Wednesday, July 29, 2015

Business Bureaucracy 9, Land title registration

A friend who is still enamored with the idea of more government regulation of markets, Floro Francisco, had a little shock of his life when he experienced government bureaucracies first hand. He posted this yesterday in his fb wall, reposting with his permission. Thanks Floro.

The images I got from the web and just added them here.
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Whew, just got back from following up documentary requirements from the BIR, Municipal Hall and the Register of Deeds for the transfer of the land title under my name for a piece of land I bought. Wow so many requirements I had to accomplish and the funny part is I have to submit almost similar requirements to 3 government agencies. And boy the amount of taxes and filing fees I have to pay was a bit shocking: 6.0% for Capital Gains Tax, 1.5% for Documentary Stamps to be paid at the BIR based on the purchase amount of the property. And then you pay also 0.50% for the Transfer Fee of Title at the Munisipiyo. And then another > 1.0% approximately to the Register of Deeds!

On top of these you need to pay the Munisipiyo for a certification of your Tax Declaration and another certification for the Tax Clearance and yet another for the Certification of No Development on the land. And you do not get to know all these payments on the first day you visit them unless you get or better yet make a checklist of the 3 agencies of government. You also had to pay for a Certified Xerox Copy from the Register of Deeds for the Duplicate of the Land Title even if you have a copy of the original owner's duplicate.

It is painstaking hard work and patience. If you play fair like me and do not go through the channel of experts and facilitators lurking around. You might need several months to complete these tasks. If you are not intelligent and ask the right questions to the right people, may be it would take you a year or two to finish everything only for a small piece of land. What if you lacked communication skills and knowledge about documentations? I wonder what happens to the lowly farmers who inherit or buy lands and the agrarian reform beneficiaries who had to deal with such government requirements to get their names on their properties.

I think I should find a politician or become a politician myself to push for reforms in such a bureaucratic mess! No wonder many lazy inheritors just leave their properties to be taken over by knowledgeable government officials and politicians! I think there is injustice there somewhere in terms of the amounts to be paid and the processes to be followed as well as the volume of documentary requirements. Yung ibang maliliit pampa-xerox lang eh wala na, yung pang taxes and processing fees pa kaya mabayaran nila? Some progressive form of taxation in this regard is much needed. A one stop shop processing system that would simplify the procedures need to be pushed! I am actually about to go through the same process for some properties we inherited from our parents and Sister which remain un-acted upon for years since they died because I nor my brother had the material time to do it. It may require that I take a leave from work to attend to these! Ah Bureaucracy! I wish I was born to a Dynasty!

… Ironically in my case mas nahirapan ako sa BIR kung saan mas maraming requirements at mas mahal ang bayarin! Also now you have to be computer literate to deal with BIR kasi you have to fill e-Forms sa eBIR. Paano na ang ka-awawang Magsasaka! Mas madali sa Register of Deeds! Kaya lang yung IT fees nila mahal! Pero tingin ko diskarte sa itaas yung IT Fees At sakop lang ng isang private servicing company yan kasama ng ID system ng SSS, GSIS at Pag-ibig pati ang Drivers License!

Some comments by his friends (I made minor revisions to #1 to make it more readable):

1. may bibilhin govt sa amin (lupa) na maliit lang naman, gagawin service road.. kaso mas malaki daw yung tax na babayaran namen compare sa ibabayad nila.. take note, hindi pa nila nare-release amount ng bayad nila, pero my computation na ng taxes na need bayaran.. at nakakaloka, binigyan kami ng two options, isang mas mataas n babayaran at isang binabaan ng around 3 percent ..whew..

2. yung mga "lazy inheritors" ay hindi talaga "lazy" in the real sense of the word. Marami lang po sa kanila ang walang pambayad sa Estate Taxes, at kung anu-ano pa pong ibang klase ng fees and taxes, para sa transfer ng title sa pangalan ng mga heirs. Idagdag pa ang layo ng locasyon ng namana. Kailangan mo munang umalis sa trabaho upang makasunod sa pinapatupad na proceso ng gobyerno, na kadalasan naman ay nakakalito sa common tao.

