Sunday, September 30, 2018

BWorld 253, Cheap, stable electricity vs climate alarmism

* This is my column in BusinessWorld last September 24, 2018.


Most electricity consumers have that single most important concern and “vested interest” — to have cheap, competitively priced and stable electricity supply. Meaning no brownout even for a minute and yet the price is affordable.

The climate alarmism movement — less rain or more rain, less/no flood or more flood, less storms or more storms, less cold or more cold, people should send more money to many climate and environment agencies, local, national and multilateral — wants to defeat this simple desire by many energy consumers.

They want to kill the stable and reliable fossil fuel, coal and oil-based power plants especially, and promote the most unreliable, most intermittent, battery needed and more costly energy sources solar and wind. Which will make our electricity prices higher and more unstable.

Cheap and stable electricity will be among the topics to be discussed this coming September 27, 2018, in a by-invite only forum “Energy Outlook: Supplying Rising Demand at Lower Cost” at Joy-Nostalg Hotel, Ortigas, to be sponsored by Stratbase-Albert del Rosario Institute (ADRi).

The three speakers will be Sen. Sherwin T. Gatchalian, Chairman of the Senate Committee on Energy; Mr. Mario C. Marasigan, Director of Electric Power Industry Management Bureau (EPIMB), DoE; and Dr. Raul V. Fabella, Fellow, Energy Policy and Development Program (EPDP).

The three reactors will be Mr. Jose Alejandro, Chairman of Energy and Infrastructure Committee, Philippine Chamber of Commerce & Industry (PCCI); Louie Montemar, Convenor of Bantay Konsyumer, Kuryente, Kalsada (BK3); and yours truly.

Let us review the Philippines’ actual electricity production and generation vs. installed power capacity and potential in 2009 (1st year of implementation of RE law of 2008 or RA 9513), 2013 (1st year of the granting of feed in tariff or FIT provision) and 2017. Power generation is expressed in tera-watt hours (1 TWH = 1 million MWH) while power capacity is expressed in gigawatts (1 GW = 1,000 MW).


If people are thankful that we have no more blackouts despite rising demand, that generation charges on average are declining through time, coal power is the hero. In 2017 for instance, coal constituted only 35% of installed capacity but provided 50% of total electricity production.

If people are wondering why there is a new item in their monthly electricity bill since 2015, the FIT-Allowance and the rate is rising, blame solar-wind. In 2017, they constitute about 6% of installed capacity yet contribute only 2% in actual electricity generation, and the annual subsidies to them keep rising.

Among renewables, geothermal is the most stable and reliable but its cost is high. Hydro is good but it is weather and season-dependent. High water level and capacity factor during the rainy season when electricity demand is generally low, low water level and low capacity factor during the dry season when electricity demand is generally high.

Solar is unreliable, zero output at night, low output at daytime when cloudy and raining, it has high output only when it is totally cloudless. Wind is another intermittent, no output when the wind does not blow.

If government will listen to the climate alarmism movement, solar-wind will be further forced upon us consumers while coal will be further bureaucratized, and we expect more blackouts. The poor will go back to using more candles and there will be more fires, more deaths and destruction of property. The rich will buy more gensets and there will be more air and sound pollution.
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The Kavanaugh confirmation hearing, or hell by the left

I am reposting some fb comments by some American friends that I respect, September 28-30, 2018.

(1)   Lawrence Reed

I'm watching the Kavanaugh hearing and several things come readily to mind: 1) Each of the shameless anti-Kavanaugh senators isn't half the human being that the Judge is; 2) Trying to make a Supreme Court nomination issue of a blurb in a 36-year-old high school yearbook is something that only a dirtbag would do; 3) The Judge, in spite of a spirited self-defense, is actually going easy on this bunch of Big Government thugs. When Durbin pressed him on calling now for an FBI investigation, the Judge should have said, "You are asking me to aid and abet my own character assassination for no other purpose than to delay a vote for political advantage. You're at the center of this disgusting conspiracy and I refuse to legitimize it by being your pawn. Get lost."

Senator Feinstein says the reason she sat for weeks on the allegation against Kavanaugh was to protect the accuser's desire to be anonymous and that it wasn't for political reasons. This raises some immediate questions in my mind: 1) So if the accuser just wanted nothing more but to tell a single Democratic legislator of her allegation and that would be the end of it, how much sense does that make and what possible purpose did she think that would serve? 2) If Feinstein really wanted to get to the bottom of it all and still keep the accuser's identity private, why didn't she at least ask Kavanaugh weeks ago about sexual crime charges without identifying the accuser? She didn't. Bottom line: I think Feinstein is a liar who, like so many of her "progressive" colleagues, will do just about anything for power. Power corrupts, as Lord Acton said, and as I like to add, power attracts the already-corrupt.

(2) Dr. Roy W. Spencer:

shame on the majority of journalists today (including Fox News Channel) who were ready to "convict" Kavanaugh based only upon the performance of his accuser. You have to hear both sides before rendering judgement. Many men have spent decades in prison before their accuser recanted. If you automatically believe someone just because she's a female, you can unfriend me now. I don't know what the truth is in this matter, but I believe in the right to answer your accuser.

every woman I've heard from who has been the victim of a sexual attack says you don't forget the circumstances. If she was too drunk to remember the details, how can she be 100% sure it was him? Inconsistencies.

(3) Willis Eschenbach:

"Practical advice on how to judge sexual assault claims ... I note that Kavanaugh's accusers raise all ten red flags."

"If you get angry when we accuse you on nationwide TV of being a gang-rapist, you lack judicial temperament."
This is the 2018 version of "We'll throw you in the lake, and if you don't sink, you're a witch".

