Monday, 6 January 2014 00:00
Sri Lanka’s limited mining resources have been put in an uncertain position as new regulations were approved by the Cabinet sans regulations governing exploration.
It was reported over the weekend that the new mining regulations also introduced a committee to determine the market value of mine output and the percentage of royalty payable by those seeking such licenses. The changes, which were gazetted on Thursday, replace certain sections of the earlier Mining (Licensing) Regulations promulgated in November 1993.
The new regulations state that any private sector proponent or participant before obtaining a licence for mining, trading in or exporting minerals must have special negotiations in the form of an Investment Agreement with the Secretary to the Ministry of Environment and Renewable Energy with regard to the terms and the supplementary rights and obligations under such agreement.
The regulations have named four categories of minerals. The first consists of industrial minerals ilmenite, zircon, rutile, graphite, mica, quartz, garnet and apatite. The second consists of base metals iron, nickel, chromium, copper, lead and zinc. The third consists of precious metals gold, silver and platinum. And the last consists of exported dimentioned stone. Mining experts pointed out, however, that by deliberately excluding from the regulations those seeking mineral exploration licences, the Government has left room for continued abuse.
Since the new amendments have omitted to put in place a framework for exploration, companies that already possess mining licences can transfer that document to foreign companies for millions of dollars. This opens up a huge issue of transparency and accountability where national assets can be misused by parties. Not laying out the exploration guidelines is a huge loophole in the new regulations and indeed has resulted in calls for another amendment to be tacked on to deal with this oversight.
The new regulations also state that the Ministry Secretary may, in consultation with the Geological Survey and Mines Board (GSMB), determine the market value of mine output and percentage of royalty payable, among other things, within the framework of the investment agreement. This opens up a veritable Pandora’s Box where public officials will come under pressure, some would argue undue pressure, to lend a helping hand to vested parties.
Basically this regulation has the same shortcomings as many others, in the sense it does not promote good governance. In an environment where politics and business is closely linked, the accountable exploration of natural resources that could bring significant wealth to the State is overlooked in favour of giving loopholes to stakeholders with vested interests. An apolitical system that provides credible, transparent and responsible processors has yet again failed to appear.
The latest mining regulations are only one example of this trend that has been striking roots to an alarming degree. As pointed out by most pundits, the lack of good governance and adherence to law and order is seriously undermining the investment climate in Sri Lanka, particularly in the sphere of foreign investment. Institutions that were set up to responsibly oversee investment and its myriad of processes are being undermined by individuals, usually politicians, and it would seem the regulations are also drafted out with the intention of assisting this sorry state of affairs.
Any new regulation needs to be as comprehensive as possible and encompass space for good governance. Otherwise Sri Lanka is only mining itself deeper into corruption.