   movement. This I am well aware of, having immersed myself in civil society for a long time in the past.

[From: Erle Frayne D. Argonza, “New Nationalism: Grandeur and Glory at Work!”. August 2004. For the Office of External Affairs – Political Cabinet Cluster, Office of the President, Malacaňan Palace.]

SCARCITY VERSUS ABUNDANCE: THE CONTINENTAL DIVIDE

SCARCITY VERSUS ABUNDANCE: THE CONTINENTAL DIVIDE

Erle Frayne D. Argonza

The Continental Divide—between Euro-America (Europe, North America, Latin America) and Asia-Pacific—is no mere geographical cleavage, but more importantly cultural-civilizational. In economic doctrines, the division lies in the core premise that underpins all other economic variables and the social class arrangements that constitute the base for appropriating the values of the totality of efforts of production, distribution, consumption and exchange. While Western thinkers premise economic realities on scarcity, the Eastern thinkers notably sages presuppose the same on abundance.

The foundational doctrines of Western political economy—mercantilism and physiocracy—were both premised on scarcity. All other doctrines that emerged thereafter, inclusive of socialism, neo-classicism and marginalism, proceeded from the same premise. The most popular socialist thinker, K. Marx, envisioned a society of abundance, rationalizing such a vision on the presumed reality of scarcity (of resources) and its attendant effect, mitigated by social structures, of pauperization on the proletariat. This ‘scarcity premise’ is indubitably a hallmark of Western discourse.

Eastern discourse raises questions about such a premise. Among all Eastern thinkers, it was Gandhi who most succinctly articulated the difference. To the folks of the East, daily living is a reality of abundance, such an abundance abetted by continuous resource materialization and allocation as graces from the transcendent spheres. With the caveat, to note, that people live according to their needs. Accordingly, the planet has more than enough for everyone’s needs, but not enough for everyone’s greed. What could be wiser today than the said dictum, so simple in structure yet so profound in substance? (Review also Buddhist economics, Sarkar’s ‘progressive utilization theory’, Sri Aurobindo’s vedic economics, Baha’i economics, Vivekananda’s socialist visions.)

I couldn’t but agree more with the Eastern discursive stream than with the Western ones. Why, let us query, do Filipinos keep on eating the whole day, sliding inputs down their stomachs as much as five (5) times a day? And why don’t the Filipinos save surplus money at all (many folks don’t even maintain back accounts)? That is because deep within their psyche, in the antechambers of their ‘collective unconscious’, resides the presupposition of abundance. Mother earth provides, the country provides, so why save for tomorrow, and why not consume that which is offered unto you when you arrive as a visitor amongst the town & country folks, such offerings being graces from God and His most divine minions?

Among ancient islanders, it was a vice to store resources (savings) for oneself, as this is a hoarding practice. Reciprocity then was the economic norm of behavior. When a household cooks nilupak, and a surplus of the delicacy is gathered after the eating, then the virtuous behavior is to share the excess nilupak among neighbors and kins rather than hoard it; and, conversely, it was a vice (read: very bad behavior) to throw away (surplus) that which has been provided for by Bathala and the anitos.

Surely, economic theorizing that is so deeply steeped in Western streams will never get to the bottom of the reality of Filipino economic behavior. Flawed premises breed flawed models that consequently produce flawed explanatory constructs and flawed practices on the developmental sphere. To a great extent, the Filipinos continue to retain, rather unconsciously, the reciprocity-based ‘systems’ of antiquity, contributing in no small measure to their bayanihan mode of adaptation. This reciprocity helps them to survive disasters and permits them to adapt quickly to new environments that are strongly cash-based, such as urban centers. It is also the basis for creating Filipino ‘social capital’ (Peter Evans had articulated well on the principle) as human asset accretions arising from networks of volunteer social groups (civil society), the kind of capital that is a catalytic factor in various development endeavors.

New Nationalism may have to find an effective bridge between the two. What is sure for now is that the exchange systems of redistribution (feudalism) and markets (capitalism), both imposed upon the islanders by Western empires, have undermined the Asian or ‘Islander Way’ of reciprocity premised on abundance. During the time of Gat J. Rizal, the islands were able to provide more than enough for everyone else, no matter how harsh the Latin-Hispanic feudal system was to the folks who were subsumed in its enclaves. Today, with over eighty (80) million people populating the archipelago, reality had assumed the scarcity mode, making us believe that scarcity has been the premise since antiquity.

The bridge between the East and West will be institutionalized through the popularization of a needs-based philosophy. However, the consumerism that is the hallmark of a revivified market strongly erodes a needs-based discourse. There surely is a dynamic tension between ‘basic needs’ and consumerism, and such a tension will be a chief definer of the premise’s compass in the succeeding decades.

[From: Erle Frayne D. Argonza, “New Nationalism: Grandeur and Glory at Work!”. August 2004. For the Office of External Affairs – Political Cabinet Cluster, Office of the President, Malacaňan Palace.]

FOOD WARS ARE COMING, PREPARE!

