Showing posts with label Charu Chadha. Show all posts
Showing posts with label Charu Chadha. Show all posts

Tuesday, February 26, 2013

Business 360 4: Brownouts and Power Deregulation

* This is my article for Business 360, published in Kathmandu, Nepal, early this month.
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Addressing power shedding and rationing

Power outages of 12 hours a day or more  is one formula for slow economic growth if not economic contraction. Almost all aspects of modern life, industrialization and agricultural modernization require stable and affordable electricity.

When Charu Chadha informed me that Kathmandu suffers from 14 hours a day of power outages in  early January and is projected to rise to 18 hours a day in the coming weeks, I was greatly surprised.  It is simply impossible to create more jobs, to develop the economy faster, if there is no stable and affordable electricity to supply the energy needs of households and companies.

The Philippines also suffered power outages of about four hours a day on average sometime in 1991-92 and it resulted in a lot of economic and political instability. What the new administration at that time did was to get some private power companies to produce electricity at the soonest possible time at high rates with long term contract. Expensive electricity from power barges were brought in within months. Power black outs were slowly addressed but electricity rates have increased.

The public adjusted to the higher electricity bill per kWh and made some adaptations like energy conservation and using more efficient and low wattage bulbs. Shops and companies that must remain open and lighted for many hours a day have no choice but endure the higher monthly electric bill. Later  the power outages slowly disappeared. Besides, such rates are still lower compared to buying and maintaining power generator sets that are not only noisy but also very costly as they are powered by gasoline or diesel.


From an outsider looking in, here are some lessons that may be considered by the Nepal government and other sectors of society.

One,  facilitate and hasten more power imports from India especially those from coal power plants. Coal  is generally cheap and supply is stable. This will require building more transmission lines from India to Nepal.

Two, deregulate power rates. Let those who can afford to pay higher electricity rates in exchange for more stable supply do so, whether imported from India or locally produced. This will encourage faster construction of more power generation plants and transmission lines. Those who can afford higher rates from new power plants will get out, partially or fully, of the old power plants, leaving the latter some respite to serve the poorer sectors that want the old, cheaper rates.

Three, privatize some power plants that produce more losses than revenues for the government, sell to private power companies in a competitive bidding. Such privatization should be coupled with industry deregulation, at least the power generation sector, to encourage more competition among various players.

Four, reduce the requirements, bureaucracies, taxes and fees for companies putting up new power generation plants and transmission lines.  Invite more power supply companies from many countries to enter Nepal and put up more power generation and transmission infrastructures over the medium- to long-term.  Norwegian and other Scandinavian power companies are generally efficient producer of hydro power plants as they are largely dependent on hydro power from huge amount of water from melting ice after winter. Nepal can benefit from their expertise and technologies in this field.

Finally, entertain the possibility of getting nuclear power as this is a cheap, stable and generally safe power source. As of end-2011, percentage dependence on nuclear power from the total energy needs of these rich countries were: France 77.7 percent; Belgium 54 percent; Switzerland 40.8 percent; Sweden 39.6 percent; S. Korea 34.6 percent;  USA 19.2 percent; Japan 18.1 percent; UK 17.8 percent; Russia 17.6 percent. See  http://www.world-nuclear.org/info/reactors.html.

Hydro-dependent Norway buys power from Sweden during winter when rivers and lakes are mostly frozen and the hydro power plants are resting. After winter, Norway exports electricity from its many hydro power plants to Sweden and other neighboring countries in northern Europe.

People from many countries though, the Philippines and Nepal included, are still wary of nuclear power plants because of safety concerns. This is a scientific and engineering problem with scientific and engineering solutions, as reflected in high reliance in nuclear power by the above-mentioned rich countries.

Nepal has a huge potential for industrialization and can retain its high profile mountaineering tourism. These must be sustained if not boosted, by easy availability of stable and cheap energy.
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See also:
Busiiness 360 1: Nepal and the Philippines, November 26, 2012
Business 360 2: Free market means free individuals, December 28, 2012
Business 360 3: Fiscal Cliff and Government Irresponsibility, January 23, 2013

Friday, December 28, 2012

Business 360 2: Free market means free individuals

* This is the paper that I submitted to Business 360 for its second issue, published early this month in Kathmandu, Nepal. The publisher, Ms. Charu Chadha, is a good friend of mine.
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Free market means free individuals

Nothing in the world would attract people’s passion and attention more than individual freedom. The freedom to explore their surroundings, communities and countries; the freedom to read and express their ideas and observations. The freedom to raise a family and interact peacefully with friends and strangers. The freedom to pursue an artistic or sports or entrepreneurial activity. Or even the freedom to bum around and be lazy.

