Thursday: July 27, 2006
http://www.pngindustrynews.net/StoryView.asp?StoryID=62664

(PNGIndustryNews) - There are some uncanny similarities between the PNG and Philippine economies. They have been underperformers for most of the period since the mid-70s but the situation is improving dramatically in both cases.

The wake-up call in the Philippines occurred in the late 1980s after the downfall of the late dictator Ferdinand Marcos. The country had enjoyed a sustained drop in poverty levels from 1957 to 1965, the year before Marcos first took office.

In PNG, poverty levels fell significantly from the mid-60s to the mid-70s and have continued to worsen due to the poor performance of the economy.

According to the Asian Development Bank, the number of people living in poverty in the Philippines showed no improvement between 1997 and 2000 but there has been a decline since then.

In the case of PNG, a major turnaround in the economy began in 2003 following the election of the Somare Government but the number of people living in poverty has continued to increase because the economy has only matched population growth of around 2.8% annually.

Much of the advance in the Philippines, a strongly Catholic nation, flows from the fact that population growth has slowed to around 1.8%. Per capita incomes are rising by more than 3% annually with the economy growing by just over 5% in the same period.

President Gloria Macapagal Arroyo has been able to bring the country’s budget deficits under control through a value-added tax that was fully implemented in February.

One of the earliest actions of her regime was a policy decision to move from “tolerance” to “active support” of the mining sector in early 2003 - the same year the Somare Government brought in a range of incentives for the resources sector.

Foreign investment in the Philippines was temporarily derailed because of concerns the Philippine Supreme Court would declare as unconstitutional the Philippine Mining Act of 1995, particularly regulations allowing for full foreign ownership of big projects. These fears were laid to rest after the court’s decision on December 1, 2004.

The decision was taken after mining industry executives, led by Chamber of Mines of the Philippines president Philip Romualdez, argued that the country would have earned at least $US20 billion ($A26.3 billion) more in export revenue since 1995 if uncertainty had not prevailed.

Only two companies have FTAA (Financial and Technical Assistance Agreements) status that qualifies them for full ownership of their respective flagship projects - Indophil Resources’ Tampakan project in Mindanao and Climax Resources’ Didipio copper-gold project in Luzon.

Climax expects to commence construction of its $250 million underground mine later this year and Indophil is expected to complete a pre-feasibility study by September on the biggest project ever undertaken in the Philippines - on par with other world-scale copper-gold projects.

This is very much like the situation in PNG, with construction due to start on the Ramu nickel-cobalt mine later this year, along with several other gold mines.

This is all very interesting because we will be hearing more about new developments and new discoveries in both countries and there will be some common Australian-listed players.

Indophil is already planning an early entry into PNG and Lihir Gold’s plan to diversify its asset base is just as likely to see it become involved in the Philippines.

After all, as Indophil managing director Tony Robbins points out, “government estimates suggest the Philippines is endowed with the fifth-richest mineral resources in the world”.