Thursday, January 31, 2019

BWorld 289, Growth by elections and FDIs by PSA liberalization

* This is my column in BusinessWorld last Tuesday, January 29, 2019.


At the UP School of Economics Alumni Association (UPSEAA) sponsored “Economic Briefing” on Jan. 25, the speakers were DBM Secretary Benjamin Diokno and NEDA Secretary Ernesto Pernia. My former teacher in undergrad and graduate economics, Sir Ben Diokno said in his presentation that with high GDP growth in 2017 and 2018, “Duterte hit the ground running.”

During the open forum, I said that with growth of 6.9%, 6.7% and 6.2% for 2016 to 2018 respectively, it should be called “Duterte hit the ground screeching and decelerating.” Compared to the ASEAN 6, our neighbors have flat lining or increasing growth, only the Philippines has a declining growth. Sir Ben said we should not include 2016 in the analysis because it was an election year and all election years have higher growth than the following years.

I checked the numbers and I found that he is partly right, and partly wrong because we should include those election years in our analysis. Below are growth rates for Philippine election years 2007, 2010, 2013, 2016, and the respective years after them (See Table 1).


The above numbers show that (1) In 2007, All 10 economies had higher growth than 2008 because the latter was the start of the global financial turmoil that started in the US; (2) In 2010, again all 10 economies had higher growth than 2011 because 2010 was a recovery year after the 2008-2009 economic turmoil; (3) In 2013, all 10 economies except Vietnam and S. Korea had higher growth than 2014; (4) In 2016, all 10 economies had lower growth than 2017, except the Philippines.

In short, since 2016 was a bad year in the region compared to 2017, Philippine growth should have retained if not surpassed the 6.9% growth, but the opposite happened.

I sustain my statement in my column last Friday, that Dutertenomics is lousy in its macroeconomic management. Rising taxes, rising inflation, rising interest rates, and declining growth.

One saving grace that Dutertenomics can do to help reverse this bad trend is to ensure legislation of investments liberalization, foreign direct investments (FDI) especially since these will bring in more foreign capital and technology to blend with local capital and technology in serving local market and labor force.

We have the lowest FDI inward stock among the important East Asian economies. We have low volume of air passengers (many of them, from domestic flights) and port container traffic, in TEU, 20-feet equivalent units (See Table 2).


We need to liberalize the entry of more foreign airlines and shipping lines because we are outside the Asian mainland and we are an archipelago with many detached islands.

There are bills in Congress now amending the Public Service Act (PSA, 1936). That 83-year- old law has many sectors listed as “public utilities” and the 1987 Constitution prohibits foreigners from owning more than 40% equity for these utilities.

In these congressional bills — HB 5828 (passed on Third Reading) and SB 1754 (still a Committee Report) — telecommunications and transportation will be lifted out of the list of “public utilities.” This means foreign investors can own perhaps up to 100% equity in telecoms, shipping lines, airlines, and possibly bus lines.

Last December, my family suddenly changed plans and decided to travel to Iloilo. By then airfares were 2x, up to 4x their regular rates. We need more competing airlines or more planes per existing airline to have more flights on peak travel season, more planes require more investments.

So I decided to drive the car via RORO ships again. The problem is waiting for many hours in the ports. We need more competing shipping lines or more boats per existing shipping company. More big boats require more investments.

If FDI and PSA liberalization are done by law before the term of the current Congress is finished, it will be a big boost for Dutertenomics and help pull the economy upwards in the next three years.
-----------------

See also: 

Wednesday, January 30, 2019

"Man-made" global warming hits the US

Horrible anthropogenic or "man-made" global warming is hitting the US this week. Some stories from sites that I follow.

1. Dangerous, Record-Breaking Cold to Invade Midwest, Chicago
January 24th, 2019 by Roy W. Spencer

2. 'Life-Threatening' Arctic Blast To Freeze Nearly 200 Million As Polar Vortex Slams Midwest
by Tyler Durden  Sun, 01/27/2019

3. ‘Polar Vortex’ Will Have Nearly 90 Percent Of US Below-Freezing
charles the moderator / January 29, 2019
01/28/2019 | Michael Bastasch | Energy Editor

4. Record Cold/Snow caused by ‘global warming’?! Climate activists predict both outcomes — more snow, less snow — so they are never wrong – Book excerpt
By: Marc Morano   January 29, 2019

Just to show further how dishonest and corrupt the climate alarmism movement is, here are some old "scientific projections".

From the UK Independent, March 2000.


And from BBC, December 2007. That year, Al Gore and the UN IPCC headed by Pachauri, won the Nobel Peace Prize. (They won an award for being big time dishonest-scammers?)


See also: 
Global warming hits the US, February 3, 2011 
Global warming hits the Arctic, October 11, 2015 


Trump forced more NATO responsibilities by EU members

Good job by US President Trump here. At the start of his term, he chided "delinquent" NATO member countries for not contributing enough for their own continental and national defense, the US was subsidizing their defense.

