Sunday, March 31, 2019

BWorld 308, MORE debt reduction please

* This is my article in BusinessWorld last March 29, 2019.


How dangerous or non-dangerous are China loans to the Philippine economy?

This is a valid concern but another bigger concern is the endless and irresponsible borrow-borrow-borrow policy of various administrations even without economic turmoil or crisis. This is the subject of the Market-Oriented Reforms for Efficiency (MORE) series of this column today.

The good news in the Philippines’ public debt is that the debt/GDP ratio has been declining since the last decade from 74% in 2004, 55% in 2009, to only 42% in 2016. The bad news is that the decline has been halted under the Duterte administration (see Figure 1)


The decline in trend was due to high borrowings by the current administration, even if they have big new tax revenues under the TRAIN law on top of natural increase in taxes. And high public debt means high interest payment.


Philippine government’s outstanding debt stock (actual + guaranteed) and interest payment, P billion

Now the China loans. One example often cited is Sri Lanka, with unpaid debt of $1.1 billion it was forced to lease out to China its strategic Hambantota Port for 99 years.

Some 21 projects worth P753.4 billion have been proposed for China funding by the administration, many of which can be done by big local firms at no cost to taxpayers. The Kaliwa Dam Project should be zero loan if the Duterte administration allowed the original Japanese proponent GUDC, or two local firms pre-qualified by the PPP Center, San Miguel and Datem, to build it under integrated PPP financing. But Duterte awarded the contract to China and we have a new loan of P18.7 billion.

We need less borrowings. We need to retire more old loans and we should pay low interest payment. There should be more fiscal responsibility in government.
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Climate Tricks 78, Catastrophe... Not, since 19 years ago

In June 1989, the UN has warned humanity that there would be global disaster, "entire nations could be wiped off the face of the earth by rising sea levels by the year 2000." Or 19 years ago, wow. So most of us now could be zoombies pretending like normal people roaming around the planet? See the story here,

Then Peter Wallace of The Wallace Business Forum wrote one of his climate alarmist articles, and he warned "it wouldn’t take much to wipe us out as a race."

Apocalypse
By: Peter Wallace Philippine Daily Inquirer / 05:20 AM March 07, 2019
https://opinion.inquirer.net/119985/apocalypse

I wrote to Peter saying that those are ALL false claims, all fake news, all alarmist stories. And he seems to be parroting the alarmism. Their goal is to have more, bigger government, bigger UN, bigger carbon taxes and regulations.

See here stories of "last chance to save the planet" since 1992 or 27 years ago. And news reports in 2007 citing scientists saying that Arctic summer would be ice-free already by 2013 or six years ago. https://www.bworldonline.com/chr-investigates-carbon-majors-by-using-more-fossil-fuels/

All those thick snow and ice from the Arctic to US mainland until few weeks ago were fake? They were 'warm ice'?

More quotes from Peter:

(1) "CO2 emissions doesn’t seem to bother Trump. Where does he think all that pollution goes?" -- Peter Wallace.

He also believes that the gas that he and all humans exhale, the gas that our pets/farm animals/wild animals exhale, the gas that our crops/flowers/trees use to produce their own food via photosynthesis -- CO2 -- is a pollutant gas? If so, he and his friends should consider breathing as few as possible because they exhale a pollutant.

(2)"Stop cutting down trees, plant them."

Because Peter thinks that CO2 is a bad, pollutant gas and not a useful gas, he is not aware, or does not believe, that more C02 = more trees, more green planet. Little need to use huge taxpayers money for endless tree planting because trees regenerate on their own fast.

The "expensive energy (oil, lpg, coal) is beautiful" philosophy under the TRAIN law is partly inspired by climate alarmism. Oil, coal, lpg are fossil fuels that ‘warm the planet’, so government should make them expensive via higher taxes to reduce their use by the people. But see the result – expensive lpg forces many poor households to shift back to using firewood and charcoal, and this results in more cutting of trees in public forest land. Cheap LPG actually helps conserve the forest because demand for charcoal and firewood declines. Firewood gatherers have little incentives to cut down many trees illegally because demand for firewood/charcoal is low and the price is low.

Flooding also happens in parts of Baguio city that is more than 4,000 feet asl. Flooding happens in many cities, coastal or mountainous, esp when natural water catchments, low lying areas, were colonized by new houses, buildings, covered with soil then structures are put up. Zero relations with 'rising sea level."

Meanwhile the UN guys are untruthful, until now, of "nations covered by rising sea level" stories, dishonest of their claims of "unprecedented global warming" (no precedent? joke), "unequivocal global warming" (no global cooling to happen? joke).
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Thursday, March 28, 2019

BWorld 307, MORE airline competition

* This is my article in BusinessWorld last Tuesday, March 26.


The Market-Oriented Reforms for Efficiency (MORE) series continues and tackles the air transportation sector. For an archipelago of more than 7,500 islands and about 20 are big islands with big populations, and air travel is necessary to hasten the movement of people and goods.

