Bloomberg News

Dawn Murder Shows Barriers to $312 Billion Mindanao Trove

July 19, 2012

Dawn Murder Shows Barrier to $312 Billion Mindanao Trove

Members of a breakaway Muslim separatist group at Camp Omar, Maguindanao province, on Mindanao island. Photographer: Ted Aljibe/AFP/Getty Images

Cris Bual’s work for mining giant Xstrata Plc (XTA) made him a target for Maoist rebels, armed bandits, or just about anyone with a gun for hire. When traveling from the relative safety of Davao City into the badlands of the Philippine island of Mindanao, Bual kept his schedule and route secret. That wasn’t enough to save him.

While two gunmen blocked off the street where Bual and his wife were jogging near their Davao home around 5:50 a.m. one Friday in September, a third walked up to the 53-year-old and shot him dead. The gang escaped on a black Honda Wave motorbike with no plates, according to police reports. On June 20, one of Xstrata’s security personnel and a policeman were shot dead near the company’s mine site.

Mindanao is no stranger to murder, with a four-decade insurgency in which as many as 200,000 people have died, frustrating efforts by companies including Xstrata and Sumitomo Metal Mining Co. (5713) to tap an estimated $312 billion in mineral deposits. Death squads that human-rights groups have linked to police and the military, contract killings over land disputes, and al-Qaeda-affiliated terrorists add to the mix of violence.

While Philippine economic growth is accelerating, stocks are close to a record high and the country pursues its first investment-grade credit rating, failure to resolve the unrest and murders in Mindanao damages President Benigno Aquino’s efforts to further boost foreign investment, surveys show.

“There is no evidence of a strategic solution to the security problems in Mindanao,” said Steve Vickers, chief executive officer of Hong Kong-based Steve Vickers & Associates, a corporate-intelligence and security-consulting company. “Some of the activities are truly well-organized terrorism, but much of it is feudalism or out-and-out criminality, which needs to be stamped on hard.”

Business Cost

The Philippines ranked 130th of 142 countries in the World Economic Forum’s latest survey on the cost to business of terrorism; and 112th in terms of crime and violence -- the worst in Southeast Asia. Fifty-four percent of mining companies said issues such as attacks by terrorists, criminals and guerrilla groups are a strong deterrent for investors in the Philippines, the second highest among 93 jurisdictions in a Fraser Institute poll released in February.

The violence also exacerbates poverty, a Jan. 26 report by the foreign chambers of commerce in the country said. Sixty-five percent of respondents in Mindanao, home to about a quarter of the Philippines’ 100 million people, described themselves as poor, according to a May survey by Manila-based polling company Social Weather Stations. That was the highest among the three main regions in the country, and up from 39 percent in March 2010, before Aquino was elected.

Too Slow

Philippine gross domestic product expanded 6.4 percent in the first three months of this year, the fastest pace since the third quarter of 2010. Standard & Poor’s this month raised the country’s debt rating to BB+, one level below investment grade, citing improved prospects for economic growth.

Aquino needs expansion of more than 8 percent to spread the benefits more evenly, said John Forbes, an adviser to the U.S. Chamber of Commerce in the Philippines. That’s a feat achieved in only two quarters since 1999 -- those immediately before Aquino took power at the end of June 2010.

Xstrata’s planned $5.9 billion investment in the Tampakan copper and gold deposit, about 100 kilometers (63 miles) southwest of Davao, includes a power station, port and refinery. The Zug, Switzerland-based company, the world’s fourth-biggest copper miner, aims to produce 375,000 metric tons of the metal in concentrate from Tampakan each year from 2016, according to its local Sagittarius Mines Inc. unit.

Gold Too

The lode also holds an estimated 17.6 million ounces of gold recoverable over the project’s 17-year lifespan. At current market rates, Tampakan may yield about $60 billion, Justin Hillier, finance manager at Sagittarius, said in May.

Sumitomo Metal, Japan’s biggest nickel producer, said repairs and beefed-up security after an attack by guerrillas from the communist New People’s Army on its mine in Mindanao in October would cost about 10 billion yen ($127 million). Dole Food Co. (DOLE:US), the world’s largest supplier of fresh fruit and vegetables, and other agricultural businesses have also been targeted. Westlake Village, California-based Dole said it is committed to the Philippines, where it has been operating since at least 1963.

“Every region in which Dole operates comes with its own factors,” Marty Ordman, a spokesman for Dole, wrote in a July 12 e-mail. “Dole’s Mindanao operations are no different.”