Yes, no such thing as cheap and highly subsidized defense of Europe. Now EU leaders have become more responsible with their own continental defense. Soon MidEast leaders will do this too. And Japan, S. Korea too?

Four stories here.

1. Trump Scores Major Victory As "Delinquent" NATO Members Boost Contributions By $100 Billion
by Tyler Durden    Mon, 01/28/2019

These charts were shown in the zero hedge article.




2. Nato members increase defence spending by $100 billion after Donald Trump called them 'delinquents'
Julie Allen   27 JANUARY 2019

3. NATO chief: Allies heard Trump 'loud and clear,' will increase defense spending
By Ben Wolfgang - The Washington Times - Sunday, January 27, 2019

4. 'Trump is having an impact': NATO head credits president's tough talk for $100B boost
William Cummings, USA TODAY Published 5:30 p.m. ET Jan. 27, 2019


Monday, January 28, 2019

BWorld 288, Economic prospects 2019 and cement tariff

* This is my article in BusinessWorld last Friday, January 25, 2019.


To be frank about it, Dutertenomics is lousy in macroeconomic management. Inability to sustain fast growth of 6.5% or higher, inability to control inflation rate below 3%, and inability to control interest rates below 5% for government bonds.

Compared to the ASEAN 6 (excluding Brunei, Cambodia, Laos, Myanmar because they have late and incomplete economic data, smaller economic size), the Philippines is the odd-man-out on three important indicators: reducing inflation rate, raising GDP growth, and reducing interest rates via reducing government borrowings and overspending.


In 2018, world oil prices were high until the first week of October. But ASEAN 6 economies have experienced stable and low, even declining inflation rate (Malaysia and Singapore) — except the Philippines because of the various tax hikes under the TRAIN law, particularly oil tax hike part 1.

Now world oil prices are rising again because of the OPEC + Russia deal of oil output cut by 1.2 million barrels a day from January to June 2019. And Dutertenomics has worsened it by imposing part 2 of oil tax hike this January, part 3 to be implemented in January 2020.

Meanwhile, the UP School of Economics (UPSE) Alumni Association will sponsor a talk on Economic Briefing on Friday, January 25, 6:30 p.m. at Astoria Hotel in Ortigas, Mandaluyong City. Speakers will be NEDA Secretary Ernesto Pernia and DBM Secretary Benjamin Diokno. Both are former UPSE faculty members. It is open to the public, just pay the buffet dinner fee on site.

The two speakers will likely be spewing pat-our-back numbers of good economic prospects. They will likely continue to deny that expensive energy policy via higher taxes is wrong.

And now another team member of Dutertenomics, the Department of Trade and Industry (DTI), has imposed a new inflation-pushing measure, the safeguard duty for imported cement, P8.40 per bag (40 kilos) of imported cement, starting February 8, 2019.

In a BusinessWorld report, “Gov’t imposes cement safeguard duty” (Jan. 18, 2019), it said “he (DTI Sec. Lopez) noted that imported cement surged to more than 3 million metric tons (MT) in 2017 from just 3,558 MT in 2013, while the share of imports by non-manufacturers or ‘pure’ traders increased to 15% from only 0.02% during the same four-year period, he noted.”

Let’s do simple math. This means that the share of local cement producers has increased from 3,558 MT (almost 100% share) in 2013 to 2.55 million MT (85% share of 3 million MT) in 2017. So local cement producers are already happy with bigger sales and revenues, why should DTI penalize the average cement consumers here with higher price?

I saw the position of the Subdivision and Housing Developers Association, Inc. (SHDA) signed by its Chairman Jeffrey Ng and President Raphael Felix. They argued that:

“Stable, consistent and reliable supply of cement is necessary. The imposition of cement safeguards or any uncompetitive non-tariff measure will create supply shortages and result in soaring cement prices, serving only to protect large multinational corporations and, worse, disregarding the general public who will bear the brunt of such actions.”

True. As this column tirelessly argues, consumer interest of cheaper, more reliable products and services (electricity, oil, food, cement,…) should be paramount over other business and bureaucratic interests of higher prices, higher taxes.

Dutertenomics is now known for “expensive is beautiful” policy. Cheap oil and energy is wrong so they made it expensive via higher taxes under TRAIN law. Cheaper cement via more imports (because demand is rising fast) is wrong so government must make it expensive via safeguard duty or tax. Lousy.
-------------------

See also: 

More photos, 1st PRPX Hawaii, May 2007

See the earlier photos that I posted during the 1st Pacific Rim Policy Exchange (PRPX), The 1st PRPX, May 2007 in Hawaii, Photos (May 04, 2015). The event was sponsored by the Americans for Tax Reforms (ATR), International Policy Network (IPN, London), Grassroot Institute Hawaii (GIH), and three other institutes.

