Sunday, February 01, 2015

MILF, Fallen 44 and Rule of Law

The Philippine National Police-Special Action Force (PNP-SAF) assault in Maguindanao province in Mindanao last January 25 without coordination with the Moro Islamic Liberation Front (MILF) was wrong. It should have not been initiated in the first place. A total of 44 elite police officers were killed in that armed encounter with the Bangsamoro Islamic Freedom Fighters (BIFF) and the MILF. A friend, Prof. Rommel Banlaoi, said that many of those fighters were also members of the Justice for  Islamic Movement (JIM).

Another friend, Jojo Garcia, noted that  "It is Umbra Kato's former command, before he split from the MILF to form the BIFF and continue his jihad. If there is any unit of the MILF still confused as to whether it is a peace partner or radical extremist, it would be this unit."

The peace agreement between the PH government and MILF (brokered and facilitated by the Malaysia government, most  of the peace talks were held in Kuala Lumpur) is only a few months old. Trust and  confidence on  both  sides is not  very high at this time, there are still hang over of small distrust. Confidence building will take years, not just months.

I do NOT and will NOT support a new war in Mindanao. To have peace with MILF, no armed intrusion should be done by the PH government without proper coordination the MILF. 

Now, some people are suggesting that the PNP should have prepared a reinforcement plan from the AFP when it entered that village in Maguindanao province to arrest Marwan, a wanted international terrorist by the US and PH governments  These people are suggesting an expanded war that day. PNP + AFP vs BIFF + MILF. People use "peace" hesitantly because  what they really want is war.

They are concerned with the backlash of the Fallen44. But what about the backlash if the PNP + AFP vs BIFF + MILF, CIM erupted into hundreds of dead combatants and civilians that day? Or expanding for several days? War is war, bullets and bombs do not evade civilians. Once you initiate armed intrusion, expect armed counter-intrusion.

If the PH govt does not trust MILF, then there should have been no peace talks initiated in the first place. Gyera lang ng gyera, barilan at patayan lang forever. Sana ang may gusto nyan, isabaka nila sarili nila.

We support the peace talks and peace agreement because ultimately we want zero armed intrusion by both sides, today and in the future. Now the PH government authorized huge armed intrusion without regard and coordination  with the MILF. 

We have been too deep in this war in Mindanao. Five, six decades of war, still  not enough? Some people want 1 or 2 more decades of war? 

If we have to uphold the rule of law, the PH government can still attempt to get Marwan, Usman, etc militarily -- but in coordination with the MILF. Then it should be a PNP + MILF operation. If it fails to get Marwan, then another attempt in succeeding months. The PH government should learn to respect international agreements and not be a violator of its own rules.

It is true that Marwan and other wanted terrorists can possibly escape if there was prior coordination with MILF. But that is the law, the agreement with MILF is that the AFP or PNP must coordinate with them. The same way that there are thieves and plunderers in govt now, stealing hundreds of milliions, yet we cannot just throw them in jail or burn them alive, there are laws to follow. 

Rule of law, let’s abide by it, not emotionalism or political populism.

Another friend suggested,

"The same Rule of Law also dictated that these terrorists be arrested or neutralised by the government. It can be argued that, coordinating with the MILF would have resulted in the failure of the government to uphold the Rule of Law. The objective here was not to attack the MILF, but to arrest fugitives from justice."

Here is an analogy:

"These thieves and plunderers be arrested or neutralised by the government. It can be argued that, coordinating with these thieves' minions would have resulted in the failure of the government to uphold the Rule of Law and not arrest them. The objective here was not to pin down the minions but to arrest thieves and plunderers."

There are rules to follow always. So another option in order to avoid existing restrictions is to scrap, officially dishonor, the peace agreement with MILF, and PNP-AFP can attack and arrest fugitives in MILF areas anytime anywhere. Is that a good scenario?

Here is another analogy. Suppose a leader has committed serious crimes (murders, rape, cultural destruction, etc.) in an MILF controlled area, then he fled to Davao or Cagayan de Oro, with 1 or 2 dozen armed men to protect him. The MILF wants to get him and his men, send several hundred armed fighters. The peace agreement says that the latter must coordinate with the PH government first and ask to get the said wanted criminal and  his men. 

Assuming that the MILF distrust the PNP or AFP because they think this wanted criminal has many friends at those government armed units. So the MILF would launch a military attack on the wanted criminal and his men without coordination with the AFP or PNP.

I am sure this is unacceptable to many Filipinos. And rightly so.  But the PH government sending 350 armed officers to get a wanted criminal/terrorist withour coordination with the MILF is fine and acceptable?