Erle Frayne D. Argonza

Food wars are coming, prepare for the contingencies! This is now a visible possibility, so all those enthused development stakeholders and peace-builders better insert an extra agendum on their ‘key result areas’.

Given the so many sources of conflict that are natural resources related, the latest ones being the ‘water wars’, it is no longer a remote possibility that food wars will erupt in some ‘hot soup spots’ in the world. Such hot spots are not those ones the world knows today (e.g. Iraq, Iran, Afghanistan, Korean Peninsula, Taiwan-China strait) that can be potential starting points for great wars. But somehow, the areas and the food wars coming can ‘cross-cut’ the issues involving conflicts in the hot spots we know.

The scenario would be as follows:

· A convergence of volatilities in the global market would, at one conjuncture, lead to simultaneous price increases in food, oil/energy, metals, utilities. Hoarding then takes place at alarmingly uncontrollable levels. Shockingly, the old ‘policy tools’ to control prices and hoarding won’t work.

· Massive urban riots and upheavals in the affected rural areas take place. New militia groups will rise almost overnight, challenging both national armies and established warlord and rebel groups where these are found.

· Noticing that their own food, energy, base metal stocks are near or pass the critical points, affected states will then turn blind eye to the militias. Tying up with underworld for arms and information, the militias would then conduct quick eco-scan of neighboring countries that are relatively porous for food ransack operations. Key areas would be mapped out as professionally as possible.

· Noticing their own relative porosity, the panic response of affected food supplier states would be to plug their borders as quickly as they can before hothead militias come. They may do panic last-level talks with the state leaders of neighboring countries, who in turn will simply claim that they do not control warlord/militia groups at all. They may send token protection groups at the border.

· Anticipating such moves, the militias, forming cross-country alliances, will mount a coordinated surprise attack. Invasive entries will be done from around 5-6 country origins, using both dawn and dusk attacks. Simultaneous attacks via air, sea, land, rivers & lakes will be mounted on all fronts.

· Effectively unable to prevent the coordinated invasion, the national army/police of the affected state will watch in horror as the rapid moving invaders coalesce with internal players (‘dog of wars’ supplied by local mafia or related groups) to open and ransack warehouses.

· The invaders will then retreat back to their base origins as quick as they’ve entered the porous state. Hot pursuit is simply nil, save for a few sporadic gunfights with retreating forces.

· The affected state will then demand for indemnification or equivalent payment from the militias’ respective states, none of which may come at all. Given the already burgeoning subsidies by states to shore up domestic supplies and prevent further civil unrest due to the crisis, the states will simply have no resource for indemnification. To print more money for indemnification would be to risk hyper-inflation on top of an already inflationary environment.

· With hardly any sincere face-saving moves by the militias’ states, the affected state may then be provoked into a ‘call to arms’ and do some punitive attacks on some quick neighbors. It can also unleash the firepower of rebel groups from the ransacking countries that are based in its territory, arm these groups and make them lead punitive attacks.

· Unless cooler heads prevail in the region, a regional conflagration could ensue, hence widening the latitudes of the conflict. The original ‘hot soup’ for the stomach then turns to a ‘hot caldron’ of total war. Multilateral efforts may fail for a time, as the conflicts happen in at least three (3) world regions.

Partners in development and peace, this scenario can no longer be ignored today. Let us all prepare for the eventuality. If it can be stopped by cutting off the bud before it blooms, whatever that may take, then let’s better do it as soon as we can. Time is now against us, I believe, as events are moving so fast they happen as soon as we forecast them, like the formation of the food cartels.

If there would still be time to constitute strategic studies teams that can eco-scan the planet and identify possible ‘hot soup spots’, this would be a welcome move. Failing to recognize the evolving contingency, let’s not get shocked at all when the paramilitary ‘dogs of war’ will be at the gates of the bereaved states. They deserve some ‘hot soup’ after all, we may surmise.

 

[Writ 04 May 2008, Quezon City, MetroManila]

EMERGING MARKETS: GLOBAL GROWTH DRIVERS, FIREWALL ECONOMIES

EMERGING MARKETS: GLOBAL GROWTH DRIVERS, FIREWALL ECONOMIES

 

Erle Frayne D. Argonza

 

Global economic growth has shown a sputtering pattern over the last couples of years. The EU-USA-Japan 1^st World corridor has particularly been the lackluster topguns, mired as they are in vicious cycles of recession, near zero growth, and ‘virtual economy’ strategies that only deepened their entrapment in the cul de sac they’re in.

 

Salving the global economic health since the opening yet of the new millennium are the Emerging Markets. Learning the lessons from the 1^st World’s mistakes, the Emerging Markets instituted regulatory measures and related strategies that enabled them to build ‘firewall’ economies.

 

A ‘firewall’ economy is sealed from the global economic turmoils emanating from the 1^st World countries. Remaining unaffected as such, they are able to sustain growth patterns that are impeccable manifestations of their trajectories of ‘virtuous circle’ of growth & development. Growing in unison, though at variance in total aggregate growth, they altogether keep the global economy afloat, thus saving many workers in the developing world from the devastating blows of market conflagrations which the 1^st World countries are tragically situated.