With Masaru Uchiyama ("Mr. You"), Tracy Sharp of State Policy Network (SPN) and her two boys.


Forgot the man on the right... With Mr. You, Grover Norquist, President of ATR, and his wife.


With Ken Schooland of University of Hawaii, also author of the famous libertarian book, "The Adventures of Jonathan Gullible", and Xingyuan Feng of China Academy of Social Sciences (CASS).

My turn as one of the panel speakers, this was in Day 2 I think.


One of the after-dinner networking socials.


Thanks again Grover/ATR, PRA, IPN, GIH, SPN, other friends.

See also: Tax Cut 5: Tax Imperialism, Privatization (PRPX 2007 Hawaii), June 12, 2007

I don't like Mondays... I don't like more Aid

In early July 2005, the G8 leaders (US, UK, France, Germany, Japan, Italy, Canada, Russia) met for their G8 Summit in Scotland, UK, and discussed more foreign aid, global warming, etc.


Front row, from left to right: George Bush, United States; Jacques Chirac, France; Tony Blair, United Kingdom (host); Vladimir Putin, Russian Federation; Gerhard Schroeder, Germany 
Back row, from left to right: Paul Martin, Canada; Junichiro Koizumi, Japan, Silvio Berlusconi, Italy; Jose Manuel Barroso, European Commission. July 6, 2005.

Bob Geldoff (Boomtown Rats band, photo on the right), Bono (U2) and other rock stars organized the "Live8" series of rock concerts in major cities of the said 8 countries. Their mission: pressure the G8 leaders to commit "more aid", "debt write-offs", to many (if not all) African countries.

The International Policy Network (IPN) in London organize the Global Development Summit (GDS), I was one of the panel speakers.

Before the program proper started in the morning, I and a few other panel speakers that day made a short "rock performance" on stage (100+ audience, including some members of British parliament, media, students, NGO leaders,...). Me on the electric guitar, them singing, in the revised lyrics of "I dont like Mondays" sang by Bob Geldoff himself, a famous song in the 80s. I made the lyrics revision the day before.

Here’s the original lyrics and my revision, June 2005.

I Don't Like Monday's
The Boomtown Rats

The silicon chip inside her head
Gets switched to overload
And nobody's gonna go to school today
She's going to make them stay at home
And daddy doesn't understand it
He always said she was as good as gold
And he can see no reason
'Cause there are no reasons
What reason do you need to be sure
Oh, oh, oh

tell me why - I don't like Mondays
Tell me why - I don't like Mondays
Tell me why - I don't like Mondays
I want to shoot
The whole day down

The Telex machine is kept so clean
As it types to a waiting world
And mother feels so shocked
Father's world is rocked
And their thoughts turn to their own little girl
Sweet sixteen ain't that peachy keen
Now, it ain't so neat to admit defeat
They can see no reasons
'Cause there are no reasons
What reason do you need
oh, woah

Tell me why - I don't like Mondays
Tell me why - I don't like Mondays
Tell me why - I don't like Mondays
I want to shoo-ooooot
The whole… day… down
Ohh… ohhh… ohhh.
I don't like more Aid
(Cords: C-G-F-G // Am-G, F-G_

The G8 leaders are planning more aid
and that would mean, more tax-es
and nobody's gonna go to shops today
they're gonna slash your take home pay
and Blair doesn't understand it
he said he'd wipe out poverty
and he can see no reasons
cause there are no reasons
what alibi you need to be shown
oh-ho-ho-ho

tell me why -- i dont like more aid
tell me why -- i dont like debt relief
tell me why -- i hate protectionism
i wanna shoo-oooooot
the monopolists!

Africa's treasury is kept so clean
and it begs to a debt write-off
And Mugabe feels so shocked
his work is rocked
and their guns turn to their citizens
sweet 18 ain't that cute and keen
no, it aint so neat to admit you're poor
and they can see no reasons
cause there are no reasons
what more aid do you need
oh-woh-woh-woh

tell me why -- i dont like more aid
tell me why -- i dont like debt relief
tell me why -- i hate protectionism
i wanna shoo-oooooot
the monopolists
Ohh… ohhh… ohhh.

See also:
Foreign Aid 2: Circuitous and Leaky Process, November 3, 2005 
Foreign Aid 3: Bob Geldoff and More Aid, November 10, 2005 

Foreign Aid 18, Presentation in London in 2005, January 15, 2019

Saturday, January 26, 2019

BWorld 287, Public transport mess and traffic congestion

* This is my column in BusinessWorld last January 22, 2019.


There are many factors to frequent heavy traffic congestion in Metro Manila and other big cities in the provinces. This short article will narrow it down to five factors.