3. Don't forget sir that there are Land grabbing syndicates who have ties with officials of LRA and Register of Deeds.

4. These seemingly rigid requirement of the Register of Deeds are the causes of fraud and anomaly in the registration of real properties. It is almost impossible for poor landowners to effect the transfer of title to them!

5. Ha ha funny how you started your cycle, BIR payments agad... The cycle actually starts from acquiring a certified true copy of the title from RD, then Municipal level, then provincial level, then BIR, then the Register of Deeds,,, after this good luck on how soon you can get your title, unless you know somebody from Rd so that release of the title can be expedited!!!

I also commented that it's a good experience for Floro. And we may wonder why many people are still enamored with "more government intervention/regulations" mantra. 

Someone said that the purpose of government is to expand government. Somehow this is true. And that explains why I and other friends campaign and advocate for minimal or limited government, more market competition, more civil society role.
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See also:

Free market sites in the ASEAN

How popular online are free market sites and blogs based in the ASEAN?

Here is one answer -- the global ranking (via alexa.com) of some known free market websites and blogs in the ASEAN. Screen shots I got today Above lists are those from Indonesia, Malaysia (IDEAS) and Vietnam  (doimoi.org).

Lower list are those from the Philippines. Hmmm, we seem to be stuck in middle ranking trap for several years now.

Nonetheless we are still around, not  raising the white flag against ever-expanding, ever-rising governments.
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See also: 
Asian free market websites, part 2, April 25, 2011 
Asian free market websites, part 3, May 10, 2011 
EFN Asia 31. Friends in the Asian Free Market Movement, November 07, 2013 

Asian free market websites, Part 4, July 19, 2015

Tuesday, July 28, 2015

Philippine media's global ranking, Part 2

There seems to be high interest in PH news recently, especially starting October 2014 until today. See global ranking of ABS-CBN News, PDInquirer and Rappler. Screen shots taken today from alexa.com.

Note also the jump in global rank over the past 3 months -- all in green, meaning an increase in ranking. Decline in ranking is red,  none of the listed media outlets here experienced red marks recently.


Maybe this is related to the PH's recent higher GDP growth rate, improvement in credit ratings, etc. More and more people around the world are reading and browsing about the Philippines.

Or there are more Filipinos living and working abroad, and they are following news back home regularly. Whatever the explanations are, this is somehow good  news -- the Philippines rising in the global radar of business, politics, etc.
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See also: Philippine Media's Global Ranking, April-July 2012,  July 24, 2012

BWorld 13, SONA's liberalism, five years after

* This is my article yesterday in BusinessWorld's Special 27th Anniversary Report, coinciding with President Aquino's 6th and last State of the Nation Address (SONA).
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PRESIDENT Benigno S. C. Aquino III will deliver his 6th and last State of the Nation Address (SONA) today, and it is a relatively safe guess that its general outline will be a report of achievements over the past five years and what the administration intends to achieve in its final 11 months.

Reviewing the past five SONAs, 2010 to 2014, it appears that in his first SONA in 2010, the President wanted to affirm the liberal ideals of a limited and clean government, dynamic market, and principled civil society. The President is from the Liberal Party, not from a nationalist or socialist party and somehow, those ideals should be reflected in his policy formulations.

The succeeding SONA from 2012 to 2014 focused more on the various welfare and subsidy programs of the administration, especially the implementation of the conditional cash transfer program. Liberalism in theory is not focused on heavy state welfare and political populism as these are the realm of socialism and conservatism. Liberalism is about having rule of law, government as enabler, judge, and policeman of the people’s three basic rights and freedom -- right to private property, right to life against aggressors, and right to liberty against dictators and bullies.