 

Emerging Markets are largely 2^nd World or Middle Income economies, a fact that many blind simpletons in their own backyards and the 1^st World fail to see nor understand. Once an economy breaches the U.S. $1,000 per capita, it qualifies as 2^nd World economy. Another criterion is the population composition: over half are in services and industries. Industrialization is, of course, rapid.

 

Emerging Markets are unique in that (a) each one of them has large populations and (b) very significantly large percentage of Middle Income earners among their people (i.e. family earning $6,000-$30,000). Large populations fulfill their labor needs at all times, and the total aggregate values of goods produced by such large populations make total national income consistently large, assuming sustained significant-to-high-level growth.

 

Top qualifiers that are recognized as ‘lead countries’ of the Emerging Markets are the BRIC:

• Brazil
• Russia
• India
• China

 

Following closely behind the BRIC are the Next 11, namely:

• Bangladesh
• Egypt
• Indonesia
• Iran
• Mexico
• Nigeria
• Pakistan
• Philippines
• South Korea
• Turkey
• Vietnam

 

South Korea is the only odd one out, as it’s economy is already 1^st World or ‘overdeveloped’ in stage. It is one of the Dragon Economies of East Asia that includes, to recall, Hong Kong, Taiwan, and Singapore. It’s close ties to the Developing Countries or DCs, from which it came from, remains though, as exhibited by trade and cultural interactions with the DCs.

 

Other DCs that are smaller in populations, though nonetheless part of the developing world and contributors to global growth, are the Malaysia, Thailand, Singapore, South Africa, Argentina, and Chile. Malaysia, Thailand, and Singapore are engaged members of ASEAN that will unify into a common market next year, which will make the entire region a gigantic growth corridor that is indubitably among the world’s topguns.

 

To sum up the broad strategies of the Emerging Markets + Tiger & Dragon Economies that enabled ‘firewall’ against global turbulence, these are:

• Putting breaks on predatory finance via monetary and capital controls.
• Consistent, persistent, yet resilient reliance on the ‘physical economy’ as basis for wealth production—agriculture, manufacturing, infrastructure, transport & communications, science & technology—that are their domestic economic drivers.
• Shoring up their Foreign Exchange Reserves at levels sufficient to effect elasticity against global turmoils and buy several months worth of imports.

 

Needless to say, the Emerging Markets will be graduating to 1^st World economy status one by one across the coming decades. By 2030, their collective wealth put together will more than surpass the combined wealth of the EU-USA-Japan. Enabled to aid other developing countries move up the ladder of success, they are exemplars of ‘inclusive growth’ that hopefully will eradicate poverty across the globe well before 2050.

 

Contrast that to the ‘exclusive growth’ of the North 1^st World (EU-USA-Japan) powers that industrialized and enriched themselves at the expense of the developing countries or DCs that the former encumbered via investments, trade, and aid. The Northern powers in particular have histories of destroying nations and populations via two (2) world wars and many more conflicts, or using coercive instruments disguised as “soft power” or maintaining “peace”.

 

As the Emerging Markets have been showing the way, new models of development are now available for the poorer DCs which the West/North just can’t destroy any longer via IMF austerity programs (IMF is a stooge institution of predatory financiers). Rest assured there will be wider breathing spaces for comfort & prosperity in the long run by the working peoples of both Emerging Markets (& DC allies) and those of the 1^st World as well who seems to have been excluded from prosperity by their own greedy politicians and elites.

 

[Manila, 08 January 2014]

POWER SHIFT FROM WEST TO EAST NOW COMPLETE

POWER SHIFT FROM WEST TO EAST NOW COMPLETE

 

Erle Frayne D. Argonza

 

Gracious Day to you fellow global citizens!

 

“Young Man, Go East!” was John Naisbitt’s challenging call unto the youth of the west who are eager to search for opportunities in life. In the late 90s yet, he released his social forecast book Megatrends Asia, which sums up macro- trends happening in Asia that all point out to the compass of economic and cultural growth of the 21^st millennium: East will be center of global development.

 

Futurologists or social forecasters from the West, beginning with Oswald Spengler and Arnold Toynbee a century ago, forewarned the West of the eventual decline in the future. Toynbee used a cyclical wave model to show that a civilization or ‘high culture’ lasts only for 2,000 years, after which it will decline rapidly.

 

Indo-European ‘high cultures’ were nearing the end of that 2000-year cycle in the early 1900s, which prompted futurologists to write daring forecasts of what’s in store for the West in general. Though accordingly the West will sustain the momentum towards high levels of technological development, the overall civilizational maturity has been reached as was nearing the terminal end phase.

 

The American sociologist Daniel Bell followed up on the social forecasts in his brilliant discourses on the Post-Industrial society. Writing in the 1950s yet, upon seeing some Asian economies jettison their amazing industrial growth, predicted that the end of the Western prominence, both techno-economically and culturally, is already at hand. He daringly registered that the year 2013 will be the precise year of the civilizational shift.