1. INCONVENIENT AND SOMETIMES UNSAFE PUBLIC TRANSPORTATION
People who live in many villages in Quezon City, Las PiƱas and other cities and going to the big commercial and business districts (CBDs) in Makati, Taguig/BGC or Mandaluyong/Ortigas, taking public transportation means multiple rides: (1) tricycle from house to main roads, (2) jeep or bus to train station, (3) MRT or LRT ride, and (4) jeep or long walk to office or meeting places. Going back home, up to eight rides and people are already very tired coming home.

Snatchers and other criminals, sexual molesters can occur in any of those rides or while walking between those six to eight rides. And it is worse during the rainy season.

The solution is to drive their cars or motorcycles. People would rather brave the heavy traffic plus expensive parking fees than endure those multiple rides. Or take transport network vehicle services (TNVS) like Grab or any of its nine competitors now, or a regular taxi.

Below are official data from the Land Transportation Office (LTO). The total registered vehicles include government, diplomatic and for hire vehicles (77,241; 2,837; and 970,427 respectively, in 2017).


There are so many motorcycles and tricycles, 6.2 million in 2017 and probably 7.4 million in 2018. But there are not too many buses, only 34.8 million in 2017.

There are many unregistered vehicles like the “colorum” jeepneys, taxi and buses, and unregistered motorcycles and tricycles like those used by many policemen who drive motorcycles with no plate.

Now there are many point-to-point (P2P) buses with more routes, true. But people still need to ride tricycles or TNVS, taxi, etc. from their house to the P2P bus stations, so some people would still prefer to drive their cars.

2. EXPENSIVE “JEEPNEY MODERNIZATION”
The noisy and often ugly tricycles and jeepneys will soon be replaced by e-trikes and e-jeeps. Silent, no direct pollution, cool. But their cost is high, up to P1.8 million for e-jeeps and P0.6 million for e-trikes. Charging stations are limited too. By November 2018, only about 1,000 e-jeepneys have rolled out, around 169,000 old jeepneys need to be replaced before the end of transition period in 2020. and

3. OLD MRT, UNUSED NEW TRAINS
In the first 40 days of 2018, the Department of Transportation (DoTr) recorded a total of 33 MRT3 glitches, with imperiled passengers having to walk on rail tracks to get off. In addition, only 8-9 trains were running per day in February vs the minimum target of 15 working trains per day. Then the Dalian trains, of which out of 48 unused trains in 2017, only two were deployed as of December 2018.

4. FAILED, DELAYED DOTR PROJECTS DUE TO POLICY CHANGES
The Commission on Audit (CoA) report for 2017 showed that DoTr was unable to fully implement P46.6 billion out of P58.9 billion of funded projects due to frequent policy changes by political leaders and economic managers. Affected were 153 out of 159 DoTr projects like the Cebu Bus Rapid Transit, LRT Line 2 east extension, and LRT Line 1 north extension common station.

5. BUREAUCRACIES IN TNVS
As this column has discussed in previous articles, there are lots of bureaucracies and requirements from the LTFRB before existing TNVS can expand, which reduces the supply of cars and drivers. And there are bureaucracies from the PCC before failing and losing TNVS and TNCs can exit the country. Even exiting from business can cost huge money, so potential big players from abroad would be hesitant to come and do business here.

The bigger the number of inconvenient public transportation like tricycles and jeepneys, the bigger the demand for private cars, which contributes to frequent traffic congestion. Even those “clean” e-trikes are still low-passenger tricycles. We need less of them, not more.

We need more modern public transportation like efficient MRT/LRT, aircon buses and vans, and reliable TNVS. These reduce the need for private car use. And these investments require less bureaucracy, permits and business taxes, not more.
---------------

See also: 

Asia Times 3, The meager truth of China’s aid to the Philippines

* This is my third article in Asia Times, published last December 5, 2018.


Beijing has stalled in delivering $24 billion in promised aid and investment to Manila. Considering the terms and conditions of the funding that may not be such a bad thing

When Chinese President Xi Jinping made a landmark visit to the Philippines last month, many expected the leader to make good on a previous reported pledge to deliver as much as US$24 billion in aid and investment on his host.

Despite a slew of new signed agreements, Xi’s visit failed to clarify China’s commitment to Philippine President Rodrigo Duterte’s expansionary economic agenda, including his much ballyhooed “Build, Build, Build” infrastructure-building scheme.

Until now, despite Duterte’s bullish pronouncements, China is not a big donor to the Philippines in terms of foreign aid and official development assistance (ODA). Indeed, as of June, China has only one outstanding loan project in the Philippines, namely the Chico river pump irrigation project worth US$62.1 million.

As a percentage of total ODA received by the Philippines as of June 2018, China accounted for a mere .8% of the estimated US$13 billion received, according to National Economic and Development Authority (NEDA) statistics.