From Scott Adams, one of the more brilliant observers of the modern scene:

“‏Dems destroyed Kavanaugh's life, and his family's life, for naked politics . . . then they raised doubts about his temperament because he seemed upset about it. Wouldn't we be more concerned about his humanity if he took it in stride?”

Can't say fairer than that. I keep asking people, would you be calm and collected if someone spread an accusation all around the world that you are a gang-rapist?

It appears that Thomas Sowell, the noted black scholar, could see into the future. At any rate, he sure foretold the Kavanaugh hearing ...

"Emotions neither prove nor disprove facts. There was a time when any rational adult understood this. But years of dumbed-down education and emphasis on how people 'feel' have left too many people unable to see through this media gimmick."

Tuesday, September 25, 2018

BWorld 252, Mining, Itogon and Lee Kuan Yew

* This is my column in BusinessWorld last September 20, 2018.



 Strong structures, transparent and properly registered businesses are among the important protection of people against natural calamities like strong storms. An informal business tends to have informal physical structures in order to evade being noticed by government regulators as doing well, that way they can evade paying many taxes and business permits.

The tragedy of the Itogon landslide in Benguet that buried many small-scale miners living in shanties is an example of an informal business having little protection against big calamities like typhoon Mangkhut and landslides last week. It is a tragedy that may have been prevented or the damage could have been minimized if people live in stronger structures instead of shanties.

The issue of various business regulations and taxes affecting the mining industry is among those discussed at the Mining Philippines 2016 at Sofitel Hotel, September 18-20 this week.

Yesterday, one of the panel discussions was on “Opportunities and Challenges in the Mining Industry.” The speakers and their topics were (1) Ms. Rafaelita M. Aldaba, DTI Assistant Secretary, “Roadmap for the Mining Industry Development”; (2) Dr. Ronald U. Mendoza and Jerome Patrick D. Cruz of the Ateneo School of Government (ASOG), “Mining Through the National Security Lens”; (3) Mr. Gary Olivar of the Foundation for Economic Freedom, “Impacts of Federalism on Natural Resource Extraction”; and (4) Dr. Cielo Magno of the UP School of Economics, “Energy Cost and the Development of the Downstream Extractive Industry Sector.”

The panel reactors were (5) Mr. Horacio C. Ramos, former environment secretary and now president of Pacific Nickel Phils., Inc.; and (6) yours truly.

Heavy and sometimes irrational regulations like banning open-pit mining and closure of companies based on frivolous and non-transparent criteria, done by an ex-environment secretary who was rejected and discredited by the Commission on Appointments, create lots of uncertainties in the sector. Many big mining projects worth billions of dollars cannot proceed or come with great caution (see table).


Government does not create wealth in society. It only regulates and taxes the wealth creators, businesses and entrepreneurs and their workers. It is important, therefore, that government regulations should be not too cumbersome and creating exemptions.

Government should enforce the rule of law. The law applies equally to unequal people and players. The law applies to both governors and governed, administrators and administered. No one is exempted and no one can grant exemption and favoritism. Making exemptions means the rule of men, not rule of law. And, speaking of the rule of law leading to economic development, wealth and prosperity for the people,as developed Asian economies exhibit this, like Japan, South Korea and Singapore.

Singapore, in particular, started as a very poor economy after it was kicked out of the Malaysian federation in the 1960s. Its first leader and strongman, Lee Kuan Yew, was very strict in enforcing the rule of law to instill discipline and respect of private property. In the process, he was able to attract lots of investors in the small and fledgling economy, make them stay for the long term.

Mr. Jose “Joey” Leviste, Chairman of Oceana Gold, one of the major sponsors of Mining Philippines 2018, published a book, “If the Philippines had a Lee Kuan Yew” (2015). Joey admired LKY’s “strong, competent, disciplined, decisive and principled leadership” and has collected volumes of articles and books about LKY or written by LKY himself.

And we go back to mining and the rule of law. The DENR’s and local governments’ strict regulations and monitoring of big mining companies should also be done with small-scale mining. Not only for taxation and environmental protection purposes, but also to protect the people’s and miners’ lives. Rule of law can secure private property, encourage more wealth creation, and help preserve human lives.
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Monday, September 24, 2018

TRAIN, inflation and Dutertenomics

A number of my friends shared the article by Men Sta. Ana of AER last week, https://www.bworldonline.com/reason-enlightenment-and-inflation/. He wrote there,

"If not TRAIN, what are the principal factors driving inflation? Global factors like the sharp increase in world crude oil prices and the hike in US interest rates (contributing to the peso depreciation) account for a significant part of the inflation. Typhoons or weather disturbances have resulted in higher prices of vegetables."

I commented that such reasoning is OA, palusot pero hindi lusot.

I have been asking this question over and over and zero reply from Dutertenomics and its supporters -- If this is true, then many if not ALL other countries in Asia, elsewhere should have experienced similar level of inflation hikes as the PH, right? They did NOT, the reverse happened for many neighbors, as world oil prices rise, as US int rates rise, their inflation declines.

World oil price hikes are temporary, not permanent. We saw $110+/barrel oil, we also saw $25/barrel oil, so people are less panicky about such world oil price swings. 

But oil tax hikes by legislation are permanent, forever, unless repealed by another law. That is what many people react to. The ordinary barber or vendor – oil cost for his motorcycle, LPG for house cooking, veggies, chicken etc from provinces brought by trucks, his monthly electricity bill, etc – ALL have risen by significant amount because of TRAIN tax tax tax, as early as January-Feb. So they have to raise their barber charge, their palengke price mark up. And current inflation does not even include fare hikes by buses, taxi, UV express, jeepneys beyond initial P1 hike.