So there is great misconception when people would object to free market, fearing that markets are ruled only by giant players and corporations, of monopolists and oligopolists who have connivance with government regulators and bureaucracies. Far from it.

All markets are made of people, rich and poor, young and old, men and women, sellers and buyers, producers and consumers. Whether we talk of the labor market, capital market, housing and education market, food and healthcare market, there are producers and consumers. So when we say free market, it simply means free individuals.

The pursuit of individual freedom is an end in itself. People have the freedom to be industrious and responsible, or the freedom to be lazy and irresponsible. The freedom to be efficient and excel, or the freedom to be lousy and mediocre. Hence, people should be allowed to do what they want, including what to do with their own body, provided that they do not prevent other people from pursuing their own liberty by inflicting or threatening physical harm and violence.

The imposition of external coercion and prohibition should be kept to the minimum.  People cannot avoid coercion as it is a matter of degree. Parents coercing their children to turn off the tv and do their school assignment may look undesirable for the kids, but it is within the rights and power of parents exercising their parental freedom and responsibility for their family.

When government prohibits killing and murder, shooting and stabbing, stealing and land grabbing, rape and kidnapping, and uses its armed and coercive powers to implement this type of prohibitions, then it is expanding individual freedom as the productive and efficient people can do their work in peace.

It is the imposition of various other regulations, restrictions and prohibitions by government that ultimately limits if not kills individual freedom. If people are prohibited from starting a food or bakery shop, a beauty parlor or computer shop, unless they get various permits and certificates from different government bureaucracies first, pay various taxes and fees first, then such coercion is limiting individual freedom. Or if people are scared of honestly speaking their minds about the affairs of government and society, otherwise they might land in jails or be executed, then such coercion is limiting or killing individual freedom.

The main function, the raison d’ etre, the reason for existence, of government is to promulgate  the rule of law, the law against various crimes and aggression, and to protect private property rights and the citizens’ right to self expression. All other functions like running banks and hotels, casino and lottery, tertiary hospitals and universities, are either secondary or unnecessary.  Of what use to a person that he gets free or highly subsidized education, healthcare, housing and other services for his family, if the fruits of his labor and hard work can easily be stolen and taken away by bullies, either from the private or government sector? Or his kids can be abducted or murdered easily and justice is too far out to be rendered?

People should assume more responsibility in running their own lives, their households and their communities. Having solidarity and compassion with the less fortunate people, the victims of calamities and accidents, does not need legislation and coercion. It is within human nature and rationality, directly or indirectly, that such solidarity and charity can happen naturally and spontaneously.

By assuming more personal, parental and civil society responsibility in running their own lives, people can rightly assert that their income and savings are theirs and theirs alone. Taxation will be retained to finance a limited and lean government that is focused on doing its basic function as outlined above. One or two consumption-based taxation should be sufficient to finance government.

Where there is more responsibility, there is more freedom. The great Austrian economist and legal philosopher Friedrich Hayek advised that “Freedom and responsibility are inseparable. People who are afraid of responsibility are afraid of freedom itself.”
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See also:
Busiiness 360 1: Nepal and the Philippines, November 26, 2012
Fat-Free Econ 33: Institutions and Why Governments Fail, December 09, 2012
Lion Rock 4: Leftism and Populism by Intellectuals, November 05, 2012
Pol. Ideology 38: Central Planning vs. Free Market, October 30, 2012

Monday, November 26, 2012

Busiiness 360 1: Nepal and the Philippines

My friend in Kathmandu, Nepal, Charu Chadha, is into publication. I have met her first in Phuket, Thailand, in 2005, during the Atlas colloquium on Friedrich Hayek's book, "The Constitution of Liberty". 