Japan, on the other hand, accounted for 40.3% of the total, while the World Bank and Asian Development Bank extended 20.6% and 17.7% respectively. China also trails Australia, South Korea, the European Union and France in total ODA given.

When Duterte visited China in October 2016, his administration boasted of a coming aid and investment bonanza, proof of his trip’s self-professed “success.”

Philippine President Rodrigo Duterte (L) and Chinese President Xi Jinping shake hands after a signing ceremony in Beijing on October 20, 2016. Photo: AFP/Pool

The US$24 billion sum was supposed to be delivered in 13 cooperation, financial assistance and investment pledges, with US$15 bill in business to business contracts and US$9 billion in ODA, US$7 billion of which were to be tied loans and US$2 billion in concessional loans.

The proposed projects included a US$3 billion memorandum of understanding (MoU) commitment with the MVP Global Infrastructure Group and Tianjin Suli Cable to produce high-end cables in the Philippines.

Another vague MoU with MVP Global Infrastructure and China’s Railway Engineering Group vowed to spend US$2.5 billion in infrastructure. Another memorandum with the Green Energy Development Corporation and PowerChina Guizhou aimed to build a US$1 billion power plant.

In March 2017, China’s Vice Premier Wang Yang visited Davao City, Duterte’s hometown, to reaffirm Beijing’s commitment to building and co-financing a southern railway projected to cost around US$4 billion on the southern island.

In November 2017, China Prime Minister Li Keqiang visited Manila and vowed to fund two projects, namely the Chico river pump irrigation project for US$62.1 million at 2% interest over a 20 year repayment period, and the so-called New Centennial Water Source Project, or Kaliwa Dam, for US$374 million.

When President Xi visited Manila last month, he and Duterte formalized and signed 29 additional agreements, including a MoU cooperation agreement on China’s US$1 trillion Belt and Road Initiative (BRI) and joint oil and gas development in the contested South China Sea.

Yet nearly all of China’s ODA and investment promises to Duterte remain unfunded. And many of the proposed deals, if ever actualized, are on less-than-generous terms. The interest rates on the proposed projects range between 2-3% per annum, versus only 0.25-0.75% interest for Japanese ODA funded projects.

Moreover, the terms of the 29 new agreements agreed to when Xi visited Duterte have not been publicly disclosed, raising criticism about the lack of transparency surrounding the deals.

The NEDA approved last year the first phase of the China-backed Mindanao rail project for US$726 million. Construction was targeted to start in the third quarter of 2018, though so far for unclear reasons no ground has been broken.

China’s ODA projects in the Philippines have been hounded by controversy in the past.

For instance, a China-backed North Rail Project was terminated under a previous administration before the loan was closed after the Supreme Court has that it was a commercial deal and not a government-to-government one that should have undergone competitive bidding.

The Gloria Macapagal-Arroyo administration was hounded by irregularities in a US$329 million government national broadband project with China’s ZTE Corporation. That project was cancelled in 2007 due to corruption allegations, including alleged kickbacks paid to the first family.

China’s ODA funneled through the Export-Import Bank of China prescribes that no less than 50% of total procurement for concessional loans should be done through Chinese contractors, often making them more costly compared to using local contractors.

The Kaliwa Dam project, which aims to supply an additional 600 million liters per day of drinking water for Metro Manila and surrounding provinces and augment the 4,000 million liters from the existing Angat Dam, will be much more costly to build under China’s proposed terms than Japan’s competing offer.

A Japanese firm, Global Utility Development Corporation (GUDC), previously submitted an unsolicited proposal for the project as part of an Integrated Public-Private Partnership (PPP) scheme.

That proposed deal would have seen the Japanese company finance all of the construction, operation and maintenance, and thus would not have entailed any foreign borrowing from Manila.

Philippines-Kaliwa Dam Site-China Site of the proposed China-backed Kaliwa dam. Photo: Facebook

China’s proposed funding agreed during Xi’s visit for the same though revised project will be done under a so-called hybrid PPP, with construction led by China contractors and operation and maintenance done by a local firm.

Eighty-five percent of the construction costs, unlike under the self-funded Japanese proposal, will come from ODA and thus be shouldered by Filipino taxpayers.

The cost of the China-backed project, including a proposed waste water treatment, will be US$640 million, compared to Japan’s more modest and less environmentally impactful US$410 million proposal. It will also take five years to build compared to Japan’s faster four year plan.

Meanwhile, there are ongoing negotiations for more China ODA, including funding for a long haul North-South Railway Project and the Bases Conversion and Development Authority’s Subic-Clark Railway project.

While Duterte aims to “build, build, build” the country to a “golden age of infrastructure,” it’s not clear China is the best or most reliable source for financing that vision.
-------------------

See also: 
Asia Times 1, The fast rising price of ‘Dutertenomics’, September 12, 2018 
Asia Times 2, Storm Mangkhut and PH inflation, January 21, 2019

Thursday, January 24, 2019

BWorld 286, Henry Sy, a hero of Philippine capitalism

* This is my column in BusinessWorld last Monday, January 21, 2019.



