MANILA - The Philippine central bank's gold purchases from small-scale miners and traders in the first quarter fell 92 percent from a year earlier, hit by rampant smuggling of the precious metal, the environment and natural resources department said.
The Southeast Asian country is believed to be sitting on metallic mineral deposits including gold and copper estimated at $1 trillion. While mining is a potential growth sector for the Southeast Asian country, policy inconsistency and corruption are a major concern for investors.
Gold purchases by Bangko Sentral ng Pilipinas (BSP) in January to March plunged to 618 kg valued at 1.35 billion pesos ($32 million) from 7,493 kg worth 14.11 billion pesos in the same period a year ago, government data showed.
The drop was steeper than the 88 percent and 76 percent annual declines seen in the fourth and third quarters of 2011, respectively.
"Given the continuing high price of gold and the increasing number of small-scale mining areas, the decrease in gold purchases by the BSP clearly means that gold output is going to the black market and smuggling activities," Environment and Natural Resources Secretary Ramon Paje said in a statement.
The official said he had sought the help of the Presidential Anti-Organized Crime Task Force to stop smuggling.
The dramatic drop in BSP's gold purchases started in the second half of 2011 when the Bureau of Internal Revenue started collecting a 2 percent excise tax and 10 percent creditable withholding tax from gold sales by small-scale miners and traders.
The witholding tax had been halved since April this year, according to Paje.
The central bank, mandated by law to buy the output of small-scale gold miners, deducts the corresponding taxes and remits the money to the Bureau of Internal Revenue.
The Philippines produced 37.1 tonnes of gold in 2011, down from 41 tonnes in 2010, ranking it the 18th largest gold producer in the world, according to Thomson Reuters GFMS.
But official Hong Kong data showed that the Philippines shipped more than 80 tonnes of gold to Hong Kong in 2011, or about 14 percent of the city's total gold imports. Hong Kong is a gold trading hub and a main conduit for gold flows into China.
Government data also showed a 38 percent drop in value of the country's metallic mineral production to 19.61 billion pesos in the first quarter.
Gold output fell 65 percent to 4,056 kg valued at 9.33 billion pesos. The yellow metal traded at as high as $1,743.5 an ounce in February, the highest for the first quarter.
Copper concentrate output rose 13 percent to 69,153 dry metric tonnes, while nickel direct shipping ore jumped 28 percent to 1.58 million DMT in the first quarter.