Tuesday, August 31, 2010

Privatization 5: Regulate Exec. Pay or Privatize Govt. Corporations?

The Senate of the Philippines is conducting a series of committee hearings and investigations on the executive pay and bonuses of certain government corporations. Their goal is to craft necessary legislation to regulate excessive pay and bonuses, if such thing will be needed, and limit the subsidies to losing corporations. I think there are other hidden objectives why the Senate is doing such kind of investigations.

Today, the favorite corporation is the Metropolitan Waterworks and Sewerage System (MWSS). Its website says its mission is "A world-class and financially stable corporation that efficiently and effectively manages its assets and resources and implements its projects." But today, it was reported in the Inquirer that "Water execs admit 25-month bonuses". Portions of the report said,

MWSS officer-in-charge Macra Cruz admitted that while their employees have been receiving 25 months worth of bonuses a year, the agency incurred about P3.5 million losses in 2008....

Before this, Drilon questioned the board chairman of the MWSS, Oscar Garcia, for receiving P5.4 million for attending 47 meetings in 2009 alone.
I think the Senators should focus their attention on privatizing most, if not all, government corporations in the next few years, rather than just regulating the pay, per diem and bonuses of Executives and appointed bureaucrats of thsoe corporations.

The main reason is the huge public debt and the high interest payment that the Philippine government, or rather us Filipino taxpayers, pay every year. This year, interest payment alone for both foreign and domestic debt by the national government alone will be P278 billion (US$ 6.18 billion at P45/$ exchange rate). Next year it will jump to P357 billion.

All government corporations are complacent. There is no threat of bankruptcy as there are always guarantees of subsidies and bail-out from Filipino taxpayers' money. All administrators and their "board of directors" are political appointees, meaning they have the backing of the highest political leaders of the country. And almost all government corporations are exempted from paying corporate income tax, even if small corporations like an ordinary bakeshop or internet shop are forced to part with 30 percent of their gross taxable income every year.

Some corporations are also exempted from slapping the value added tax (VAT) to their customers, like Pagcor. This is anomalous actually. Sick and dying patients have to bear with the 12% VAT on top of import tax on their essential drugs, but gamblers are exempted from paying VAT.

Corruption is a never-ending issue in the public sector, both in regular agencies and in government corporations. The above discussion just focuses on the fiscal aspect of the problem of debt and government corporations, not on the governance issue yet.

I posted this blog entry to a friend's facebook status who posted the Inquirer report that caught my attention. A statist Filipino based in the US swooped down on my comments and argued that
when Henry Sy/SM, Lucio Tan/PAL games the system by refusing to provide workers comp/benefits then what is the next maneuvering, Nonoy? At least in a govt corporation[ esp those dealing with vital public services] the public has some recourse to demand transparency and accountability... you come up with the most ludicrous proposition...privatization, deregulation same nonsense that led to america's demise. I don't see taxes the way you do. I prefer the govt getting my money since it's maintaining my police, airport, water treatment system, social sec. medicare and a million other things that you and rightwingers don't see...

I replied the following:
We have zero tax burden with any of those corporations by Henry Sy, Lucio Tan and other "big capitalists". Our burden rests on the big government and their big abuses, big taxes. My question was very simple: What's your alternative to the huge interest payment that we taxpayers here in the Philippines endure: P278 B this year alone, another P357 B next year. We keep breaking our back just to pay interests while govt corporations keep getting subsidies and not even paying corp income tax?... some activists who love big govt are telling us that we should endure those shameless govt bureaucrats, that we should pay taxes left and right for interest payment alone, so long as we keep them as govt corporations and not entertain privatizing those subsidy-hungry corporations. What a shame.

The statis replied back:
your philosophy is WRONG, WRONG! WRONG! You argue for low taxes, deregulation and privatization in the guise of promoting the common good when what you are truly doing is concentrating more wealth into fewer and fewer hands. 8 yrs of BUSH/Cheney/Palin/Koch brothers is testament to that and it is taking heaven and earth to fix it. To the detriment of everyone else. again WRONG! WRONG! WRONG! get it???

Look, i am just as incensed as anyone reading this article... but the answer is not privatization but to make government accountable. Hey, just in case you haven't noticed. henry Sy controlls 80% of the local credit market...you want to stimulate
growth? work on that!!!

And I persisted,
Where is the ANSWER to my question earlier: What is your alternative to the huge interest payment that we taxpayers in the Philippines endure for those high interest payment, for those endless subsidies to those pampered govt corporations? where? where?
When cornered, statists normally become more defensive and cannot reply to simple questions that require definitive and explicit answer/s. That statist made my day for he/she voluntarily self-destructed.

See also:

Criminals 4: Hostage-taking of HK Tourists in Luneta

(This is my article last week for thelobbyist.biz, Killers, the Police and the State)

The main function of the State is to protect the citizens’ right to life, right to private property, and right to liberty. When people have peace of mind that they can work until midnight if they have to, and worry little that muggers will accost them on the roads as they go home, or thieves will boldly enter their house at night, then people will become more productive. The economy will be dynamic, lots of jobs will be created, and poverty will be cut. Only the lazy and irresponsible will remain poor.

It is very important, therefore, that the justice system, from the courts to the armed forces like the police, are well-disciplined, well-motivated, and well-respected. If any of those pillars of the justice system are corrupt, then people’s respect for the system will decline if the rule of law – law against killing, against stealing, against kidnapping and hostage-taking, etc. – is not promulgated, people will be less productive as they have little peace of mind that the State can protect them and their family members from the bad guys.

The handling of the hostage-taking by the Philippine National Police (PNP) was so bad, many people think that everyone was a loser.

Hong Kong lost eight of its citizens who came to Manila as tourists and visitors, and ended up as dead hostages. The others were wounded and hospitalized.

The Philippine tourism and investment industries lost thousands of potential foreign tourists and businessmen who were either scared to come or were discouraged by their governments to come to the country. From airlines to hotels, restaurants, travel agencies, travel guides, souvenir shops, to domestic investment, everyone was a loser.

The Filipino taxpayers who pay for the salaries, training, travels, guns and cars, pension and other perks of the PNP, are losers too. We taxpayers expect competent troopers who can deal with killers and hostage-takers quickly.

We taxpayers who are unskilled and scared to face people with guns, have to trust some guys who said they are brave enough to face armed killers, armed robbers, armed kidnappers, armed hostage takers. That is why they joined the PNP.

When those troops took so long to end a hostage taking involving many persons, much worse resulted in death of many hostages, we feel we are paying for incompetent troopers.

If the PNP sent a Rambo-type of policemen, they may have been wounded or killed while doing their job, the image of the PNP would have been different. The PNP would be seen as uncompromising brave heroes who kept their words in protecting the citizens’ right to life, even at the cost of their own lives.

But the PNP sent cops who were nervous even in breaking the bus door, in breaking the front glass. The cops who smashed those two doors lost grip of the ax they were using, most likely because they were nervous. If the hostage taker totally flipped his mind, he could have killed all the remaining hostages as it took several minutes more before the police resumed their assault.

A friend from Hong Kong asked, "what turned this ex-police officer to become a murderer? Is the system so corrupt that he had to do crazy thing to put the whole system into trial?"

Yes, the police system is corrupted. That ex-police official turned criminal was dismissed because of some extortion cases. Perhaps he felt bad being singled out and dismissed from the ranks, knowing that there are many other crooks in the police hierarchy but were not dismissed, some were even promoted to higher positions.

This was another instance where corruption causes more disappointment, triggering hostage-taking and caused national shame before millions of eyes around the world.