 

It took yet younger social forecasters, notably Alvin Toffler and John Naisbitt, to follow up on the emerging global developments and observe the amazing rise of Asian ‘dragons’ and ‘tigers’. By the 1990s, both thinkers held the convergent opinion that Asia will be the trend-setter techno-economically and culturally in the forthcoming 21^st century.

  

To complete the picture of global rise to prominence of Asia, Immanuel Wallerstein, then president of the American Sociological Society, explained in the late 1990s that civilization was actually moving towards the East by the 16^th century yet. Tragically, the Western powers intervened to undercut that process, colonized the East via imperious methods of encumbrances, and ended what could have been a gargantuan awesome experience of East-led global development.

 

As Western imperialism, colonialism, and hegemonism considerably declined by the latter part of the 20^th century, so was the momentum of techno-economic, political, and cultural development propelled in the East.  By the latter years of the 1990s, there was no more doubting the predictions made by social forecasters that indeed the compass of civilization will soon move to the East.

 

Upon the catastrophic entrapment of the economies of Europe, USA, and Japan in short recessions that congealed into a Great Recession in 2007, the momentum was finally lost on the West. Japan was only partly saved due to its Asian location and trade positioning strategies, though its economy was flat since 1994 yet. By early 2008, Western global observers released their consensual evaluation that Asia already overtook the West in cutting edge technologies by the end of 2007.

 

By global observers I mean those coming from international magazines, thinktanks, and academe. The economic analysts of the Time Magazine, Far Eastern Economic Review, The Guardian, and Newsweek, for instance, came up with that very upbeat observation, as Asia was growing while the West was stagnating technologically and crashing down economically.

 

It’s now 2014 and many developments that boggle the mind did happen since 2007. As far as wealth production from the ‘physical economy’ is concerned, Asia is leading and showing the way towards keeping the global economy afloat. The West, on the other hand, is mired in ‘bubble economy’ or ‘virtual economy’ cul de sac, which promises only short-cycle growths that can burst again in the near future.

 

The power shift is now complete, though the shift doesn’t mean that the East will supplant the West in global importance. The Eastern mind thinks in terms of inclusive development, in contradistinction from the Western mind that is binary/dichotomous, zero-sum in practice, and pursues development at the expense of the small nations of East and South.

 

Western peoples better accustom themselves to the emerging reality and cease to be bellicose and hostile towards the Eastern peoples whom they pejoratively condescended upon for centuries as “monkeys” or “halfway between man and ape.” Civilization’s root word is ‘civility’, and that means if some nations become prosperous, so must all nations be some day, all marching together in a global ethos of goodwill and cooperation rather than destroying the weaker ones.

 

[Manila, 01 January, 2014]

OBSERVATIONS AND POSSIBLE ADVOCACY POSITIONS REGARDING THE MINING SECTOR

April 28, 2008

 

Erle Frayne D. Argonza

 

Date: 10 February 2005

 

[Written for the Office of the President/multi-agency task force on mining advocacy.]

 

BACKGROUND

 

The paper summarizes the observations of this analyst regarding the mining sector. Some prospective advocacy positions are advanced at the concluding part of the report. The references were largely the Mining Act and related reports coming from the DENR

 

Being a constituency-enabling agency, this organization most appropriately considers the ‘constituency criterion’ in addressing problems/issues of advocacy. That is, in regard to mining, the relevant question is: do the constituency groups benefit at all from a revitalized mining sector? This paper will try to answer this question in particular.

 

DEFINITION OF TERMS

 

For easier comprehension, a number of key terms are operationally defined as follows:

 

State: Government of the Republic of the Philippines, with all of its agencies and instrumentalities.

 

Market: All economic institutions aimed at seeking profits, notably: single proprietorships, partnerships and corporations.

 

Civil Society: Non-profit institutions, specifically: NGOs, Peoples Organizations or POs, brotherhoods/sisterhoods & civic clubs, associations (in the generic sense) and cooperatives and social enterprises (civil society with market functions).

 

Community: Territorially-bound, localized grouping of people, with associational life and unique culture.

 

Constituencies: Social sectors, localized community groups.

 

POTENTIALITIES, BARRIERS, ADDRESSING PROBLEMS

 

The developmental and wealth-producing potentials of the mining sector are enormous. The sector is noticeably in the doldrums though. Inspite of the enormous levels of mineral resources possessed by the nation, the (mining) sector produces only around 1% of the GDP, and employs merely 104,000 human resources or 0.30% of the labor force.  Barriers to entry of market players combine institutional, policy, fiscal, technological, environmental, infrastructural and micro-level productions factors. A combination of technological, environmental and financial factors led to the closure of big metallic mineral producers in particular (i.e. Atlas , Marcopper, Lepanto, Dizon).

 

Legislative measures were enacted to address the policy side of the sector.  Among these are: (a) Presidential Decree No. 1899, “Establishing Small-Scale Mining As A Dimension In Mineral Development,” and (b) Republic Act No. 7942, the Philippine Mining Act of 1995. DENR Administrative Order No. 96-40 was put into place in 1997 to serve as the administrative framework of the sector.