For the Philippines, the good news is that from mere trickles of less than nine million local and foreign passengers transported in the past four decades (1986, 1996, 2006 data), things have significantly improved starting 2010 (global recovery from financial turmoil of 2008-09, then change of administration from Gloria Arroyo to Benigno Aquino III). That year, passengers jumped to 22.6 million, then 35 million in 2014 and 40 million in 2016.

The bad news is that compared to our neighbors in East Asia, we are not dynamic and liberal enough to allow more airline competitors, and/or we do not have more big airports, including budget terminals, to fly more passengers. Several neighbors with smaller populations than us — Hong Kong, Malaysia, Thailand, S. Korea — have more air passengers than the Philippines (see table). 



Note that of the Philippines’ 40 million passengers in 2016, only six million were international visitors (corresponding to 6 million foreign arrivals,) so some 34 million or 85% were domestic passengers.

We need to further liberalize airline competition in the country. We also need to expand physical infrastructures like bigger and more provincial airports, have more budget terminals, more toll roads that link the airports to big city centers and major tourist destinations.

These will have a combined effect of attracting more local and foreign fliers, and of hastening commerce, tourism, investments, job creation, business expansion and economic growth in the country.
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Tuesday, March 26, 2019

PH's debt/GDP ratio stopped declining under Duterte

Until the last full year of Gloria Arroyo in 2009, PH's debt/GDP ratio was 54.8%. Then came the Benigno Aquino admin, the ratio kept falling with numerator (borrowings) controlled while the denominator (GDP) kept expanding, only 42.1% by 2016. Then Duterte admin, the decline in ratio has stopped. If the trend under the Aquino admin continued, we should only have about 39%, not 42% under Duterte.


Dutertenomics lousily takes credit for the low debt/GDP ratio when it was the previous administration that worked hard to reduce the ratio. The purpose of Dutertenomics is to reverse the gains and momentum of the previous govt, via shameless over-borrowings even if there is no economic turmoil/crisis.

#fiscalirresponsibility #spendspendspend #taxtaxtax #borrowborrowborrow #Dutertenomics.

BWorld 306, MORE stock market development

* This is my article in BusinessWorld yesterday, March 25, 2019.


 Continuing the Market-Oriented Reforms for Efficiency (MORE) series in this column, we look at one of the important indicators of an economy’s attractiveness to private business, entrepreneurship and job creation, the stock market.

Unlike foreign direct investments (FDI) which are long-term and, hence, require lots of basic soft and hard infrastructure, portfolio and stocks investments are often short-term, with investors buying today and selling after a month, or a week, or within hours. Thus, the stock market reflects the long- and short-term business sentiments.

The Philippines stock market has experienced good expansion in the previous decade, and further expanded until 2015. It has tanked though at the end of 2016 during the Duterte administration, grew in 2017, but declined again early this year.

Thailand and Indonesia have started at similar levels with the Philippines in 2000 and, since then, have expanded much faster and are twice that of the Philippines today. Vietnam started late but has shown consistent increases. One reason for this is that the Philippines has a small number of listed companies, only 267 (see table).


  
Taiwan is not included in the WB report but it is listed in the WFE, it has market capitalization of $1,118.3 B in February 2019 from 1,716 listed companies.

China is wobbling from the ongoing trade dispute with the US and many domestic problems are surfacing today, like huge debts by the corporate sector, state-owned enterprises and local governments.

The Philippines needs to attract more companies to be publicly listed. This will invite more individual and corporate investors and help expand market capitalization. I am not aware of the major reasons why there is low participation by corporations in the local stock market. Could it be the huge minimum capitalization required, big and voluminous SEC requirements, BIR alert of more taxes if companies are listed? Or cultural, companies would rather remain “low key” to preserve their clan-dominated corporate structure and investment?

Hope that such hurdles will be addressed soon. In particular, the DOF-BIR should not be too tax-hungry that they can scare many companies to be more publicly transparent.

There are two forums on the stock market this week. First is the “BusinessWorld Stockmarket Roundtable 2019” on March 25 at Conrad Hotel. The four speakers are Roel Arco Refran, COO of the Philippine Stock Exchange, Michael “Mike” Gerard Enriquez, Chief Investment Officer of Sunlife Financial, Justino “Jun” Calaycay, Jr., Head of Research and Engagement Department of Philstocks Financial, and Marvin Fausto, Business Development Consultant of COL Financial.

Second event is the “Breakfast and Market Update” at the PSE on March 29, exclusive for members of the UP School of Economics Alumni Association. It is co-organized by Hans Sicat, former PSE president and a school alumni.

Last year, the “BusinessWorld Stockmarket Roundtable 2018” was held in February at Makati Shangrila Hotel. The four speakers were Augusto “Gus” Cosio Jr. of First Metro Asset Management, April Lynn Tan of COL Financial Group, Jun Calaycay, Jr. of Philstocks, and Mike Gerard Enriquez of Sunlife.
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Monday, March 25, 2019

On the Trump-Russia hoax, the scammers are silent

Hoaxhers -- like NYT, CNN, Wapo, Dems, etc. -- of the world, unite! You have nothing to lose but gullible and emotional followers :-)

Sound of silence from people who for nearly 3 years were posting regularly of "Trump as Putin puppet". Spreading lies is wrong if it affects them but is correct and fine if it fits their personal biases and dogma.