Attacks Increase

In the 15 months from January 2011, the NPA launched about 600 attacks on mining companies, loggers and plantations, as well as landlords and other targets, including the “Sumitomo nickel plant, SMI-Xstrata, Toronto Ventures, Russel Mining, Dole-Stanfilco, Sumifru, Del Monte plantations, and others,” according to a March 29 statement from the group. In 2010, there were 250 raids, it said.

The NPA has denied any involvement in Bual’s killing.

Mindanao became a U.S. concern in 2001 after al-Qaeda attacks on New York and Washington that killed almost 3,000 people. Abu Sayyaf and Jemaah Islamiyah, both linked to al- Qaeda, operate on Mindanao and its neighboring islands, which are located near to oil and gas fields in the South China Sea contested by China.

The U.S. set up a military base in Zamboanga on the west coast of Mindanao and has had about 600 troops stationed there for the past decade to combat terrorists. At least 13 U.S. special-forces personnel have died in Mindanao, according to the military, though both governments deny American forces engage in combat.

Catholic Settlers

Waves of migration by Catholic settlers have overwhelmed the island’s Muslim population, which had resisted Spanish conquest. Now outnumbered about five-to-one, they are concentrated in many of Mindanao’s poorest areas.

As the island furthest from Manila, the region hasn’t been at the top of government spending priorities, keeping many of its provinces underdeveloped and breeding the sense of resentment that has fueled rebellion, Ramon Casiple, executive director at the Manila-based Institute for Political and Economic Reform, said July 17.

After more than a decade of U.S. military assistance, the islamist rebel groups have been depleted by the deaths of almost all their top leaders, the U.S. Congressional Research Service said in an April 5 report. The military’s mandate doesn’t extend to the NPA -- which the U.S. government views as a domestic issue -- or to criminals.

‘Under-equipped, Under-trained’

“The police forces are under-equipped, under-trained and under-manned to fight determined criminals,” said the American Chamber’s Forbes, who has lived in the Philippines for 40 years. Still, the country is safer now than in the 1970s, when “politicians had pistols under their barongs and machine guns in their cars,” he said, referring to the traditional business attire.

“The biggest tragedy of Mindanao is the image that the dangers of the conflict has brought, even though the conflict is really localized,” said Cielito Habito, an economic adviser for the Australian Agency for International Development, who is tasked with attracting investors to the island. “It has so much to offer in terms of natural resources.”

Habito estimates only 10 percent of Mindanao is dangerous to overseas investors because most of the violence isn’t directed at outsiders.

The U.S. government on June 14 renewed its advisory against traveling to Mindanao. “As long as bombs explode in the Zamboanga airport, as long as kidnap for ransoms dominate the headlines, as long as bus owners are extorted through violence, as long as political feuds are resolved through bombs and assassination, we will not be able to change our travel warning,” Harry Thomas, ambassador to the Philippines, said Sept. 8.

Feeling Unsafe

In central Mindanao, more than half of respondents in a World Bank survey released in April said they felt unsafe just going to their nearest market. Only for the most serious crimes of rape and murder did a significant number say they would contact police -- 24 percent and 27 percent, respectively, according to the study.

A witness to the Bual murder declined to give a statement and has gone into hiding, fearful the killers may go after him and his family, according to a Jan. 16 police report. Police said Bual may have been murdered in a dispute over a business transaction -- he negotiated the purchase of land needed for the mine.

Latest Deaths

Sagittarius suspended all work on the project following the assassination. Only six months earlier, the company had been forced to do the same following the murder of three contractors.

In the most recent fatal attack, Villamindo Hectin, a retired police officer working as a security consultant for Sagittarius, was shot by a bandit group near the exploration site, police said June 22. A police officer also died.

“We recognize the challenges to security and we continue to engage with our stakeholders towards enhancing peace and order,” Sagittarius spokesman John Arnaldo said in a July 13 e- mail. “We remain committed to developing the Tampakan project.”

From Sagittarius’s offices in the coastal city of General Santos, about 65 kilometers south of the Tampakan area, the two- lane national highway snakes past plantations of corn, coconut, banana and pineapple. Dense jungle clads the sides of volcanic mountains. Turning off near Crossing Rubber hamlet, a dirt track not wide enough for two cars to pass leads to Liberty village, home to the B’laan tribal group that owns land at the center of the Tampakan deposit.