 

A debate raged for some time regarding the constitutionality of the Mining Act. The debate had since been resolved, with the Supreme Court deciding to defend the legality and propriety of permitting foreign investors to engage in mining within the Philippine territory, both onshore and offshore, at a 100% ownership scheme. The SC decision finally resolved a key policy barrier, and is expected to lead to synergy of efforts between the state and the market to revitalize mining activities and increase mining’s contribution to GDP in the short run.

 

POLICY ENVIRONMENT AMID SHIFTING POLITICAL REALITIES

 

Based on a review of the Mining Act of 1995, it can be inferred that the policy environment for the sector had become more definitive. Such a definitiveness had encouraged more market players to signify their intention to participate in the sector, from exploration to extraction. However, ambiguities lie in the operational side of the policy, which has implications to revising the present policy. It is quite premature to say though that a comprehensive national policy on mining prevails, this being the product of series of trilateral talks among state, market and civil society players.

 

As can be observed from the introductory provisions of the law, mining intervention is largely a state-market synergy. To quote Section 2 (Declaration of Policy) of Chapter 1 (Introductory Provisions):

 

It shall be the responsibility of the State to promote their rational exploration, development, utilization and conservation through the combined efforts of government and the private sector…

 

Such a policy statement that delimits mining to a state-market synergy, without civil society provision, is explained by the fact that liberal economic policies were the wave of the past three (3) decades when the law came out. The ‘ideological field’ changed the states’ role from ‘provider state’ to ‘enabler state’, while providing greater space for market players to operate—presumably on ‘level playing field’. The policy regime comprised of: liberalization, deregulation, privatization, decentralization, tax reforms, downsizing, and liberalized currency exchange.

 

However, while the policy statement excluded civil society, the other chapters of the law provides for the roles of civil society players along the various phases of mining operations. Invariably mentioned were the following players: NGOs, cooperatives, associations, indigenous cultural communities or IPs, and local communities. This is in addition to small-scale miners covered by previous laws.

 

Such a recognition of civil society as industry stakeholder is a response to the broad challenges posed by a strong civil society on state and market players to fast-track the  redistribution of power, resources and values. Even traditionally market-oriented sectors and engagements must provide space for civil society to participate in the sector, while corporate social responsibility turned into a powerful wave in the corporate world.

 

In sum, using a typical cost-benefit analysis, the policy environment has become more definitive so as to ensure that a revitalized mining would economically benefit market players, most specially but not exclusively corporate players, as well as government coffers in terms of added taxation (e.g. excise tax). However, there are remaining kinks concerning the social and economic benefits of communities and constituencies, or civil society, that must be addressed. Hopefully, a Comprehensive National Policy will eventually address the ambiguities in the constituency side of the equation.

 

While relevant issues concerning civil society stakeholders are not sufficiently addressed, thorny questions will be raised and tensions will prevail during the implementation of the Mining Act. Many detractors will claim that civil society has been reduced to a kibitzer in the Mining Act and related documents, a contention that is not altogether invalid. The Mining Act campaign of government will also be largely biased for market players in the absence of more definitive provisions for civil society benefits. The constituency side must therefore be addressed with immediacy and dispatch, to avoid making the mining sector a mitigating factor in destabilization campaigns.

 

PROVISIONS CONCERNING CONSTITUENCIES/CIVIL SOCIETY

 

Non-Governmental Organizations

 

Among the functions of NGOs is policing mining activities. Ch. 2 (Authority of the  Bureau) stipulates that “the Director may deputize, when necessary, …duly registered nongovernmental organization (NGO) or any qualified person to police all mining activities.”

 

Another important role of NGOs concerns the environmental side of mining. Section 70 (Environmental Impact Assessment) under Chapter 11 (Safety and Environmental Protection) stipulated the following:

 

That a completed ecological profile of the proposed mining area also constitute part of the environmental assessment. People’s organizations and nongovernmental organizations shall be allowed and encouraged to participate in ensuring that contractors/permittees shall observe all the requirements of environmental protection.

 

 

Indigenous Peoples

 

The Mining Act was very clear about IPs as stakeholders in the sector, from the exploration phase through the post-production phases such as royalty provisions. Chapter 3 (Scope of Application) contained two (2) relevant sections on IPs, to note:

 

Sec . 16. Opening of Ancestral Lands for Mining Operations. No ancestral land shall be opened for mining operations without the prior consent of the indigenous cultural community concerned.

 

Sec. 17. Royalty Payments for Indigenous Cultural Communities. In the event of an agreement with an indigenous cultural community pursuant to the preceding section, the royalty payment, upon utilization of the minerals shall be agreed upon by the parties. The said royalty shall form part of a trust fund for the socio-economic well-being of the indigenous cultural community.

 

It can be remarked that the provisions are progressive enough. However, Section 17 does not contain specific  benchmark ceilings that define how much can the IP community receive as royalties. In the absence of such a benchmark ceiling, the IP group can end up at the losing end, as royalties can be defined in the marginal figures by the mining companies involved. Also, corrupt leader-officials from the IP side can appear on the scene to aggrandize a large portion of the royalties.