Some reports here. The illustrations I got from the web.

Trump did not collude with Russia, says Mueller, and is cleared of obstruction by the attorney general
PUBLISHED SUN, MAR 24 2019 • 3:10 PM EDT |
Jacob Pramuk  Spencer Kimball

Trump "Totally Exonerated", Calls For Investigation Into "Illegal Takedown That Failed"
by Tyler Durden  Mon, 03/25/2019 - 05:44

Gregg Jarrett: Trump-Russia 'collusion' was always a hoax -- and dirtiest political trick in modern US history
Gregg Jarrett  March25, 2019

Trump Is Going To Repeat This Until November 2020. Thanks, MSNBC.

by Tyler Durden Mon, 03/25/2019 - 10:15


‘Two years of unceasing lies’: Russia responds to the Mueller report summary
Sam Meredith  March 25, 2019

FLASHBACK: ‘Shattered’ Book: Clinton Campaign Hatched Russian Narrative 24 Hours After Hillary Loss to Trump
By Jerome Hudson  25 March 2019

Meanwhile, Trump's recent tweets are getting 300k+, 400k+ likes.


Meanwhile, where are HRC and Obama? Will they and their friends invent a new hoax, like Trump-Timbuktu or Congo collusion?

Sunday, March 24, 2019

BWorld 305, MORE electricity supply in East Asia

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


Continuing the Market-Oriented Reforms for Efficiency (MORE) series in this column, we tackle the importance of more electricity production in the development of Asia-Pacific economies.

On Tuesday, March 19, I attended the joint press conference of the Department of Energy (DoE), the National Power Corporation (Napocor), National Transmission Corporation (Transco), National Grid Corporation of the Philippines (NGCP), and Manila Electric Co. (Meralco) in formally announcing the Philippines hosting of two big international energy events.

First, the Association of the Electricity Supply Industry of East Asia and Western Pacific (AESIEAP) in September 2019 in Shangrila Mactan, Cebu; second, the Conference of Electric Power Supply Industry (CEPSI) at the Philippine International Convention Center (PICC) in November 2020.

During the open forum, I commented that the Philippines holding these two big energy events that are technology-neutral on energy sources is important, to contrast with the renewable energy (RE) favoritism of the Asian Development Bank’s Asia Clean Energy Forum (ACEF). The latter is an annual event glamorizing the role of wind-solar and other renewables while implicitly demonizing the role of fossil fuels in energy development in Asia. Their delegates, speakers, and sponsors fly from all over the world on fossil fuel then directly or indirectly lambast fossil fuel and talk of a “decarbonized world” via RE favoritism and cronyism.

Having a technology-neutral energy policy is important for fast economic growth and expansion of Asian economies. For instance, despite the decades-long lobby to glamorize and subsidize wind-solar and other renewables, fossil fuels provided 74% of total electricity generation in Asia-Pacific in 2017, with many countries being more than 80% fossil fuels-dependent — India, Australia, Indonesia, Malaysia, Thailand, Taiwan, etc. (see table 1).


Other AESIEAP members with low electricity generation are Cambodia, Laos, Macau, Nepal, Papua New Guinea, and Sri Lanka. Hong Kong is also a member; its reported domestic electricity production is small because mainland China supplies the rest.

High power generation coincides or correlates with high economic expansion. The numbers are shown below spanning 30 years from 1987 to 2017. High correlation is shown in some countries like S. Korea, Indonesia, Malaysia, India, Taiwan, Thailand, and Bangladesh (see table 2).


As shown in table 1, the Philippines still has small power generation despite its huge population of 108 million (two times that of S. Korea, four times that of Australia). We need more investments in the sector — in generation, transmission, distribution, and supply.

Energy efficiency as “substitute” for more power generation is not enough. If one will drive at night in many provinces, one will notice that national and provincial roads are dark and conducive to accidents, except in some city centers.

In many instances, government taxes, permits and bureaucracies, plus occasional price control (like the Wholesale Electricity Spot Market price cap), are among the hindrances to more energy development. Government should learn to step back on these.
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US Marines training for SCS/WPS island seizures

See these stories below. Go Trump, Pompeo, Shanahan. Just enforce existing international rule of law on freedom of navigation and territorial sovereignty of countries in the region.
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Marines Seize Pacific Island As Training For War With China
by Tyler Durden Fri, 03/22/2019 - 17:15

US Marines are practicing seizing small islands as a possible China fight looms in the Pacific
Ryan Pickrell Mar. 21, 2019, 10:32 AM

Marines Seize an Airfield and Small Island While Testing Tactics for Fight Against China (excerpt)
(Source: Military Times; posted March 22, 2019)
By Shawn Snow

Marines seize an airfield and small island while testing tactics for fight against China
By: Shawn Snow    March 22, 2019

Beijing Threatens "Retaliation" Over Sale Of F-16s To Taiwan
by Tyler Durden  Fri, 03/22/2019 - 21:45

Saturday, March 23, 2019

BWorld 304, MORE tax relief in CIT

* This is my article in BusinessWorld last March 19, 2019.