A young UPSE fellow alumni, Jose Endrinal, posted yesterday:

Nonoy Oplas, you might want to take a look at this: https://en.wikipedia.org/wiki/List_of_countries_by_net_oil_exports

We're the only developing country that is among the top 10 net importers [bottom of the list], except India. The short answer is that because we are more dependent on oil than other Asian countries, the oil price increases from outside hit us the hardest and in a different way.

Now you can make the case that tax hikes aggravated the problem, but you have to distinguish between which factors produce more of the increase. It isn't fair to blame tax hikes when it produces little of the effect compared to increases in world oil price.

I checked the link. KR, JP, CN, IN, PH among the top 10 net importers of oil, 2014 data. Sige pagbigyan ang old data. Now see this, one of the slides I presented at BMAP (Bank Marketing Association of the Philippines) last Friday. Despite the continued rise in world oil prices this year, 2018 ytd vs 2017 inflation, KR experienced a decline, 1.9% to 1.4%; JP and CN experienced an increase but only by 0.5%. PH increase is far out, 2.9% to 4.8% or 1.9 % pts increase. ALL of these countries did not have tax-tax-tax in oil and other products except the PH.


I can see that Dutertenomics and its supporters, rah-rah boys have little or zero humility about the real impact of their beloved TRAIN on PH inflation. Blame everything -- high world oil prices, peso depreciation, US int. rate hikes, etc. except TRAIN.

So since TRAIN is so cool and innocent, I can see that Dutertenomics and its rah-rah boys and girls will be clapping and jumping with joy when oil, lpg, coal tax hikes part 2 will occur this coming January or 3 months from now. This will give more money to their beloved govt, leave less money from their demonized rich who "consume 50% of total oil products" in the PH. Any additional inflationary pressure can be blamed on everything else except TRAIN. magaling.

Many people still insist that it is not fair to place the blame the high inflation primarily on TRAIN. Duhhh? It was still a TRAIN bill and there were many resistance in raising the tax on oil products as it will affect everything -- farm tractors, irrig pumps, threshers, harvesters, fishing boats, motorcycles, trucking of food products and other goods, transpo of people (bus, jeep, taxi, UV express, planes, ships, etc.) -- but Dutertenomics and its apologists like AER were so adamant that it won't affect the poor.

Another table I showed at BMAP forum. PH Inflation jumped quickly in Jan-Feb 2018 upon TRAIN implementation while many neighbors experienced decline or flat infl. People know that govt-legislated oil tax hikes are permanent unlike high world oil prices that can go down after sometime, like the $25/barrel we saw some 2-3 years ago.


If people will keep denying the major impact of TRAIN on inflation, then those same people will clap and jump with joy when TRAIN's oil, lpg, coal tax hikes part 2 will be implemented this coming Jan. This will give more money to their beloved government and its welfarism while this will affect mainly the rich and not the poor. Lousy.

BWorld 251, Cure the big trade deficit, bring in the miners

* This is my article in BusinessWorld last September 17, 2018.



The Philippines is suffering from a deteriorating merchandise trade gap. From January to July 2018, total exports was only $38.74 billion (vs. $39.87 billion same months in 2017) while total imports was $61.23 billion (vs $52.92 billion same months in 2017). So the trade deficit was $22.49 billion or an average of $3.2 billion a month. This is the worst trade performance of the country all these years.

Among the direct results of widening trade deficit is the peso depreciation, averaging only P51/US$ last year, now trading at P54/US$. The expectations are it will depreciate to around P55 in order to further encourage exports while discouraging less essential imports.

Many sectors look at various measures to spur the country’s exports but one thing that escapes their radar is to bring in the miners — have more metal exports, raw ores or semi-processed; have more mining investments and permits.

The Duterte administration though seems to be doing the opposite. The discredited and rejected ex-DENR Secretary Gina Lopez closed many mining firms even for frivolous and unsubstantiated cases and banned open pit mining. Her successor did not significantly reverse those idiotic policies despite recommendations by the Mining Industry Coordinating Council (MICC) to remove the ban on open pit mining, among others.

Below are primary data from the DENR’s Mines and Geosciences Bureau (see Table 1).


From the above numbers, notice the following:

One, very small contribution by small-scale gold mining despite the huge environmental damage created by thousands of such units. Two, low mining investments when a huge, single biggest foreign direct investment (FDI) in the country, the $5.9-billion Tampakan gold-copper mining project, has been tempered for nearly a decade now. Three, low exports share of metallic and nonmetallic exports when the opportunities are high. Four, significant tax collections by national and local governments. And five, declining number of approved and registered MPSA, FTAA and EP.

The opportunities for high mining exports are opened by recovering prices of important metals where the Philippines has good reserves, particularly gold, copper and nickel (see Table 2).


These and related issues will be covered in the forthcoming Mining Philippines 2018 on Sept. 18-20, 2018 at Sofitel Philippine Plaza.

One pronouncement by President Duterte a few months ago is that he will ban the export of raw mining ores, only semi-processed and manufactured mining products will be exported.

This mandatory, state-dictated mining manufacturing has been done in Indonesia some two decades ago and Indonesia is a much bigger mining player than the Philippines. The result was rather catastrophic — many companies, local and foreign, that went there later became bankrupt. The capex, opex and marketing chains were larger than expected and prices of manufactured metals were highly fluctuating.

