Friday, August 07, 2020

BWorld 446, More water and investments, less political whims

* My column in BusinessWorld last July 30, 2020.

During President Rodrigo Duterte’s State of the Nation Address (SONA) 2020 last Monday, he lashed out again at the Lopezes and other conglomerates and companies:

1.) Telecom: “… if you are not ready to improve …I might just as well close all of you and we revert back to the line telephone at kukunin ko ‘yan, i-expropriate ko sa gobyerno (and I will get them, I will expropriate that for the government).”

2.) Innovator pharma: “…Executive Order No. 104, which imposed ceilings on the retail prices of at least 133 drugs and medicines…”

3.) Water concessionaires: “… I would insist that you pay the billions and billions that you collected. For example, water treatment. O, nandiyan sa kontrata (It is in the contract). It’s in the billing, they are being collected since 1997. Ilang bilyon na nga wala ni isa (How many billion and there is not even one), not even a faucet was built for a water treatment facility.”

4.) Electricity: “This is the oligarchy that controls the Philippines by… taking control of the water and the electricity and power.”

These four sectors alone would involve tens of billions of dollars of private investments, local and foreign, to put up and maintain. By threatening them with government expropriation and imposing price controls, the President is sending a message to the international investment community that he can arbitrarily change rules midway at anytime and penalize certain businesses.

Two pieces of investment data here. Foreign direct investments (FDI) inward stocks to reflect yearly inflows minus outflows over time, data from the UN Conference on Trade and Development (UNCTAD) World Investment Report (WIR). And stock market capitalization, data from the World Federation of Exchanges (WFE). Until today, the Philippines is the least attractive to FDIs and portfolio investments among major economies in the Asia-Pacific (see the table).

On a per capita basis, the Philippines has the lowest in FDI inward stock and third lowest in stock market capitalization. This is not something to brag about and the President should be aware of the implications of his whimsical pronouncements.

The Maynilad and Manila Water concessions in particular — the President has demonized them since December 2019 and arbitrarily canceled the contract extension from 2022 to 2037. The privatization of Metropolitan Waterworks and Sewerage System (MWSS) in 1997 into two areas was due to an admission by the government that it did not have the financial and technical resources to significantly improve water supply delivery to the people of Metro Manila and nearby cities.

Of the estimated eight million customers in 1997, only 26% had 24-hours water supply, and non-revenue water (NRW) due to leaks and theft was 62%. By 2019, water customers had doubled to 16.5 million and 96% of them have 24-hours water supply, NRW has declined to only 19%, meaning higher water pressure for consumers. Plus 100% sanitation coverage and over 50 new wastewater treatment plants which brought waste water coverage from almost zero to 30% of the metropolis. The capital expenditures (capex) to make these drastic improvements should be at least P300 billion.

And more investments will be needed because of two big challenges: rising urbanization and customer base, and stricter environmental regulations. The new Department of Environment and Natural Resources standards for biological nutrient removal are more stringent than the European Community standards. The estimated costs to comply with these new standards is around 30% on both capex and operating expenses.

And why should the contract extension to 2037 proceed, and not be arbitrarily canceled and abrogated?

Because in the last rate rebasing exercise by the MWSS Regulatory Office, the required combined capex of both concessionaires to complete the targeted water and sewerage systems by 2037 would amount to over P465 billion. The Clean Water Act plus the Supreme Court Mandamus have jointly raised the requirement from 50% to 100% sewerage coverage.

Government is now borrowing left and right to re-stimulate the economy. It is not prudent to borrow even more if it will re-nationalize the water sector in the metropolis and do the huge capex. And why should taxpayers from northern and southern Luzon, Visayas, and Mindanao, pay for the continued water supply improvement of people in Metro Manila?

President Duterte should respect the rule of law, respect the sanctity of contracts even by the previous administrations because future administrations are also obliged to honor and respect the contracts that his administration has entered into during its term.

See also:
BWorld 443, Vaccine to avert more IPD, pneumonia deaths, July 19, 2020 
BWorld 444, Economic hardships worse than virus risks, July 25, 2020 
BWorld 445, Virtue signaling in energy, August 02, 2020.