The MILF has the political jursdiction in ARMM areas and hence, PH government political and military coordination with them is required. Palpak si President Noynoy (PNoy) Aquino dito. He should apologize to the Filipino people, even apologize for breaking the peace agreement.

Rule of law is useful. The law applies equally to unequal people, the law applies to governors and the governed, the administrators and administered. No one is exempted and no one can grant an exemption. The PH govt should never have exempted itself in getting prior coordination with the MILF as stipulated in the peace agreement.

Now, supposed there was no death among SAF officers, government casualty was zero. Did it make the operation without coordination with MILF, AFP, LGUs, justified?

I would still say NO. Disrespect for the peace agreement, dsrespect of political jurisdiction, is wrong. The law applies to the governors and the governed. No one is exempted and no one can give an exemption, even unto itself. 

See also: 

ASEAN Voices 2: PH Multinationals in the Region

* This is my second article for the new Jakarta-based magazine, January 2015 issue. My first article published in the maiden issue December 2014 was entitled, Is the PH power supply ready for the AEC?

Southeast Asia’s economy is largely driven by rising household consumption, and one industry that thrives on this consumption like no other is food and beverages, fueled by rising personal incomes and increased spending.

Consequently, this is also an industry where local companies have been particularly ambitious, with several evolving into successful global exporters.

On the other hand, numerous foreign companies based outside Asean have also positioned themselves inside one or more of the 10 member countries, in a region with the third largest population on the planet, next to China and India.

The large population with consumption of close to US$2 trillion is one of the largest strengths of the region—offering more people, more producers and consumers, more entrepreneurs and workers, along with low dependency ratio, since the population is generally young.

Among companies located in the Philippines,at least six have already been listed among the largest transnational companies with existing branches and subsidiaries, or as having expansion plans in Asean.

Jollibee Foods Corporation (JFC) is a perfect example, as it operates the largest fast food chain in the Philippines. As of end-September 2014—what started as an ice cream parlor in 1975—has grown to become a business with 2,121 food shops throughout the country. Its flagship and most popular chain store is Jollibee, with 800 stores nationwide, as of October 2013. It is owned by billionaire Tony Tan Caktiong.

Other JFC food shops, each with dozens of branches, are Chowking (noodles, etc), Greenwich (pizza), Red Ribbon (cakes, 250 plus stores), and Mang Inasal (chicken with unlimited rice). JFC also holds the Philippine franchise for Burger King.

Further, JFC owns more than 100 stores internationally, with a presence in the US, Middle East, China and Hong Kong. Though it has yet to enter Canada and Europe, within the region Jollibee has branches in Singapore, Vietnam and Brunei Darussalam.

In Singapore, JFC has a wholly-owned subsidiary, Golden Plate Pte Ltd, which entered into an agreement with Beeworks Inc to own and operate Jollibee stores there. GPPL will own 60% and Beeworks will hold the remaining 40% stake in the company, with an initial funding of US$1 million. JFC has 32 stores in Vietnam and 11 in Brunei, as well.

Now the company is set to enter Malaysia and return to Indonesia, in the absence of a local fast food firm available for acquisition. Its reopening in Indonesia after the Asian financial crisis in the late 1990s is largely encouraged by a very tempting market, given its large population and rapidly growing middle class.

JFC’s plan, however, is not to expand into the neighboring country alone, but to have a local partner, according to the news portal.

Asia’s Biggest

In November 2013, the company declared, “Among all Asians, restaurant companies including fast-food, Jollibee can be the biggest.” Also, JFC Chief Financial Officer Ysmael Baysa said the company could become Asia’s largest restaurant chain by 2020.

JFC also has a 50% interest in joint ventures with Highlands Coffee (Vietnam, Philippines), Pho 24 (Vietnam, Indonesia, Philippinesand Japan) and Sabu (China).

Also making it big in the food sector is the Max’s Group, which owns numerous restaurant brands, with its flagship and most famous being Max’s Restaurant. Its 13 other brands include Max’s Corner Bakery, Krispy Kreme (donuts), Jamba Juice, Pancake House, Dencio’s, Kabisera ng Dencio’s, Teriyaki Boy, Sizzlin’ Pepper Steak, Le Coeur De France, The Chicken Rice Shop, Singkit, Maple and Yellow Cab (pizza).

Max’s Group President Robert Trota was quoted by as saying that the company plans to open 12 locations in the US, Canada and the Middle East. In Asean, Pancake House has four stores in Malaysia, while in Brunei it recently opened its first store. “We’ve been looking at Indonesia, Singapore… We’re just assessing formats,” Trota said.