Government is a lousy business entity and, hence, cannot be trusted to render non-lousy business regulations. It should stick to enforcing its environmental rules to all players, big and small miners, and not demonize the big ones.
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Sunday, September 23, 2018

Energy 113, First Gen/EDC's anti-coal drama

A friend, Vic Saulon of BWorld tweeted this the other day:


I replied to Vic with 2 tweets:

1. Lopezes, allies are dishonest when they show 60s era photos of coal plants. Visit any coal plant now, Batangas, Quezon, Zambales, Pangasinan, Davao, etc., you won't see black smoke. They're scared after Malampaya, might be no more business bec imported LNG facility very expensive.

2. Their gas plants in Batangas are sure money makers, Malampaya gas has priority in the grid. Coal off peak hrs can sell P2/kWh or less, need to keep running even at 0 or neg profit off-peak hours, recover profit daytime. They demonize coal like the Legarda-Leviste solar business.

Malampaya gas is relatively cheap because it goes straight from Malampaya platform as gas to Batangas power plants as gas, no need to convert to liquid, transport via huge ships, store as liquid, then convert again to gas for power plants use. 

Imported LNG means multiple cost -- gas from abroad is cooled and converted to liquid, transported by huge ships, unloaded and stored in huuuge storage tanks as liquid, then heated and converted to gas again to be used in gas plants in Batangas.

This huge cost prompts the Lopezes and their allies, environmental NGOs, to lobby that government  through PNOC and DOE should be heavily involved, perhaps use taxpayers' money to build the LNG storage tanks and regassification facilities, then they will use the gas for their gas plants in Batangas. DOE is hesitant to compromise taxpayers money for this so I think this is their game plan, just a raw hypothesis.

The Lopezes and their allies make lots of noise -- in media, press conferences, rallies by some street militants, congressional hearings, etc. -- to demonize coal, perhaps stop all new coal power plants, which can lead to medium-term power shortage. Government might be forced to use taxpayers money to build those LNG facilities, or private funds to build the facilities but government should give them lots of direct and indirect subsidies, various mandates.

The Energy World Group (EWG), an Australian energy multinational, built a 650 MW gas plant in Pagbilao, Quezon. No demand for any govt subsidy, direct or indirect, mandatory energy mix, they just build their own gas storage, regassification facilities. They have the technical, engineering and financial muscles to build the facilities and sell gas power at competitive pricing.

In contrast, the Lopezes have about 3,000 MW of gas plants in Batangas and they seem hesitant to build their own LNG storage and regasiffication facilities unless there are govt subsidies, govt-set energy mix where gas power shd be made mandatory, and off-take security similar to Malampaya gas. Meaning even if their gas power becomes expensive, DUs and consumers should continue buying from them. See https://funwithgovernment.blogspot.com/2017/09/bworld-152-cronyism-in-renewable-energy.html

I hope this hypothesis is wrong. Meanwhile, their continued anti-coal drama is lousy and self-serving.
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BWorld 250, E-smoking and ASEAN integration, Part 2

* This is my column in BusinessWorld last September 13, 2018.


THIS is a continuation of the earlier column published on Sept. 4, 2018. We are exploring some inconsistency in the formulation that “more smoking (and drinking) prevalence means more cardio-vascular diseases (CVD), cancer, etc.” and hence, people live less healthy and live shorter.

The World Bank’s World Development Indicators (WDI) database provides a good and wide range of data. The selected data shows some surprising results: developed Asian economies Singapore, Japan and S. Korea have high smoking prevalence compared to Australia, US and UK and yet these Asians have (a) lower mortality from CVD, cancer, etc., and (b) higher life expectancy (see Table 1).

A Malaysia-based free market think tank, the Institute for Democracy and Economic Affairs (IDEAS) in partnership with Manila-based Minimal Government Thinkers will organize a small group forum, “Alternative Tobacco Product Regulations: The Role of the Consumers” on Friday, Sept. 14, at the Holiday Inn Makati.

The event will explore various arguments on the merits and demerits of more government regulation of tobacco and alternative products considering that (a) government wants more revenues and less public health harm, (b) consumers want more freedom about their own lives, and (c) illicit and smuggled products should be controlled because they are a lot cheaper and will encourage more smoking and smokers, not less.

As noted by the earlier paper, whenever the free market is curtailed and restricted, the black market immediately comes in and thrives. Prostitution, prohibited drugs, prohibited gambling, smuggling, all of these products and services are legally banned and prohibited and yet all of them exist until today.

Then IDEAS and Economic Freedom Network (EFN) South East Asia will hold another small group, by invite-only roundtable discussion in the afternoon of the same day, same hotel venue, on “Economic integration within ASEAN.”

Some interesting data on foreign direct investments (FDI) are shown above related to the subject. While FDI inflows constituted only 7.4% of gross fixed capital formation (GFCF) globally in 2017, 4.7% in East Asia, it was 17.7% for ASEAN countries.

FDI inward stock as percent of gross domestic product (GDP) in 2017, the ratio was only 27% for East Asia, 40% globally, but 79% in the ASEAN.

These two data show the high degree of ASEAN economic integration not only among themselves but also with the rest of the world. External capital and business are playing a big role in the economic dynamism of the region (Table 2).


For the Philippines in particular, FDI inward stock was only $3.3 billion in 1990, rose to $13.8 billion in 2000, $25.9 billion in 2010 and $78.8 billion in 2017. Good expansion but still low compared to our neighbors in the ASEAN as of 2017: $129.5 billion in Vietnam, $139.5 billion in Malaysia, $219.4 billion in Thailand, $248.5 billion in Indonesia, and $1,284.9 billion in Singapore.