Starting this week, this column will produce a series of Market-Oriented Reforms for Efficiency (MORE) articles related to recently enacted laws and proposed legislations in the Philippines on various sectors. Thus, recent Republic Acts (RA) and some pending bills for bicameral committee meetings after the May 2019 elections will be discussed.

First on the list is the need to simplify and reduce tax rates for business that create sustained jobs for Filipinos. Currently in East Asia, the Philippines has (a) the highest corporate income tax (CIT), (b) among the highest in withholding tax for dividends and interest income, (c) the highest withholding tax for royalties, and (d) among the highest VAT or gross sales tax (GST).

These non-attractive fiscal policies plus the Constitution restrictions on foreign investments, among others, contribute to the Philippines having the lowest foreign direct investments (FDI) stock among more mature economies in the region (see table 1).



The main bill under deliberation is HB 8083, the “Tax Reform for Attracting Better and High-Quality Opportunities” or TRABAHO bill. Originally it was called the “TRAIN 2” bill but with the generally adverse impact of the TRAIN law of 2017, the DOF changed its moniker to TRABAHO.

Among the important provisions is the reduction of CIT from the current 30% to 28% in 2021, 26% in 2023, 24% in 2025, 22% in 2027, and 20% in 2029. In exchange it intends to remove certain fiscal incentives that supposedly “lower” DOF tax collections, especially the 5% gross income earned (GIE).

The Senate version intends to cut CIT from 30% to 25% in year 1 of implementation and not staggered to 10 years.

TRABAHO bill has been passed on third reading in the House last September 2018, awaiting action from the Senate for a possible bicameral meeting in late May this year.

If the government is sincere in really attracting more local and foreign investments, it should either (a) cut CIT to low, flat 15-16% within year 1 of implementation and abolish the GIE, or (b) cut CIT to 21-25% and raise the GIE to 7%.

There is real, not fictional, CIT competition in the region. For instance, Singapore’s 17% is positioned near Hong Kong’s 16.5%. Socialist Vietnam until 2013 has 25%, became 20% in 2016 (see table 2).


Let us hope that when Senators and Congressmen/women meet for a bicameral meeting after the May elections, or when they refile the bill in the next Congress in July, they will be more aware that capital and people are more mobile these days. Both the national and local governments should not be too tax-hungry and reducing the tax rates, lowering the number of permits and payments, will greatly help in attracting both local and foreign investments, and retaining them for the long-haul.
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Agri Econ 30, Tractors controlled by local politicians

There is no "market failure" in tractor use and rental. More privately-owned tractors (like privately-owned tricycles/jeeps/buses/vans for hire), more competition, the rental cost goes down, farmers benefit, taxpayers do not owe anything to anyone as no tax money was used to procure tractors and maintain them. Local politicians should be disfranchised with arbitrary power to select who can use, who cannot use, the tractors.

Control of tractor gives mayor more power
By: Tonette Orejas  05:18 AM March 11, 201

"The four-wheel drive tractor costs P2.495 million while the harvester with a heavy-duty transport trailer was worth P1.995 million."

Wow, P2.5 M for one tractor. If those people/bureaucrats used their own money, they won't buy that big, heavy tractor for ricefields, it's designed more for sugarcane or corn or tobacco farming. Ricefields often have soft soil due to water inundation, they would need smaller, lighter tractor, about 1/2 or 2/3 the size of the tractor in photo.

Wise and practical private agribusinesspersons won't buy that Kubota 540 tractor for P2.5 M. They can buy a Kubota 225 to 300, brand new at around P1M each, 2nd hand (about 6-12 years old) at P300-500k each. These smaller Kubota (or Yanmar) tractors are more practical in PH ricefields because the soil is soft for 2nd cropping, heavy tractors can get stuck in mud even if they have big tires.

Only politicians and bureaucrats will go for the more expensive machines/tractors, the tong-pats is bigger for just one unit.

And this is the danger of using revenues from rice tariffication to buy farm machines and given away for free to farmer groups. The purchasing agencies, DA or LGUs or DILG, can go for the more expensive tractors and harvesters -- which will also require more expensive maintenance. The 'commission' will be bigger per tractor, and local politicians, from Mayor to Barangay Capt, can use the machines to sway political votes and support. Non-supporters likely won't be able to use the machines, or they can use but they must pay rent; only supporters can use, for free except diesel.

Most policy makers and supporters, lobbyists do not realize some details about soil character and appropriate tractors. I think for that big Kubota tractor in the Inquirer photo, it's good for sugarcane, corn, tobacco farming where the plots are larger, the soil is not too soft with water inundation.

When that big tractor gets stuck in a muddy rice field, it will also require another big tractor to pull it out. Small tractors may have difficulty bailing it from the mud.
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Friday, March 22, 2019

BWorld 303, Water surplus vs water shortage

* This is my column in BusinessWorld last March 15, 2019.


In terms of water supply for the Philippines and many other tropical countries, we have a mixture of news. First the good news — we have too much rain water yearly, floodings damage lots of public and private properties, crops, and drown or kill many people.