Meanwhile, San Miguel Corporation (SMC) is known as one of the Philippines’ largest corporations, with its San Miguel beer flagship product. Currently, there are six San Miguel Breweries in Asia, one in Hong Kong, two in China (Guangdong and Baoding) and three within Asean (Vietnam, Thailand and Indonesia.). San Miguel started as a brewery during Spanish colonial times in 1890, but has diversified into packing, property, petrochemicals and power generation.

However, San Miguel’s dominance in the food industry may soon be facing a serious challenge from Indonesia’s Salim Group, which through its Hong Kong-based conglomerate First Pacific Co Ltd, and in cooperation with Malaysia’s Wilmar International, acquired Australia’s Goodman Fielder for US$1.37 billion, according to an report.

The transaction is expected to be completed in Q1-2015.

Beating MNCs

Within the pharmaceutical and healthcare sector, a local generics manufacturer, United Laboratories (Unilab), has cornered about 25% of the market share in the Philippine pharma market and has out-performed all multinational pharma companies in the country. It also has a presence in all Asean countries, except Brunei, and will only expand its existing operations within the region.

In Indonesia, Unilab’s leading over the counter brands are Decolgen and Neozep in the cough and cold category, the multi-vitamin Enervon C and Biogesic for headache relief.

Apart from Unilab, there is also Zuellig Pharma, one of the largest multinational pharmaceutical distribution networks in Asia. It originated in the Philippines and its operations today cover all 10 Asean member countries.

Separately, Pilmico Foods Corp President Sabin Aboitiz said the food unit of the Aboitiz Group is also eyeing acquisitions as a template for expansion, capitalizing on opportunities presented by the
Asean economic integration.

Pilmico completed its first flour shipment to Vietnam last December, and is also opening an office in Indonesia. Incorporated on Aug 8, 1958, Pilmico started out as a joint venture among the Aboitiz Group, Lu Do Group, Soriano Group and the US Pillsbury Group.

At the end of the day, everything will look like a case of companies from other Asean countries entering the Philippines and Philippine companies entering other Asean economies.

However, it must also be taken into account that the region is a complex and competitive market where success is defined not only by product quality or marketing efforts, but also by the ability to deliver product to consumers using an optimal distribution strategy.

It is therefore essential for all food and drink brands, and investors looking at the Southeast Asian market, to also have a sound understanding of local distribution structures, coverage and commercial terms. Only then can an expansion drive be truly effective.

Saturday, January 31, 2015

UHC 26: Public and Private Spending on Health

The 3rd paper which I briefly discussed in Ateneo last Wednesday night was about healthcare spending. Some data here I belatedly added as I ran out of time preparing three different topics in one lecture.

I also used some old data, 2011, 2007, but current numbers should not be too different.

A time series data on number of physicians over 22 years in selected Asian countries.

Many people say that government spending in healthcare is "not enough". Really? These national and local agencies are not small. Public spending in healthcare is big. What makes them "small" perhaps is the huge amount of wastes and leakage. Like spending more money on salaries and perks of government personnel and officials who are not providing relevant or useful service delivery.

Universal healthcare (UHC) in the Philippines.

An example of wastes and leakage in the government health delivery system.

Private spending in health, at least in the corporate and pharma sector.

Average life expectancy of people anywhere in the planet is rising. Many people do not recognize this and only point out the pessimistic and negative scenario.

I made the following concluding notes.

* Reduce taxes on medicines and healthcare. import tax 1-5% + VAT 12% + local government taxes.

* Encourage, invite more players in pharma (innovators and generics), drugstores, hospitals. Competition from more players is often the best insurance to bring down prices and improve products and  services quality.

* Focus on fighting substandard, fake medicines, in partnership with civil society. Protect the public via quality control, not drug price control,

* Do not re-centralize healtcare, allow decentralization and competition among LGUs, among private health  insurance, drugstores, hospitals, pharma.

The 15-slides presentation is available in  my slideshare account.

See also: 

Climate Tricks 37: Climate Money and the Scientific Dishonesty Behind It

This is the 2nd paper that I presented in a graduate class in Ateneo handled by my friend, Alvin Ang. The 1st paper was about some classical theories why government was invented.

People are not talking about several billion dollars of money here, they are salivating at trillions of dollars yearly.

The big handlers of climate money are the following:
Asian Development Bank (ADB),
African Development Bank (AfDB),
European Bank for Reconstruction and Development (EBRD), 
Inter-American Development Bank (IDB)
World Bank (IBRD/WB)
International Fund for Agricultural Development (IFAD),
Climate Investment Funds (CIF),
Global Environment Facility (GEF)

Systems engineer Ira Glickstein made an estimate of how much of the past century's 1 deg F or 0.6 deg C warming, was due to nature and human modernization. His findings, about 0.5 C of it nature-made, and 0.1 C man-made.

