Saturday, December 29, 2018

BWorld 276, Fiscal irresponsibility vs household responsibility

* This is my article in BusinessWorld last December 18, 2018.


A report in BusinessWorld yesterday, Dec. 17, said that the country’s foreign debt grew 5.6% to $76.4 billion as of end-September 2018.

The Bureau of the Treasury data of the Philippines’ outstanding debt showed P7.167-trillion total as of October 2018, composed of P4.62-trillion domestic debt and P2.546-trillion external debt.

These are huge numbers. With or without economic crisis and financial turmoil, the figures keep rising, never flatlining or declining.

But this is not unique for the Philippines. Other countries have bigger debt even if they are already industrialized, and even if they have a smaller population. See the numbers for external debt alone.


There is one term or description for the ever-rising debt of governments around the world: fiscal irresponsibility. Spend-spend-spend, tax-tax-tax, borrow-borrow-borrow, as if the money comes from the sky falling on governments forever.

At the household and micro level, when a person always spends beyond his/her means, he is called “mayabang, gastador, maluho, iresponsable” etc. When governments do this, they are not called as such, they even get self-congratulatory labels of practicing “fiscal prudence.”

In the Philippines and other countries, certain sectors realize the value of savings, of living within their means or below their means to have forced savings.

To have sufficient savings, people use the formula: Income — Spending = Savings.

There is a problem here. If Savings are not targeted, spending can eat up the whole income and savings will be small, if not negative.

The appropriate attitude then should be: Income — Savings = Spending.

There should be forced savings target and spending should be variable and adjusted downwards to reach the targeted level of savings.

This is among the important discipline and messages that the Palawan Savers Club (PSC) has adopted for its members and friends under the guidance of their founder, Peter “Pidro” Sing.

Pidro is a self-made successful businessman. He did not inherit money or business from his parents or close relatives. He is a friend from the University of the Philippines Diliman. In the 1980s, we both stayed in Narra dormitory and we were both student-activists when Marcos was still the President of the Philippines. His CV is a roller coaster of hirings, resignations, and start-ups (he knows what it’s like to start a business, go bankrupt, start another, close it, start another — sometimes simultaneously. He did not get a formal business education; he was enrolled in the “school of life.”

When Pidro formed the PSC in July 2014, there were only 20+ members. To date, it has 800+ member-savers. They are mall and office employees, vendors and sari-sari store owners, tricycle and van drivers, tour guides, OFWs, students, professionals (like doctors, veterinarians, lawyers), and government employees.

Pidro gives lectures on “Savings for Success (S4S): An introduction to financial education” at least once a week in Puerto Princesa, Palawan. If out of town, he speaks two to four times a week to optimize his time. Sometimes he has two speaking engagements in a day.

He spends his own money and time for his personal advocacy. After going through cycles of wealth and bankruptcy, he realized that the key to wealth is not so much how big the monthly or yearly income is, but how big and consistent is the forced personal and household savings.

Government’s fiscal irresponsibility should be tempered by citizens who know the value of living within their means, the value of forced savings, and limited spending. And government should learn to live below its means when there is no economic and financial turmoil in order to accumulate fiscal surplus and pay off huge debts.

Pidro and PSC — and other groups with similar advocacies — are setting the needed social and political change that we hope to see in our lifetime.
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See also: 
BWorld 275, The LNG bill, December 28, 2018

EFN Asia 68 / API 1, Launching of API in Singapore

The Economic Freedom Network (EFN) South East Asia has officially been renamed and launched as ASEAN Prosperity Inititive (API) last December 11, 2018 at a half-day conference at Intercontinental Singapore Robertson Quay, organized by IDEAS (Malaysia). I was there.

Below, IDEAS CEO Ali Salman giving the welcome message.


Audience came from multilaterals, bilaterals, governments (Indonesia, Singapore), corporate, academe, think tanks and media.


Panel discussion, Deborah Elms of Asia Trade Center (ATC) speaking. Deborah is frank, as usual.


One of the slides by Janant Menon. This could be one reason why anti EU bureaucracy is much larger than anti ASEAN bureaucracy, and ASEAN economies growing faster.


Materials are available here, http://api.ideas.org.my/abcde.html.
--------------

See also:
EFN Asia 65, EFN panel at Jeju Forum 2017, June 20, 2017 

EFN Asia 66, Meeting 2017 in Kuala Lumpur, September 22, 2018 

EFN Asia 67, Program of Conf 2006, KL, June 01, 2018


Friday, December 28, 2018

BWorld 275, The LNG bill

* This is my article in BusinessWorld on December 14, 2018.


To have cheaper, stable energy sources, especially in electricity generation, there should be maximum competition and minimum taxation, distortion and government favoritism among players using different technologies and energy sources.

So if an energy or environment tax should be imposed, it should apply to all energy technologies and sources. If a subsidy should be given, it should also apply to all energy technologies.

This does not happen in the Philippines and many other countries in the world. There is always a double standard, like high taxes, unguaranteed dispatch to the grid for some technologies, and high subsidies and guaranteed dispatch to the grid for wind-solar and other new renewables.

Among power plants using fossil fuels — oil, coal and natural gas — there is also favoritism. Oil and coal are slammed with higher excise taxes to make them more expensive while natural gas has no excise tax, which makes it artificially cheaper.