Public-private partnerships (PPPs) were among the salient pronouncements and promises of the President’s first SONA 2010. In particular:

1. Expressways: “Some… want to build an expressway from Manila that will pass through Bulacan, Nueva Ecija, Nueva Vizcaya, until the end of Cagayan Valley, without the government having to spend a single peso.”

2. National defense. “Some... will rent the Navy headquarters on Roxas Boulevard and the Naval Station in Fort Bonifacio. They will take care of the funding necessary to transfer the Navy Headquarters to Camp Aguinaldo. Immediately, we will be given $100 million.”

3. Build-Operate-Transfer (BOT): “Projects will undergo quick and efficient processes…. a process that used to take as short as a year and as long as a decade will now only take six months.”

4. Business registration: “The never-ending horror story of registering business names, which used to take a minimum of four to eight hours depending on the day, will be cut down drastically to fifteen minutes. What used to be a check list of 36 documents will be shortened to a list of six, and the old eight-page application form will be whittled down to one page.”

Among the bills that Mr. Aquino sought from Congress were the Antitrust Law (“No monopolies, no cartels that kill competition”) and Whistleblower’s Bill “to eradicate the prevalent culture of fear and silence that has hounded our system. From 2009 to 2010 alone, cases which involved the participation of witnesses under the Witness Protection Program resulted in a ninety-five percent conviction.”

The four items above are consistent with liberalism, of lesser government intervention and more private enterprises involvement and dynamism. Also the two (and more) legislative measures.

After five years, from July 2010 to July 2015, were those four (and more) plans and promises fulfilled? Were those legislative proposals enacted into laws?

This writer interviewed Communications Secretary Herminio B. Coloma, Jr. of the Presidential Communications Operations Office about some of those issues. In particular, about #4, the business bureaucracies. Mr. Coloma said that after SONA 2010, “DTI buckled down to work immediately to simplify business registration procedures. The Philippine Economic Zone Authority also introduced minimum procedures in business registrations.”

The World Bank has been producing an important study, the Doing Business (DB) annual reports, on how easy or difficult it is to do business in different countries. Here is a summary on the Philippines. The fourth column is not part of the report, it is only added here for a comparison of positive changes or improvements, and reduction in bureaucracies; a negative figure means deterioration or increase in bureaucracies. (See chart) 


So it is true, after five years, the Philippines’ overall global ranking in “Ease of Doing Business” has improved by 49 notches. In particular, to start a new business, there is a reduction of 18 days and to get construction permits, there is a reduction of 109 days, after five years. These are good improvements.

Mr. Coloma also mentioned the Civil Service Commission’s (CSC) Citizen’s Satisfaction Center Seal of Excellence, wherein government offices are rated by the public through a Report Card Survey.

Apparently, Item #s 1 and 2 in SONA 2010, the expressway to Cagayan Valley and rental of Navy HQ in Roxas Boulevard, did not take off.

Item #3 on BOT seems to be on track as there are plenty of big PPP projects that are on-stream or being implemented. These include the North-South Railway Project, NLEx-SLEx Connector Road, and NAIA Development. PPP projects for approval include LRT Lines 4 and 6, and the Batangas-Manila (BatMan) 1 natural gas pipeline project.

The proposed Whistleblower’s Law is still pending in Congress, and it is hoped that it will become law before the end of Mr. Aquino’s term and of the current Congress.

We also asked Mr. Coloma why Mr. Aquino doesn’t seem too enthusiastic in the moves to amend the Constitution and remove economic restrictions like the prohibition or limitation of foreign investments in certain sectors and sub-sectors of the economy.

Mr. Coloma said “the President has adopted a hands-off stance so far, [is] not against it but reasonably open to it.” He added that the President is just being careful because Congress might interpret it differently and this might lead to a comprehensive amendment of the charter, not just the economic provisions.

Looking up to SONA 2015, what would be the outlook for the Palace in the next 11 months?