The Pacific Decadal Oscillation (PDO) also shows warming-cooling cycle.

Friday, January 30, 2015

Pol. Ideology 61: Raison d 'Etre of Government

Last Wednesday night, I was a guest lecturer at a friend's graduate class in Ateneo on public finance. I presented 3 unrelated topics but all related to public finance. The first is about the reason for existence of government, why government was invented and what are the scope and functions of government, based on one's political belief. The second paper was about climate money and the corrupted science behind it, and third was about public and private healthcare spending.

About 13 or 14 students came, fine. Alvin was out of the country that day.

If A and E are the extremes, zero and all-government, then where should be the level of involvement of a sensible government?

Adam Smith in his earlier book already cautioned people of not allowing their governments to go to point D or E.
And in his second, more popular book, he reiterated that position.

“Every individual...generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it…. he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.”

 –TWN (1776), Book IV Chapter II

The father of "Austrian economics", Mises, elaborated the value of a free market economy. The customer is "king" even if there are no politics involved.

Also among the classical thinkers of "why was government invented", these three philosophers stood out.

Uhh ohh, Plato himself has cautioned against the danger of (big) government and its governors/administrators/rulers.

After WWII, Britain went almost socialist. Meaning almost everything is socialized, including people's pockets and bank savings. Reagan in the US and Thatcher in UK, the pair re-introduced classical liberal philosophy in their governments.

Populism and socialism are deceptive. They promise heaven on earth for the people, especially the poor and/or gullible. Now almost anywhere in the planet, the main complaint of the people are their respective governments. Lots of coercion and prohibitions (yes, things are prohibited unless people get the permits and signatures of regulators first).

There is a need to shrink government. Local, national, multilateral agencies. They have been expanding like amoeba and are devouring lots of resources from the private sector like amoeba.

Takeaway reminders:

Government is not reason; it is not eloquent; it is force. Like fire, it is a dangerous servant and a fearful master. – George Washington

The more numerous the laws, the more corrupt the society. - Tacitus

A government big enough to  give you everything you want is a government big enough to take from you everything you have. -- Gerald Ford. 

The full 15-slides presentation is posted in slideshare.

See also: 
Pol. Ideology 55: Jules Maaten's Lecture on Liberalism, May 11, 2014

Tuesday, January 27, 2015

Agri Econ 15: Why do Thailand and Vietnam Produce More Rice than the PH?

The new Administrator of the National Food Authority (NFA) and a friend, fellow UP  alumni, Renan Dalisay, shared in his fb wall photos of his recent visit to IRRI including meeting IRRI Dep. Dir. General Bruce Tolentino. Then he added,
Like many of you, i could not resist asking why other countries like Vietnam and Thailand, who learned the technology of rice planting in IRRI, are now way, way ahead of the Philippines in the area of rice production. The reply was simple and forthright, they walk their talk.

Dr. Bruce Tolentino's presentations earlier should have answered such question -- why Vietnam and Thailand have high rice output than PH. Here are two charts from some of his recent presentations.

1. Thailand has about 11 million hectares of rice land, Vietnam nearly 8 million hectares, vs. only less than 5 M hectares for the PH.

2. The term Thailand and Vietnam are "way ahead of the PH in rice production" is true on absolute rice output, but not for Thailand in average productivity per hectare.

Another chart from Bruce T.

3. TH and VN are on mainland SE Asia. PH is far out and detached from the mainland. Them in the mainland have Mekong River, Ton Le Sap River, other huge rivers that provide huge irrigation. They also have wide flat lands suitable for rice farming.

And I will  add these additional factors:

4. VN and TH perhaps have only about 1/5 of the number of typhoons per year as those entering PH. On average, about 20 typhoons enter the PH, about half just pass nearby while another half make actual landfalls and cause more damages and crop losses.

5. VN and TH are done with their agrarian reform (AR) and forced land redistribution; the PH is not done yet, after 43 years of implementation, starting only in 1972 Marcos' land reform, not counting earlier land reform programs. No timetable, seemingly forever AR means endless uncertainty in agribusiness. Large scale rice farming is not possible because of potential political backlash.

6. Thailand has only about 65 M population, the PH has 100 M people (as of last year).

7. Subsidies to rice farmers, it is also being done in the PH. Tractors and water pumps, farm roads and irrigation, seeds and credit support, etc., these subsidies are given by the PH national government to small rice farmers. LGUs have their own subsidies too. 