Now another favoritism scheme is being prepared in Congress. I saw at least two reports in BusinessWorld on the subject this year:

1. “Gov’t may need to finance natural gas infrastructure” (June 21)
2. “LNG bill to require guaranteed offtake of import shipments” (Dec. 6)

If report #1 is done, it will compromise Philippine taxpayers. Firms put up big hydro, geothermal, coal plants using their own money and they are fine. But construction of liquefied natural gas (LNG) infrastructure — terminal, storage, regasification facilities — will be passed to taxpayers, before private natural gas plants can use the gas for their power generation.

If report #2 is done, it will compromise Philippine energy consumers. If LNG prices go up, consumers must pay for it even if cheaper energy is available during that period.

It is also related to constant lobby that government should set the energy mix, which is wrong. Setting the energy mix should be done by the market, by the energy consumers and suppliers, and not by the government.

Anti-coal hysteria and drama in the Philippines, among the reasons that renewables and natural gas are favored, is based on the wrong premise that the country’s coal use is high. Far from it. Compared to our neighbors, we have low coal use (see Table 1).

Another reason for renewable energy and gas favoritism is the belief that the Philippines is poor in environmental sustainability in its energy development. This too is wrong.

The World Energy Council (WEC) publishes an annual study, the World Energy Trilemma Index. WEC is a United Nations-accredited global energy body with over 3,000 member organizations in over 90 countries, from governments, private and state corporations, academia, nongovernmental organizations and energy stakeholders.

The Trilemma Index is composed of three factors:

1. Energy Security — reliability of energy infrastructure, ability of energy providers to meet current, and future demand

2. Energy Equity — accessibility and affordability of energy supply

3. Environmental Sustainability — energy efficiencies and energy supply from renewable and other low-carbon sources

Out of 125 countries covered, the Philippines ranked 74th overall; 96th in energy equity because of our expensive energy prices; and 1st in environmental stability (we’ve come in first for several years now) because of the country’s high input from geothermal and big hydro, energy sources that are available all year round (see Table 2).

The Department of Energy itself and Energy Secretary Alfonso G. Cusi are using and citing the WEC annual reports and take pride in our #1 global ranking in environmental sustainability. The Secretary has adopted a technology-neutral energy mix policy — it is the good and right thing to do.
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See also: 

MMDA Towing 6, Letter to MMDA last January

This is my letter to MMDA last January when I was called during further investigation of my case, I forgot to post this earlier. See background,
--------------

January 30, 2018

MMDA Legal Department
MMDA Compound, Guadalope, Makati City

Sir,

Related to the incident of towing of my car last December 19, 2017 in Makati City, I actually did not file a formal complaint. I just showed Mike Salalima, Dep. Chief of Staff of MMDA Chairman Danny Lim, on December 20 my draft article to be published in BusinessWorld on December 21. Mike forwarded my draft article to the Legal Department later.

To summarize the case:

I indeed parked briefly in a “No Illegal Parking” area in front of a talipapa in JP Rizal, Makati that afternoon. About 5-6 minutes parking to buy a kilo of pork and rice, my 2 daughters aged 7 and 11 yo inside, engine and car air-con on. When I came back, MMDA already hooked the metal, I pleaded for a violation ticket, no luck. My car was towed and impounded at Tumana, Marikina, December 1.

The next day, December 20, I was able to meet Mike Salalima, he opined that my car should have not been towed, a simple violation ticket should have been issued. Mike arranged for the release of my car with no towing fee. I thanked Mike for that, I briefly included our conversation in my BusinessWorld column published on December 21.

Since I did not pay the supposed fine, I did not file a formal complaint anymore. It was enough that I wrote my experience and it was read by so many people. My article was #2 then #1 most read article in BusinessWorld from Dec. 22-26, five days. I received a number of letters in my email, my article was shared by many people, it triggered many debates and exchanges in social media especially in facebook.

Last week, January 23, I attended a meeting called by MMDA Legal Department, Officer Dayaon was there. Among the issues raised during that meeting.

1. Mr. Dayaon said he does not know that crew of any towing company can not and should not hold the wheel of a towed vehicle if the owner or driver is inside the car. Since he has been with MMDA for several years now, either he is ignorant of the towing regulations that he implements and enforces, or he is outrightly lying.

2. MMDA Hearing officer Cristopher (?) rightly said towing officers that day should have spared my car from towing (and plain ticket violation should have been issued instead) for humanitarian reason – there are two young girls inside experiencing the vibrations and loud blag-blag sounds when the truck stops and go. And they see a stranger holding the wheel of the car.

3. Mr. Dayaon said he did not notice that there were young girls inside. This is impossible because my car tint is medium, just to minimize bright, direct sunlight, so people outside can easily see what’s inside, even a ball pen or pencil.

4. Fighter towing truck counter-flowed a few times, traffic violator itself. One incident I took a photo while we were along Makati ave.-Burgos area going to Buendia then Edsa. Photo below left, (a) Fighter towing crew is holding the wheel, and (b) counter-flowing; should be 2 lanes on the left, 2 lanes on the right, truck and my car was on the 3rd lane.