See also: Criminals 3 Kidnappers in Government, August 24, 2010

Monday, August 30, 2010

Rotary Notes 1: Barangay Roads and Solar Panels

This morning, I joined our club President (Rotary Club of Taguig Fort Bonifacio) Niel Antonio and potential clubmate Eric Lucero, in going to a remote barangay in Boso-boso, Antipolo, Rizal. Niel's company will donate solar panels to that barangay which until now has no electricity yet. This will be a club project for the indigenous people, Mangyans, who live in that part of the Sierra Madre mountains. We will go there first to meet the barangay captain or village leader, other barangay officials to schedule a turn-over ceremony.

The road going there is bad, one would need a 4x4 vehicle with big tires to hopefully deal with the situation. In many mountainous barangays in the Philippines, barangay roads are generally ugly. Exceptions are the barangays in big and famous mountain cities like Baguio and Tagaytay.

Eric's 4x4 vehicle had difficulty negotiating the road. The engine was powerful, but the tires, though big by most cars' standard, were still not big enough for the deep canals created by flash floods.

It's good that there were many barrio folks who were going home and were walking up. They helped us get Eric's car out of the deep mud.

We had to cancel the trip as we pitied the car and we lost time just negotiating the bad roads. Even if we can tackle that part, we still have to walk for at least 30 minutes to reach the community as the bad and muddy roads will show up again up there. We will schedule another trip in the coming weeks.

By the way, here's one jeepney that we met on our way up. The road is bad, only very few vehicles woould enter the barrio, and people have to sit on top of the jeepney just to catch a trip as the next trip will be several hours away.

About solar panels and solar energy, I have no opposition to this renewable energy, I support it. These are technological developments that will add more choices for the people on the kind of electricity sources they can use for their households and community structures.

What I oppose is when governments subsidize the manufacturers of solar and wind farms purportedly to "save the planet." If people truly believe in doing their share to reduce their carbon footprints, then they should patronize those renewable energy sources even without government subsidy. Governments have no money of their own to allocate and dispense subsidies, except what they take away from the pockets and savings of the taxpayers.

This is the solar panel that Niel's company is importing and selling here. It's cool, it's relatively light. From left to right: Niel's helper, Niel, me, Eric and Niel's other helper.


Alcoholic drinks in a drugstore

One would normally expect that a drugstore would contain only drugs, vaccines, food supplement, and other health products. But almost all drugstores in the Philippines are also convenience stores. Thus, they sell various products, from snacks and soda to beer and hard liquor.

Mercury drugstore is the biggest drugstore chain in the Philippines. And since all of its branches have a convenience store, it is also among the biggest convenience stores in the country.

Aside from selling drugs and other health and food products, some Mercury drugstores also sell hard liquor. Like this one in its branch in front of Makati Medical Center.

This one is from its other branch in makati.

This is not to attack Mercury drugstore. I buy medicines there for my daughter or for my wife. It has lots of branches nationwide, in convenient areas. Of course I also buy medicines and other consumer items from its rival drugstores-convenience stores like Watsons.

I just think that being a big drugstore, Mercury should have avoided selling alcoholic products in its branches. Or do their regular customers demand it from them?

Sunday, August 29, 2010

Healthcare competition 2: Singapore

Singapore's total health spending is relatively small, only 4.1 percent of GDP in 2009, compared to 5 percent and up in many rich countries. Well, there are two reasons for this. One, the numerator, health expenditures, may not be so big as people live healthy lifestyle and get sick less frequently. And two, the denominator, GDP, is so big that the ratio becomes smaller.

Majority of Singaporeans are covered by their government's healthcare financing schemes, known as the 3Ms: Medisave, Medishield and Medifund. The EIU Healthcare Report February 2009, as reprinted in Asia Healthspace blog, defined those 3 Ms:

Medisave is a simple national savings scheme designed to enable patients to save income for future healthcare expenses. At end-2008 there were 2.9m Medisave accounts, the average balance of which stood at S$14,900 (around US$10,600). Medishield is a low-cost insurance scheme, premiums for which can be paid out of Medisave accounts, and is aimed at providing patients with cover in the event that balances in Medisave accounts are insufficient to meet healthcare expenses. At the end of 2008, 84% of the population were Medishield members, with the ratio for the working-age population standing at 93%. Medifund is an endowment fund that is financed by the government to provide a safety net for those who cannot afford their part of subsidised healthcare expenses. The Private Medical Insurance Scheme, which allows private insurers to offer medical insurance to members of the Central Provident Fund (a compulsory savings scheme to finance pension payments) and is similar to that offered under Medishield, has around 500,000 members.

While there is a big public sector healthcare like government hospitals, there is a dynamic private sector healthcare that compete with each other. While government hospitals admit the bulk of confined patients, private hospitals and clinics attend to 75 percent of all primary healthcare services.

Singapore is a developed economy and its public hospitals are way advanced and more modern compared to public hospitals in the Philippines and other developing countries. But government clinics do not provide free healthcare, the government subsidizes only 50 percent of treatment cost in all public clinics. Thus, patients still have to fork out cash, either via their health insurance or out of pocket spending. This system should somehow implant into the minds of the citizens that "health is not exactly a right", there is a big portion of healthcare being personal, parental, and company responsibility.

It is this kind of competition among public and private healthcare hospitals and institutions, and not 100 percent healthcare subsidy by the government, that helps Singaporeans be in good health. Alcohol and tobacco taxes there are very high. Not many people therefore, can afford to become drunkards or chain smokers. Compare that in the Philippines where alcohol and tobacco taxes are low, and many people can be habitual drunkards and chain smokers. Which increases demand for public healthcare when people from poorer income groups would run to government hospitals and clinics for lifestyle-related diseases like lung cancer and liver cancer.

Saturday, August 28, 2010

Healthcare competition 1: Switzerland

Most healthcare systems in rich countries are nationalized, socialized and monopolized. That is, a national government healthcare agency monopolizes or near-monopolizes (only a token of private health insurance competitors) the system. A centralized and socialized system like that will have difficulty adjusting to varying needs of the patients.

Switzerland's style is different. There is no national monopoly health insurance system.

See this brief description from a good article:


Swiss welfare runs like clockwork

17 JULY 2010
There is plenty to learn from the way healthcare, education and social security are managed in Switzerland, says James Bartholomew
Switzerland has arguably the most successful system of healthcare in the western world. It is an insurance system with a twist. You are obliged to take out health insurance but you can choose which company to use. There is no state monopoly. So you can choose an insurance group which is connected to your line of work. Or you could go with a trade union-run insurance co-operative. Or a private, commercial company. That means there is some competition among these companies to provide the best possible service for the lowest possible price. Then these companies, in turn, have some choice over which doctors and hospitals they commission to work for them. So again, the doctors and hospitals have to compete to offer the best facilities and treatment at the lowest possible cost. Poorer people get credits which enable them, too, to choose insurance.

The Swiss health service is decidedly superior to that in Britain, too. It has more doctors per capita, more advanced scanners, better results in treating cancer and so on. All right, it is not perfect. People get treated for free, effectively, and, since the service is easily available and good, they tend to overuse it. Thus the costs have been rising worryingly, as with other social insurance systems. The Swiss model remains, however, one of the best around. It provides less of a barrier to employment than most social insurance systems. The cost of the premiums is borne by individuals, not shared among companies as it is in Germany.

Swiss schools are also better, on average, than British ones. That has, again, surely got a lot to do with local control — not the fake kind to which we have become accustomed to. Primary schools are run by little communes and secondary schools and universities by the cantons. It means there are villages where the officials in charge of a school will all know the headmaster and many of the students. There is much less wasteful bureaucracy and much more direct accountability.