Difficult Lives

“We can’t afford to lose this project,” Linsay Sanuhay, 48, a member of the B’laan, said in an interview during a May trip arranged by Xstrata. “People who oppose mining and are blocking this project don’t know how difficult our lives were.”

Before Sagittarius built the access road that passes through Liberty on its way to the mine site, the grandmother of 18 said she had to walk all day to get to the nearest market 17 kilometers away.

Xstrata plans to hire 2,000 workers from the municipality of Kiblawan to build infrastructure for the mine, Mayor Marivic Diamante said in an interview on the same trip. About 68 percent of the 50,000 people in Kiblawan live on $1.25 or less a day, she said.

The biggest threat to the mine comes from the NPA, said Lieutenant Colonel Alex Bravo, the army commander of the district where Sagittarius, also known as SMI, plans to operate.

“There’s a pronouncement by the NPA -- not just a perceived threat -- that SMI needs to leave,” Bravo said in a phone interview before the latest killings. “If we cannot protect our investors, if they get harassed by threat groups, of course we will lose face. I cannot let that happen.”

Murders Unpunished

Other opponents of mining on environmental and indigenous- rights grounds include Catholic missionaries from an Italian group, Pontificio Istituto Missioni Estere, or PIME. Three members of the order have been assassinated in Mindanao. The latest, Fausto “Pops” Tentorio, was shot dead in October in front of witnesses inside the church compound where he lived.

Since 2008, the government has successfully prosecuted only four cases of extra-judicial killings, all under the previous administration of President Gloria Macapagal-Arroyo, according to Human Rights Watch. The monitoring agency documented at least 10 killings and disappearances attributed to the security forces during the first year of Aquino’s administration. No suspects have been successfully prosecuted in any of these cases, it said.

Bogged Down

Following Tentorio’s murder, Aquino, who won power pledging to end rights abuses, corruption and bring security, set up a task force to investigate the slaying. After filing charges against four suspects, the case has been bogged down in conflicting testimony that PIME says was given under duress. The missionary group called on the government to investigate the role of the military in the murder, and for the withdrawal of Philippine special forces from the area because of “documented reports of threats and human-rights violations.”

Twenty-seven witnesses and their family members are in hiding because of fear of retribution, PIME said in a May 7 statement on its website.

“There are parts of Mindanao where those who have political connections, those who have arms and plenty of money, can even use the poor to be instruments of violence,” Father Peter Geremia, who has been living in the southern Philippines since 1977, said in a phone interview from Kidapawan City. “So many killings have happened with no judicial solution.”

Ten months after Bual’s murder, the suspects remain free because police are still waiting for a judge to be assigned to the case and for arrest warrants to be issued, Albert Ferro, the officer leading the investigation, said by phone on July 13.

Death Squads

“The ball is now with the judicial branch of government,” Aquino spokesman Edwin Lacierda said in a briefing in Manila yesterday. “We can ask them to hasten the proceedings” but it might “sacrifice due process,” he said. “We continue to go after the perpetrators.”

The dawn murder in Davao was surprising because the city is one of the safest in Mindanao. The leadership has a very strong will to “maximize the coercive power of the state to deter crime,” Rommel Banlaoi, executive director of the Philippine Institute for Peace, Violence, and Terrorism Research, said in a phone interview from Manila.

According to Human Rights Watch, Vice-Mayor Rodrigo Duterte has made it clear that criminals are targets for assassination. There were more than 800 death-squad killings in Davao City in the decade to 2009, it said.

“I take care of my city,” the then-mayor said in a 2009 interview with Al Jazeera television. “It’s very dangerous for you to do crime here.” Duterte didn’t respond to requests for an interview.

Reward Doubled

Duterte, whose daughter stood for mayor when the limit on terms in office forced him to step down, doubled the reward for capturing Bual’s killer to 1 million pesos ($23,975) in May, saying the death threatened much-needed investment, according to the Mindanao Times.

“If you’re an ordinary citizen who couldn’t care less whether the city is killing criminals as long as you can roam around unmolested, I’m sure you will praise Duterte,” said Carlos Conde, a researcher at Human Rights Watch. “From the perspective of human rights, this is really an anomaly.”

To contact the reporter on this story: Luzi Ann Javier in Singapore at ljavier@bloomberg.net

To contact the editor responsible for this story: Ben Richardson at brichardson8@bloomberg.net


Coke's Big Fat Problem
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

 
blog comments powered by Disqus