 

Not only that. IP groups can always cite the USA case as the most progressive instance of IP treatment. In the USA today, various ‘affirmative action’ measures have taken place to ensure that the native Americans become co-owners of gambling centers, tourist spots and various market concerns in their localities. Many native Americans today own middle class residential structures and live middle class lives precisely because they all benefit as being co-owners rather than just be treated as beneficiaries of trickles from ambiguous royalties. The mining sector doesn’t seem to be prepared to cross swords with any IP group citing the USA case.

 

Cooperatives and Associations

 

Cooperatives and associations were clearly stipulated as among the permissible participating market players in the sector. They were lumped up together with partnerships and corporations, notably in Chapter IV (Exploration Permit). The chapter defined the geographical limits of operations by market players, without discriminating against any particular form of stakeholder.

 

Whether in onshore or offshore operations, the limits applying to partnerships and corporations will likewise be benefited by cooperatives and associations. Let us cite for example Secion 22 (Maximum Areas for Exploration Permit):

 

 

(a)    Onshore, in any province –

For partnerships, corporations, cooperatives, or associations, two hundred (200) blocks.

(b)   Onshore, in the entire Philippines –

For partnerships, corporations, cooperatives, or associations, four hundred (400) blocks.

      © Onshore, beyond five hundred meters (500 m) from the mean low tide level –

For partnerships, corporations, cooperatives, or associations, one thousand (1,000) blocks.

 

Corollary provisions in Chapter 5 (Mineral Agreements) also stipulated the same stakeholders as participating market players. The chapter set the limits on maximum areas for mineral agreements, without discriminating against any form of stakeholder, inclusive of cooperatives and associations.

 

There was no clear definition, however, of association. Just exactly what sort of associations can participate in mining intervention in a given area? This question must be answered by the operating guidelines affecting the sector.

 

[Note: 1 block approximately equals 81 hectares.]

 

Marginal Miners

 

Aside from stating that a previous law (RA 7076) already defined the scope and limits of participation by small-scale miners in the sector, the Mining Act also contained important provisions affecting the said miners. Chapters 4 and 5 referred to them as ‘individual miners’, with maximum ceilings of geographical areas considerably smaller that those of partnerships, corporations, cooperatives and associations.

 

Mining Communities

 

The Mining Act also cared to ensure the development of mining communities. Chapter 10, titled “Development of Mining Communities, Science and Technology,” articulated on provisions about the locality being a beneficiary of a mining intervention within its folds. Section 57 (Expenditure for Community Development and Science and Mining Technology) states: “A contractor shall assist in the development of its mining community, the promotion of the general welfare of its inhabitants, and the development of science and mining technology.”

 

Another section of the same chapter, Sec. 61 (Donations/Turn Over Of Facilities), defined how a mining community can benefit from the post-operational facilities left behind by a mining operator. The section stipulates the following:

 

…Prior to cessation of mining operations occasioned by abandonment or withdrawal of operations, on public lands by the contractor, the latter shall have a period of one (1) year therefrom within which to remove his improvements; otherwise, all the social infrastructure and facilities shall be turned over or donated tax-free to the proper government authorities, national or local, to ensure that said infrastructure and facilities are continuously maintained and utilized by the host and neighboring communities.

 

Labor

 

First of all, the latest mining law is very friendly towards children, and strictly prohibits child labor. Section 64 (Mine Labor) under Chapter 11 (Safety and Environmental Protection)  contained the following unambiguous provision: “No person under sixteen (16) years of age shall be employed in any phase of mining operations and no person under eighteen (18) years of age shall be employed underground in a mine.”

 

Labor in FDI (foreign direct investments) controlled firms have relevant provisions for Filipino labor, as contained in Chapter 10 (Development of Mining Communities, Science and Technology). To cite the key provisions:

 

Sec. 59. Training and Development. A contractor shall maintain an effective program of manpower training and development throughout the term of the mineral agreement and shall encourage and train Filipinos to participate in all aspects of the mining operations, including the management thereof. For highly-technical and specialized mining operations, the contractor may, subject to the necessary government clearances, employ qualified foreigners.

 

Sec. 62. A contractor shall give preference to Filipino citizens in all types of mining employment within the country insofar as such citizens are qualified to perform the corresponding work with reasonable efficiency and without hazard to the safety of the operations. The contractor, however, shall not be hindered from hiring employees of his own selection, subject to the provision of the Commonwealth Act No. 613, as amended, for technical and specialized work which in his judgement and with the approval of the Director, required highly-specialized training or long experience in exploration, development or utilization of mineral resources: Provided, that in no case shall each employment exceed five (5) years or the payback period as represented in original project study, whichever is longer…

 

While the provisions are sterling instances of ‘affirmative action’ measures for Filipino labor, certain quarters can raise the howl that labor is treated in the traditional way as wage labor. There is no provision at all that stipulates a far more progressive scheme on profit sharing. We may as well anticipate such howls to come, added to another age-old issue of  ‘nationalization’ pertaining to the sector.