So what happens if you are, say, a young mother in Switzerland with a little baby but no husband or similar on the scene and nowhere to live? There is no countrywide answer to this question because it is not dealt with on a national basis. It is not even dealt with by one of the 26 cantons. It is dealt with by your local commune. There are 2,900 of these and their population can be anything from 30 to 10,000 or more.

Officials from this ultra-small local government will come and investigate your individual circumstances. The father will be expected to pay. The mother’s family, if it is in a position to, will be expected to house and pay for her. As a last resort, the young mother will be given assistance by the commune. But the people who pay the local commune taxes will be paying part of the cost. You can imagine that they will not be thrilled at paying for a birth or separation that need never have taken place. Putting yourself in the position of the mother — and perhaps the father — you can imagine that you will be embarrassed as you pass people in the street who are paying for your baby. Instead of feeling you have impersonal legal rights, as in Britain, you are taking money from people you might meet at your local café. No wonder unmarried parenting is less common.

A similar system applies if you need means-tested benefits. Those made redundant receive, for a while, generous unemployment insurance payments from the cantonal governments. But once these payments run out, people depend again on their local commune. You would be cautious of claiming fraudulently because, if you worked in the black economy, your chances of being spotted would be high. And so it is that Switzerland has the second highest rate of male employment in the OECD. Britain’s rate is about 50 per cent worse.

Switzerland has arguably the most successful system of healthcare in the western world. It is an insurance system with a twist. You are obliged to take out health insurance but you can choose which company to use. There is no state monopoly. So you can choose an insurance group which is connected to your line of work. Or you could go with a trade union-run insurance co-operative. Or a private, commercial company. That means there is some competition among these companies to provide the best possible service for the lowest possible price. Then these companies, in turn, have some choice over which doctors and hospitals they commission to work for them. So again, the doctors and hospitals have to compete to offer the best facilities and treatment at the lowest possible cost. Poorer people get credits which enable them, too, to choose insurance.

The Swiss health service is decidedly superior to that in Britain, too. It has more doctors per capita, more advanced scanners, better results in treating cancer and so on. All right, it is not perfect. People get treated for free, effectively, and, since the service is easily available and good, they tend to overuse it. Thus the costs have been rising worryingly, as with other social insurance systems. The Swiss model remains, however, one of the best around. It provides less of a barrier to employment than most social insurance systems. The cost of the premiums is borne by individuals, not shared among companies as it is in Germany....

The important key is there: there is competition among various healthcare providers, the people have a choice which system or company can provide them the best service based on their specific health needs and personal or corporate budget. And there is competition too among physicians, clinics and hospitals, to be employed or accredited by the more well-known private healthcare groups.

If something is given for free, expect an abuse, where demand is larger than the supply. To reduce or control such abuse, encourage and allow market segmentation among patients within the same healthcare provider. That is, healthcare company A can provide 10 or more different healthcare services at 10 or more different costs.

For instance, Package A is worth only $500 per year and coverage is only for annual general check up plus limited physician visit, no diagnostic test coverage. Package B is worth $750 for wider healthcare coverage, up to Package J, and so on.

This way, those who take care of their body and live healthy lifestyle will get only the cheaper package as they know that they are less likely to get sick and less likely to visit a physician too often. Those who live unhealthy lifestyle, or love risky adventures, or those who work in physically and mentally-stressful work, should get the more expensive package as they are likely to visit physicians more often than the average guys.

There is incentive for people to be more responsible about their body. There is no incentive for people to be irresponsible about their body because there is always a state-run healthcare system that assures people that "health is a right."

Wednesday, August 25, 2010

PhilHealth Watch 1: Claims vs. reimbursement

This afternoon, I went to the Philippine Health Insurance Corporation or PhilHealth, Manila office at Quirino Ave. My purpose is to file the form for reimbursement (plus official receipts) of my wife who was hospitalized last month.

The claims and membership assistance section is on the 4th floor of the building. Outside the room there is this flowchart on steps for claims. Sorry, my camera phone is low-tech and can only give a low res picture. But at least there is effort by PhilHealth to inform members of some steps to go.

Inside the room though, there are plenty of people waiting for their number to be called. I entered that room and got my number around 2:25pm, was entertained around 4:30pm (or about 2:05 hours waiting). It's not a good way to spend your working day, waiting for 2 hours or more. Anyway, the staff are helpful and professional, except that they are still few compared to the big number of members and fund contributors filing for claims and other purposes.

The reimbursement will be given after at least 60 working days, or about 3 months at least, wow! One may wonder why it takes that long for PhilHealth to give the reimbursement, considering that members and fund contributors are paying on time. If they are not updated in their payment, they may not be eligible for reimbursement.

Perhaps PhilHealth needs to check and re-check the papers and receipts presented, in order to weed out bogus or excess claims by some opportunist members, or opportunist physicians, hospitals, etc. I think there should be some ways to shorten the period of reimbursement. My wife's expected reimbursement is not big, only P5,000+.

I just checked PhilHealth's website, I was looking for some statistics about membership. It's not there anymore, it's gone. They used to have a powerpoint presentation for the latest quarter of the year available.

In some of my papers last year, I slammed PhilHealth for exagerrating their number of beneficiaries, saying that they have already covered up to 85 percent of all Filipinos as of mid- or end-2009. It's not true, it's a misleading data, if not a lie. I think their actual coverage, including dependents of members, will not be more than 40 percent of the entire population.

Hospital data, both public and private hospitals, show that PhilHealth reimbursement constitutes only about 15 percent of their revenues, with the bulk, about 50 to 60 percent are out of pocket (OOP) expenses, about 20 percent from private health maintenance organizations (HMOs), about 5 to 10 percent from other government entities (local governments, PCSO/Pagcor, DSWD, etc.).

PhilHealth got lots of money, P100 billion plus in reserves. That's why it is a big candidate for politicized funds.

Meanwhile, I wish that they can speed up the reimbursement period to their members. They owe that to those who were forced and coerced to become PhilHealth members.

Meanwhile, I wrote two similar articles over the last few months.

(1) Health Insurance and Government Failure

August 21, 2009

I presented this paper last Monday here in Manila during the "Social dialogue on health care". It's 7 pages including a 1-page annex.

Among my arguments there are the following:

1. Market failure and government failure: Sectors with little government direct intervention

In food, there is not a single government restaurant or government carinderia or “turo-turo”, or government supermarket, and yet people are eating. Some food are cheap, some are very expensive, but most people eat at least 3 meals a day.

In clothing, there is not a single government clothing and jeans corporation, or government shoes and slippers corporation, but people have clothing and slippers. Some are cheap, some are very expensive, but people have something to protect their body and feet.

In transportation, there is not a single government bus line, government jeepney or taxi or tricycle corporation, government shipping or airline company. But people are mobile. Those who can afford buy their own private vehicles or private boat or private plane.

Compare that in health care where there are government hospitals and clinics, government pharmacies and drugstores, and government health insurance. On top of that, there are plenty of government regulations of private enterprises and corporations in the healthcare industry, like the current drug price control of selected medicines. And yet public health problems are often more pronounced than food, clothing and transportation problems.


Competition and market dynamics respond to whatever big market failure is existing. Whereas more politics and more intervention exacerbate whatever is an ongoing government failure.

Product differentiation and market segmentation – different prices for different products and services for different people with different needs and different budget – is an excellent tool to correct any market failure. Different suppliers and sellers target their specific buyers and consumers, and the latter send certain signals (like price and quality preferences) to the former, which allow the former to adjust the products that they supply and sell to the public.

This spontaneous and quick adjustment is difficult and very slow when government comes in to politicize the delivery of certain services, like healthcare. Things become rigid and less flexible once politics comes in. The bureaucracies and rent-seeking behavior associated with various regulations and taxation get in the way as government comes in.