Mr. Coloma expressed the hope that certain priority bills would become law, like the Rationalization of Fiscal Incentives, the Tax Incentives Management and Transparency Act, and others. He also pointed out the continuing need for good governance, transparency, and institutional moorings.

It should be noted that there is more emphasis on “good governance” by the Palace as the political heat leading to the 2016 presidential election rises. The liberal ideals of limited government and, by extension, “less governance” has been muted.

The political opposition and militant civil society do not show any interest in limited government. On the contrary, they show voracious appetite for further expansion of government, provided that they are the ones occupying high government positions.

Between a liberal government with muted aspiration for more market competition and a political opposition with expressed desire for a more welfarist, more populist and interventionist government, the public have a choice.

If they wish to see a more dynamic, more competitive private enterprise, they should call for less governance. If they wish to try a welfarist, interventionist government system, the case of Greece and its huge debt and fiscally unstable economy should be a gentle reminder of the danger of this option.
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Monday, July 27, 2015

Inequality 26, Pew survey result on support for free market

There is an interesting report in vox.com, covering the recent result of Pew Research survey on Support of the free market system. 

People in socialist Vietnam and China have high support for free market capitalism and its inequality than people against it. Also high support of people in Nigeria, Turkey, Malaysia, Philippines. 

Pew's survey question was, "Are people better off in a free-market economy given the wide disparities in wealth that might result?" Agree or Disagree.


And another interesting chart from that report -- optimism of people who say that children will be better off financially than their parents, socialist Vietnam and China are again outliers. People in Chile, Brazil, Bangladesh and India are catching up to the optimism.


In a related thread on inequality and "inclusive growth", I argued that inequality is good. Up to what level of inequality, like gini ratio?

There should be NO ceiling on the degree of inequality. There is no way to stop some people from being too intelligent or too efficient and too hard-working + some luck. Almost all the things that we so enjoy -- facebook, youtube, google, laptops, cars, airplanes -- were created by very intelligent, very hard-working and efficient people, and they have become super rich. And we benefit from them and their invention. So why put a "cap" on their wealth?

More inequality, the better for society and humanity. Notice also that the richer they become, the more that they give away their wealth. From Bill Gates to Warren Buffet to Zuckerberg, they all have foundations or donate to foundations whose main business is to give away their wealth via charities.

I think the endless call for forced equality is simply driven by envy.

The role of government should be limited only to setting fair rules for everyone, ensuring the rule of law. To have equality before the law, equality in opportunity for everyone, but NOT equality of outcome, like those endless calls for forced equality via endless subsidies and welfare programs and endless taxation of the rich.

On the other hand, there are people who have zero ambition in life except to eat and drink/party, 5-7 days a week. Even if government will give them $2,000 a month in various subsidies, they will remain poor as they will simply spend $2,100 a month or more and be in debt, the money is spent on interest payment and other wastes, forever.

An anarchist commented in my wall, 
“there must be a LIMIT as to the wealth you can generate." 

Huhh? An anarchist advocating zero government now advocates "LIMIT to wealth"?  The one that will enforce that limit is government, via endless taxation, fees, penalties, mandatory contributions, etc. And guns and prison if they evade those endless taxation.
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Sunday, July 26, 2015

Investment liberalization, trends and lessons

Capital, like labor and technology, simply wants to be mobile across islands, provinces, countries and continents. They are like migratory birds and large fishes/mammals, they go to areas that are hospitable to them, allow them to survive and flourish.

Economies that are more open to global trade tend to attract more foreign direct investments (FDI), like Hong Kong and Singapore, but Japan has a different story.


Data is from UNCTAD, World Investment Report (WIR) 2015, http://www.unctad.org/fdistatistics. This table is from a paper produced by my sister's auditing firm. I will blog about it soon here.

Meanwhile, here are some reports and papers on the subject.

