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Natural Wealth Appropriation and Misuse The Malampaya Case

Natural Wealth Appropriation and Misuse The Malampaya Case. Grizelda Mayo- Anda. Malampaya Natural Gas Platform. The Malampaya Project. Philippine’s only natural gas offshore project

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Natural Wealth Appropriation and Misuse The Malampaya Case

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  1. Natural Wealth Appropriation and MisuseThe Malampaya Case Grizelda Mayo-Anda

  2. Malampaya Natural Gas Platform

  3. The Malampaya Project • Philippine’s only natural gas offshore project • Natural gas fed to power generators produce max capacity of 3,000 MW, supplying over half of Luzon, the country’s largest region • Operated as Service Contract 38, led by Shell, Chevron, Philippine National Oil Company (PNOC) • Yields over P12 billion annually in royalty shares for the national government (In 2012 and 2013, royalty shares reached $1B or P40B annually)

  4. Legal Framework on Natural Wealth Sharing • Local Government Code of Philippines provides 60-40 sharing on royalty between National Government (NG) and Local Government Units (LGU) • NG denies Palawan share (Camago natural gas field located 80 kilometers offshore Palawan) • Supreme Court still to rule on territorial jurisdiction issue

  5. SERVICE CONTRACT NO. 38 Government Republic of the Philippines (GRP) Shell Philippines Exploration (SPEX) Together with Invested in oil rich shore of Palawan Invested 4.1 B USD 60% 40% Palawan 40% GRP 60%

  6. R.A. 7160: LOCAL GOVERNMENT CODE • NATIONAL GOVERNMENT 60% ELECTRIFICATION80% • PALAWAN 40% LIVELIHOOD 20% MUST BE UTILIZED FOR

  7. Sharing Agreement • Interim sharing scheme between NG and LGU not subjected to public scrutiny and transparency • Initial release of P3.9 billion to Palawan in 2008, exercised by key political leaders • Disposition of fund did not follow the general provision of law (80% must be spent in energy-related projects benefitting local populations) • Royalty fund become huge political pork barrel for powerful politicians

  8. How Malampaya Was Misused • Political leaders determined projects and manipulated bidding rules to favor certain public works contractors • Ghost and overpriced projects • Favoritism of project contractors • Share spent by national government unaccounted for

  9. “It is clear from the testimonies especially of Department of Public Works and Higways (DPWH) Secretary Singson during these hearings that there was massive corruption of Malampaya funds.” - Sen. TeofistoGuingona III Chair, Senate Blue Ribbon Committee January 2013

  10. “Why most of these funds went to infrastructure projects instead of being used to alleviate the energy problem begs for an honest answer. Is it because this is where kickbacks are made?” - Bishop Pedro Arigo, testimony during the Senate Blue Ribbon Hearing, January 2013

  11. “It is clear that there are people who are accountable. There was clear misuse of public funds in the MalampayaProject. This is not only about corruption. This is about the gross injustice done to a person who was just seeking to bring out the truth.” • Senator TeofistoGuingona III, closing statement during the Senate Blue Ribbon Hearings, January 2013

  12. Road Project Funded with $5M from Malampaya

  13. Reclamation Project in N. Palawan ($12M+-)

  14. Areas of Concern • Accountability of government agencies • Governance of natural wealth revenues (Transparency and Participation of Civil Society groups; Monitoring of Royalty Funds) • Gross abuse on established rules on government contracts

  15. Civil Society Policy Advocacy • Full transparency through effective safety mechanisms • De-politization of royalty as “pork barrel” • Congressional oversight of royalty money; special law • Prosecution of criminal and administrative cases against officials behind Malampaya corruption

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