2. Taxation and hypocrisy

From “expensive medicines”, the government says it wants cheaper medicines, thus the “Cheaper medicines law”. And yet government slams various taxes on medicines that contribute to their high prices. There is clear hypocrisy there.

When PhilHealth was created (RA 7875, February 1995), it is explicitly stated.

“SEC. 15. Exemptions from Taxes and Duties – The Corporation shall be exempt from the payment of taxes on all contributions thereto and all accruals on its income or investment earnings.”

So government recognizes the distortionary impact of income tax and related taxes, that it has exempted PhilHealth and other government corporations from such taxes. So while private health insurance corporations that also provide healthcare services to the public are slam-dunked with various taxes and duties, the government health insurance corporation is exempted from such taxes and duties.

There is dual hypocrisy there. Taxing medicines that contribute to their high prices and still loudly call for cheaper medicines. Exempting a government corporation from taxes when the government wants more and higher taxes from almost everything and from everybody.

This explains, partly or largely, why the government has low moral ascendancy in expecting public support for its various programs.

3. So, is there government failure in health insurance?

Yes, there is. The same way that there is also market failure in health insurance. The only difference is that there are market solutions to market failure that are quicker to emerge if politics should step aside. Whereas government solutions to government failure results in more expensive and more bureaucratic way of solving problems.

Despite the “compulsory coverage” provision where “all citizens of the Philippines shall be required to enroll in the Program”, PhilHealth membership remains low, only 13+ million of paying members out of the 35 million employed Filipinos. If PhilHealth membership is voluntary and not mandatory, there should be less than 13+ million members, probably only one-half of that number.

See the full paper here, http://www.minimalgovernment.net/media/mg_20090817.pdf

(2) Health financing and market segmentation

April 20, 2010

I just produced a new paper, Socialized healthcare vs. Market segmentation, dated April 6, 2010, 6 pages.

I believe that market segmentation of healthcare financing via health maintenance organizations (HMOs) deregulation and more local government provision/participation will allow the majority, especially the poor, to have greater access to better healthcare.

National health agencies like Philhealth and the DOH should step back a bit, and allow more roles for local government (like in San Isidro, Nueva Ecija case) and the HMOs. Let them be engaged in fierce competition to get more patients. When the national government comes in the provision of health financing and insurance, there is zero competition. When the design of the project is lousy, it will become lousy when it is implemented. If there are waste, inefficiencies and corruption at the top, such wastes are repeated at the bottom.

My hypothesis is that a better, wider coverage of health financing, can be done through more HMOs deregulation, more LGU participation, as add-on to PhilHealth membership.

PhilHealth is lousy. They say they have covered up to 85% of all Filipinos already. If that is true, why is it that in many hospital records, between 50-60 percent of costs come from out of pocket (OOP), only 12-15 percent come from PhilHealth?

So if PhilHealth is lousy after about 15 yrs in existence, why should we work to further expand PhilHealth power and mandatory contribution?

Let us try other modes, like more HMOs competition, more cooperative and LGU health card system. If we combine competition among HMOs, cooperatives and LGUs, it should be fun and challenging. Those who are lousy in providing health financing will lose clients. But not PhilHealth, because membership there is by coercion, by force. Whether you like it or nor, you become a PhilHealth member. That is the only way why Philhealth is making money, by forced and coercive contribution.

More rains because of global warming

That statement comes from the Philippines' top climate official next to the President, the Vice chairman of the Climate Change Commission (CCC), Heherson Alvarez. In a news report yesterday, Brace for La Niña, local gov’ts told, a DA official and Mr. Alvarez were quoted,

“La Niña is expected around September and October,” said Dr. Esteban Godilano of the DA’s Planning and Policy Officer. “According to studies, it may still be extended even up to February,” he noted.

Climate Change Commission chief Heherson Alvarez said the Philippines is not prepared for extreme weather brought by global warming.

That's climate alarmism, plain and simple. There is El Nino and prolonged drought, because of "man-made warming". There is La Nina and prolonged rains and cooling, because of "man-made warming".

Here's the sea surface temperature (SST) record as of August 18, 2010. Note the blue color -- very cold ocean water -- moving from east to west pacific, straight to SouthEast Asia -- Philippines, Indonesia, Singapore, Malaysia, and neighboring countries.

And this is the chart of the SST anomaly as of August 18, 2010. Global SST anomaly is not yet negative, just heading there, but Nino region 3.5 (East Pacific, South America) is already negative since last July or late June.

Graphs' sources are from Dr. Roy Spencer.

Tuesday, August 24, 2010

Underground economy and taxation

Not all types of coercion are unproductive, like when parents coerce their kids to stop watching tv late at night and sleep early. Or when government coerce criminals to go to prison.

But most coercions imposed by government are unproductive. Like high and multiple taxes. That is why taxation has to be done by state coercion, there are legal, political and armed components of the state to enforce taxation to those the state administrators want to run after.

Business taxation is among those taxes that many people hate to pay. The higher the business taxes, the more that the state is penalizing success and good performance. That is why many business people hide their real enterprise and personal income whenever possible. And one way to do it is to do business via the "underground" or "shadow" or "informal" economy.

Here's a chart from The Economist magazine. It shows the (estimated) percentage of a country's GDP that is not covered by state (and federal/national) taxation. (

source: The Economist, August 11, 2010)

Note that while the figures for 2008 showed a decline from their 2006 levels, the figures increased again this year. The Economist has this explanation:

Mr Schneider attributes this reversal to the financial crisis, which seems to be pushing more people in OECD and EU countries to avoid the extra burden of taxation by resorting to informal transactions. The shadow economy, in other words, can act as a cushion when times are tough.

Right. And governments should recognize that. Any amount of money not siphoned off by the government through taxation will be used by the people for their personal or household or community or corporate needs, like expanding the business, hire more people. More jobs created by the private sector means less people expecting dole-outs or welfare from the government.

Criminals 3 Kidnappers in Government

(Note: the original title of this paper was "When government is breeding ground of criminals". I changed the title to reflect a new discussion series on "Crime and Rule of Men".)

The hostage-taker-criminal in the tourist bus incident yesterday, Rolando Mendoza, was a former police captain. He was dismissed last year because of charges of robbery, extortion and grave threats filed against him and 4 other police officials by an employee of one hotel in Manila.

He was angry, so he has to resort to terrorism, by taking a bus full of tourists from Hong Kong, used the foreign visitors as his hostages to impose his demand -- that he should get back his past position as a police official. Whether he was unjustly charged or not, hostage taking is never a sensible solution to assert one's demand, personal or political.

After aboout 12 hours of negotiations, watching, monitoring, drama, 8 HK visitors were dead, the hostage taker was also dead.

The focus of public discussions was how the Philippine National Police (PNP) handled the crisis -- why it took them 12 hours to end the crisis, why so many dead hostages, why a lot of questionable, if not idiotic actions were commited prior to the storming of the bus, etc.

As expected, many potential foreign tourists, especially from Hong Kong and mainland China, cancelled their trip to the Philippines. The HK government even issued a "black" travel advisory to their citizens not to visit the Philippines.

A number of blogs in China had some angry and satirical comments against the Philippine police. Some negative comments were directed at the "monkey" Filipinos. See this popular blog about China and Chinese people for non-Chinese-speaker readers, http://www.chinasmack.com/2010/stories/philippines-hostage-crisis-ends-many-dead-chinese-netizen-reactions.html

The big issue is that the criminal, the hostage-taker-killer, is a former government personnel, armed and dangerous. He's got government-issued armalite and ammunitions, government-conducted training. Such deadly combinations when used to threaten ordinary civilians is very dangerous.