News from CNBC, June 29, 2015, Vietnam is liberalizing further its foreign  investments policy, except that
"The announcement gave few other details, although it said industries such as banking that are covered by separate rules would keep ownership limits at 30 percent." 

A paper from Econ. Research Institute for ASEAN and East Asia (ERIA) in 2008, "Investment Liberalization and Facilitation:..", 15 pages, http://www.eria.org/.../pdf/PDF%20No.1-2/No.1-2-part2-7.pdf

A new paper from ERIA, April 2015 by Dr. Pons Intal, "AEC Blueprint Implementation...", 27 pages, http://www.eria.org/ERIA-DP-2015-32.pdf

“In conclusion, it is worth noting that investment liberalization is only one of many factors that determine the investment attractiveness of a country, as we have seen. A number of them are also within the purview of the AEC. Thus, implementing those measures (e.g., regulatory improvement through the National Single Window) should  generate greater synergy between them and investment liberalization, which should result in an improved investment climate.”

And a good OECD paper in 1999, "Open Markets Matter...", 12 pages, http://www.oecd.org/trade/benefitlib/1948792.pdf

The major concerns of foreign investors in many countries, from a presentation by Dr. Rafaelita "Fita" Aldaba of PIDS then, 2012, "INVESTMENT FACILITATION AND LIBERALIZATION IN THE AEC: CHALLENGES FOR THE PHILIPPINES", http://aric.adb.org/.../Investment%20Facilitation%20and... 


Meanwhile, a note and  warning from this  article,


"billions of dollars of Chinese investment in countries such as Angola, Sudan, and Venezuela, which fare quite poorly in the pertinent international rankings. Moreover, there are numerous reports of Chinese companies paying bribes to secure a major port deal in Sri Lanka, to try to obtain a major broadband telecommunications deal in the Philippines, and to secure lucrative oil and gas opportunities in Kazakhstan...." July 26, 2015. http://thediplomat.com/.../chinese-outward-investment.../

Foreign investments should be liberalized. It is unfair for employees and those looking for new work that the number of investors and job creators in the domestic economy is limited and restricted mainly to local investors. What usually happens is that if they cannot be hired by foreign investors in the home country, they are hired by foreign investors in foreign countries through the process of migrant employment, like our OFWs. So there is no sense keeping the investment protectionism policy.
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See also: 
Free Trade 35: EU-FNF Forum on 'FDI Engine for Job Growth', May 15, 2014 
BWorld 12, Investments, APEC and economic liberalization, July 25, 2015

Saturday, July 25, 2015

Energy Econ 39, the UPSE-Ayala forum on the PH power sector

Last Thursday, July 23, I attended this forum held at the Ayala Museum, Makati. Main speaker was Atty. Raphael Perpetuo "Popo" M. Lotilla, former DOE Secretary and Chairman, Center for the Advancement of Trade Integration and Facilitation (CATIF). Discussants and reactors were (1) Mr. Vicente S. Perez, Jr., former DOE Secretary, President of ALTERNERGY and Chairman of WWF-Philippines, (2) Mr. John Eric T. Francia, President & CEO of Ayala Corp. (AC) Energy Holdings, Inc., and (3) Dr. Peter Lee U,Dean, School of Economics, University of Asia and the Pacific (UAP).

This photo from the UPSE website; from left: Perez, Lotilla, Francia, Lee U.


Popo talked about the various provisions of the Electric Power Industry Reform Act (EPIRA) law of 2001, in particular the Retail Competition and Open Access (RCOA), the Energy Regulatory Commission (ERC), Wholesale Electricity Spot Market (WESM), etc.

It was a full-packed room, as usual. Many participants are from the energy sector, public and private. Mr. Jaime Zobel de Ayala (JAZA) was there, also ERC Chairman Atty. Juan, people from San Miguel Power, Aboitiz Power, Meralco, etc. Many faculty members of UPSE were there too. And former PM Cesar Virata,

During the open forum, I spoke, I said that I agree with the speakers that EPIRA does not need amendment or abolition. It's the renewables cronyism law, Renewable Energy (RE) Act of 2008 that needs amendment or abolition.

