Understanding and Managing the Philippines Political and Security Risk Environment Presented by: Pete Troilo Business Intelligence Director Pacific Strategies & Assessments (PSA)

1. Pacific Strategies and Assessments Inc
Understanding and Managing the
Philippines Political and Security
Risk Environment
Presented by:
Pete Troilo
Business Intelligence Director
Pacific Strategies & Assessments (PSA)

2. Pacific Strategies and Assessments Inc
Brief History
1930s-50s
 Large-scale mining begins with about 30 mostly American firms
 Sector is devastated by World War II
1972-1986
 President Ferdinand Marcos nationalizes the mining sector
 Between 1971-1981 , 45 mines open
 By 1980, minerals represent over 20% of total exports
Post -Marcos Era
 Numerous mining mishaps
 Steady decline in global value of minerals
 220 mines close
 By 1990, minerals represent less than 2% of total exports
1990’s
 Philippine Mining Act of 1995
 Co-authored by Senator Gloria Arroyo
 Enacted into law in March 1995 by President Fidel Ramos
 Provides for 40% foreign ownership

3. Pacific Strategies and Assessments Inc
1995 Mining Act
Deregulated the mining sector and liberalized foreign ownership of
large mining projects
Regarded as a “first-class” and “very liberal” code
The 1996 Marcopper accident ignites nationwide environmental
consciousness and a review of the Act
The Indigenous Peoples Rights Act (IPRA) of 1997 exacerbates
resistance to mining
Debate drags on 8 long years in the Supreme Court – collapses
foreign mining efforts in the Philippines
January 2004, Executive Order (EO) No. 270 or the National Mining
Revitalization Order issued to attract foreign investment
December 2004, the Philippines Supreme Court legalizes 100%
foreign ownership of mining operations

4. Pacific Strategies and Assessments Inc
Assessing the historic correlation between global
mineral prices and Philippine mining investments
Trends: Global Mineral Prices & Philippine Mining Investments
$20.00 $2.50
Investment
$2.00 (in Billion US$)
$15.00
Global Mineral
Prices $1.50
$10.00
Investment
Silver / oz
$1.00
Copper / lb
Nickel / lb
$5.00
$0.50
$- $-
05 06 07 08 09 10
Period

5. Pacific Strategies and Assessments Inc
Socio-Political Challenges
Little genuine political capital spent on supporting foreign mining at the bureaucratic
and grass roots levels
Government processes riddled with corruption and proclivities to push foreign mining
operations into joint venture agreements with questionable local partners
Dominant feudal families control politics/business in every province and often obstruct
foreign mining initiatives
Radical segments of the Catholic Church, environmentalists, NGO’s with global
connections, and communist and Islamic insurgencies are major obstacles to progress
Manipulation of indigenous peoples’ (IP) groups to oppose foreign mining
Cumbersome bureaucratic processes designed to extort foreign companies under the
guise of smuggling prevention and other seemingly beneficial programs
Provincial governors can and have declared their domains no mining
zones in contravention of the Philippines constitution and superseding
national law
Malleable judges can issue Temporary Restraining Orders (TROs)
against foreign mines from any legal jurisdiction in the Philippines

6. Pacific Strategies and Assessments Inc
Aquino’s First Foreign Investment Test
A newly passed environmental code in Mindanao’s South
Cotabato Province that bans open pit mining
The Writ of Kalikasan that authorizes special
environmental courts to issue protection orders against
entities engaged in natural resources investment

7. Pacific Strategies and Assessments Inc
Characterizing the NPA Threat
PSA data shows that of the total
recorded NPA attacks in 2008 and 2009,
only about 20% targeted or involved
private businesses. Of this total, only
9% targeted foreign firms and a few of BICOL
their subcontractors.
PSA has recorded an average of
approximately 20 NPA attacks against CARAGA
mining firms in 2008 and 2009 and that
appears to be on pace for 2010.
Failed NPA extortion bids, not strict
communist ideology, were the primary
motivation for attacks in all these cases. SOUTHERN MINDANAO

8. Pacific Strategies and Assessments Inc
Characterizing the NPA Threat
Causes:
Failed extortion or “revolutionary tax” collection bids
Fronts for community opposition
Ways and Means:
Pose as soldiers to gain entry
Community members provide intelligence to launch attacks
Brute force (NPA attacking force strength can range from 1 to 100
members)
Impacts:
Clashes with responding security forces
Burning of property and mining equipment
Theft off firearms, ammunition, and communication equipment
Kidnapping and murder (less common)

9. Pacific Strategies and Assessments Inc
Analyzing NPA Attacks and Ambushes
One common and predictable NPA tactic is to attack lightly guarded
government outposts or remote businesses that have rejected
extortion demands to lure responding military and police units to the
scene; and then ambush them along the only tertiary road that leads to
the original attack site.
The tactic forces the military and police units to respond cautiously or
not at all and rarely results in any negative consequences for the NPA.
NPA attack on private
vehicle and Secondary Road
subsequent ambush (paved)
on rescue unit.
NPA raid and subsequent
ambush on responding
government forces.
National Highway
(paved)
Philippine Army
58th Infantry Battalion

10. Pacific Strategies and Assessments Inc
Securing Operations
Political and security risk due diligence – should we be there or not?
Corporate due diligence on all JV partners and their leading
officers/shareholders
Focused security and socio-political assessment of areas of
operations down to the municipality level including detailed
stakeholder mapping – identification of both immediate and potential
risks
Consistent threat intelligence collection, vetting, and monitoring
Crisis management and contingency planning – scenario-based and
in detail
Design comprehensive security systems “inside the fence” and
robust community relations “outside the fence”
Sustained outreach, constructive relationship building, and consistent
contact with community leaders

11. Pacific Strategies and Assessments Inc
Voluntary Principles on Security and
Human Rights
Main Categories:
Risk Assessment
Interactions: Companies + Public Security
Interactions: Companies + Private Security
Justifications:
Only human rights guidelines designed specifically for oil, gas,
and mining companies
Non-binding and non-prescriptive
Tool to collaborate and synchronize with other key stakeholders
Tool to facilitate and confirm compliance with global standards

12. Pacific Strategies and Assessments Inc
Thank You
Questions?
Pacific Strategies & Assessments Group
Hong Kong  Manila  Bangkok  Beijing 
Shanghai  Sydney
(632) 843-6853
info@psagroup.com
www.psagroup.com