The Charter change initiative of the Duterte administration was wasted by federalism hard sell and short-sightedness, instead of focusing on liberalizing the Philippine economy to more foreign investments and businesses.


Bienvenido S. Oplas, Jr. is president of Minimal Government Thinkers, a member institute of Economic Freedom Network (EFN) Asia.
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Weekend Fun 66, Keith Richards is immortal

I saw this on fb last month, really funny. Yeah, Keith Richards of the Rollingstones is immortal. :-)


Adding some funny motorcycle riders. Got them from fb, other web sources, none from my camera.



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Thursday, September 13, 2018

BWorld 249, Reduce fares and increase passenger convenience by increasing supply

* This is my article in BusinessWorld last September 11, 2018.


Economics is the study of proper allocation of limited resources mainly via market mechanism. If there is rising demand for a particular commodity or service, the price goes up as indicator of consumers’ willingness to pay for more services or goods, and this tells existing and potential providers to increase the supply as there is more revenue and profit to be made.

When the supply outstrips the demand due to rising competition, the price begins to flatline or decline, telling producers to stop expanding the supply, otherwise the price will keep declining further and they will lose money and may go bankrupt.

The role of government as regulator and prohibitor in this case should be limited unless a commodity or service can directly and adversely affect public health and safety, like the sale and distribution of guns, ammunitions and bombs, toxic and poisonous substances, and substandard or expired medicines, food and drinks.

When government intervenes and regulates a lot even for very useful services like providing convenient public transportation to people who have no cars or have cars but do not want to drive because of frequent heavy traffic, that is a signal or red flag that government becomes abusive and is engaged in corruption and cronyism, directly or indirectly.

The Land Transportation and Franchising Regulatory Board (LTFRB) is among the most bureaucratic and prohibitionist agencies in government. It issues plenty of NOs, prohibitions and restrictions to entrepreneurs and companies that want to provide convenient and safe rides to the public.
  
The long lines of people daily in many areas and cities who cannot get fast and convenient rides are the result of LTFRB bureaucratism. The franchise of legal and accredited air-con vans, buses, ride-sharing services is limited and capped or controlled at low levels. This seems a calculated move so that there will be more illegal and “colorum” vans, buses, ride-sharing cars as passenger demand is very high. And that is where lots of apprehensions, driver harassment, corruption and extortion can come in.

Last week, there were two news reports in BusinessWorld about continuing LTFRB bureaucratism of transport network vehicle service (TNVS) or transportation network companies (TNC):

(1) “LTFRB junks order for Grab to reimburse passengers” (Sept. 5), and

(2) “LTFRB approves P2-per-minute TNVS charge” (Sept. 6).

Report #1 is the agency taking back its previous order that Grab should reimburse future passengers but it should still pay the agency P10 million for “overcharging” its passengers and failure to inform the board of its P2-per minute charge.

Report #2 is the agency allowing the per minute charge and ordering TNVS to give detailed and unbundled breakdown of fares — flag down rate, per kilometer rate, travel time rate and surge price.

The P2-per minute charge is an important incentive for drivers to endure heavy traffic or flooded areas and pick up, bring passengers to their destinations.

In a deregulated environment, TNVS should be allowed to charge whatever amount as their per minute charge so long as passengers know their rates via online transactions. So a TNVS can charge P5, P10 per minute or higher — because it is fielding an SUV or a BMW or Benz to passengers who can afford.

I checked the LTFRB budget, the biggest item is on its “service” for issuing the Certificate of Public Convenience (CPC), granting of permits and establishment of routes.


One can interpret it as we taxpayers giving the LTFRB hundreds of millions of pesos yearly so that it can choose who among the entrepreneurs and businesses can expand and who should be choked. We are giving them lots of money so it can harass and even confiscate and impound private property that provide services to wary and harassed passengers but has no accreditation precisely because the agency has capped and limited the number of accredited vehicles to small numbers.

LTFRB bureaucratism seems to be doing the exact opposite of what government should do — to respect private property and allow market mechanism to respond to passengers’ rising and changing demand.
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US-CN 'trade war' 3, stockmarkets divergence

The China Communist Party (CCP)-led stockmarkets continue to be the worst-performing in the world for several months now. As of September 12 closing, Shenzhen is -26% ytd, Shanghai is -20% ytd. Data from https://markets.wsj.com/.


In contrast, the US stock markets continue to experience double-digit growth in the past 52 weeks. See for instance DJIA and Nasdaq composite.


Protectionist Xi Jinping and the CCP feel the pain but they are not showing or admitting it publicly.
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See also: 
US-CN 'trade war' pummels CN the protectionist, August 3, 2018 
US-CN 'trade war' 2: DJIA vs Shanghai stockmarkets, August 19, 2018

Wednesday, September 12, 2018

BWorld 248, Inflation, energy prices and mini-greed

* This is my column in BusinessWorld on September 06, 2018.


INFLATION has further jumped to high levels. Only 2.9% in December 2017 (no TRAIN law yet), it became 3.4% by January 2018 (first month of TRAIN law), 3.8% in February, 5.7% in July, and now 6.4% in August 2018.

While high world oil prices and peso depreciation against the US dollar were among the important factors, it was the energy tax hikes in the TRAIN law — oil, LPG, coal, plus coverage of VAT in electricity transmission charge — that triggered and sustained the inflationary pressure.

And talking about inflation and energy prices, the recent Pulse Asia Research’s “Ulat ng Bayan Survey,” June 15-21, 2018 is among the misleading surveys that will indirectly justify higher electricity prices. How?