Second, the bad news — we do not have enough deep and wide lakes, or dams (man-made) to catch, “harvest” and store those huge volume of rain water.

Third, the worse news — some natural water catchments like rivers, streams and low-lying areas are often silted if not covered with soil to become new residential, commercial or industrial zones.

Let us check some numbers to prove the good news, that our problem is not lack of water but lots of water.

In 2014, the Philippines has naturally produced an estimated 479 billion cubic meters (bcm), higher than those in S. Korea, Thailand, Vietnam and Japan. In terms of per capita production, we have 4,757 cubic meters per year (see table 1).


Need more proof? In terms of annual freshwater withdrawals, the Philippines in 2009 has produced nearly 82 bcm, at par with Vietnam and Japan and higher than Thailand, S. Korea and Malaysia. But in terms of water productivity, ours is low, only $2.3 per cubic meter of freshwater withdrawals (FW), see table 2.


What the numbers imply would be the following.

One, we should have more dams to store lots of flood waters yearly. This will greatly reduce flash flooding that damage some midland and lowland areas, while storing water for the dry months of March to May.

Two, conduct regular, large-scale dredging of heavily silted rivers and lakes. Like the many rivers and streams in Bulacan, Pampanga and Tarlac that are silted with lahar from Mt. Pinatubo since the 90s. PHIVOLCS estimate that lahar deposits in the mountains can continue to flow downstream for the next 30 years or so.

Three, encourage more private sector participation and investments in building more dams. The reversal from integrated PPP (construction then O&M done by one private entity) to hybrid PPP (construction via ODA/budget then O&M by another entity) of Kaliwa Dam is a big mistake that resulted in delays in construction and lead to some P18.7 B of new loans to China.

Four, have more open pit mines, not less, then when they are mined out, do not cover them with soil and reforest. Leave them as deep and wide man-made lakes that will help store flood waters. The new lake can be used for fishery, tourism and water sports, etc.

Five, allow private ownership of man-made lakes, like the mined-out open pit mines. The artificial lake should be under management and control by the private mining company or consortium of private firms.

The current water shortage problem in many parts of Metro Manila is totally unnecessary and avoidable. El Niño and La Niña are natural phenomena that occur in predictable cycles, alternating usually every two years per episode. There should be less politics, more private sector investments and management of water resources.
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China Watch 31, Overstated and exagerrated GDP size

This is interesting. The China Communist Party local leaders over-state the size of their economy for the past 9 years. They also under-state the government debts (and degree of political persecutions).



SCMP calculations show the adjusted nominal GDP level in China is about US$11.5 trillion using current exchange rates, still more than twice the size of Japan’s economy at US$5.16 trillion, but well below the economy of the United States at US$20 trillion.

The paper, “A Forensic Examination of China’s National Account”, was submitted to the “Brookings Papers on Economic Activity”, a journal published by the US-based think tank Brookings Institute twice a year…

The paper’s four authors – Chen Wei, Chen Xilu and Michael Song from the Chinese University of Hong Kong and Chang-Tai Hsieh from the University of Chicago – used a mix of economic indicators that are less likely to have been manipulated by authorities to prove that the National Bureau of Statistics (NBS) have not done enough to correct the errors in the data collected from provincial governments over the past decade.

It has long been believed that local Chinese officials inflate figures reflecting their economic performance, which is closely tied to their opportunity for promotion. Since 2003, the NBS has produced a national gross domestic product (GDP) figure that is lower than aggregate provincial data after examining other data such as the census and land sales.

One method that the authors used to probe the accuracy of the NBS’s adjustments was comparing the growth of official GDP with the growth of revenue from value-added tax (VAT). Local governments have fewer incentives to manipulate VAT revenue, since a large portion of it is eventually transferred to the central government, therefore overstating VAT would only increase fiscal revenue losses.

The authors found that since 2008, the official growth rate for industry and other sectors exceeded their corresponding VAT growth rate, with the gap widening over the past decade, indicating that the government was overstating official GDP.

In other words, the overstatement of official growth has worsened since 2008 and NBS’s corrections have been increasingly inadequate to offset bottom-up data exaggerations.

A similar conclusion was drawn when the authors examined and adjusted the official GDP growth data with a set of alternative indicators, including satellite images showing lights at night, national tax revenue, electricity consumption, railway cargo traffic, as well as imports and exports that are less likely to be over-reported, although these proxies did not fully capture the growing importance of the service sector in the economy in recent years.

The economists suggested that the problem is that much of the underlying data needed to project GDP is outside the NBS’s control, even though the agency has been trying hard to collect local data itself. At the same time, the NBS is also in a weak political position to confront local political leaders to demand better data collection.

“Although the NBS adjusts downwards local statistics, it does not report the adjusted local statistics, perhaps out of a desire to not confront powerful local leaders,” the authors said.

“There are three problems with China’s GDP. One is that it doesn’t necessarily measure the right thing. Two is statistical bias in the way data is collected. Three is really a macro policy problem by the government which should write down all the bad debt,” said Michael Pettis, professor of finance at Peking University.