Vince Perez and  others in the audience I think raised their eyebrows and wondered, so I repeated it's renewables cronyism. In particular, the feed in tariff (FIT) and renewable portfolio standards (RPS) provisions. FIT is guaranteed minimum price for 20 years. In classic and orig capitalism, there is no such thing as "guaranteed" price and profit. Prices rise and fall due to dynamics in supply and demand. If there are lots of power plants running at the same time relative to power demand, the price shd go down. By how much, well down to P0.50/kWh perhaps during midnight or long holidays.

RPS is mandatory use by the national grid through NGCP. Thus, if good wind comes in at midnight, wind power produce more power at P8+/kWh (FIT priice) but coal can also provide power at P0.50 or P1/kWh that same time, NGCP is arm-twisted, coerced by the law to take the more expensive wind power and reject cheaper power from coal on that hour/s.

That is hypocrisy. We should have cheap electricity because we already have the 2nd or 3rd most expensive electricity in Asia. Yet RE law mandates more expensive electricity on top of already high prices.

Then I specifically asked Vince about my opinion  that he has conflict of interest in the sector. He is the Chairman of WWF-PH that explicitly lobbied for FIT/expensive electricity implementation, and his companies benefit from those FIT and RPS. RE law was enacted in December 2008 but FIT was implemented only by mid-2012 because many sectors and energy consumers opposed even more expensive electricity.

Two more questions from the floor, one about nuke power. Then Popo replied to the two questions. Vince replied to  my question that he has no conflict of interest because RE law was enacted when he was no longer the DOE Secretary.

I did not make a follow up question because there were many other hands raised to ask questions or make comments. Vince simply did not answer my question and my point above I think, remains valid.

Meanwhile, the reasons why I agree with the speakers that EPIRA does not need not amendment now, or even abolition, among others:

1. It allowed privatization of losing, low capacity National Power Corp. (NPC) power plants, especially hydro.

2. This drastically reduced NPC losses and public debt, before something like P100B or P150B a year, NPC has near-zero capacity to pay those ever-rising debt, it can only add and exacerbate it. Who will pay those huge NPC debts? You, me and our children through taxes and more taxes.

3. It allowed more players, more competition in the power generation sector. Before, there was only NPC, Lopezes and some Aboitiz power. Now there are San Miguel, Trans Asia, KEPCO, SN Power, GN Power, AES, AC, Salcon, GBPC, and about dozen-plus others, aside from the Lopez and Aboitiz companies.

4. It allowed retail competition and open access (RCOA). If you have a 1 MW power plant, say a small hydro in Montalban or Marikina, and some villages in Marikina or UP-Ateneo area want to buy your power output, you can bypass Meralco, bypass NGCP, etc. You pay fewer fees (no transmission fee, no distribution fee, no universal charges too, I think).

5. Compare Mindanao hydro, ALL are still under the government/NPC, and they have frequent "Earth Hours" there. In Luzon, almost all hydro plants were privatized, government made money from privatization proceeds which helped reduce the public debt, while improving the capacity factor of those plants. Ex. Magat hydro in Isabela, 360 MW. Under NPC, it would be VERY lucky if it can produce 300 or even 250 MW. When Magat was bought by a Norwegian power company in partnership with Aboitiz power, its capacity went up to 100%, full 360 MW. The Norwegians are perhaps #1 in the planet when it comes to hydro power tech. Later, Magat's capacity even improved to 380 MW.

Private power plants, if they run too low against their capacity, will be losing money, something they cannot afford. On the other hand, losing power plants under NPC was not so much a concern of NPC officials and employees, they were assured of funding (their salaries, travels, trainings, etc.) from the budget, yearly.
  