The PH's Q2 2020 GDP meltdown

The Philippines experienced technically an economic meltdown in the second quarter (Q2) this year with a -16.5% GDP contraction, the lowest since 1981. The country is also in a recession having a two consecutive quarterly contraction -- along with SG, HK, and many EU countries. 

The virus did not cause this. All countries have their own share of virus infections. It was the PH government's hard lockdown policies that started in March 16 up to the present. See 
Covid 16, Philippines having the strictest lockdown policies in the world (July 28, 2020). 

In Europe, notice also that no-lockdown Sweden has (a) escaped contraction in Q1, and (b) lowest contraction in Q2 compared to its hard-lockdown neighbors.

Here's the PH's GDP quarterly performance, data from the PH Statistics Authority (PSA).

The endless, indefinite lockdown should stop. Mr. President, open up the economy.

We can learn from Sweden -- no lockdown, only the oldies and immuno-compromised people were protected and quarantined, the healthy and young can go out anytime. Shops and schools, restaurants and bars, churches are open; trains and buses go. Social distancing is limited to 50 people max in a gathering.

Tuesday, August 04, 2020

Covid 17, Hard lockdown Europe vs no lockdown Sweden, any difference in death trend?

Six European countries were heavily affected by Covid-19 or Wuhan virus: Belgium, France, Italy, Spain, Sweden and UK. As of August 03, 2020, they have 460+ or higher deaths per million population (DPMP). Russia and Germany also have high cases but their DPMP are low, only 98 and 110, respectively.

Of the six countries mentioned, five have heavy lockdown policies while Sweden has no lockdown. Below are the charts of daily deaths of the six countries from March to August 03. Data from 

Question 1: Can you guess which of them is Sweden?


You got or guessed Sweden?

The answer is #6, the last.

The countries from #1 to #6 and their respective DPMP are: Belgium 850, UK 680, Spain 609, Italy 582, France 464, Sweden 568.

Question 2: Any difference in trend with the five high-lockdown countries with no-lockdown Sweden?

None. They all have similar trend of declining, low deaths, even zero on some days, in recent weeks.

Two lessons we can derive from the above data. 

One, lockdowns did NOT help in containing the spread of the virus. What helped was protecting the oldies and immuno-compromised people because they have the weakest immune system in the population to withstand the virus.

Two, herd immunity threshold (HIT) may have been attained already in Europe, Sweden in particular.

The Philippines (only 19 DPMP) should stop this continuing and indefinite lockdown policy, started March 16, ECQ-GCQ, MECQ August 4-18. These lockdowns are "guided by science" kuno. In my estimate, it's 50% political science, 30% military science, 20% medical science.

Update: European Mortality Monitoring (MOMO), until July 2020.

The six countries again:

Sunday, August 02, 2020

BWorld 445, Virtue signaling in energy

* My column in BusinessWorld, July 23, 2020.

Virtue signaling is the process and habit of taking a conspicuous but generally unproductive action supposedly to advance a good cause but actually to show off the “moral supremacy” of the person or group  compared to the rest of the population.

In the energy sector, it is the habit of some people and groups to tell others that they are anti-environment and anti-planet if they do not demonize fossil fuels, especially oil and coal, and embrace variable renewables like wind and solar.

While this behavior may be understandable in industrialized and rich economies which have ample power capacity, this behavior is counter-productive for poor economies with thin power capacity. The Philippines is a classic example of this and yet it is constantly and endlessly bombarded by many virtue-signaling groups and multilaterals that it must “decarbonize” as soon as possible.

Let us review some hard data. Some definitions and conversion factors: One Exajoule (EJ) = 23.88 million tons oil equivalent (mtoe), or 277.78 tera-watt hours (TWH). And one Gigajoule (GJ) = 23.88 kilos oil equivalent (koe), or = 277.78 kwh.

Of the countries and economies listed in the table on a per capita or per person basis, the Philippines has the smallest CO2 emissions, the smallest primary energy consumption (PEC), and among the smallest coal consumption. PEC includes all energy use from power and electricity to transportation, household and commercial cooking (see the table).