See two of their three questions, loaded and leading:

1. How satisfied or dissatisfied are you with the price of your electricity?

3. Are you in favor or not in favor of increasing the use of renewable energy in the Philippines such as energy from the sun or solar energy?

On #1, Pulse Asia did not explain to respondents that there are nine different charges in our monthly electricity bill that contribute to higher overall rate: generation charge, transmission charge, distribution charge, supply charge, system loss charge, metering charge, universal charge, feed-in-tariff (FIT) subsidies, taxes. Loaded question with an expected high answer of Dissatisfied.

On #3, another loaded question as it does not clarify that even with more solar energy, the eight different charges will remain and worse, the FIT subsidy for solar will further rise.

So the result of their survey was: Question #1, 64% dissatisfied and only 27% satisfied, 14% undecided. Question #3, 89% in favor, 9% not in favor and 2% volunteered/undecided.

Having more intermittent, unstable and unreliable solar and wind power in the national grid can lead to higher prices because of the higher need for backup power, ancillary services that are mostly oil-based, and huge batteries. This is shown in both Europe and the US where in many cases, countries and states with high reliance on wind + solar also have higher electricity prices.


Then two House bills sprang up out of nowhere. HBs 8013 and 8015 entitled “An Act Granting Solar Para sa Bayan Corporation a Franchise to Construct, Install, Establish, Operate and Maintain Distributable Power Technologies and Minigrid Systems throughout the Philippines to Improve Access to Sustainable Energy” were filed only last month, Aug. 6, and were quickly approved by the House committee on legislative franchise on Aug. 29. The committee report was approved last Sept. 3 and will go to plenary this week or next week.

This is a very anti-EPIRA bill and, hence, an attempt to legalize many illegal provisions. While all players in the generation, distribution and supply sectors comply with specific requirements of the EPIRA law, this newbie, no track record corporation wants to do anything they want — can connect anywhere, can build their own grid anywhere, can carve out to DUs franchise areas, will pay only 3% franchise tax in lieu of all taxes, exemption to universal charges, COC and local taxes.

In a position paper by the Philippine Rural Electric Cooperatives, Inc. (PhilRECA), some parts reported in BusinessWorld last Sept. 4, PhilRECA observed that:

“Solar para sa Bayan Corp. said that it could offer electricity at an equal or much lower cost compared with the ERC approved rates of ECs… Paluan was cited as an example with P8.00 per kWh. However… the company is actually charging more at P10.37 to P15.29 per kWh… such misrepresentation… that corporation could not afford to offer lower rates.”

This newbie corporation whose franchise is all ready for a congressional plenary is owned by a son of a sitting “environmentalist” senator.

To have cheaper and more stable electricity, we need more competition, less government cronyism and favoritism, and less energy taxation.
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The fast rising price of ‘Dutertenomics’

* This is my first article in the Asia Times, published last month. More than 2,700 shares as of today, thanks readers.


Inflation is finally catching up with Philippine President Rodrigo Duterte’s high octane economic stimulus measures, a fast growth-geared policy push known locally as “Dutertenomics.”

Statistics released this week showed inflation rose 5.7% in July, the fastest rate in over five years, according to the National Economic Development Authority, a state agency. It marked the fifth consecutive month that inflation breached the central bank’s 2%-4% target band, leading to market speculation that it will soon hike interest rates.

The surge in prices has sparked a local debate over whether global or local factors are more to blame. Economic analysts note that inflation rates were modest as recently as late last year, clocking in at 3% and 2.9% in November and December respectively.

However, Duterte’s controversial Tax Reform for Acceleration and Inclusion (TRAIN) law came into force in January, a broad-based tax hike that many believe has driven the inflationary trend. Indeed, inflation has steadily risen in recent months: 3.4% in January, 3.8% in February, 4.3% in March, 4.5% in April, 4.6% in May, 5.2% in June, and 5.7% in July, or almost double the December 2017 level of 2.9%.

Duterte’s tax law was passed to help finance the government’s ultra-ambitious infrastructure spending plans, estimated at 8 trillion pesos (US$150 billion) over six years, as well as social welfare programs that aim to reduce poverty from 21% to 15% by the end of his term in 2022. While taxes have risen, widespread infrastructure-building has largely failed to materialize.

Still, the Philippines has recently been among Asia’s fastest growing economies, with gross domestic product (GDP) growth of 6.9% in 2016 and 6.7% last year. But that growth is now decelerating as inflationary pressures start to weigh against consumption and investment. Second quarter GDP growth fell to 6%, from 6.6% in the first quarter. That means first half GDP growth was only 6.3%, down significantly from the government’s full-year target of 7%.

Duterte’s economic managers, including officials at the Department of Finance (DOF), National Economic Development Authority (NEDA), Department of Budget and Management (DBM) and Department of Trade and Industry (DTI), have played down the TRAIN tax’s impact on galloping prices while at the same time scrambled to offer credible alternative explanations for the inflationary surge.

They have generally pointed to three main factors supposedly beyond their policy control, namely rising global oil prices, a recent fast depreciation of the peso which is currently among Asia’s worst performing currencies this year, and “profiteering” by big and small private businesses that have allegedly unscrupulously marked up their prices.

While the TRAIN law has cut personal income taxes, it has raised several other levies, especially for energy sources such as oil, liquefied petroleum gas and coal. Sin taxes for sugary drinks and tobacco have also been upped, while an expanded 12% value-added tax (VAT) now covers more economic sectors, including electricity transmission and foreign currency-denominated sales.