“The NBS is only trying to fix the second problem.”
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Thursday, March 21, 2019

BWorld 302, Energy favoritism by legislation

* This is my article in BusinessWorld on March 12, 2019.


Going through the Economy section of BusinessWorld last week, I checked these four energy-related reports:

1. “NGCP declares ‘yellow alert’ for Luzon power grid” (March 06);

2. “Bill tapping Malampaya fund to pay down Napocor debt hurdles bicameral session” (March 08);

3. “First Gen’s Batangas LNG terminal project cleared by DoE” (March 08); and
  
4. “Power-line obstruction bill could still pass before Congress closes” (March 11).

Report #1 refers to low reserves on March 5 of only 624 MW, available capacity was only 10,115 MW due to unscheduled shutdowns by some (aging?) power plants while peak demand hit 9,491 MW.

Report #2 refers to the “Murang Kuryente” proposal, under House Bill (HB) 8869 and Senate Bill (SB) 1590, to allocate P208 billion of the net national government share in the Malampaya fund to pay off Napocor’s stranded contract cost (SCC) and stranded debt (SD).

Report #3 is about DoE Secretary Cusi signing a notice to proceed (NTP) for First Gen Corp. to build a liquefied natural gas (LNG) import terminal. Two other entities with similar proposal were issued NTP by the DoE: Phoenix Petroleum and China Oil (CNOOC), and Australian firm Energy World Corp. Ltd. (EWC) in Quezon province.

Report #4 is about HB 6276 and SB 2098 penalizing the construction of structures that interfere with power transmission.

On report #1, it is ironic that government targets fast GDP growth of 7-8% and yet we still experience occasional near-deficiency in power during the hot months of March to May. It is not possible to have sustained fast growth if there is insufficient and limited supply of stable electricity.

From 2000 to 2017 or in just 17 years, the expansion in electricity generation in terawatt hours (TWH) and GDP size are as follows: China, 4.8x and 9.9x; Indonesia, 2.8x and 5.7x; Vietnam, 7.2x and 7.1x; Philippines, 2.1x and 3.9x. Philippines’ power generation is small (see table), there is no valid reason why certain groups would oppose fast expansion of the country’s power generation capacity if the power source is against their ideological beliefs.


On report #2, under SB 1590, SCC refers to the excess of the contracted IPP costs and the actual selling price, SD is any unpaid financial obligation of Napocor. The good news is that the bill will reduce power prices for the consumers as the universal charge in our monthly electricity bill will significantly decline if not be erased. The bad news is that the SCC and SD of Napocor/PSALM will keep rising because PSALM will keep subsidizing the cost of its contracted energy by selling low and buying high and still look “financially healthy.”

The Implementing Rules and Regulations (IRR) should put a cap on the amount of SCC and SD to avoid endless, bottomless complacency by NPC/PSALM. Over the long-term, these government corporations should (a) learn to sell power rates at true costs, and (b) fade away as there are many government agencies that regulate private generating companies (DOE, ERC, SEC, BIR, LGUs…).

On report #3, there is a draft substitute HB on “Downstream Natural Gas Industry Development Act” with some lousy, anti-consumer provisions. For instance in Chapter IX (Incentives), Section 34 (Natural Gas Portfolio Standards), it mandates that “all distribution utilities shall be required to allocate ten percent (10%) of its electricity capacity from natural gas.”

Proponents and lobbyists of this bill or section intend to rob Philippine electricity customers. Even if they price their natgas to high levels, DUs and customers have no choice since they are coerced to buy minimum amount of natgas power. If the claim by one big natgas company that “natgas is cheap and competitive compared to coal” is true, then there is no need for this bill. That claim therefore is a lie, hence a need for legislation to arm-twist DUs and customers nationwide.

Related to report #4 is the Energy Virtual One Stop Shop (EVOSS) under SB 1439 and HB 8417. The bicameral meeting was finished and the bill may have been signed by President Duterte already. It is among the very few laws to reduce red tape by bureaucrats. For instance, Section 13 states: “Failure of the mother agency and its attached bureaus, offices and agencies both on the national and local level, including GOCCs, to release its action on applications duly filed with complete supporting documents within the prescribed time frame shall be deemed approved for such application…”

The IRR will soon be issued, the reform should cover all power gencos with no exception and favoritism.

The Arangkada Philippines Project (TAPP) document on Power made Recommendation #15, “new generators to enter the market with plants that are profitable at a much lower cost per kWh, creating an abundant supply of baseload.” Amen.
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On murders and genocide, Muslims or Christians

Murder of one person already terrifies me. Murder of 49 in NZ is sickening. Genocide of 6,000+ is pure evil.

'Pure Genocide': Over 6,000 Nigerian Christians Slaughtered, Mostly Women and Children
By Stoyan Zaimov, Christian Post Reporter
CP CURRENT PAGE: WORLD | TUESDAY, JULY 03, 2018

“Church leaders in Nigeria have said that Christians are experiencing "pure genocide" as 6,000 people, mostly women and children, have been murdered by Fulani radicals since January.

"What is happening in Plateau state and other select states in Nigeria is pure genocide and must be stopped immediately," said the Christian Association of Nigeria and church denominational heads in Plateau State in a press release last week.”