Charu recently rolled out the first issue of her new mgazine, Business 360. The magazine hit the newstand last November 01 in Kathmandu and other cities of Nepal. In its facebook page, it says,  

"Business 360 is a magazine that promises to deliver on quality business news content, profiles of entrepreneurs and leaders, features on issues that matter, articles that assess and analyze policy and delivery mechanisms in the world of trade and commerce."

Charu invited me to be one of the guest columnists in her new paper, a request that I quickly accepted. I would write once a month only. So in the first issue, my first article also appeared.

Below is my article. A friend and batchmate from UPSE, Leo Riingen, who is in Kathmandu for a vacation, saw the magazine. He scanned a copy of my article, below. Thanks Leo!
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Nepal and the Philippines, Mountains and the Seas

Bienvenido “Nonoy” Oplas

Manila – Coming from a country with more than 7,000 islands and islets, sometimes called “a country of ocean and seas with islands in it”, a land-locked country like Nepal with so many huge mountains would appear like a strange world.

But It is a good contrast and an interesting perspective to study and draw comparison and lessons, geography wise. Much of the Philippines’ economy is based on the ocean and the seas – international trade, beaches and tourism, fishing and inter-island transportation. This is something that some people in Nepal  perhaps would wish to have, while adventurous people in the Philippines would also wish to see if not live near Nepal’s world-known mountains and rivers.

History wise, the Philippines has little or nothing in common with Nepal and many other Asian countries. First, we are the only Asian country colonized by Spain, for more than 300 years until 1898. Second, we are also the only Asian country, and perhaps the only country around the world, that was colonized by the US, from 1898 until the Japanese came to colonize us too during World War II.

But in recent history, we have several things in common. One, we both have Maoist Communist insurgency. The Maoist Communist Party of the Philippines (CPP) has been around for more than four decades since 1969. Their revolution has morphed from an ideology-based capture of state power via armed struggle, to extortion-based “revolutionary taxation” where some provincial companies must pay them huge amount of money, or the penalty includes burning and destruction of company properties.

Two, we both seem to have high incidence of corruption in government, from local to national agencies.  The Philippines has pioneered the “People Power” revolution and two notoriously corrupt Presidents were toppled in power via two peaceful but  huge and sustained protests, in 1986 and 2001. And still corruption is persistent until today.

Three, we seem to have both strong and politically articulate labor unions that are able to successfully lobby for rigid labor laws that tend to constrict many small and medium enterprises (SMEs) and drive many of them to go to the informal sector.

Four, we both have high percentage of the population living outside the country. Out of the Philippines’ estimated population of 95 million people, about 10 million are residing, studying and working in many countries around the world. While out of Nepal’s estimated 27 million population, nearly two million are living and working abroad.

There should be many other similarities, like the single-digit inflation rate, and the level of government debt as a percentage of the economy’s gross domestic product.

Indicators
Country
2005
2010
2012 Est.
PPP GDP per capita,
Nepal
969
1,269
1,388
US $
Philippines
3,061
3,920
4,214
Investments,
Nepal
26.7
35.8
32.4
% of GDP
Philippines
21.6
20.5
20.8
Inflation rate,
Nepal
4.5
9.5
7.8
%
Philippines
7.8
3.8
3.4
Government Debt,
Nepal
51.9
36.1
34.0
% of GDP
Philippines
58.2
42.2
40.1

Source: IMF, World Economic Outlook, April 2012 Database

The rather high degree of the population that live and work abroad is an indicator not so much that the governments of both countries are great believers of free market, free trade and free mobility of people and capital. On the contrary, these governments seem to be too bureaucratic if not paranoid, of free trade and free mobility of capital, especially foreign capital. So the locals do not have enough jobs and opportunities for entrepreneurship, so they went abroad to seek a better future.

The mountains and the seas represent huge tourism and economic opportunities for both countries. There is only one country in the world that has Mt. Everest and many other huge mountains, while there are only few archipelagic countries in the world with thousands of islands, white sand beaches and dive spots that can lure tens of millions  visitors and tourists, both local and foreign.

The mountains and the seas represent deep individual aspirations: to scale and reach high ambitions and hopes, and to explore the wide expanse of the planet where both personal and economic opportunities are boundless.

This is the big challenge for the people of both Nepal and the Philippines. To limit the restrictions and unnecessary regulations and coercion of the state, so that the average individuals and citizens can scale their own mountains and explore their own niche in this wide and huge planet.