 

Environment

 

The concern for ecological balance was taken up in one whole chapter (Ch. 11/Safety and Environmental Protection). This chapter signifies the changes in developmental approaches, in that this time around development cannot be left to market forces alone. The risk to a purely market-driven development is the further degradation of the environments and destruction of human habitats mitigated by severe ecological damages. Section 63 stipulates provisions on mines safety and environmental protection. Section 64 defines mine labor, as previously mentioned.

 

Other interesting and relevant sections are: Section 68 (Reports of Accidents), which penalizes mining firms that fail to report mining-related accidents within a given time; Section 69 (Environmental Protection), which mandates participating market players to undertake an environmental protection and enhancement program; Section 70 that mandates the conduct of Environmental Impact Assessment, with civil society participation as mentioned earlier; and, Section 71 (Rehabilitation) that requires contractors and permittees to “technically and biologically rehabilitate the excavated mined-out, tailings covered and disturbed areas to the condition of environmental safety…,” with stiff penalties for failing to undertake rehabilitation.

 

EFFECTING WINNABLE ADVOCACY BY CLARIFYING POLICY & OPERATIONAL AMBIGUITIES

 

This analyst argues that the mining campaign could be a potentially winnable one, and can be a focal point to reverse prevailing perceptions about the state. It is further argued that the crux of the winnability lies in providing clearer, unambiguous guarantees to the social benefit & acceptability aspect of the entire mining sector. The following positions are advanced for deliberations and adoption:

 

Draft a Comprehensive National Mining Policy. Such a policy must pay respect to the evolving trend of tripartite state-market-civil society synergy in all forms of developmental endeavors and all phases of program and project execution. The national policy must ensure that constituencies are co-partners in the sector and are not just mere kibitzers that can ‘perform a role’ when contingencies arise.

 

Call for a Mining Summit that should involve precisely the three (3) sectoral stakeholders, namely: state, market, civil society. The output of the summit should be clear, definitive and doable policy agenda that can serve as input for the drafting of the national policy and revision of the mining act to incorporate the changes in the policy framework.

 

Revise the mining act in accordance with the summit covenant drafted and adopted thereof. The law should not just limit the participation of NGOs to monitoring activities and the conduct of EIAs but should be broadened to include  participation in the periodic review and assessment of the entire mining industry and drafting of policy covenants in the succeeding years.

 

Define specific benchmark ceilings for the royalties that should go to the IP communities where mining is involved. Such a ceiling should not be lower than five percentum (5%) of the income after taxes derived from the specific cite. [5% is the standard brokerage fee in various enterprises.] The accounting system that can define the benchmark should likewise be clearly defined. The basis for the royalty should be ‘social capital’, which means that the norms, values, institutions of the community must be properly valuated and regarded as equity or equivalent for royalty purposes.

 

Define clearly what ‘association’ means, by defining who can constitute an ‘association’ that can participate as a market stakeholder. Should local, broad-based community associations be involved in mining, as co-partners of partnerships, corporations and cooperatives, than the ‘social capital’ of the members should be considered as an equity capital equivalent to no less than five percentum (5%) of the authorized capital requirements for the concerned mining project.

 

Stiffer penalties on those market stakeholders that violate child labor policies should be added to the mining act. Section 64, Chapter 11 of the law should be amended accordingly.

 

Provide incentives to partnerships and corporations that will share profits to their laborers. The higher the percentage of profits shared to the workers at any given time, the greater the incentives, notably tax incentives.

 

 

END

 

 

 

 

 

 

SOCIAL CAPITAL FOR MINING

Erle Frayne D. Argonza

[Note: The author is a political economist and social development consultant. The paper was delivered in a panel lecture at the Kamayan Forum, Kamayan Restaurant, Manila, 12 noon-2 pm, 19 November, 2004. See also: http://raefdargon.blogspot.com]

This paper advocates for an alternative framework regarding mineral resource extraction. It begins with the contention that mining must be considered as primarily a community undertaking, whether the community be national or local. As such, mining must necessarily depart from market-driven models of extraction, or from state-centered models of development, and proceed to a community-oriented or constituency-based engagement.

To be able to comprehend the theme of this paper, let me begin with a story. About four (4) years ago, a former university student of mine at the University of the Philippines Manila informed me that a mining engineer wished to establish a (mining) foothold in the Cordillera. Accordingly, the engineer heard about my mystical background, and was interested to know if there are indeed precious metals in the proposed project site. That is, the engineer expected me to communicate directly to the invisible elemental entities in the area and ask their permission to establish a mining project.

Not only that. Having heard about my background as a political economist, with diversified interest and studies in indigenous culture, the mining firm he represented wanted to know what acceptable methods to employ in flushing out the indigenous people residing in the area.

To cut the story short, I declined the offer, even as I registered my vehement opposition to the sordidly profit-oriented venture of this engineer. If mining has to prosper at all, it must begin with the reality that there are people who have been settled for many epochs in the area of extraction. A win-win solution to the mining problem must be executed, not by expelling the local residents but precisely by involving them in the venture.