“Wealth is well known to be a great comforter.” — Plato

Until about the 1960s and 70s, Philippine business was dominated by the land-based and a few real estate wealthy families like the Zobel-Ayalas. Things changed in the 1980s in both politics and business and when the Marcos dictatorship collapsed along with its huge cronies.

Unlike the Ayalas who somehow started their wealth since the Spanish period, Henry Sy started his wealth only in the 1950s after the Pacific War. His first store (SM Carriedo) was built in 1958 and his first supermall (SM North Edsa) was built in 1985. From there, many huge malls along with “SM City” sprouted around Metro Manila and in big cities in the provinces.

As of a September 2018 count by Forbes, Mr. Sy and his family were the 52nd richest family in the whole world. They were also the richest family in the ASEAN countries (See Table 1).


Enrique Razon, Jr. was the world’s #404 richest businessman with $4.9 billion and Lucio Tan was #441 with $4.7 billion.

Forbes has another list, the richest people per country and for the Philippines, the numbers are a bit different from the above table. Nonetheless, 18 Filipino families were billionaires in 2018, the top 10 listed below (See Table 2).


Given the speed and size of the Sy family’s wealth, accumulating $20 billion in net worth in just seven decades, I would consider Mr. Sy as a hero of Philippine capitalism. He has expanded his wealth and in the process, tremendously expanded job creation, entrepreneurship of small and medium business partners, suppliers and mall locators across the country.

And all big capitalists do not really aspire to be the “richest man in the grave” so he gave away a big portion of his wealth to others in the education sector. He did not come from UP but he donated a building to UP’s BGC campus. All these can never be replicated even by the most famous political families in the country.

My hypothesis that he is a hero of Philippine capitalism is somehow confirmed by two of my friends and fellow alumni from UP School of Economics (UPSE).

From my batchmate, Leo Riingen: “Henry Sy is a great Filipino. He changed the retail landscape and shopping experience of Filipinos. I owe my entrepreneurial spirit to him as I started most of my businesses in SM.”

And from the current president of the UPSE Alumni Association, Jeffrey Ng: “Through his humility, hard work and grand vision, Mr. Sy has provided Filipinos with all the modern conveniences of shopping in the malls. He was also a great philanthropist who donated whole buildings to our top universities, numerous schoolhouses all over the country and gave scholarships to many Filipinos.”

Now there will be groups who will demonize Mr. Sy and his SM business for “labor exploitation” like “endo” practices as a means towards capitalist accumulation. This view would come from leftist and socialist groups.

Creating tens of thousands of jobs, direct or indirect, is not labor exploitation but labor optimization. Definitely there were cases of business abuses in treating workers and entrepreneur-suppliers. It happens in other businesses, big and small, and it happens in government. But such negatives would easily be surpassed by positives in the form of ever-expanding job creation and business expansion by partner entrepreneurs.

Have a good rest up there, Mr. Sy.
---------------

See also: 

MACR at 9 years old is stupid

There is a move in Congress to lower the minimum age of criminal responsibility (MACR) from the current 15 years old to 9 years old. As in nine years old, wow.

MACR means that if the person or child is within or below that age, he/she cannot be jailed for crimes commited. It is true that many children are used by criminal syndicates and gangs, thousands of children. 

If this is the case, then government and the criminal justice system should penalize the parents or guardians, not the 9 or 10 or 12 years old who are caught commiting a crime. There should be more personal and parental responsibility in rearing children to become responsible adults and members of a community.

The image here I got from a friend's photo comment. Meanwhile I like this position by Sen. Recto in his press statement the other day.
-------------

Senate President Pro Tempore Ralph G. Recto
21 January 2019

The proposal to lower the minimum age of criminal responsibility (MACR) calls for evidence-based legislation.

It should be grounded on facts, supported by studies. Not on whims, and unproven theories.
We need to read the scholarship behind the proposed policy. In the absence of any, we may be legislating based on superstition.

Ilan po ba ang drug lords na 9 years old sa bansa ngayon? Ilan po bang nuebe anyos ang sangkot sa kidnap-for-ransom? Mayroon po bang mga sampung taong gulang na kilabot na carnapper? Sa record ng BOC, ilang onse anyos na ba ang nahuli sa pagpupuslit ng shabu? Where is the science in pegging the age threshold at 9?

Wednesday, January 23, 2019

BWorld 285, Consumer interests and the Public Service Act

* This is my article in BusinessWorld last January 18, 2019.



The Philippines has a huge and increasing economic potential mainly because of its big population, estimated at 108 million as of mid-2018 and the 13th largest in the world. Which means more entrepreneurs and workers, more producers and consumers.

