Joint Foreign Chambers of the Philippines

American Chamber of Commerce of the Phils., Inc. Australian-New Zealand Chamber of Commerce (Phils.), Inc. Canadian Chamber of Commerce of the Phils., Inc. European Chamber of Commerce of the Phils., Inc. Japanese Chamber of Commerce & Industry of the Phils., Inc. Korean Chamber of Commerce of the Phils., Inc. Philippine Association of Multinational Companies Regional Headquarters, Inc. Website: arangkadaphilippines.com, investphilippines.info

28 March 2014
AMERICAN

H.E. Benigno S. Aquino III President Republic of the Philippines Malacaang Palace, Manila Dear President Aquino, The Joint Foreign Chambers (JFC) of the Philippines would like to express our concern over statements appearing in the media, over the past few months, concerning the Administration's proposed new fiscal regime for minerals development. The media articles quote key members of the Minerals Industry Coordinating Council (MICC) indicating that the Council has approved a concept which would levy either a 10% royalty on gross receipts, or 50% of adjusted net mining revenue, whichever is greater, plus either a windfall profits tax or surcharge on any residual profits. It is added that the industry will be taxed on an annual basis whether it is profitable or not. We believe such a fiscal regime will have an extremely negative impact on future investment in the minerals sector; and we urge the Administration to reconsider its proposals in this light. According to the recently published Fraser Institute survey of global minerals industry leaders, the Philippines policy regime for minerals is already viewed as the third most negative in the world. On the other hand, according to the same survey of over 5,000 international CEOs, Exploration VPs and consultants, the Philippines ranks 6th from the top in terms of geological prospectiveness. With an improved rather than more penalizing fiscal and regulatory environment, we believe the country could be the recipient of substantial investment and minerals growth. As outlined in the 2011 study conducted by the International Monetary Fund (IMF), the Philippines' Financial and Technical Assistance Agreements' (FTAA) fiscal regime is already a tough regime for investors". The IMF noted that the Philippines' fiscal regime already captures a 60% (+) Average Effective Tax Rate (AETR); in other words it already takes in excess of 60% of the net discounted cash flow of a mining operation over its life. According to industry studies, the country's fiscal regime is already uncompetitive with other

AUSTRALIAN-NEW ZEALAND

CANADIAN

EUROPEAN

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developing country jurisdictions such as Peru, Chile, South Africa, Indonesia and Papua New Guinea. Mining investments generate jobs, and multiply those jobs into other jobs. They build infrastructure. They inject money into communities; into local businesses and trade. They result in improved health and education in the hinterland of the country. They train local people, create enterprises and improve livelihoods and standards of living. In short, they create inclusive growth which is so much needed in these economic times of the country's development. In the absence of an attractive fiscal and regulatory policy, the investments taking place are small-scale and largely illegal. It is illegal mining that destroys the environment, batters communities and distorts the government's revenue base from its mineral heritage. Legitimate, industrial mining by contrast is regulated and proper, will be subject to the EITI provisions, and will bring to the operations all the best in technology and socioenvironmental practices. We are also concerned about the degree of consultation by the MICC with the private sector or relative lack thereof. Therefore we urge you to instruct your officials to resume consultation with the minerals industry and the private sector, including the multiple business associations of the country, before proposing to Congress any of the terms attributed to them in the media. Any damaging legislation that might be passed by Congress in the next two years may cripple for decades the countrys chances for significant minerals development in the future. The JFC would welcome the opportunity to meet with you and your team to discuss at any time at your convenience this hugely important issue for the nations future.

RHICKE JENNINGS President American Chamber of Commerce of the Philippines, Inc.

IAN PORTER President Australian-New Zealand Chamber of Commerce of the Philippines, Inc.

JULIAN PAYNE President Canadian Chamber of Commerce of the Philippines, Inc.

MICHAEL RAEUBER President European Chamber of Commerce of the Philippines, Inc.

TAKASHI ISHIGAMI President Japanese Chamber of Commerce & Industry of the Philippines, Inc.

EUN GAP CHANG President Korean Chamber of Commerce of the Philippines, Inc.

SHAMEEM QURASHI President Philippine Association of Multinational Companies Regional Headquarters, Inc.

Cc: Secretary Gregory L. Domingo Department of Trade and Industry Secretary Cesar V. Purisima Department of Finance Secretary Ramon J.P. Paje Department of Environment and Natural Resources Guillermo M. Luz National Competitiveness Council