5. Even in the issuance of “Impounding Notice”, officers violated the MMDA rules. (a) Name, signature, and designated ID number of the officer who issued the impounding notice should be there, there was none. (b) Name, signature of the MMDA escort should be there, there was none. (c) Names of the towing crew are impossible to decipher. 

6. The act of towing-impounding cars to far away place is actually worsening, not reducing, the traffic congestion in Metro Manila. I avoid driving outside Makati 6 days a week, Monday-Saturday but that afternoon December 19, we were on the road for 2 ½ hours, Makati-Edsa-White Plains-C5-Marcos Highway-Marikina, contributing to traffic congestion on those areas. Coming back to Makati the next day, December 20 afternoon, it took me 3 hours from Marikina to Makati via C5-Kalayaan Ave-Buendia. The truck and my car unnecessarily contributed 5 ½ hours of traffic congestion for 2 days in already traffic-heavy December when there should be none if a simple traffic violation ticket was issued.

My request and appeals:

1. Reeducate Mr. Dayaon for being either ignorant of the regulations he implements or being a liar.

2. Remind other MMDA officers assigned in towing operations to observe MMDA rules, especially on illegal boarding of towing crew in private vehicles.

3. MMDA to consider “grey areas” like the driver is outside when the towing team arrives but it is obvious that he/she will appear anytime because there are children/people inside the car who do not know or not authorize to drive the car. Towing should not be done in this case. If my 11 yo daughter knows how to drive, she could have moved the car.

4. Remind or penalize Fighter Towing Co., other towing firms, for violating MMDA rules that towing  crew have no right to board and drive a private vehicle, a private property, if the driver or owner is inside.

5. Remind or penalize Fighter Towing Co. for counter-flowing traffic violation.

6. Revise the rules on towing so that if the towing firm is found to have abused its power, it should pay the car owner 2x or 3x the assessed towing fee.

7. Finally, consider revising MMDA rules on towing-impounding to minimize this practice because (a) this actually worsens traffic congestion in the metropolis, not reducing it, (b) it fans some public perception that government in general and MMDA in particular are a bunch of insensitive people, and (c) the state should not confiscate private property on minor or frivolous offenses. Just issue a violation ticket, or clamp the car if necessary. Limit towing and impounding only to vehicles involved in accidents and those  used in committing crimes like robbery and murder as the police need the finger prints, other evidence inside the vehicles.

Attached are my 2 articles published in BusinessWorld. I will also write a third article on this subject soon.

Thank you very much.

Sincerely,

Bienvenido S. Oplas, Jr.
Makati resident and Columnist, BusinessWorld
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See also:
MMDA Towing 3, November 26, 2013 
MMDA Towing 4, January 06, 2018 


Sunday, December 23, 2018

BWorld 274, The ASEAN single aviation market

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


Singapore — Freedom means mobility and more mobility means more freedom. The modern symbols of mobility are comfortable and fast cars, buses, motorcycles, airplanes, fast crafts and roll-on/roll-off (RORO) ships.

I am attending here the official launching of the ASEAN Prosperity Initiative (API) today at Intercontinental Singapore. API is pioneered by the Institute for Democracy and Economic Affairs (IDEAS) based in Kuala Lumpur and API used to be the Economic Freedom Network (EFN) South East Asia.

The launch features the publication of the newest reports by IDEAS: (1) ASEAN Economic Integration Report Card, and (2) ASEAN-EU Free Trade Agreement (FTA).

Travel from Manila to Singapore and the rest of ASEAN member countries is much easier now because of previous air travel liberalization policies, increased airline competition, and visa-free travel for 30 days or less.

The Philippines is among the laggards in East Asia in optimizing its tourism potentials. More than 7,500 islands and islets, lots of white sand beaches and islands, big mountains and waterfalls, nice golf courses and entertainment, and we got only six million foreign tourists in 2016 — about one-half of those going to Vietnam, Indonesia and Singapore , one-fourth those in Malaysia. In tourism receipts, Philippines got only one-fifth of those going to Thailand (see Table 1).



The bulk of the Philippines’ carrier departures (take offs) were domestic flights and passengers. We need to attract more foreign airlines and carriers that will bring in more foreign visitors and investors.

The same can be said for other ASEAN economies, especially the poorer ones like Cambodia, Myanmar and Laos.

In a paper published by IDEAS titled Economic Benefits of ASEAN Single Aviation Market, Adli Amirullah made this projection on the importance of more aviation liberalization (see Table 2).

Mr. Amirullah summarized the important policy reforms needed: (1) Liberalization through the ASEAN Single Aviation Market (ASAM) has already benefited millions of people in the region via more competition; (2) More benefits will be achieved if ASAM is fully implemented; (3) The biggest markets will be the biggest winners, particularly Indonesia and Philippines; (4) Specific steps are needed to advance ASAM, like prioritizing full implementation of ASEAN community carriers.

The liberalization should not be limited to city-city partnerships between two countries. Instead, an ASEAN-based airline should also be allowed to hop to other destinations of the Philippines after landing in Manila or Cebu before flying back. The same way, Philippines-based airlines should be allowed to hop to other destinations of neighboring countries after landing in capital cities before flying back home. This will optimize airline loyalty and related schemes.