My friend Jayant Bhandari made this observation when he posted that story in his fb page,

“No one cares when Third World people kill each other. On any day 10 times or more Muslims are killed by other Muslims. It is only when Muslims are killed in the West, it becomes an opportunity for virtue-signalers to come out of the woodwork, and for Muslims to feel horrified--and these Muslims completely fail to see outpouring of sympathy the victims get in the West. Anyone who does not puke watching this disgusting show of irrationality has a serious problem. And the NZ PM covered her head today. Why? I am starting to wonder if women are so protected at home that they have no balanced understanding of reality?”

At Least 32 Christians killed as mob burns homes, church in Nigeria
By Samuel Smith, CP Reporter
CP CURRENT PAGE: WORLD | SATURDAY, MARCH 02, 2019

Why Does The Mainstream Media Purposely Ignore Mass Killings Of Christians Across The Globe?
by Tyler Durden Mon, 03/18/2019 - 23:00


I agree with Tyler Durden's observation here,

"So far in 2019, there have been 453 Islamic terror attacks in which 1,956 people have been murdered.  But you will never hear those numbers from the mainstream media.
Instead, when the mainstream media talks about Bible-believing Christians it is almost always an attack story.  As a recent Breitbart article aptly observed, having “an anti-Christian bias” has become “the last acceptable prejudice”…"

Murder is reprehensible, much more with genocide. Going back to the classical 'social contract' theory why government is created, the main purpose of having government is to protect the people's basic freedom and rights -- right to life (vs murderers), right to private property (vs thieves), right to liberty and expression (vs bullies, dictators). Government failure in any of these three basic functions would guaranty government failure in any of its expanded roles and interventions in society.

Wednesday, March 20, 2019

BWorld 301, Inflation, Interest Rate, BSP Governor, and Travel Tax

* This is my column in BusinessWorld, March 06, 2019.


Many people want the government to protect the consumer. A much more urgent problem is to protect the consumer from the government.”

— Milton Friedman (1912-2006), Nobel Prize economist

This paper will briefly cover four topics showing various degrees of “outlierness” in Philippines economic performance and policy compared to our neighbors in Asia.

(1) Inflation rate. The Philippines registered a 4.1% inflation rate average for the first two months of 2019. The good news is that it is a lot lower than the past four months average of 6.1%, but the bad news is that compared to our neighbors, it is the highest. In the ASEAN-6, Malaysia experienced a deflation, Singapore and Thailand have near-zero inflation while Indonesia and Vietnam have below 3% (see table).


So we are the inflation outlier in the region. Since Dutertenomics’ TRAIN law has penalized the consumers with high inflation (1.3% in 2016, 2.9% in 2017, 5.2% in 2018), the administration should compensate this year by targeting a 1-2% inflation via tax cut somewhere, or suspension of tax hikes. Far out. Its mantra is spend-spend-spend, tax-tax-tax, borrow-borrow-borrow. Let the future taxpayers worry about current high borrowings.

(2) Interest rate. In particular, Bank lending rates, the numbers for March 2018 to January 2019, are:


So the Philippines is an outlier again, the only economy with ever-rising rates and surpassing the 7% mark.

(3) New BSP Governor. The third BSP Governor, Armando Tetangco, worked at BSP for two decades before he was appointed Governor in 2005. His successor, the late Nesting Espenilla, also worked at BSP for more than three decades before he was appointed as the fourth Governor. The new and fifth Governor, Ben Diokno, is somehow an outlier because he has zero BSP work experience, zero private banking experience. But he is a known economist, was a two-term DBM Secretary (under former President Erap Estrada, then President Rodrigo Duterte). Diokno was my teacher twice, in undergrad mid-80s then graduate studies late 90s in UPSE. I notice that he’s a fiscal hawk, practicing spend-spend-spend philosophy at DBM. I just hope that he will not be a monetary hawk, print-print-print money at BSP.

(4) Travel tax. In my work as a free market advocate in the Philippines, I get to travel abroad about 3x a year mostly in Asia, all expenses covered by my various sponsor-think tanks and fellow free market institutes. I see plane fares fluctuate depending on the season but one thing that does not fluctuate is the Philippines travel tax (P1,620 for economy, P2,700 first class passengers).

While my sponsors pay for my plane fare including the travel tax (makes my travel cost go higher), occasionally I would bring my family when the kids are on school break and plane fare is cheap (KL, HK, Bangkok) as they can stay in my hotel for free for few days. I have to pay extra for their travel tax.

The Philippines is an outlier again because we seem to be the only country in Asia that imposes a travel tax on its citizens. This is on top of airport terminal fee of P700 and there is not even free drinking fountain.

Travel tax abolition should be done. Senate Bill 1841 by Sen. Koko Pimentel aims to do this but it was not even passed at the Committee level. TIEZA and other bureaucracies that benefit from gouging more taxes from Filipinos oppose. They should be abolished too someday.
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El Nino and water shortage in Metro Manila

On the current El Nino, four points here:

(1) After a brief La Nina from October 2017 to April 2018, El Nino resumed from October 2018 to present.
(2) current El Nino is mild compared to 1998 and 2015-2016 El Nino.
(3) Severe La Nina experienced from the 50s to 70s, then 1999-2001, 2008-2011. 
(4) El Nino - La Nina events are natural, cyclical, and predictable, they occur every 2 years per episode on average. 