I think the criminal was angry that while he was charged (convicted?) as a police extortionist, he knew that many PNP officials are also extortionists. But those guys kept their positions, some were even promoted, so why was he singled out? To get back his position and to become a future criminal in police uniform, he has to do a criminal act of using foreign visitors as his hostages to pursue his personal agenda.

And true to being a criminal, he killed some of his hostages and fought it out with policemen in active duty.

His death though, will not end a bigger danger: the government as breeding ground of criminals in uniforms. Those criminals are not many, they may be few, but even one criminal -- an extortionist, a murderer, a kidnapper, a carnapper, etc. -- is enough to taint the image of the PNP as an institution.

So long as government people do not fully appreciate 100 percent, the importance and value of the "rule of law", the temptation to use their position to perpetuate the "rule of men" will always be there.

See also:
Criminals 1: Killings in Thailand and Military Crackdown, April 16, 2009
Criminals 2: Pakistan, the Criminal state, August 17, 2010

Friday, August 20, 2010

Transport Econ 3: Brand Competition Among Jeepneys and Buses

A friend, Benson Te, posted a good article today, Can Government Prevent Disasters? It's about his reaction to new government moves to further regulate buslines and bus drivers in order to "prevent future accidents."

Benson observed that
regulators are obsessed with rules and NOT with pleasing the consumers. Yet rules don’t and won’t incorporate everything that is known for the benefit of society. The fundamental premise of which anew is the Knowledge problem and of the interest of diverse groups involved in shaping the laws.

So instead of looking for the welfare of their clients or the consumers, industry providers will be forced to pay attention FIRST to comply with the web of laws.

And he made this concluding statement,
you don’t need more government intervention, what you need is more competition and judicious facilitation of tort laws.

I agree with many points that Benson wrote, especially on the role of allowing more competition among more industry players. But I will suggest that we specify and qualify the term competition: that there will be brand competition.

Jeepneys, tens of thousands of them in the Philippines, compete with each other on various routes, but they have no corporate brand, they compete as individual units. Thus, they can be reckless and discourteous (like stopping in the middle of the road) and they risk not losing any credibility or brand reputation.

Bus lines compete on brand: Victory, Five Star, Philtranco, Penafrancia, Dagupan, Ceres, Jam, other local bus lines. When just one bus of any of those bus lines meet an accident, especially involving death to many passengers, the whole brand or the entire bus company is affected. Passengers would shy away from that busline, thinking that drivers of that bus company maybe over-worked and over-fatigued, or underpaid and have low morale, or the company hires undertrained and underqualified drivers, and so on.

With competition among buslines that keep their brand reputation, internal control among bus companies become strict. The pressure to bus drivers not to be involved in any accident -- zero accident goal -- is high. And this protects passengers.

Zero government regulation will be needed there as self-regulation is strict and efficient.

Back to jeepneys. I think either we abolish the Land Transport Franchising Regulatory Board (LTFRB), or we change its mandate to promotional, not regulatory, of transpo franchises. All jeepneys should belong to a jeepney corporation or cooperative, they should belong to a particular jeepney brand. A jeepney brand, say brand A, will have a distinct corporate or coop entity, will have one design, and can field jeepneys in various routes. Operators and owners of individual jeepney units will pay to the jeepney corporation or cooperative, the brand, and the brand will provide various services to the jeepney operators. Like continuing driver education and training, good maintenance of units, advertising the brand to attract more passenger loyalty, etc.

Passengers will remember the brand -- more courteous drivers, they don't over-charge, they follow traffic rules, they don't stop in the middle of the road, more comfortable units, drivers don't overload their jeepneys, etc. Those brands that have ugly record and have no reputation will go bankrupt. Or they will be forced to improve their services to regain passenger loyalty.

There is practically zero government role to improve the services of jeepneys. Government comes in only in disputes like accidents and there are casualties. Government enforces the rule of law -- laws to protect passengers' right to life, right to safe travel.

* See also:

SST plunge and high SW reflection

Today, Dr. Roy Spencer released an update in sea surface temperature (SST) both global and Nino 34 region (east Pacific Ocean). The plunge in SST is deep especially for Nino 34, at the -1.5 C temperature anomaly, very much following the 2008 global cooling. Data as of August 18, 2010.

But what is even more interesting, is the high shortwave (SW or sunlight) reflection last month and this month, as shown in this graph. Dr. Spencer posited 3 possible explanations, plus his observation of the role of "negative feedback" of clouds over whatever surface or oceaning warming:

(1) the ocean cooling is being driven by decreased sunlight, or (2) negative feedback in response to anomalously warm conditions, or (3) some combination of (1) and (2). Note that negative low-cloud feedback would conflict with all of the IPCC climate models, which exhibit various levels of positive cloud feedback.

Dr. Spencer is a former NASA scientist, currently a practicing climatologist at the Univ. of Alabama in Huntsville (UAH). All important data that he and his university use, are from NASA satellite data, especially NASA's Aqua satellite and its AMSR-E instrument. Such data include (a) SST, (b) tropospheric temperature (about 8 kms. above sea level), (c) oceaning SW reflection like the above graph, among others.

Such NASA satellite data produce more independent, hard to tweak data, and such data show either a warming-cooling-warming-cooling cycle, and more recently, a cooling trend. But NASA is known for being among the frontline climate alarmism camp. Why?

It's the Goddard Insitute for Space Studies (GISS), an agency under NASA and headed by Dr. James Hansen, that is actually associated with the warming and alarmist camp, not the entire NASA. And GISS is using (land) surface temperature data collected by thousands of surface thermometers from many stations around the world. Such instruments are known for having warming bias -- like temperature measurements just a meter or 2 away from an air-con exhaust, or situated in car parking lots and affected by reeving car engines and hot asphalt, or situated in airports and their hot plane engines and hot concrete tarmac and runway.

When I learned about this, I also shook my head, along with others. NASA is known for space research, not land surface research. But GISS is relying on land surface temperature data, and not on NASA satellite data.

That's how politics work in science. And NASA is a government and political creation, so it is impossible for that office to avoid politics and political pressure.

Thursday, August 19, 2010

Illusion of conflict bet material economy and services sector

(Note: this is my article today at http://www.thelobbyist.biz/perspectives/columns/back_to_personal_responsibility/886.html)

Improvement in productivity in the agriculture and industry sectors will necessarily spur the growth and expansion of the services sector. The latter not only provides the transportation and financial infrastructures for the growth of the former, it also creates new sub-sectors that expand the market for more agricultural and industrial production.

Some people though keep selling a lousy idea of conflict or contradiction between "Physical economy" and the Services sector. That the reason why poverty is high, why many economies are so crisis-prone, is because of the “stagnating physical economy with ballooning services sector.” Thus, government should further regulate the services sector and government should support and subsidize further the agriculture and industry sectors.

There is zero contradiction between the two groups of the economy. People in the education, health, media, consulting, and other sub-sectors of the Services sector; produce zero electronic product like a circuit or cell phone or laptop. But they create the demand for more new cell phones, new laptops, new iPods, etc. as these electronic products are among the main “means of production” of these people in the services sector.

The car manufacturing industry can grow only if the service economy that uses those cars also grows: taxi, rent a car, company car, hotel and tourism car, and personal car. There are banks and financial intermediaries that allow the car buyers and users to purchase those cars. Through bank financing and related schemes, the car manufacturers have the peace of mind to produce and sell those cars to people who only have a fraction of the money needed to buy the whole new car, and expect to be paid in full after sometime.

As the recent global financial turmoil is not yet over, certain groups and sectors in society keep blaming free market capitalism as the main source of the crisis. But look again: hundreds of millions of people use web-based email addresses and online networking like Yahoo and Yahoogroups, Google and Googlegroups, MSN, Facebook and Tweeter.