We are also an archipelago with more than 7,500 islands and islets, lots of white sand beaches and deep fishing grounds (under Chinese control in certain areas now, to be sure). This means huge potential in tourism and fishery. Other countries, as we now see, are envious of coastal ones. One of the reasons for regional and world wars is the need by some countries to have more access to the sea, hence the need to invade and occupy their coastal neighbors.

The Philippines, however, is not able to optimize these potentials. Foreign direct investments (FDI), an important indicator for a country’s attractiveness to business, is not big. In the table below, I use FDI inward stock, the estimated accumulated FDIs in the country, and not FDI inflows. A country may attract $50 billion a year of inflows but if outflows are more than that, then net inflows will be negative. Data are from the UN Conference on Trade and Development (UNCTAD) World Investment Report (WIR) 2018.

We are also not able to optimize our huge tourism potential. Consider Macao with just 0.6 million population, yet they were able to attract $35.6 billion in tourism receipts in 2017, while the Philippines got only $7 billion. International tourism data are from the UN World Tourism Organization (UNWTO) Tourism Highlights 2018.


A big reason for these not so beautiful numbers for the Philippines is our non-friendly policies to foreign investments via Constitutional restrictions and the 83-year-old Public Service Act (PSA) enacted in 1936. That law has several sectors listed as “public utilities” where foreigners are prohibited from owning more than 40% equity.

An important legislative proposal at the moment is the PSA Amendment where telecommunications and transport (land, sea, air) are to be removed from the list of “public utilities,” thus allowing foreigners to own more than 50% and up to 100% equity. Only three sectors will be retained in the list — transmission of electricity, distribution of electricity, and water works and sewerage system. Explicit is a certain provision from Senate Bill 1754 (New Public Service Law of the Philippines) that “No other business or service shall be deemed a public utility other than those listed in this section.”

Two congressional bills seek to make the PSA Amendment. HB 5828 (Amending Commonwealth Act No. 146, known as the “Public Service Act”) was passed on third reading by the House of Representatives in September 2017. SB 1754 remains a committee report and needs to be passed on third reading so that a bicameral meeting may be set soon, for its enactment into law possibly before the congressional break during the May election campaign.

More investment liberalization measures should be done, especially airline and shipping line liberalization. Foreign investors and their managers need to see their potential and existing projects as often as possible. They want to see their investments here are secured and protected. Unlike in mainland Asia where tourists and investors can travel by land, say, from Thailand to Cambodia, Laos and Vietnam, they cannot do that in the Philippines.

Passengers are interested to see more choices in their domestic and international air travels. More choices in routes, days and time of flight, and airfare.

Consumers, investors and employees will greatly benefit from having more airline competition, with more airlines attracting more local and foreign visitors and entrepreneurs. This will create more domestic jobs, minimize labor migration, and fight poverty in the Philippines without the need for more taxes and public borrowings to finance endless government welfarist programs because many people are poor and have low-paying jobs.
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Tuesday, January 22, 2019

Stratbase-ADRi's Pilipinas Conference 2018

I attended the Stratbase-Albert del Rosario Institute (ADRi) "Pilipinas Conference 2018" last December 07, 2018 at Manila Peninsula Hotel.


Below, among the slides shown by Gregory Polling.


Horrible China communist government. Stealing of territory by other states is the norm because they have the armaments and instruments of deception.




One of the slides shown by Dr. Raul Fabella, my former teacher in International Economics/Trade in undergrad in the 80s.


Thanks again for the invite, Dindo.

ALF 11, Conference 2019 in Colombo, Sri Lanka

The Asia Liberty Forum (ALF) 2019 will be held in a month in Sri Lanka. ALF is mainly sponsored by the Atlas Network and co-sponsored by a local free market think tank. This year, the local sponsor will be the Advocata Institute, based in Colombo.

Some good speakers, below. I know Razeen Sally since nearly a decade ago, in past Economic Freedom Network (EFN) Asia conferences.


Other speakers are from Atlas (Linda Whetstone, Brad Lips, Tom Palmer, Lyall Swim, Matt Warner, Casey Pifer), Rainer Heufers and Anthea Haryoko of CIPS in Jakarta, Aira Azhari of IDEAS in KL, Bryan Cheang of Adam Smith Center in Singapore, Dhanna Fernando of Advocata.