The natural cycle been occuring since millions or billions of years ago, will continue in the next millions and billions of years in the future. No such thing as "unprecedented" big El Nino and Gorebal warming, lots of precedents in the past. Don't believe scammers who say these are "unprecedented" and "unequivocal."

Another view, multivariate el nino southern oscillation (ENSO) index, 1950 to present.


So there is no basis for people to say that the current water shortage in some parts of Metro Manila is due to El Nino because the phenomenon is predictable and expected. The government and the water concessionaires simply failed to develop new water sources and dams. The Philippines' main problem is lots of rain water during the wet season, many people die due to landslides, drowning and leptospirosis due to prolonged flooding. We do not have enough dams to impound and store those huge volume of rain water and help reduce flash flooding of low-lying areas.

Meanwhile, watermelon activisim shows once again -- Green outside, red inside. Their goal is global ecological socialism.

Ending climate change requires the end of capitalism. Have we got the stomach for it?
Phil McDuff 
Mon 18 Mar 2019 12.09 GMT Last modified on Mon 18 Mar 2019 12.11 GMT

Guardian: “Ending climate change requires the end of capitalism”
Eric Worrall / March 18, 2019

Thursday, March 07, 2019

BWorld 300, IPR, innovation and growth

* This is my article in BusinessWorld on March 05, 2019.


“The natural effort of every individual to better his own condition…is so powerful, that it is alone, and without any assistance, not only capable of carrying on the society to wealth and prosperity, but of surmounting a hundred impertinent obstructions with which the folly of human laws too often encumbers its operations.”

— Adam Smith, Book IV, Chapter V, The Wealth of Nations (1776).

The ideas of Adam Smith, John Locke and other classical liberals were indirectly discussed in the various panel discussions during the Asia Liberty Forum (ALF) held in Hilton Colombo, Sri Lanka last week February 28 to March 1. The ALF was mainly sponsored by Atlas (USA) and Advocata (Sri Lanka), with co-sponsorship by the Friedrich Naumann Foundation for Freedom (FNF) and other groups. FNF is a German foundation whose main work around the world is to help promote the value of economic freedom, free markets, human rights and political diversity.

The last panel on Day 2 was on “IPR for Innovation and Economic Growth” and speakers were Lorenzo Montanari of the Property Rights Alliance (PRA, USA), Philip Stevens of Geneva Network (UK), and Rainer Heufers of Center for Indonesian Policy Studies (CIPS). The panel was moderated by Harith de Mel of Advocata.

Mr. Montanari showed the three components of the International Property Rights Index (IPRI) — legal and political environment, physical property, and intellectual property — and the results of the 2018 Report. He emphasized the role of institutional arrangements and property rights protection in building a free, productive, prosperous and inclusive societies.

Mr. Stevens presented “The knowledge economy as a driver of sustainable economic development.” He showed data on the components of S&P 500 market value, the rising share of intangible assets vs tangible assets as follows: 17% vs 83% in 1975, 68% vs 32% in 1995, and 84% vs 16% in 2015. He further observed that “One third of the value of manufactured products sold around the world comes from ‘intangible’ capital.”

And Mr. Heufers observed that “For Indonesia to be free and prosperous” in the agriculture and food sector, the adoption of modern rice varieties protected by IPR has contributed significantly to greater food production in the country.

Let us review some numbers. Data below are from three sources. (1) IPRI Report http://internationalpropertyrightsindex.org/, (2) Global Innovation Index (GII) 2018 report, produced by the World Intellectual Property Organization (WIPO), INSEAD, and Cornel SC Johnson College of Business, http://www.wipo.int/edocs/pubdocs/en/wipo_pub_gii_2018.pdf, and (3) IMF World Economic Outlook (WEO) October 2018.


Notice the top seven countries and economies — they have higher global ranking in property rights protection, also in innovation index, and higher per capita income of at least $8,600 in 2017, higher sustained economic growth.

The Philippines has low rank in both IPRI and GII and low per capita income. Improving the country’s global ranking and score in at least these two reports will send a good signal to both local and foreign investors and traders, that their investments and branding here will be respected and protected.

There are efforts in Asia though to circumvent IPR protection. Like moves to issue compulsory licensing (CL) and kill the patents of newly-invented and successful medicines. Or impose plain packaging and kill trademarks and brands of certain products deemed “unhealthy” like tobacco, soda and sugary foods.

These anti-IPR moves downgrade the fact that people in general are living longer, healthier and freer. Life expectancy at birth keeps rising, mortality rate across ages keeps declining, and people engaged in “dangerous” hobbies and sports like sky jumping, downhill cycling and motorcycle stunts is rising. Threat on companies’ IPR on their invention and corporate branding is also a threat on the overall investment environment. Governments should avoid such populist and anti-liberal policies.
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See also: