Of bangsamoro and other musings


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Of bangsamoro and other musings

  1. 1. Of  Bangsamoro  and  other  musings    The  Framework  Agreement  on  the  Bangsamoro  (“Framework”)  signed  between  the  Republic  of  the  Philippines  and  the  Moro  Islamic  Liberation  Front  is  a  major  milestone  not  just  for  the  ongoing  peace  process  and  reconciliation  in  Mindanao,  but  also  for  the  improvement  of  the  economic  conditions  of  the  area.  The  signing  of  the  Framework  shall  serve  as  an  invitation  for  investors  to  take  a  second  look  at   the   potential   wealth   of   Mindanao’s   natural   resources   once   the   region   is  stabilized  and  ready  for  economic  utilization.    Peace  and  order  will  bring  in  the  entry  of  investments  in  power  generation,  transmission  lines,  and  mineral  and  energy  exploration  and  development  projects.    The  agreement  consists  of  several  subjects,  which  shall  serve  as  the  preparatory  skeletal  framework  for  the  eventual  creation  of  a  new  entity,  the  Bangsamoro.  While  the  constitutionality  of  the  Framework  is  presumed,  it  will  be  subject  to  future  challenges  on  issues  questioning  its  legality  and  validity.  The  negotiators  share   the   belief   that   unlike   the   Memorandum   of   Agreement   on   the   Ancestral  Domain,  the  Philippine  Government  will  not  cede  or  surrender  ownership  and  possession   of   certain   territorial   lands.   The   Framework   discusses   the  governmental   and   administrative   aspects   to   be   delegated   to   the   Bangsamoro,  which  will  remain  part  of  the  Philippines  where  the  Philippine  government  will  continue  to  exercise  its  power,  authority  and  sovereignty.    Barring  any  potential  legal  obstacles,  the  Framework  may  yet  be  the  single  biggest  achievement  of  the  Aquino  Administration  that  will  spur  long  lasting  stability  and  economic  growth  in  Mindanao  until  such  time  that  the  Final  Peace  Agreement  is  signed.    The  Bangsamoro  government  shall  be  vested  with  exclusive  powers  to  create  its  sources   of   wealth   in   the   region.   As   succinctly   provided   in   the   Framework,  “consistent   with   the   Bangsamoro   Basic   Law,   the   Bangsamoro   will   have   the  power  to  create  its  own  sources  of  revenues  and  to  levy  taxes,  fees,  and  charges,  subject  to  limitations  as  may  be  mutually  agreed  upon  by  the  Parties.  This  power  shall   include   the   power   to   determine   tax   bases   and   tax   rates,   guided   by   the  principles   of   devolution   of   power,   equalization,   equity,   accountability,  administrative   simplicity,   harmonization,   economic   efficiency,   and   fiscal  autonomy.”          The   ability   to   create   its   own   internal   revenue   code   may   prove   to   be   both  advantageous   and   disadvantageous.   On   one   hand,   the   Bangsamoro   legislative  body  can  provide  for  less  bureaucratic  processes  of  implementing  and  paying  tax  schedules,  entice  investments  by  providing  tax  breaks  and  incentives  as  well  as  favorable  tax  treatments,  prescribe  tax  rates,  and  provide  for  its  own  tariffs  and  customs  code  governing  importation.    On  the  other  hand,  the  creation  of  a  tax  law  may  not  be  as  efficient  as  anticipated  if  obstacles  would  come  from  the  numerous  vested  and  powerful  interests  that  will  represent  the  legislative  body  causing  a  stalemate  over  important  provisions  of  the  law.  Needless  to  say,  the  implementation  of  the  tax  laws  shall  be  left  to  the  sole  authority  of  the  Bangsamoro,  following  the  provisions  of  the  Framework  on  the  exclusive  powers  of  the  Bangsamoro  government.  
  2. 2.  More   importantly,   the   Bangsamoro   government   shall   have   just   and   equitable  share   in   the   revenue   generated   through   the   exploration,   development,   or  utilization   of   natural   resources   obtaining   in   all   the   areas/territories   of   the  Bangsamoro  based  on  an  agreement  on  the  revenue  and  wealth  sharing  with  the  Philippine   government.     The   Bangsamoro   can   enter   into   resources   exploration  contracts  and  control  the  flow  of  revenue  through  its  different  tax  provisions  as  well  as  financial  mechanisms  while  the  Philippine  government  gets  its  share  in  the  revenue  income  that  the  Bangsamoro  will  raise.    Resource  developers  will  then  have  to  be  guided  as  to  what  legal  and  regulatory  framework   will   be   followed   on   intended   future   investments   in   Bangsamoro.    Should   Imperial   Manila   continue   to   grant   exploration   permits,   mining  agreements,  petroleum  service  contracts,  coal  operating  agreements,  renewable  energy   service   contracts   and   other   form   of   resources   agreements   over   areas  located  in  Bangsamoro  under  the  fiscal  regimes  of  energy  presidential  decrees,  the   Mining   Act   of   1995,   the   Renewable   Energy   Act   of   2008,   the   Foreign  Investments  Act  of  1991  and  other  related  laws?    And  in  relation  thereto,  can  the  Bangsamoro  veto  resources  projects  of  national  significance  or  interest?  Is  the  Regalian   Doctrine   enshrined   under   the   Philippine   Constitution   applicable   to  Bangsamoro?        The   Bangsamoro   agreement   will   also   have   repercussions   on   the   just   recently  concluded  Philippine  Energy  Contracting  Round  (“PECR”)  No.  4  for  petroleum,  which   included   among   other   areas,   Area   12   –   Cotabato   Basin.     Covering   an  onshore  area  of  456,000  hectares  where  around  820  line-­‐km  of  2D  seismic  has  been  acquired  and  five  wells  drilled,  the  Cotabato  Basin  has  a  mean  total  risked  recoverable   resource   (excluding   speculative   unmapped   resources)   of   ~   71  MMbbl   oil   and   312   Bcf   gas,   according   to   the   Department   of   Energy   (“DOE”).    About  1  billion  cubic  meter  of  natural  gas  in  the  Sultan-­‐sa-­‐Barongis  structure  is  considered  potential  resources.    Will  the  Bangsamoro  honor  the  service  contract  of  the  winning  bidder  or  proceed  to  look  for  another  contractor?    The  same  goes  with   the   service   contracts   covering   the   Sulu   Sea   particularly   areas   in   offshore  Sulu  and  Sabah.    Resource   developers   will   be   closely   monitoring   the   preparatory   work   on   the  drafting  of  the  annexes  to  the  framework  agreement  and  the  law  that  will  govern  a   new   Bangsamoro   region   that   will   be   drafted   by   a   15-­‐man   Transition  Commission.    *  *  *  *  *  *  *  *    Professor  Marvic  M.V.F.  Leonen,  former  dean  of  the  University  of  the  Philippines  College   of   Law   and   noted   indigenous   peoples   rights   and   anti-­‐mining   advocate  may  be  appointed  Justice  of  the  Supreme  Court  by  President  Benigno  Aquino  as  a  reward  for  negotiating  the  Bangsamoro  agreement.    It  should  be  remembered  that   Dean   Leonen   represented   the   petitioners   in   the   La   Bugal-­‐BLaan   Tribal  Association   vs.   Ramos   (01   December   2004),   which   questioned   the  constitutionality   of   the   Philippine   Mining   Act   of   1995   and   argued   for   an  
  3. 3. intervenor  in  the  case  of  Cruz  vs.  Sec.  of  Environment  and  Natural  Resources  (06  December  2000),  which  questioned  the  constitutionality  of  IPRA.    If  appointed,  Prof.   Leonen   will   join   another   colleague   from   UP   Law,   Chief   Justice   Lourdes  Aranal-­‐Sereno.     CJ   Sereno   by   the   way,   co-­‐authored   in   1983   with   now   IBP  President   Roan   Libarios,   an   article   published   in   the   Philippine   Law   Journal  entitled   “The   Interface   Between   National   Land   Law   and   Kalinga   Land   Law”  recommending   recognition   of   ancestral   land   rights,   protection   of   indigenous  system  of  land  ownership,  and  promotion  of  the  indigenous  mode  of  settling  land  dispute.    IPRA  was  upheld  on  a  technicality  resulting  from  a  7-­‐7  deadlock  vote  among  the  SC  justices  so  if  ever  the  law  is  challenged  again,  we  have  CJ  Sereno  and  a  possible  J  Leonen  in  the  bench.    *  *  *  *  *  *  *  *    The   2013   national   and   local   elections   are   upon   us   and   mining   is   expected   to  become  a  hot  election  issue.  In  South  Cotabato  candidates  are  being  measured  according  to  where  they  stand  on  the  $5.9  billion  stalled  Tampakan  copper-­‐and-­‐gold  mining  project  by  Xstrata  Plcs  Philippine-­‐unit,  Sagittarius  Mines,  Inc.  where  candidates  have  been  branded  as  either  anti  or  pro  mining,  which  could  affect  the   way   they   handle   their   campaigns.     