Meanwhile, wind-solar lobbyist and businessman Eddie O’Connor resumed his attacks against me with his recent letter in BusinessWorld (“There is a well-known syndrome for coal lovers. It is called carbophilia,” published on Dec. 9). His parochial mind cannot comprehend that it is not me or anyone else in this country that advocates and implements more coal use for electricity generation in the region; it is the people and governments themselves: in China, coal accounts for 67% of 6,495 terawatt hours (TWH) production in 2017; India 76% of 1,497 TWH; Indonesia 58% of 260 TWH, Australia 61% of 259 TWH; S. Korea 46% of 572 TWH, Taiwan 47% of 270 TWH. My longer response to his letter will be posted in my blog as I do not want to further use this newspaper’s space to respond to marginal minds promoting expensive, subsidy-dependent and marginally-producing energy sources. [Mr. O’Connor also contributed a piece in today’s Opinion page. — Ed.]

More competition, more choices for the people. Governments should prioritize this as an overriding concern when they craft new policies and regulations — in land, sea and air transportation, in energy and other sectors.
---------------

See also: 

Climate Tricks 76, Greenpeace deception model

A good analysis of the GreenPeace (GP) business model was made by five scientist-authors including GP co-founder Patrick Moore. They noted that "Although Greenpeace relies heavily on marketing, advertising, and free market principles, they promote socialist and anti-capitalist ideals in their messaging."

They further observed, "Greenpeace is a very successful business. Their business model can be summarized as follows:

1. Invent an “environmental problem” which sounds somewhat plausible. Provide anecdotal evidence to support your claims, with emotionally powerful imagery.

2. Invent a “simple solution” for the problem which sounds somewhat plausible and emotionally appealing, but is physically unlikely to ever be implemented.

3. Pick an “enemy” and blame them for obstructing the implementation of the “solution”. Imply that anybody who disagrees with you is probably working for this enemy.

4. Dismiss any alternative “solutions” to your problem as “completely inadequate”."

The "simple solution" that GP along with WWF, UN, Al Gore, etc. always propose is more government, national and multilateral like the UN; more government regulations and taxation, subsidies to crony energy sources. I like this chart where the authors noted,

"Greenpeace’s average annual expenditure on “Climate change” over the last 10 years has been 
approximately $34 million/year. This means that Greenpeace’s annual “Climate campaign” expenditure is greater than the $31 million which Greenpeace claim that Exxon has spent on “funding climate denial” over the entire 1998-2014 period!"



The full report, "Analysis of Greenpeace’s business model & philosophy" by Dr. Michael Connolly, Dr. Ronan Connolly, Dr. Willie Soon, Dr. Patrick Moore and Dr. Imelda Connolly (December 2018), 75 pages, https://www.heartland.org/_template-assets/documents/12-3-18%20Analysis%20of%20Greenpeace%20Business%20Model.pdf?
---------------

See also: 
Greenpeace is Blocking You, November 01, 2015 
Agri Econ 24, Greenpeace voodoo science vs GMOs, July 07, 2016 
Climate Tricks 51, The CCC, Greenpeace and fossil fuels, February 01, 2016 
Climate Tricks 56, Using the CHR for climate harassment, July 30, 2016 
Climate Tricks 70, Greenpeace and the Economist love fossil fuels, August 6, 2018
Climate Tricks 73, Attacking Dr. Will Happer as 'CC denier', September 10, 2018 
Climate Tricks 74, People should eat insects to fight CC? October 29, 2018 

Climate Tricks 75, Brazil President Borsonaro is 'threat' to the planet? November 16, 2018

Saturday, December 22, 2018

BWorld 273, UAAP basketball tickets and Philippines inflation

* This is my column in BusinessWorld last December 7, 2018.


The University of the Philippines (UP) Fighting Maroons reaching the University Athletic Association of the Philippines (UAAP) championship this year was so spectacular, the spectacle is easily seen in two things: quick scarcity of game tickets and hyper-inflation of available ones.

UP became the UAAP champion in men’s basketball only twice, in 1940 when there were only four member-universities, and in 1986 with plentier teams. So after 32 years, 2018 could have been the rare chance for UP to become champion again. 

From always cellar-dweller with often winless records, UP reached the top four, the semi-finals this year, and it was big celebration among UP students and alumni. High inflation of ticket prices started in their two knock-out games with Adamson.

When UP defeated Adamson and reached the finals after three decades and challenged defending champion Ateneo Blue Eagles, hyper-inflation of ticket prices occurred. A P200 ticket in Upper Box for instance was selling for P1,000, P1,500, even P3,000.

I watched Game 2 of the championship when Ateneo officially bagged the 2018 championship trophy. The energy of both sides was electrifying. Perhaps anyone paying the hyper-inflated ticket with a seat from scalpers would not bother just to feel such electrifying experience.

There is no escape from the law of supply and demand. When demand is very high while supply of seats is limited — Araneta Coliseum 16,500 seats, Mall of Asia (MOA) Arena 20,000 seats — then the tickets at original prices would quickly vanish. To reappear at a much higher, hyper-inflated prices.