Users of such facilities pay zero tax or zero registration fees. Such facilities are 100 percent a product of free market capitalism. Yahoo is fighting hard with Google, Facebook, Multiply, and other online networking companies. So all of them, all without exception, are giving free use of their facilities to the public, and make money somewhere.

It is not entirely free lunch, of course, as those online networking sites and search engines keep some personal information for their own corporate purposes. But people enter on a voluntary basis. They were not coerced to sign the agreement; they were only interested in having free email address, in having access to quick group messaging, and so on.

When the poor complain of expensive dress, expensive shoes, expensive food, expensive-everything in the malls or other shopping areas, they do not go to Malacanang or DTI or other government agencies to demonstrate and demand that government will impose dress price control, shoes price control, food price control, etc. No. Only socialists and statists always think of running to the government to seek for more state intervention and more state regulation.

The poor go to Baclaran, Divisoria, Quiapo, tiangge-tiangge, and seek the cheap dress, cheap shoes, cheap food, that they need. There is zero politics, zero street demonstrations needed. And they go home happy that somehow they were able to buy something. And they work again to save and go back to buy cheap commodities the next time. And there is order in society.

How can the poor be pacified in such a way? By free market capitalism. The expensive retailers are not in Baclaran or Divisoria; they are in Greenbelt, SM, Robinsons, etc. There is a place for everyone.

People just do not realize it. Without free market capitalism, life is lousy and idiotic. See North Korea for instance.

Drug price control: 1 year of failure

(Note: This is my article for People's Brigada News this week, submitted last August 11, 2010)

This August 15, the drug price control policy will turn exactly one year old. The government, through the Department of Health (DOH), imposed a 50 percent mandatory price reduction for many branded drugs that it deemed were essential but expensive. Let us see some results of the policy.

Medium-sized chain MedExpress and Manson drugstores reported some chilling sales data. From August-December 2009, all the price-controlled drugs suffered a 3.4 percent decline in volume and 34.3 percent decline in sales value, compared to August-December 2009. Comparing January-May 2010 with January-May 2009, sales volume of the price-controlled drugs has managed to post an average of 7.3 percent, but sales value has declined by an average of 65.4 percent.

The sales value decline is bigger than the 50 percent forcible price reduction because there are other mandatory discounts that the government has imposed on drugstores on top of the 50 percent mandatory price cut, like 20 percent mandatory discount for both senior citizens and persons with disabilities (PWDs).

There are a number of reasons why the drug price policy failed. Four reasons stand out.

One, the policy was driven mainly by politics and not by any national health emergency. A former Senator running for President but lagging in Presidential surveys pushed hard the issue some 12 to 13 months before the May 2010 elections. A very unpopular President serving the last of her 9 years in office rode on the emotional popularity of the measure.

Two, competition among innovator drugs and generic drugs was already dynamic prior to the price control measure. Take amlodipine molecule for anti-hypertension. The most popular drug was Norvasc 5mg, selling for P44 a tablet. Then it became P22. But the cheapest generic available prior to price control was selling for only P8. The poor who buys the latter drug finds the P22 still a lot more expensive and hence, will not buy it.

Three, the policy has the unintended consequence of hitting the local pharmaceutical companies that produce the competing generic drugs. They were pushed to further bring down their already low prices.

Four, some small and independent drugstores were forced to further cut their personnel and other cost of operations just to survive, or close shop altogether. Which contributed to more unemployment in the country.

It is important that the government should focus on encouraging competition among various drug manufacturers, among importers, drugstores and hospitals. The new President should signify that the government will not entertain another round of drug price control in the next six years of its term. This will help improve the investment environment in a country that badly needs more investors and job creators.

Tuesday, August 17, 2010

Climatism! A book review

That's the title of the new book by a new friend, Steve Goreham. Steve briefly defines Climatism as "the belief that man-made greenhouse gases are destroying Earth's climate."

Steve sent me a "For Review Only" copy of his book last February. I was amazed at how clear the author has presented the various topics, from science to engineering to economics and politics of climate issues. I thought that Steve was a scientist, but turned out that he's an (American) engineer-businessman who got tired of all the alarmism and lies that were spreading around. He enclosed himself for several months, read the various books, papers he accummulated, plus various online research, and came up with his book.

Last May, during the Heartland Institute's 4th International Conference on Climate Change (4th ICCC) in Chicago, I have met Steve in person. The man is a giant, he should be about one foot taller than me. In this picture, two big Steves are with me. From the left is Steve G, then another Steve, Steve McIntyre, a Canadian statistician and owner of Climate Audit, and me.

The book is thick, 466 pages including Index. Here is the general outline of the book:

PART 1: Global Warming Alarmism Debunked

Chap. 1, A Tsunami for Global Warming Alarmism
Chap. 2, The Thin Science for Man-Made Global Warming
Chap. 3, Carbon Dioxide: Not Guilty
Chap. 4, Climate Change is Continuous
Chap. 5, The Sun is Our Climate Driver
Chap. 6, Global Warming Disasters Debunked

PART II: Climatism and "Snake Oil" Remedies

Chap. 7, The IPCC and the Road to World Delusion
Chap. 8, Climatism: The Ideology Behind Global Warming Alarmism
Chap. 9, The Beliefs, Objectives and Tactics of Climatism
Chap. 10, The Science is Not Settled
Chap. 11, Snake Oil Remedies to "Save the Planet"

PART III. Renewable Energy "Solutions"

Chap. 12, Energy: The Lifeblood of Prosperity
Chap. 13, Renewable Energy: Reality Far Short of Promises
Chap. 14, Chains for the Developing Nations
Chap. 15, Climatism in Action: Debacles Around the World
Chap. 16, Energy Nonsense for the Good Old USA
Chap. 17, Common Sense and the Future

In Chapter 2, Steve showed this graph, the Vostoc Ice Cores, Antarctica, from a study by JM Barnola et al. in 1987. Steve wrote,

If there was no human industry to emit carbon back in history, how did the atmospheric CO2 increase? The answer is that the CO2 increases are from natural causes, primarily out-gassing from the oceans.

And note the cycle in global temperature -- warming, cooling, warming, cooling. Just another proof that climate cycles happen, that "unprecedented warming" is a joke.

In Chapter 4, Steve showed this graph, a roller-coaster ride of warming-cooling-warming-cooling since the last Ice Age some 10,000 years ago. It shows in particular, the Holocene, Roman and Medieval warm periods, and the Little Ice Age (LIA) just prior to the Industrial Revolution in 1800s. Data is from oxygen isotope analysis of ice cores in Greenland.

In Chapter 5, the author showed a graph similar to this, with labels of the (a) Maundeer Minimum between 1650 to 1700+, (b) Dalton Minimum in 1800+, and (c) Modern Maximum from 1850 to the last century.

The two minima coincided or represented the LIA. Where there was a period of weak and few sunspots, that was also the period of global cooling. And where there was a period of strong and plentiful sunspots, that was the period of global warming.

In Chapter 6, Steve showed these 2 graphs, among others. The first is seaice anomaly (or divergence from the average) in the Arctic. This graph though is more updated, as of August 17, 2010, but taken from the same source as Steve's graph. It is true that seaice extent in 2010 is lower than the average for 1979 to 2008 by -1.23 million sq.km. Source of graph is http://arctic.atmos.uiuc.edu/cryosphere/IMAGES/seaice.anomaly.arctic.png

But look at seaice anomaly in Antarctica, the 2010 seaice extent is +1.59 million sq.km. larger than the average for 1979 to 2008. The statement by many climate alarmists of "ever-melting polar ice" is idiotic. Seaice extent is a cycle, growing-melting-growing-melting, every year, every decade, every century. Again, this graph is more updated (as of August 17, 2010) from the graph in Chapter 6 of the book, but taken from the same source that is updated daily, http://arctic.atmos.uiuc.edu/cryosphere/IMAGES/seaice.anomaly.antarctic.png

In Chapter 14, the author showed this satellite picture, "Africa at night". Note the bright lights to the north of Africa -- Middle East and Europe. The time zones are similar so evening in Africa is also evening in Europe, so no "camera trick" in this picture.