In   Nueva   Vizcaya   on   the   other   hand,  environmentalists  are  not  comfortable  over  some  politicians’  apparent  campaign  platforms  riding  on  the  anti-­‐mining  sentiment  in  the  province  as  a  move  to  win  votes  in  next  year’s  elections.    In  the  meantime President  Benigno  Aquino  said  he  wants  to  wait  for  the  passage  of  a  mining  taxation  reform  law  before  approving  the   Tampakan   mining   project.     Sagittarius   has   asked   Aquino   to   reverse   the  Department   of   Environment   and   Natural   Resources   decision   not   to   issue   an  environmental  compliance  certificate  for  the  project.      In  Leyte,  the  much-­‐anticipated  political  showdown  between  the  Romualdez  and  Petilla  families  in  Leyte  is  not  going  to  happen  as  Chamber  of  Mines  President,  Benjamin  Philip  G.  Romualdez  will  not  be  throwing  his  hat  to  the  gubernatorial  race   against   Leopoldo   Dominico   L.   Petilla.     In   response,   incumbent   Leyte  Governor   Carlos   Jericho   L.   Petilla   dropped   his   plan   to   challenge   Ferdinand  Martin  G.  Romualdez  to  represent  the  first  district.    Gov.  Petilla  is  being  groomed  instead   to   be   the   next   DOE   Secretary   replacing   Sec.   Rene   Almendras   who   is  reportedly   heading   off   to   Malacanang   to   be   designated   as   head   of   the  Presidential  Management  Staff.    The  good  news  is  that  Mr.  Romualdez  will  still  be  available   to   lead   the   local   mining   industry,   which   he   described   in   the   recent  mining   conference   as   “at   a   crossroads”.   Secretary   Almendras’   promotion   will  also  help  the  energy  industry  as  it  has  somebody  to  push  the  paper  works  in  the  Palace  when  energy  issues  are  under  deliberation.    His  push  is  also  needed  to  coordinate   the   often   times   dysfunctional   relationship   between   the   energy   and  environment  departments.    *  *  *  *  *  *  *  *    The   DOE   has   concluded   the   bidding   round   for   petroleum   exploration   under  PECR  4  in  July  but  no  service  contract  has  been  awarded  to  the  winning  bidders  yet.     It   seems   that   the   initial   expectation   of   a   warm   reception   from   the  
  4. 4. international  petroleum  industry  on  the  bidding  round  did  not  materialize,  as  the  big   boys   prefer   to   remain   in   the   sideline.     Despite   numerous   roadshows  conducted   in   Australia,   Singapore,   and   Italy,   no   bids   came   from   the   major  petroleum  exploration  firms.    The  reason  could  be  the  still  unresolved  territorial  dispute   with   China   over   portions   of   the   West   Philippine   Sea   where   the   main  petroleum  prospects  are  located.    *  *  *  *  *  *  *  *    Kudos  to  the  quiet  and  diligent  work  and  collaboration  done  by  a  team  which  includes  scientists  and  legal  experts  from  my  alma  mater,  the  University  of  the  Philippines  (“UP”)  through  the  National  Institute  of  Geological  Sciences  and  the  Institute  of  International  Legal  Studies  of  the  UP  College  of  Law.    The  team  was  responsible  for  the  recognition  of  Philippine  jurisdiction  over  the  Benham  Rise  Region,  which  is  the  Philippines  first  successful  validation  of  a  claim  in  accord  with  the  1982  Law  of  the  Sea  Convention.  It  is  the  first  major  expansion  of  the  Philippines   maritime   boundaries   since   the   late   1970s   when   it   declared   its  exclusive   economic   zone.       The   DOE   is   set   to   conduct   seismic   surveys   to  determine   the   oil   and   gas   potential   of   Benham   Rise,   with   the   possibility   of  including   the   area   in   the   next   contracting   round   for   petroleum   exploration   in  PECR  5.    The  Benham  Rise  is  believed  to  be  rich  in  natural  gas  and  manganese  nodules  and  is  reportedly  being  eyed  by  a  number  of  interested  bidders.      *  *  *  *  *  *  *  *    President   Benigno   Aquino   III   capped   his   recent   state   visit   to   New   Zealand   by  witnessing   the   signing   of   a   bilateral   agreement   entered   into   by   Philippine  Foreign   Affairs   Secretary   Albert   Del   Rosario   and   New   Zealand   Minister   of  Foreign  Affairs  Murray  McCully  meant  to  provide  a  government-­‐to-­‐government  framework  to  support  geothermal  development  between  the  two  countries.    The  agreement   aims   to   build   more   competence   for   human   resources   at   the   DOE  through  scholarships  and  development  of  opportunities  not  just  for  investment  but  also  for  transfer  of  technology.  Foreign  Minister  McCully  believes  that  both  countries  are  well  placed  to  develop  business  opportunities  around  the  world,  including  in  Indonesia  and  South  America.    Fernando  “Ronnie”  Penarroyo  is  the  Managing  Partner  of  Puno  and  Penarroyo  Law  Offices  (fspenarroyo@punopenalaw.com).  He  specializes  in  Energy,  Resources  and  Environmental  Law,  Business  Development  and  Project  Finance.    He  is  a  trustee  of  the  International  Geothermal  Association,  the  National  Geothermal  Association  of  the  Philippines  and  the  Philippine  Mineral  Exploration  Association.