The answer to Renan's question is often outside of politics and governments. Geography and nature provide the clue who should specialize on rice production, who should specialize in tourism, etc.

The cost  of production can always be lowered through technology and biotech. But  crop losses due to frequent typhoons, especially in the current  period of global cooling -- more rains, more flood -- losses cannot be easily controlled or minimized.

If the PH government should insist on rice "self-sufficiency", then it should allow corporate, large scale rice farming. Economies of scale, tapping lots of plant scientists and geneticists, will greatly improve PH rice output.

What is wrong with selling cheap rice from Thailand, Vietnam and Cambodia? Do people glorify expensive rice via rice protectionism, rice QR and rice tariff? Then turn around and lambast the government, lambast anyone else, why PH rice prices are high?

The quick solution to  more rice supply in the  PH is through free trade, Abolish  rice protectionism, even  NFA monopoly in rice importation and  licensing of  importers. Allow those cheap rice from Th and Vietnam, and Cambodia, to be sold here cheaply too.

See also:
Agri Econ 11: Protecting Land Properties by the Poor in India, April 22, 2014

Agri Econ 12: Presentation at WASWAC-BSWM Seminar, May 13, 2014

Agri Econ 13: What and Where to Plant, Nature vs. Government Planning, June 24, 2014 

Agri Econ 14: NO to Further Extension of Agrarian Reform, July 03, 2014

Monday, January 26, 2015

Cheap Oil and Rising Abundance

My second lecture before graduating management engineering students of Ateneo in their Development Economics class was about cheap oil. Thanks again to their professor and my friend, Joey Sescon, for allowing me to share these data and observations to the students.

As of last weekend, WTI crude oil closed at $4549 a barrel while Brent oil closed at $48.79 a barrel. Wanting to go down to $40 or go up to $50.

Current prices are attempting to go down  the levels in 2009.

The low prices in 2009 were due to global financial turmoil and hence, reduction in demand. Today's low prices are due to huge oil supply.

At 9+ million barrels per day, the US' oil output is similar to Saudi Arabia's, if not larger.

Japan and Europe are still grappling with anemic growth, even threat of deflation, thus oil demand is almost flat. Besides, modern cars, buses, airplanes, are more fuel efficient. They can travel the same distance at lower fuel consumption. It is in Asia and other emerging markets that oil demand is rising significantly.

The PH economy to be the biggest winner in the current cheap oil, good news from Bloomberg.

A brief presentation, these were my conclusions.

* See also, Fat Free Econ 56: Major Global Economic News of 2014, January 07, 2015

Energy 33: Renewables Cronyism, Germany and UK Cases

Last Thursday afternoon, I gave two lectures in one class in Ateneo handled by my friend, Joey Sescon. The first is about renewables cronyism, the second about cheap oil. There were many questions and reactions on the first paper, so I presented it again in another class, also handled by Joey.

Before presenting the paper, I mentioned that I just came from Nepal. And at this month of the year, brownouts in certain parts of Kathmandu is up to 18 hours a day. The country relies heavily on hydro power and when the ice are still up  there in  the  mountains, not yet melted because it is winter, then  the  capacity of hydro power plants is very limited.

My six points outline:
1. Global energy mix
2. Generation cost, Electricity prices
3. Germany Case
4. UK Case
5. No climate basis for renewables cronyism
6. Conclusions

So despite decades of favoritism and subsidies to renewables by many governments especially in Europe, the share to total energy mix and electricity generation remains very small until this decade.

Just one major explanation: wind and solar are simply costly. Their energy density is low, their reliability and stability is low because they are intermittent. When the  wind  does not blow, when  the Sun does not show up, electricity output is zero, even on days and hours that people want electricity.

When I went to south Sweden in 2003, I landed at Copenhagen airport in Denmark, then travelled by train to Malmo, then Lund. Before the plane landed, I saw many windmills on the sea in Denmark, the offshore windmills. They looked cute.

Europe being a very modern continent, and Germany and UK being highly industrialized countries, and  yet there are stories  and reports of “EU risks blackout”, a “dark continent”, and “impossible green  dream”.

In developed Asia like Hong Kong (electricity, 71% from coal, 29% from natural gas, zero from renewables; Singapore 78% from natural gas and 18% from oil, very small from renewables (as of 2011, from ADB’’s Key Indicators 2014) ); S. Korea and  Japan, the words “blackout” or brownout” or “dark continent” are never heard. They have huge, stable and reliable energy supply, at cheap  prices, their energy policies have not been hijacked by green  socialism yet.