After the forum, meals. From left: Prof. Ruperto "Ruping" Alonzo, retired UPSE faculty and former NEDA Dep. Dir. General, me, Popo Lotilla (a former dormmate at Narra dorm, UP Diliman in the 80s), Simplicio Endaya, a fellow UPSE alumni, and Dr. Epictetus "Lingling" Patalinghug, Prof. at UP Coll. of Business Administration, trustee of ADR Institute.

Ninong Ruping and Lingling are my former professors in UP, and among my wedding sponsors. :-)

I also talked briefly to Eric Francia. I think I told him that the Ayala Corp. (AC) should not ask for energy subsidies. He replied that they have a diversified energy sources of power generation.

The main reason why AC should NOT ask for subsidies (Eric, Romy B., feel free to  forward this to Mr. JAZA :-)) is that AC is a net energy consumer, not energy producer. Its core business is real estate, those expensive and glittering malls, residential and office condo, sprawling expensive subdivisions, etc. Thus, it should lobby for cheaper electricity, not expensive power. When it develops renewables like wind and power and get subsidies, it is contributing to more expensive electricity. The Ayalas (unlike the other big Spanish families and hacienderos) were able to build their huge business empire because of innovation, not because of political cronyism. So why would it ask for renewables cronyism and favoritism now?

They can develop renewables like putting up solar roof on their malls like what SM North Edsa has done, mainly to augment their power needs, or part of their CSR publicity, WITHOUT asking for subsidies. I heard that they lobbied for retroactive FIT for an old wind farm they bought but was built before RE law (RA 9513) was enacted in 2008. Will check how true is this story.

Ok, that "subsidize renewables to save the planet" and "man-made" warming/climate change drama. Here's the chart again of planet Earth's long-term climate history.


The campaigners and lobbyists of "more expensive electricity to save the planet" are of course dishonest. The UN, Al Gore, WWF, Greenpeace, Oxfam, etc. They make huge money by fooling the public, and they get more donations from the public, more tax money from governments.

It is simply wrong and dishonest to say that:

1. There is only "man-made" warming/CC, no or little "nature-made" warming/CC;
2. There is only global warming, no global cooling that can happen after GW;
3. There is only "unprecedented" warming, no Medieval warm period (MWP), Roman warm period (RWP), other warm periods in the past while there was not a single SUV or coal power plant;
4. Less rain or more rain, less flood or  more flood, less storms or more storms, less snow or more snow, less dogs and more dogs, they are all proof of "man-made" CC.

So ALL those alibi and drama for expensive electricity via subsidies to wind and solar "to save the planet" have no justification.

Trivia: I knew that the forum would be on July 23, but I thought it was at 1:30pm, so I went to the office that day in polo shirt, jeans/maong and rubber shoes. When I checked again the event around 9:20am, it said the program would start at 9:30am! No time to go home to change dress and shoes, I went there in the most casual, informal attire. I arrived when Popo was already speaking, just stood at the back.  Later I sat in the front chairs, beside NEDA Dir. Gen. and my former teacher in UPSE, Dr. Arsenio M. Balisacan.
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BWorld 12, Investments, APEC and economic liberalization

* This is my article yesterday in BWorld Weekender.

MANILA WILL HOST the annual Asia-Pacific Economic Cooperation (APEC) Summit this coming November 18-19, 2015, or less than four months from now. Presidents and Prime Ministers of the 21 member-countries including the three largest economies in the world, US, China and Japan, will be coming to Manila for two days to discuss and sign certain agreements related to trade, investments and related concerns.

The Philippines’ trade and investments in the face of ASEAN integration just five months from now was also discussed last July 15 at the Tower Club in Makati City, sponsored by the Albert Del Rosario (ADR) Institute.