Also:
Roy Spencer - Conscious Capitalism, USA
Khaliun Chimeddorj - Silk Road Foundation (SRF), Mongolia
Basanta Adhikari - Bikalpa, Nepal
Luis Miranda - Centre for Civil Society (CCS), India
Ronald Meinardus - Friedrich Naumann Foundation for Freedom (FNF), India
Ganeshan Wignaraja - Lakshman Kadirgamar Institute of International Relations and Strategic Studies, Sri Lanka
Mirsuljan Namazaliev - Central Asian Free Market Institute (CAFMI), Kyrgyz Republic
Scott (Sungchull) Kim - Teach North Korean Refugees (TNKR), South Korea.
(See, https://www.atlasnetwork.org/events/asia-regional-liberty-forum/starring/)

The last EFN Asia conference was held in 2016 in Manila. EFN 2015 was held in Thimphu, Bhutan, EFN 2014 and 2012 in Hong Kong, EFN 2013 in Bangkok, EFN 2011 in KL, EFN 2010 in Jakarta. There was no more EFN Asia conference since 2017 as the major speakers and participants tend to overlap with ALF's participants and speakers.

The ALF annual conferences started in 2013 then 2014, both held in Delhi and co-sponsored by CCS. I participated in ALF 2015 in Kathmandu, Nepal; ALF 2016 in KL, ALF 2017 in Mumbai, ALF 2018 in Jakarta. FNF became one of the major sponsors of ALF, perhaps since 2013.

My participation in ALF 2015 was mainly sponsored by Media 9/Business 360 in Kathmandu, thanks to Charu Chadha. My attendance in ALF 2016 to 2018 was sponsored by EFN Asia/FNF, thanks to Siggi and Pett.
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BWorld 284, ‘WALANG’ forever: Universal charge in electricity and PSALM

* This is my article in BusinessWorld last January 15, 2019.


We have the 2nd or 3rd most expensive electricity in Asia (after Japan and Hong Kong or Singapore) mainly because there are many charges that are imposed on our monthly electricity bill. The biggest item is the generation charge (goes to power generation plants) plus eight other items: transmission charge, distribution charge, supply charge, metering charge, system loss charge, universal charge, feed-in-tariff allowance (FIT-All), VAT and other taxes.

This column has discussed many times the FIT-All or guaranteed high price for renewables for 20 years, also competition in power generation that are reflected in WESM prices, the transmission charge, system loss charge, others.

I get intrigued by the universal charge (UC) because it contains four items (UC-ME, UC-EC, UC-SCC, UC-SD) that seem forever. UC is provided in the EPIRA law of 2001, Section 34, to be paid by all electricity consumers nationwide.

The UC fund administrator collected by the distribution utilities, electric cooperatives and other electricity suppliers is the Power Sector Assets and Liabilities Management Corp. (PSALM). It has three functions under the EPIRA law: (a) privatize NPC generation and Transco transmission assets, (b) manage liabilities of NPC debts, obligations of electric coops to NEA and other agencies, and (c) administer the collection and disbursement of UC funds.

Below are the current UC rates, UC remittances received by PSALM until September 2018, and its petition to avail huge funds.


What are these four components?

1. SCC — excess of the contracted cost of electricity by the National Power Corp. (NPC) over the actual selling price of the contracted energy output.

2. SD — financial obligations of NPC which have not been liquidated by the proceeds from the sales and privatization of NPC assets.

3. ME – subsidy for steady supply of electricity in small island provinces and far-flung areas.

4. EC — for watershed rehabilitation and management.

So PSALM is sitting on and administering a huge pile of cash from us electricity consumers. Some problems and issues that I see here.

Universal Charge (UC) Rates, Remittances, and PSALM Availment

One, those old SCCs and now SDs, these were contracted since the early 90s during the power crisis and consumers have been paying for them. After about 27 years they are still there? The UC rates do not even decline through time and we have to keep paying for them forever? Wow, very lousy.

Two, the ME subsidy for small island provinces and far away areas, they are forever too? Why can’t they have their own baseload, 24/7 power plants (coal, hydro, geothermal, etc.) and just augment with big gensets running on diesel during peak hours, so that the ME subsidy can be eliminated?

There is a moral hazards problem by NPC-SPUG (small power utility group) here. The agency might dislike that those areas will have their own baseload plants because that will ultimately eliminate their agency, their jobs and perks. Even then, those existing NPC gensets are not enough so those islands suffer regular brownouts, which adversely affect their tourism, commercial and industrial businesses.

Three, PSALM is a generation player, it manages and operates NPC plants that are not yet privatized and joins the competition for power supply. It can “sell low” at a loss, then raid the UC funds to recover its losses and appear to be financially healthy.
This creates a moral hazards problem too. PSALM will have little incentives to hasten the privatization of the remaining NPC plants. It can become a forever bureaucracy funded by forever UC subsidies. PSALM becomes another anti-competition factor in the Philippine electricity market.

To have cheaper electricity, we should do away with all subsidies as much as possible. Power plants that sell expensive electricity, whether conventional or renewable, base load or peak load, let them sink. Remove UC, remove FIT-All, over the long-term. Consumers interest of cheaper, stable electricity should be paramount over all other business, bureaucracy and taxation interests.
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