Climatism barks at heavy energy use by modern societies, especially electricity coming from "dirty and non-renewable" sources like coal, natural gas and other hydro-carbon sources. For many climate alarmists, they would rather see more darkness and underdevelopment if a modernizing economy cannot source its electricity from "clean" but expensive, taxpayers-subsidized renewables.

This picture is not in Steve's book but it is similar to the "Africa at night" picture above. This is a satellite picture of North and South Korea at night.

The World Wildlife Fund (WWF) campaigners of their annual "Earth Hour" should be jumping with joy if they were in continental Africa and North Korea. Why? Houses and offices there do not turn off their lights for one hour per year only. Instead, they turn off their lights many hours per night for 365 nights a year. Less electricity from non-renewables, less carbon emission, less "man-made global warming", more joys for their climate religion.

The book is a powerful tool to understand the many natural factors that Al Gore, the various bodies of the UN like the Intergovernmental Panel on Climate Change (IPCC), World Meteorological Organization (WMO) and the UN Environmental Program (UNEP), have deliberately ignored.

Many people thought that the IPCC is a scientific body. No, it is not. It is a political, government body, that is why it is called "Intergovernmental Panel". The officials of IPCC are non-scientists but appointed bureaucrats. The IPCC head, for instance, Mr. Rajendra Pachauri, is an economist from India.

To see the contents of the book more, check http://www.climatism.net/

Steve just emailed me this week saying that he has just accepted the post as Executive Director of the Climate Science Coalition of America.

Congrats Steve! It's a well-deserved position and there are lots of work and challenges that a serious researcher and public intellectual like you can take on.

Criminals 2: Pakistan, the Criminal state

I did not invent that statement. It was my friend, Dr. Khalil Ahmad, the founder and director of the only free market think tank in Pakistan, Lahore-based Alternate Solutions Institute. With all the political instability in Pakistan due to the fight against the Taliban and other armed fundamentalist groups, Khalil is a very brave man to write his paper, Pakistan -- A Criminal State

In his paper, Khalil bravely wrote,

Who is to deny that from day first most of the individuals, from top to bottom, associated with the state of Pakistan and its institutions and the government were somehow having criminal record, or they were patronizers of criminals, or they directly or indirectly help promote crimes and criminals, or they let crimes and criminals flourish by not letting law take its course. In the first half, not by giving the nation a constitution under which they were to be ruled, and in the second, not by adhering, in letter and spirit, to the dictates of the constitution, the said elites committed crimes of the highest order.

More than that, they used public money as if it was booty looted from an enemy in time of war. It seems these elites, who behave quite like merciless parasites, in the form of public exchequer found a gold mine to fulfill from their minor needs to their choicest luxuries. Throughout they proved to be the worst thieves and merciless robbers, if not to dub them as the worst marauders.

I have written several papers in this blog or in the MG website pointing out how shameless many Filipino political leaders and bureaucrats are, but if I read Khalil's description of Pakistani politicians, military leaders and bureaucrats, I begin to think that perhaps Philippine government corruption is still a "mild" one.

But Khalil is very consistent in his arguments: it is the non-promulgation of the rule of law in Pakistan that causes the various problems of underdevelopment, corruption and political instability. The absence of the rule of law means the monster rule of men, the rule of non-accountable political elites and the various business groups and interests that benefit from such rule of men in Pakistani society.

Given the boldness that Khalil exhibits when he writes and the occassional bombings, massacre and other acts of terrorism happening in Pakistan, I sincerely wish for his safety.

There is a huge price in asserting freedom and liberty. Khalil and other friends in the liberty and free market movement in Asia and other parts of the world are perfectly aware of that. A struggle to expose a criminal state is a struggle worth fighting for.

See also: Criminals 1: Killings in Thailand and Military Crackdown, April 16, 2009

Monday, August 16, 2010

China Watch 8: World's Largest Economies in 2010

China will be the 2nd biggest economy in the world starting this year. It overtook Japan's economy by 2nd quarter of this year. This was reported today here, China Passes Japan as Second-Largest Economy

I checked the IMF's World Economic Outlook (WEO) recent database to see the actual numbers, and also the ranking of other countries. Below is what I got.

Country Gross Domestic Product (GDP), current prices, 2000 (1st column) and 2010 (2nd column)
in US$ billion

1. United States, 9,951.5 / 14,799.6
2. China, 1,198.5 / 5,364.9

3. Japan, 4,667.4 / 5,272.9
4. Germany, 1,905.8 / 3,332.8
5. France, 1,333.4 / 2,668.8
6. United Kingdom, 1,480.5 / 2,222.6
7. Italy, 1,100.6 / 2,121.1
8. Brazil, 644.3 / 1,910.5
9. Canada, 724.9 / 1,556.0
10. Russia, 259.7 / 1,507.6
11. Spain, 582.4 / 1,424.7
12. India, 461.9 / 1,367.2
13. Australia, 400.7 / 1,193.0
14. Mexico, 628.9 / 995.9
15. Korea, 533.4 / 991.1
16. Netherlands, 386.2 / 797.4
17. Turkey, 266.4 / 710.7
18. Indonesia, 165.5 / 670.4
19. Switzerland, 249.9 / 512.1
20. Poland, 171.3 / 479.0

21. Belgium, 233.0 / 471.8
22. Sweden, 245.6 / 443.7
23. Saudi Arabia, 188.7 / 438.0
24. Norway, 168.3 / 433.3
25. Taiwan, 326.2 / 418.2
26. Austria, 191.8 / 391.6
27. Iran, 96.4 / 360.0
28. Argentina, 284.3 / 344.1
29. South Africa, 133.0 / 329.5
30. Greece, 127.6 / 325.1
31. Denmark, 160.1 / 313.8
32. Venezuela, 117.2 / 301.0
33. Thailand, 122.7 / 297.9
34. Colombia, 94.1 / 268.1
35. United Arab Emirates, 70.2 / 252.7
36. Finland, 122.1 / 240.1
37. Portugal, 113.0 / 226.0
38. Hong Kong, 169.1 / 223.7
39. Ireland, 96.9 / 216.1
40. Egypt, 99.2 / 215.8

41. Nigeria, 46.4 / 214.0
42. Malaysia, 93.8 / 213.1
43. Israel, 124.7 / 199.5
44. Czech Republic, 56.7 / 199.0
45. Chile, 75.2 / 196.5
46. Singapore, 92.7 / 194.9
47. Philippines, 75.9 / 181.5
48. Pakistan, 74.1 / 177.9
49. Romania, 37.3 / 168.6
50. Algeria, 54.7 / 156.8
51. Peru, 53.3 / 146.3
52. Hungary, 47.3 / 145.6
53. New Zealand, 53.0 / 135.7
54. Kuwait, 37.7 / 135.1
55. Ukraine, 31.3 / 127.1
56. Kazakhstan, 18.3 / 126.3
57. Qatar, 17.8 / 110.8
58. Bangladesh, 47.0 / 104.6
59. Vietnam, 31.2 / 103.1
60. Morocco, 37.0 / 94.0

source: International Monetary Fund (IMF), World Economic Outlook April 2010 Database,

Notice how China's economy jumped from only $1.2 trillion 10 years ago to the projected $5.36 trillion this year, or a 348 percent increase. Compare that with Japan's 13 percent jump from 2000 to this year's GDP level, the US's 49 percent increase, Germany's 75 percent increase, and France's 100 percent increase.