The convenor and main speaker was Dr. Epictetus Patalinghug (UP College of Business Administration, and a Trustee of ADR Institute). Discussants were Dr. Gilbert Llanto (President of the Philippine Institute for Development Studies/PIDS), Dr. Ramon Clarete (UP School of Economics/UPSE Prof. and former Dean), Mr. Donald Dee (Honorary Chairman, Philippine Chamber of Commerce and Industry/PCCI), and Atty. Wilfredo Villanueva (Head of Tax and General Counsel, SGV & Co.).

In his presentation, “The Role of Exports and Foreign Direct Investments in Industrial Development,” Dr. Patalinghug said that the five striking resemblance among highly successful economies were: (a) Openness to the global economy, (b) Macroeconomic stability, (c) High saving and investment, (d) Market allocation, and (e) Leadership and governance.

He also showed this summary of Philippine economic history. (See Table 1)

That is an objective and correct assessment. And it is not unique to the Philippines or its neighbors in the ASEAN, but rather the general trend for the rest of the world. If we check the economic integration and liberalization of the four newcomers to the ASEAN, namely Cambodia, Myanmar, Laos and Vietnam (CMLV), their pace of liberalization in trade and investments on average was much faster than the Philippines.

Let us focus on investments; in particular, foreign direct investments (FDIs). The UN Conference on Trade and Development (UNCTAD) released the World Investment Report (WIR) 2015 last month and that paper shows many interesting data. (See Table 2)


There was significant expansion in FDI inward stock (ie, net of FDI outflows) in many APEC member-economies. In particular, the expansion from 1994 to 2014 (two decades) were as follows:

* Americas: Peru 18x, Mexico and Chile 10x, US 7x, Canada 6x.

* North Asia: China 15x, S. Korea 12x, Japan 9x, HK 7x, Taiwan 5x.

* Southeast Asia: Vietnam 23x, Singapore 17x, Indonesia 16x, Thailand 13x, Philippines 11x, Malaysia 6x.

Australia, New Zealand and PNG did not experience significant FDI expansion.

Russia and Brunei are the “outliers” with 114x and 103x expansion, respectively, mainly because they have very low base in 1994. Russia has emerged from partial disintegration where a number of central Asian economies (Georgia, Kazakhstan, Tajikistan,…) separated from the former USSR. APEC was formed in 1989 but Russia, along with Vietnam and Peru, joined it only in 1998.

In terms of FDI stock/GDP ratio, three economies that have undertaken unilateral trade liberalization (meaning no or little trade negotiations) stand out: Hong Kong, Singapore and Chile, with ratio of 535%, 296% and 80%, respectively.

Some important lessons from the above numbers and discussion:

One, openness to trade almost always results in high attractiveness to foreign investments and all the opportunities they bring -- technological, financial, managerial, and market access. Clear examples are HK, Singapore and Chile. Also the socialist economies China and Vietnam that allowed certain degrees of economic freedom and the market system.

Two, global capitalism is about integration and competition, complementation and substitution, happening simultaneously. Business risks will always be there. Companies and people need to keep their radar for adaptation and familiarization of those risks, while keeping the pace of innovation at regular or higher levels.

Three, for the Philippines, its FDI stock/GDP ratio of 20% is the lowest among its neighbors in SE Asia, but this is not something to look down or commiserate. Some richer economies have rates lower than 20% like Taiwan, Japan, S. Korea and China. Nonetheless, this should be one reminder that the country needs to amend its Constitution to remove protectionist provisions that restrict or prohibit foreign investments in many sectors of the Philippine economy.

Four, more than low taxes and/or high profit, foreign businessmen are concerned more with the security of their investments, that threats of confiscation and political harassment are zero or kept to the minimum. Respect of private property, rule of law, and economic freedom by the people, producers and consumers alike, domestic and foreign entrepreneurs alike, are important factors to attract, retain and expand investments in the economy.

Bienvenido S. Oplas, Jr. heads the free market think tank, Minimal Government Thinkers, Inc., and also a fellow of the South East Asia Network for Development (SEANET), a regional center that advocates trade and investments liberalization.
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