Both venues should have struck a deal with UAAP and member-universities to raise ticket prices to 3x or 5x their original prices and portions of the extra revenues will go to UAAP members. This way, people with lower budget would opt themselves out and watch the games free in their respective campuses, malls, bars or in their houses. This is a proven measure to get rid of scalpers partially or fully.

The lesson — rely on market forces, let prices go up or down temporarily depending on supply-demand dynamics.

When government comes in, this market dynamism is restricted if not killed. Like when government imposed high oil taxes under the TRAIN law and this was implemented this year.

The Philippines’ inflation rate this year has mellowed from peak 6.7% in September and October to only 6% last November. This is the good news.

The bad news is that such decline is not enough to counter the inflation momentum this year. The Philippines has the biggest jump in inflation 2018 year to date (ytd, January to October or November) versus inflation 2017 (See Table 1).


A few weeks ago, the Duterte administration announced that it will suspend part 2 of oil tax hikes this coming January. That was good, and it was an implicit admission that oil tax hikes under TRAIN law are mainly responsible for our high inflation.

This week, the government made a U-turn and announced that part 2 of oil tax hikes will proceed as scheduled next month.

Cheap oil and energy is good. It means lower cost of farming (tractors, irrigation pumps, threshers, harvesters, trucks) and lower cost of fishing, which can help bring down food prices. Lower cost of manufacturing and in all other sectors of the economy.

But government and its allies think this is wrong, so government imposed high taxes to make oil and energy become expensive. Lousy.

French President Emmanuel Macron suffered heavy political beating after his government imposed high diesel taxes this year, part two to be done next month. Public reaction was deep anger at such a policy of expensive oil, expensive energy, even if Macron said it was meant to help “fight (man-made) climate change.”

After more than two weeks of violent demonstrations and rioting, Macron reversed policy and will not implement additional oil tax hikes.

While players, officials and fans of UAAP basketball and other sports can now rest, Philippine consumers have no rest from government-imposed expensive energy policy.
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See also: 

On the US troop withrawal from Syria and Afghanistan

A friend, citizen scientist Willis Eschenbach, posted in fb below and I am sharing/reposting it. Trump is correct in pulling US troops out of Syria. Mattis strongly objected to this move, among others, then it is good that he resigned. I like Mattis' sending of US warships at the WPS/SCS as part of their FONOPs, these are non-permanent structures or bases. But I don't like continued, long-term US military presence in the Middle East, etc.
------------ 

ISIS is defeated as a dangerous military force. The Caliphate is destroyed and they've been thrown out of almost all of their strongholds. See the map below.


Is there still fighting? Sure. They will fight to the last man. Could they come back? Possibly. If so we can always go back in. But basically, the job we went there to do is DONE.

Right now, about all the 2,000 US troops are doing in Syria is assisting in the targeting of Syrian bombing runs and acting as advisors ... on what planet is this either critical or worth it?

And at the moment we're doing ZERO to protect the Kurds, so how will our leaving change that?

For those of you saying we should stay, you need to enumerate:
1) What advantage the US will get from staying.
2) What costs in US lives are acceptable.
3) What will be the sign that we should leave.

Me, I'm tired of armchair generals telling me that we should engage in endless foreign wars with no stated aims, no defined end, and no obvious advantage to the US.

And  here's the curious part to me. When Obama invaded Syria without Congressional approval, and we armed and supported the Al-Qaeda jihadists in an attempt to topple a secular leader, no one batted an eyelash, no one said a word.

But when the decision is made to bring back home US troops in Syria without Congress's OK, all hell breaks loose. Looks like partisan politics rather than anything to do with the actual issues ...
----------

Also shared by Willis:

Twitter Shot:
Erick Erickson
If we lived in a lesser country than our great nation, today is the day we really would be talking about a military coup. Soldiers down to the enlisted ranks are raising hell about the President's Syria decision.

Twitter Chaser:
Mookjuice
Are you fucking kidding me? I’m in the military. The majority of us are against these wars. We’d only go there voluntarily to make rank or get paid more. Not one single person at my base has said anything negative about trump’s decision to withdraw from Syria and Afghanistan.

This news is dated Jan. 25, 2013.
Obama Fires Top General Without Even a Phone Call
DANIEL HALPER

Let’s Leave Syria
By MICHAEL BRENDAN DOUGHERTY
December 21, 2018 5:24 PM

Establishment Meltdown Over Mattis Resignation: Talk of Impeaching President Trump, Coups and Suicide
by Kristinn Taylor December 20, 2018


Another good decision by Trump. Zero point being the "world policeman". It should be self policing by governments themselves.


As usual, the anti-Trumpistas just hit whatever the man decides. If he decides to send more US soldiers, to spend more US taxpayers money in Syria, they will attack him. He decided to pull out US soldiers, he decided to save US taxpayers money, they still attack him. For now, good job, Trump.

Tuesday, December 11, 2018

BWorld 272, The ASEAN Prosperity Initiative

* This is my article in BusinessWorld last December 05, 2018.


“The rapid economic advance that we have come to expect seems in a large measure to be the result of this inequality and to be impossible without it. Progress at such a fast rate cannot proceed on a uniform front but must take place in echelon fashion, with some far ahead of the rest.”
— Friedrich Hayek, The Constitution of Liberty (1960), Chapter 3.

While many activists and central planners will disagree with the Nobel economist Hayek, this has been the inescapable reality – as prosperity expands, inequality among people also expands but the state of poverty significantly declines.

One measurement of economic prosperity is per capita income or GDP. Many economies in East Asia were able to double or triple the figure in just two decades. The Philippines’ income per head for instance has expanded from only $1,241 in 1997 to nearly $3,000 in 2017 (see table 1).


The Institute for Democracy and Economic Affairs (IDEAS), a free market think tank in Malaysia, will launch the ASEAN Prosperity Initiative (API) next Tuesday, December 11, at Intercontinental Singapore. API predecessor is the Economic Freedom Network (EFN) South East Asia.

The API launching will coincide with the publication of two IDEAS reports: (1) ASEAN Economic Integration Report Card, comparing the targets set in the ASEAN Economic Community Blueprint 2025 and actual achievement; and (2) ASEAN-EU Free Trade Agreement (FTA), studying the potentials and pitfalls of such big FTA.

One indicator for these two topics is the direction of trade – how much of ASEAN countries’ exports go to fellow members and the rest of Asia-Pacific, and how much of their imports come from the region (see table 2).


Many ASEAN countries are trading more with themselves and the rest of Asia-Pacific, reducing the share of trade with North America, Europe, Oceania, South America and Africa.

Another indicator of economic integration is the flow of foreign direct investments (FDI).

FDI inflows in Southeast Asia have more than doubled, but, more important, the FDI stock has expanded nearly 15 times over the past two decades (see table 3).



For the Philippines in particular, FDI inward stock was only $13.8 billion in 2000, rose to $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: $130 billion in Vietnam, $140 billion in Malaysia, $219 billion in Thailand, $248 billion in Indonesia, and $1,285 billion in Singapore.

A day before the API launching, IDEAS will also organize a meeting among ASEAN think tanks on air transport liberalization. If this liberalization happens someday, investments and tourism in the region will further expand significantly.

More economic liberalization and deregulation, this should be the continuing policy of the Philippines and neighbors in the region.
-------------- 

See also: 

Inequality 36, Adam Smith the poor

Last September, I have a brief email discussion with some friends and former classmates from UPSE in the 80s. A summary of those points:

1. On scale of economy -- PH economy has momentum mainly because of our big population. Our GDP size doubles about every two decades on average.

2. Poverty reduction, what to do -- Adam Smith the poor. Don’t give too many freebies, forever subsidies. But if the poor are industrious, government and NGOs also should not ask for too many permits, taxes, fees, penalties. There are 100 ways to be poor like being lazy, or work 1 day and then complain about work the next full day. Or people work 6-7 days a week but they also drink, party and/or gamble 6-7 nights a week and have zero savings. These are 101% sure formula for perpetual poverty.


3. "Ambisyon Natin 2040" by NEDA -- it's useful but it looks more like centrally-planned ambitions and hence, may not be attainable. Households and individuals' ambitions are different from bureaucrats and legislators' ambitions.

4.  Where are we headed -- I think towards more, bigger government. Take the RH law, condoms lang, govt and legislation pa? These can be done via civil society, corporate volunteerism.

5.  The "Marcos revival” -- this seems inevitable, as govt expands like amoeba, the amoeba will proliferate like Marcos big govt.

6. Is the PH hopeless? -- No. No country is hopeless, even N.Korea, Myanmar, Venezuela have hopes but the realization takes time. Something like 2 steps forward, 1 step backwards. I remember the first time I took a plane, I was 25 years old already. My eldest took her 1st plane ride at about 6 months, her 1st trip abroad at 1 yr 8 months, 2008. Things are improving fast in the private sector, government is only the drag.
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See also:

Monday, December 10, 2018

BWorld 271, More smokers and drinkers needed to fund more UHC?

* This is my column in BusinessWorld on November 30, 2018.


“The man of system…is apt to be very wise in his own conceit; and is often so enamoured with the supposed beauty of his own ideal plan of government, that he cannot suffer the smallest deviation from any part of it….He does not consider that in the great chess-board of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might choose to impress upon it.”
— Adam Smith, Theory of Moral Sentiments (1759)
  
That observation by Adam Smith also applies to the plan of many sectors to further raise tobacco and alcohol taxes to fund higher resources for universal health care (UHC).

There is a clear contradiction here. The stated goal is to further reduce smoking and drinking but there is implicit demand for more smokers and drinkers who will pay more tobacco and alcohol taxes to fund more UHC beneficiaries and health care providers.

There are four stories in BusinessWorld this week related to this:

1. House hearing bills on P40-P60 per pack increase in cigarette tax (Nov. 26),
2. Senate panel opens hearing on raising tobacco tax (Nov. 26),
3. Alcohol tax hike hurdles House committee on 2nd reading (Nov. 26),
4. Tobacco excise bill hurdles House on 2nd reading (Nov. 28).

In report #2, Senator Pacquiao’s bill proposes a cigarette tax hike to P60 per pack, Senator Ejercito’s bill wants to raise the tax up to P90 per pack, to cover the estimated P164-billion funding gap in UHC on top of current funding of only P93 billion.

In report #3, the plan is to generate P60 billion for five years in higher alcohol tax rates. Distilled spirits ad valorem tax on net retail price (NRP) per proof liter will rise from 20% to 22%, in addition to a rise in specific tax from P23.40 to P30 per liter in 2019, P35 in 2020, P40 in 2021, P45 in 2022 and annual increase of 4% be changed to 7% beginning 2023.

In report #4, the approved excise tax hike is P2.50 per pack per year on top of current P35/pack until it reaches P45/pack in 2022, then annual increase of 4%.

My 54-page paper, “Assessment of the Sin Tax Reform Act of 2012” was released last Monday Nov. 26 by Stratbase-Albert Del Rosario Institute (ADRi). I made my own estimates of price elasticity of demand (PED) for both alcohol and tobacco products based on estimated retail price (ERP), changes in tax revenues and volume removals. The various estimates of tobacco smuggling are also summarized here (see Table 1).

There was consistent decline in volume removals except in 2015, and consistent rise in ERP, resulting in average PED of -0.31 for 2013-2016. This paper’s estimate is lower than the PED findings of Quimbo, et al (2012) of -0.87 and DoH (2012) of -0.58.

But all three estimates have one conclusion: PED is below 1 and hence, is inelastic, meaning less- or non-price responsive. A 10% increase in the price because of higher taxes did not result in 10% decline in tobacco consumption, only 3% decline as estimated in my paper.

So for tobacco products, the Sin Tax law was successful only in raising more money for the government but a failure in significantly reducing tobacco use.

For alcohol products — beer, wine and distilled spirits — the average PED from 2013 to 2016 is 0.40 (see Table 2).


Both tobacco and cigarettes products exhibited inelastic demand. If government imposes even higher taxes, many smokers and drinkers will simply shift to (a) cheaper legal brands with lower taxes, or (b) cheaper illegal products with little or no taxes. Thus, a potential failure to address high smoking and drinking incidence and at the same time, revenue loss for the government.

Instead of calling for higher sin tax rates, government should focus on significantly controlling smuggled and illicit products that are cheap and readily available. Newton’s 3rd law of motion (for every action, there is an equal opposite reaction) restated — for every government intervention and taxation, there is an equal opposite distortion — seems to apply in our tobacco-alcohol taxation experience.
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Agri Econ 29, Bruce Tolentino lecture at BSP

Last November 28, I attended the lecture of Dr. Bruce Tolentino, "Rice and Inflation: the supply side" at BSP. Bruce is the new member of BSP Monetary Board, a former DA UnderSecretary and former IRRI Dep. Dir. Gen., I think.


Among the slides shown by Bruce:



 Room later became full. Connie Dacuycuy of PIDS was giving her own presentation. 


Among the conclusions by Bruce -- the PH needs more: R&D, tariffication and liberalization, resilient varieties, rice crop managers, mechanization,...

Former DOST Secretary Emil Javier also spoke, among his points....


I also do not support giving away more "freebies" to farmers, and to many other sectors. There is no such thing as "freebie", taxpayers pay for those things while politicians and bureaucrats get free PR points. 

Government resources for agri should be focused on improving rural infra, like more farm roads, wide and cemented roads; more dams and irrigation. Taxpayers' money should not be used for price support and direct subsidies.
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Tuesday, December 04, 2018

BWorld 270, Debating with Mr. RE

* This is my article in BusinessWorld last November 27, 2018.


In a paper, “Setting up the debate with Mr. Coal,” published in BusinessWorld yesterday, Mr. RE and climate scam Eddie O’Connor of wind-solar lobby made new wild claims but did not answer the points I made against his previous paper.

In my paper, “Corrupted science to justify renewables cronyism” in BusinessWorld last Oct. 11, I made these points that the RE/climate scam did not respond to:

(1) “Earth’s climate history is one of natural warming-cooling cycles since the planet was born some 4.6 billion years ago.” I showed there a chart, ”450 Million Years of Unrelatedness between Atmospheric CO2 and Temperature.”

In his paper yesterday, O’Connor showed a chart of ocean heat content the past 50+ years. Sorry but planet Earth was not born in the ’60s as starting point of temperature measurement. Here is another chart showing warming-cooling cycle (see Figure 1).


(2) “Solar price of P9/kWh at P54/US$ is not 2.9 cents but 17 cents/kWh. Wind price of P8.5/kWh at P54/$ is not 4.1 cents but 16 cents/kWh.”

In his paper yesterday, Mr. O’Connor made other wild and fake claims:

(1) “Of course, the developers of wind and solar agree to abolish mandatory dispatch.”

This is lie #1. Mandatory dispatch was put in the RE law of 2008 (RA 9513) because it was demanded by the solar-wind developers. Cost upon dispatch includes the total price (capex and opex; WESM price + FIT-All) and not just the marginal price. In 2018, the total price of solar is P9+/kWh, the total price of wind is P8.50/kWh, data from ERC.

(2) “Regarding abolishing the feed-in-tariff. It is not hard to agree to this, as it is already abolished.”

Lie #2. FIT is still there, not abolished. The FIT-Allowance in our monthly electricity bill has been rising from 4 centavos/kWh in 2015 to 12.40 in 2016, 18.30 in 2017, and 25.32 centavos /kWh since June 2018 billing.

(3) “I am alarmed, indeed devastated by the disappearance of some 60% of species by 2020 due to global warming.”

Lie #3. In a paper published in Nature this year, Steinbauer and 52 other scientist-co-authors reported “a continent-wide acceleration in the rate of increase in plant species richness, with five times as much species enrichment between 2007 and 2016 as fifty years ago, between 1957 and 1966… consistent across all [continental regions], with no single region showing the opposite pattern.” (See Figure 2.)


(4) “I am afraid that Mr. Oplas is a latter day flat earther for denying climate science.”

Lie #4. I believe in climate change and global warming, they are true, they are happening. What I do not believe is that they are “man-made.” On the contrary, the climate/RE scam and square-earther is the big denier: (a) deny that global warming has many precedents and not ‘unprecedented’; (b) deny that climate change is natural and cyclical; (c) deny that global cooling can happen after global warming phase; (d) deny that natural factors — the Sun, galactic cosmic rays, water vapour, clouds, geological degassing, AMO/PDO in the ocean, etc. — are big factors for climate change.

Finally, square-earthers (e) deny that coal remains a big if not biggest source of electricity for many Asia-Pacific economies (see Figure 3).


Square-earthers produce lots of lies and fake stories to fool the public so that the people will keep subsidizing their expensive, intermittent solar-wind energy.
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BWorld 268, Market-oriented reforms in the Senate, November 24, 2018 

Energy 118, Climate lies to justify RE subsidies

An RE developer and lobbyist reacted to my paper, "Corrupted science to justify renewables cronyism". He wrote again to oped editor and his paper was published by BWorld. My reply to this in my next post.
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November 25, 2018 | 11:01 pm

By Eddie O’Connor

MR. Bienvenido S. Oplas, Jr. writes in his Oct. 10 column, “Corrupted science to justify renewables cronyism,” “if wind-solar are indeed that cheap, then will the lobby agree to (a) abolish the priority and mandatory dispatch of wind-solar to the grid, and (b) abolish the feed-in-tariff (FIT) scheme of guaranteed high price for wind-solar, other variable REs for 20 years?”

Of course, the developers of wind and solar agree to abolish mandatory dispatch. So long as the system dispatchers continue with the practice of dispatching the next batch of electricity at the lowest marginal price, wind and solar will always be dispatched first. The marginal price of wind and solar is zero. Every system dispatcher in the world dispatches the lowest marginal cost first. Remember that once plants are built every marginal unit of coal costs circa $3.5+ cents depending on efficiency. A unit of electricity from a wind and solar plant, once built, costs 0.

Regarding abolishing the feed-in-tariff. It is not hard to agree to this, as it is already abolished. Thank God. Now perhaps we will get a chance to compete head to head with dirty coal. We can then do what has been done in South Africa, Chile, Mexico, and everywhere auctions are run and hammer coal into oblivion.

Mr. Oplas seems to be unaware that in an experiment conducted in the Royal Institution in London in 1861, the great Irish scientist, John Tyndell, passed radiation through a series of gases and observed that CO2 CH4 and H2O, absorbed radiation while oxygen and nitrogen did not. This experiment is easy to replicate, and any university to which Mr. Oplas has access, can replicate it.

I apologize to non-technical readers for the following but it is the real science which has driven the world to sign the Paris accord.

All radiation is quantized. These quanta, or packages of solar radiation, only interact with certain molecules, whose electrons can be jumped to a more energetic orbital. They then fall back releasing an increment of heat.

The chart here shows the heat buildup due to the absorption of radiation by greenhouse gases (see chart).


The slope of the global heat accumulation graph tells us how rapidly the Earth’s climate is building up heat. Over the past decade, the rate is 8 x 1021 Joules per year, or 2.5 x 1014 Joules per second. The yield of the Hiroshima atomic bomb was 6.3 x 1013 Joules, hence the rate of global heat accumulation is equivalent to about 4 Hiroshima bomb detonations per second.

The data comes from peer-reviewed research (Church et al. 2011) and has also been confirmed by more recent research (i.e. Balmaseda et al. 2013).

The slope of the global heat accumulation graph tells us how rapidly the Earth’s climate is building up heat. Over the past decade, the rate is 8 x 1021 Joules per year, or 2.5 x 1014 Joules per second. The yield of the Hiroshima atomic bomb was 6.3 x 1013 Joules, hence the rate of global heat accumulation is equivalent to about 4 Hiroshima bomb detonations per second. That’s nearly 2.7 billion atomic bomb detonations worth of heat accumulating in the Earth’s climate system since 1998, when we’re told global warming supposedly “paused.” That has to be the worst pause ever.

Again let me reiterate. I am alarmed, indeed, devastated by the disappearance of some 60% of species by 2020 due to global warming. I am similarly saddened to observe that even if we can limit the temperature increase to 1.5 degrees we lose 90% of all the corals in the oceans.

There were those who persisted in believing that the earth was flat for hundreds of years after it was demonstrated by Ferdinand Magellan to be round. I am afraid that Mr. Oplas is a latter day flat earther for denying climate science. Delighted to debate on my next visit in May 2019.

Eddie O’Connor is chairman of global renewable energy company Mainstream Renewable Power.
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