Other countries that produced huge increase in GDP size in just 10 years are (1) Russia 480 percent increase, (2) Indonesia 305 percent increase, and (3-5) Brazil, India and Australia which registered 200 percent increase in GDP size.

The Philippines with 94 million people this year has a lower GDP size than Singapore with less than 5 million people. The country is ranked 47th in GDP size this year, higher than Pakistan.

China should continue its fast growth rate. A rich China means a rich billion plus consumers just a few hours from Manila by plane. A rich China also means market diversification opportunity for many other poorer countries that used to rely on exporting their goods and services to the US, Japan and Europe.

And more importantly, a rich China means that freeing markets towards more capitalist competition will unleash more entrepreneurial spirit from tens of millions of big and small entrepreneurs and investors.

World's Biggest Trade Surplus/Deficit Economies

While Germany was enjoying a trade surplus of $577 million per day in the last 12 months ending June 2010, the United States was draining by $1.62 billion per day in trade deficit also in the last 12 months ending in June 2010.

China's trade surplus is more than 2x that of Japan's. India and Hong Kong are the only Asian countries in the top 10 biggest trade deficit countries.

Below is a list of the world's biggest trade surplus and biggest trade deficit countries.

A. Biggest Trade Surplus (exports larger than imports) latest 12 months, in $ billion

1. Germany, 210.8 (June)
2. China, 174.7 (July)
3. Russia, 152.6 (June)
4. Saudi Arabia, 104.4 (2009)
5. Japan, 81.7 (June)
6. Norway, 55.6 (June)
7. Ireland, 54.1 (May)
8. Netherlands, 53.3 (May)
9. S. Korea, 40.1 (July)
10. Malaysia, 36.6 (May)

B. Biggest Trade Deficit ( exports smaller than imports) latest 12 months, in $ billion

1. US, 592.4 (June)
2. Britain, 135.0 (June)
3. India, 110.2 (June)
4. Spain, 69.5 (May)
5. France, 62.4 (June)
6. Turkey, 52.6 (June)
7. Greece, 43.5 (May)
8. Hong Kong, 41.7 (June)
9. Portugal, 27.6 (June)
10. Egypt, 24.2 (Q1)

source: The Economist, August 12, 2010, http://www.economist.com/node/16793552?story_id=16793552

* See also China Watch 7: Rising Yuan, Economic Bubbles, April 07, 2010

Agri Econ 6: My Treehouse

Government-sponsored housing (directly provided or financed or subsidized) is among the “human rights” and entitlements that many welfarists argue as a “basic government function”, along with “healthcare is a right”, “education is a right”, “agri credit is a right” and their various cousins and derivatives.

If people would expect that many things are “government responsibility” and very little is left for personal and parental responsibility, then people should expect many things to become “government control and property”, including our monthly income, our savings, our individual rights and liberty.

In the Philippines, various government agencies doing various forms of intervention and forced contribution are engaged in housing. Like the National Housing Authority (NHA), Housing and Urban Development Coordinating Council (HUDCC), National Home Mortgage Finance Corp. (NHMFC), Pag-IBIG Fund, among others.

I am a month-end (or “trying-hard”) farmer and a lower middle class urbanite. Since I go to the farm (Pangasinan, northern Philippines) every 3 to 4 weeks to visit a farm that I manage (I don’t own it), my dogs (I used to have 7, now down to only 4) and our farm caretakers, I need to have my own house there. And since I want to live in Makati where I hold an office but I also cannot afford to buy a condo or townhouse, I have to continue renting a place.

So I got no house in Metro Manila despite various government housing “programs” (to be discussed in future postings) but at least I got a house in the farm. It is easy and non-costly to put up a house there, an all-wood house, because we have lots of trees that we planted since the early 90s. And this is what I got there – a treehouse!

It’s a 2-storey, all-wood, no walls (except the toilet, of course), slatted-bamboo floor, house perched on a big and live mahogany tree. We built it around March 2005, so it’s more than 5 years old now. The tree carries the bulk of the weight of the house, but there are 8 smaller posts that help support the house and give it more stability.

The roof used to be cogon, neatly tied and arranged. It’s cool, not hot on cloudless days and not noisy when it rains. But remember, this house is perched on a live tree. The tree’s trunk on ground floor is getting thicker but not rising. The second floor though is rising by about ½ to ¾ inch per year. And the trunk where the roof is clamped is rising by about 3 inches per year! The roof has to be repaired every 2 to 3 years as rainwater slowly seeps into the trunk and into the house.

This is the house until early 2009, before we changed the roof to iron. Termites were able to climb up the house and they like munching the rain-soaked cogon roof a lot, contributing to the damage to the roof. The part covered by wooden slabs is the toilet. Notice the stone terraces on the right side, fronting the treehouse.

And this is the house this year. The cogon roof at the ground floor and second floor has been changed with galvanized iron. The termites on the roof are gone. It’s not so hot during cloudless days, mainly because of the surrounding trees and their leaves. But it can be noisy when it rains though.

I mentioned above that the 2nd floor is rising by about ½ to ¾ inch per year. The tree’s trunk is rising and getting bigger there, it is trying to move apart the two huge 3 x 6 inches support beam of the 2nd floor. Since the beams are well-secured, the tree has tried a new tack: if it cannot push them away, it will swallow them!

A close up view of the thick new “lips” of the tree. At the rate the “lips” are moving and expanding, this part of the wood will be entire swallowed in 3 to 4 years. I do not know if this will break the wood or it will strengthen it by then.

This is a view of the house 5 years ago, sometime in April or May 2005. Notice the trees surrounding it were still thin and small.

And this is the house last month. The trees surrounding it have become bigger and taller. At least two big and leaning trees have been cut already as they posed danger to the house during typhoon season.

A view of the house on the 2nd floor. Yes, those are live new leaves and branches that grow on the trunk. We have to remove some of them; otherwise, they will grow even bigger and occupy the entire house.

A tall, “Tarzan-like house” would need a Tarzan-like carpenter. That carpenter is Charlie Espinoza, the one on the left. Charlie is cool: a rice and vegetable farmer, tricycle driver/mechanic, carpenter, various other jobs, He’s the one who repaired and/or changed the roof. Assisting him, on the right, is Danny Paragas, who also assists his father, Nong Endring Paragas (not shown here) in taking care of the farm.

For those who plan to build their own treehouse too, the first thing to do is to have many trees near your area. Plant trees now on your private land, or take care of those that have grown naturally. Take note that the operative term is “tree growing”, not just “tree planting”. The former means planting trees for the long-term, the latter describes tens of thousands, of such activities every year. An average “tree planting” activity by various groups consist of 99 percent tree planting and 1 percent monitoring. After the picture-taking and being published in some newspapers or posted in some online sites, the newly planted seedlings are left on their own. After a week or a month, many of those seedlings are dead – choked by vines and tall grasses, or got burned in forest fires, or eroded by heavy rains and flash flood, or got trampled by farm animals, etc.

Note also that it is very bureaucratic to cut and transport trees even if you’re the one who planted them on your private land. To deal with the forest bureau of the Department of Environment and Natural Resources (DENR), at the central or regional offices, is time consuming and costly. A way to avoid such bureaucracy is to remove the need to transport by truck the wood that you need. Have the trees you need to cut someday be near the house that you will build.

See also:
Agri Econ 1: Food Prices and Government, April 13, 2008

Agri Econ 2: Rice Laissez Faire vs. Subsidies, May 06, 2008
Agri Econ 3: Dr. Samran Sombatpanit and WASWC, July 03, 2008
Agri Econ 4: Government Agricultural Interventions, October 21, 2008 (long paper)