Official attempts to mostly blame higher global oil prices for the local surge in prices, however, doesn’t hold statistically when compared with other net-fuel importers in the region. Indeed, other oil-importing nations such as Thailand, South Korea and Sri Lanka have all seen a decline in inflation in the first half of this year compared to their full year 2017 rates.


The inflation differential for developed countries between January-June 2018 vis-a-vis 2017 is also statistically miniscule, measuring -0.1 for the United Kingdom, 0.1 for Germany, 0.4 for France and the United States, and 0.6 for Canada.

Instead, it is mostly domestic factors that are driving the Philippines’ inflation situation. First and foremost, inflation is hitting the poorest 30% of Filipino households harder than other demographic groups. In the first half of 2018, overall Philippine inflation was 4.3% but for poor households it was higher at 5%.

That’s because while “food and non-alcoholic beverages” comprise only 38% of the overall Consumer Price Index (CPI) basket, used for calculating the national inflation rate, the products constitute 61% of the poor’s consumption. The telling statistics were calculated by Dr Dennis Mapa, dean of the University of the Philippines School of Statistics (UPSS).

Nor is there any near-term relief in sight. Fare hikes for taxis, buses and point-to-point air-conditioned vans will soon come on-stream, as will phase two tax hikes on oil, LPG and coal in January 2019. A third phase tax hike on energy will be imposed in January 2020 as part of the Train tax reforms. Firms are also expected to start raising wages due to labor demands over TRAIN’s impact on prices, leading to a potential virtuous cycle of inflation.

Tuesday, September 11, 2018

BWorld 247, E-smoking, smoked rice and ASEAN integration

* This is my article in BusinessWorld last September 04, 2018.


TOBACCO, alcohol and fossil fuel products are among the most demonized, most bureaucratized, most taxed products in the country and abroad. Thus, the excise tax for them on top of VAT, income tax and related taxes.

The hypothesis is that more smoking and drinking prevalence means more diseases for the people and hence, people live less healthy, live shorter and more miserable.

Some official data, however, would douse cold water on this claim. Some countries with high smoking incidence or prevalence like Singapore and Japan have higher life expectancy than countries with much lower smoking prevalence like Australia (see Table 1).

The Institute for Democracy and Economic Affairs (IDEAS), a free market think tank in Malaysia, in partnership with Minimal Government Thinkers, our counterpart free market think tank here in the Philippines, will organize a seminar, “Alternative Tobacco Product Regulations: The Role of the Consumers” on Sept. 14, 2018 at the Holiday Inn Makati.

This small-group, by-invitation-only event aims to bring together stakeholders to discuss ways where government regulation of tobacco and alternative products can be optimized — lesser public health harm, government gets revenues, and not encouraging illicit and smuggled products that are cheaper and product quality is unregulated.

Focus will be on e-cigarettes and heated products — should rising restrictions and taxation of the usual tobacco products apply to these alternatives?

Some government officials like the National Tobacco Administration (NTA), Congress, independent researchers, and various consumer organizations will speak.

Whenever the free market is severely curtailed and restricted, the black market always comes in and thrives. This is true for drugs, certain gambling, smuggling, gun-running, prostitution. All these products and services are legally banned and prohibited and yet all of them exist until today. The black market and illicit trade makes it very lucrative for government regulators and enforcers to allow the prohibited in exchange for handsome personal and financial favors.


In the afternoon of the same day, IDEAS and the Economic Freedom Network (EFN) Asia will hold another small group, by-invite only roundtable discussion on “Economic integration within ASEAN” also at Holiday Inn Makati.

IDEAS is conducting a research project on two areas related to ASEAN. First, the implementation of the ASEAN Economic Community (AEC) 2025 Blueprint, and second, the prospects for deepening trade relationship between ASEAN and the EU.

Talking about ASEAN economic integration, a good data to look is the direction of trade — how much of ASEAN countries’ exports go to fellow members and the rest of Asia, and how much of their imports come from fellow members and the rest of Asia (see Table 2).

As shown in the numbers above, many ASEAN countries are trading more with themselves and the rest of Asia, reducing the share of trade with North America, Europe, Oceania, South America and Africa.

For the Philippines, our high-trade dependence with the US before has significantly declined. Philippines exports to Asia rose from 48% of total exports in 2000 to 66.5% in 2016.

Which leads us to the current issue of “rice crisis,” “bukbok/weevil rice,” and “smoked/fumigated rice.” It is foolish for the government through the Department of Agriculture and National Food Authority (NFA) to retain rice protectionism when the two biggest rice exporters in the world are our neighbors, Thailand and Vietnam.

We should have free trade in rice, get cheaper rice from our neighbors, give cheaper rice to our poor consumers, instead of asking them to endure bukbok/weevil and smoked/fumigated rice. Abolition of NFA as a huge and costly bureaucracy is a good proposal.
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Monday, September 10, 2018

Climate Tricks 73, Attacking Dr. Will Happer as 'CC denier'

See here: (a) A famous atomic physicist from Princeton U. has been appointed as Senior Director for Emerging Technologies on the National Security Council, (b) A 20s yo journalist with BA in Writing Seminars and believer of 'universally accepted science' criticized this 79 yo physicist, and (c) the Climatariat or Clinton News Network (CNN) bannered the story of this reporter.
https://wattsupwiththat.com/2018/09/06/william-happer-joining-trump-national-security-council-cnn-report-happer-climate-denier-trump-adviser/

There are 5 cool charts there too. And here's a description of Dr. Happer at the Princeton U. website, https://dof.princeton.edu/about/clerk-faculty/emeritus/william-happer

The CNN story using the stupid formulation "climate deniar", https://edition.cnn.com/2018/09/04/politics/happer-climate-denier-trump-adviser/index.html.
There was climate change (CC) for the past 4.6 B years since planet Earth was born, there is CC now and there will be CC for the next 4 B years or so -- how can anyone "deny CC"? Only low life and emotional minds will keep using that term.