Let me now share to you another story. In 1998, at the height of the Asian financial crisis, my consulting firm then, the Phoenixkonsult, contracted a project with a client. The project was about yellow clay extraction, with Bicol as the project site. In a small town in Bicol is found yellow clay, a rare material that has various industrial applications as well as aesthetic uses. Incidentally, the area also has some Aeta-related residents as well as marginal peasants.

Being then the board chair of the corporation, or being in a central position to direct the developmental strategies of the firm, I strongly proposed that the project involve the residents in a number of ways.

First of all, in the feasibility study preparation, the residents can be tapped as eco-scanners to identify possible sites where the material was highly concentrated. Also, the same residents will be constituted into a cooperative, properly trained in social entrepreneurship, and invited to be co-investors in the mining project through their cooperative. A third involvement would be to tap those residents who are physically capable enough as human resource for the extraction and production activities.

Such a scheme is what social scientists and development practitioners like myself refer to as tapping ‘social capital’. Mining should not just be regarded as investment capital, but should also consider the vast wealth of social networks—‘social capital’—that can wield tremendous powers of production. Studies in comparative political economy have shown that developmental pursuits that tapped ‘social capital’ ended up more appreciably better than those that failed to do so.

The development experiences of Brazil are particularly instructive. As documented by such social science luminaries as Peter Evans (see Evans’ works on ‘state-society synergy’), those projects in agriculture, irrigation and urban-based infrastructure and housing in Brazil where a state-civil society partnership was consistently used, turned out really good in results. On the other hand, those projects that were largely state-centered or market-driven and insulated from the community networks eventually faltered, as indicated by typical experiences in most Third World economies.

In today’s evolving global context, state-centered development has become ridiculously passé. In this old framework, the state performs the role of a ‘provider state’—giving out everything such as candies and shelter units to helpless people waiting for the ‘Santa Claus’ dole outs. Such a framework had proved to be disastrous in results. Not only did it reinforce a strong dependency syndrome among the people, it also led to vicious poverty instead of eradicating this malaise. It need not be stressed that much money went to the pocket of state officials and contracting firms’ managers through this old framework.

The new framework delimits the state’s role to that of an ‘enabler state’. In this framework, development efforts are properly the tasks of market players, who possess the investment capital, and civil society players, who possess the vast social networks of ‘social capital’. The state then builds the policy environment and strong institutions that can support and sustain various developmental efforts.

I strongly contend for a ‘social capital’ approach to mining. In this approach, the first thing to do is to recognize the institutional capacity building efforts of people who live in the areas of resource extraction. Stewardship agreements must be concurred between market players and community or social enterprises of the folks, with the state serving as a mediator or facilitator. I am very optimistic about the positive results of this scheme, compared to market-driven and state-centered approaches.

You see, when people, through their social enterprise groups, are motivated to co-direct development projects, the people themselves will do so much to zealously guard and monitor the entire project or enterprise venture. The bonus for indigenous peoples is that they have easy access to the spirit world, to the nature beings in the area (called ‘elementals’ by mystics), beings that can also be tapped to guard the project.

Now, go back to the cranky old models (market-driven and state-centered), and remove the indigenous peoples from the scene of a gargantuan development effort. What will you have?

It would be instructive to recall the Celophil and Chico dam projects, both Cordillera-based, that proceeded from the old frameworks. The disastrous offshoots of the projects became the fuel for insurgent groups, largely peopled by the I.P.s, to wage zealously bloody campaigns against the colossal projects.

There is no further reason today for the likes of the Celophil and Chico projects to be repeated. We must have learned lessons from their failures at this juncture. But it seems that those who now wish to revive a mining sector that has been in the doldrums for two (2) decades to go the route of Celophil and Chico.

I wish not to further highlight the folly of any idea today that wishes to pursue development by expelling people like they were deadly toxins. Many advocates of win/lose pursuits are well placed in government even as they dominate the corporate sector. They simply couldn’t see the folly behind their antiquated approaches, blinded as they are by greed.

As a final statement, let me declare that the framework elaborated in this brief paper is not an official policy framework of state. Rather, it is a policy framework that should be discussed among various quarters and social sectors, the state included. The state after all comprises of a plurality of framework trends operating in a vast array of bureaucratic mechanisms. There is no such thing today as a monolithic state with a singular framework dominating the policy environment. Rather, the state is a fluid field for contestation by various interest groups that are all aiming to influence the shaping of the policy environment.

But this I am optimistic about: if given a chance to prosper, a ‘social capital’ framework for mining will sell like very hot cake. I am very sure about this forecast. And may the communications enclaves allow this idea of ‘social capital’ for mining to germinate and percolate, because whether we like it or not this will be the direction of resource extraction in the foreseeable future. Bar it from crystallizing, and the result will be more resentments leading to more vicious insurgencies. Permit it to galvanize, and the whole nation becomes heroic in the eyes of the international community for setting new precedents. So, which option is the better choice?