From a world-famous US climatologist, Dr. Roy W. Spencer, posted few days ago:

Congrats to my friend and famous physicist Will Happer for accepting a position as Senior Director for Emerging Technologies on the National Security Council, under John Bolton,where he will have access to President Trump on climate change and energy policy issues. As we walked around the Capitol building one night, Will and I discussed the pressures on me to have my name put forward as Trump's Science Advisor, and his gentle warnings about working in that environment helped me decide against putting my family through it. I know he reluctantly accepted his new position, and his wife is not happy about it (Will was fired by Al Gore in a previous administration for questioning global warming). I hope he can do some good there.


See also a good interview with Dr. Happer here; portions:

"The DOE Office of Science had an annual budget of over $3 billion at that time, more than the National Science Foundation. It funded almost all of DOE’s non-weapons basic research, including a great deal of environmental science and climate science. This was my first encounter with the climate establishment, and I was surprised to find environmental science so different from high-energy physics, nuclear physics, materials science, the human genome, and the many other areas we had responsibility for....

"Greenpeace is one of the many organizations that have made a very good living from alarmism over the supposed threat of global warming. They are unable to defend the extremely weak science. So, they demonize not only the supposed “pollutant,” atmospheric CO2, but also any scientists who seem to be effectively refuting their propaganda."

Good debate, Will Happer (atomic physicist, Princeton U.) vs David Karoly (Meteorologist, U of Melbourne), 35 pages,

Many anti-Trumpistas will have headaches with this development. It is hard to convince top caliber scientists to join the White House.
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See also:
Climate Tricks 70, Greenpeace and the Economist love fossil fuels, August 06, 2018 

Climate Tricks 71, "Rising ocean" when reality is rising rivers, lakes, August 13, 2018 
Climate Tricks 72, Calling El Nino-La Nina as weather anomalies, September 02, 2018

Saturday, September 08, 2018

BWorld 246, LTFRB command and control

* This is my column in BusinessWorld last August 31, 2018.


HERE’s a mixture of news for traffic-wary motorists and passengers in Metro Manila and other big cities in the country.

The good news: (1) more big infrastructure projects like skyway extension, M.Manila subway and Makati subway are either near completion or about to start construction, and (2) regular passengers of transport network vehicle service (TNVS) will soon experience shorter waiting time as the Land Transportation Franchising and Regulatory Board (LTFRB) has increased the number of accredited cars by 10,000 last August 24.

The bad news: (3) many roads leading to and after exiting the skyway will remain congested because of the big volume of vehicles, (4) the 10,000 new TNVS cars to be accredited by LTFRB are not enough to significantly bring down waiting time and fares, and (5) many accredited but inactive, suspended, or booted out TNVS drivers and their cars are still not delisted in the LTFRB “masterlist” and hence, cannot be replaced by new ones who can help expand the number of available ride-sharing vehicles.

The LTFRB is ground zero of these endless problems not only with TNVS but also other types of public transportation in the country. Here are the reasons.

One, franchise control. Putting a small and fixed cap on the number of accredited TNVS, UV express vehicles, buses, taxis, resulting in huge numbers of people unable to get fast and safe rides. Queuing and waiting too long, or standing in cramped, heavily-loaded buses and jeepneys, force many people to drive their cars, which further worsens traffic congestion.

In the table below, when there was still Grab-Uber competition, total number of cars and drivers was 43,000. After the merger, it went down to 35,000 because LTFRB did not and would not accredit 8,000 former Uber drivers and cars to be absorbed by Grab. The immediate result is longer waiting time for passengers and higher fares as additional disincentives for limited drivers to go into heavy traffic or frequently flooded areas.


Two, fare control. Fare-setting is not a function of rise or fall of oil prices, or degree of competition per route per hour, but a function of the willingness of the Board’s bureaucrats to meet and decide on fares that hardly change for months or years.

Three, route control. Disallowing buses, UV express, jeepneys, etc. to serve routes that experience high passenger volume (there is a barangay or city or provincial fiesta, etc.).

Four, very bureaucratic and costly procedures to get LTFRB accreditation. For instance, if one would apply as a new TNVS driver/partner, applicant must provide (a) proof of existence/various IDs, (b) proof of sufficiency of garage, (c) TCT or tax declaration or contract of lease/Authority to use with TCT of lessor, (d) LGU Zoning Certificate for garage, (e) proof of financial capability, latest income tax return, proof of bank deposit of P50,000, (f) DTI business registration, (g) BIR certificate of registration, (h) Proof of publication, (i) affidavit by the publisher, copies of publication, etc.

Five, rising regulations and requirements. Which means rising cost of operating public transportation. Mandatory receipts in taxi, GPS for buses and taxi, unbundling and detailed breakdown of fares by TNVS. Soon mandatory CCTV inside buses and TNVS, other wild requirements.

LTFRB has become a wild-cannon bureaucracy that creates more inconvenience to passengers instead of making their travels more convenient, more safe.

LTFRB should be checked by Congress or the Office of the President. Providing safe and convenient transportation to wary passengers is not a crime that should be penalized with endless command and control culture, stiff fines and penalties, even confiscation of private property like a car, van or bus.


Bienvenido S. Oplas, Jr. is president of Minimal Government Thinkers, a member institute of Economic Freedom Network (EFN) Asia.
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