So what is the point in endlessly bombarding the Philippines public and government energy officials to hasten decarbonisation and quitting oil-coal usage, and push the country towards more energy poverty and economic underdevelopment?

Take these two stories in BusinessWorld of lobbying by groups for more decarbonisation:

1. “Renewables board studying changes in power contracting rules” (July 14, NREB planning to target 35% share of renewables to total power needs by 2030).

2. “Asia-Pacific must set loftier electrification goals — ADB expert” (July 20, talking primarily about solar).

I have also read and heard in some public lectures some officials of a big gas power company here demonizing oil-coal for their high greenhouse gas (GHG) emissions of CO2, without admitting that gas as fossil fuel is also a significant GHG emitter of methane. Even anti-coal campaigner Greenpeace also turned anti-gas, arguing that gas has high methane emission.

Meanwhile, I attended the Market Participants Update (MPU) organized by the Independent Electricity Market Operator Philippines (IEMOP) on July 3. The market participants are the various private players in the sector, the 279 members of the Wholesale Electricity Spot Market (WESM) like the transmission system operator, generating companies (gencos), distribution utilities, and electric cooperatives. Plus 1,581 participants of the Retail Competition and Open Access (RCOA) like retail electricity suppliers (RES) and contestable customers.

WESM and RCOA are two of the most beautiful provisions of the EPIRA law of 2001 that directly benefit electricity consumers. WESM ensures fierce competition among gencos and RCOA ensures competition in electricity retail and distribution. And that is why the EPIRA law should not be junked or tinkered with as proposed by some groups that irrationally advocate re-nationalization and state re-monopolization of the power sector.

I requested updated data from the IEMOP and here are some interesting trends in the Luzon-Visayas grids as a result of ECQ-GCQ policies.

One, the average electricity demand from April-June 2020 has changed by an average of -1,578 MW or -14.7% over April-June 2019. I see this figure as an indicator of a -10% to -12% GDP contraction by second quarter 2020.

Two, average prices (ESSP) over the same quarters have changed or declined by P5.59/kwh.

Three, for July 1-20, 2020 vs July 1-20, 2019, the decline in electricity average demand has tapered to -366 MW or -3.5% while prices (LWAP) have declined by P2.64/kwh.

The main lesson here is that if people want cheaper electricity and stable power supply, we should strengthen the spot market system, expand WESM to Mindanao soon, maintain the “energy-agnostic” policy of Secretary Alfonso Cusi and not promote energy favoritism and cronyism for variable renewables.

See also:

Saturday, August 01, 2020

PSA updated data on PH death statistics

Kudos to the Philippine Statistics Authority (PSA) for updating the country's death statistics until June 2020. PSA Chief, the National Statistician and Civil Registrar General, is Dr. Dennis Mapa (BS Stat, MA Econ, MS Stat, PhD Econ, all from UP Diliman). Dennis is a friend and the last two weeks I was bugging him when they will release the updated PSA vital stats (births, deaths, marriages, etc). The death stats especially because of this persistent hysteria over the Wuhan virus -- that there are more diseases and deaths now because of the pandemic.

I often use PSA data in my BWorld column (GDP, inflation, employment, trade, deaths, etc.), Dennis sees it and he's very kind to update me on the death stats. Yesterday morning he pm me quickly after the numbers have been posted in their website. I thanked him for the heads up.

Now the data. Is the general assumption and belief that there are more deaths this year than in recent years, true?

Bad news for the pandemic hysteria movement and the hysterics, the answer is No. At least from these 2020 preliminary data below. The columns on variation or deviation from 2020 I just added and not in the PSA official excel file.

I also told Dennis that I'm interested on the (1) causes and (2) demographics of death stats, among others. He said that such breakdown will follow soon. Thanks bro.

As I argued in my some of my column on the Covid/Wuhan virus subject, people count only Covid cases and deaths but not hunger- and poverty-related sickness and deaths because of the indefinite, no timetable lockdowns. Metro Manila has been on GCQ (I call it General Colonel Quarantine) since about mid-May until at least August 15.

ALL the scary and hysteric scenarios of the pro-lockdown indefinitely "while cases remain high" groups are wrong. No massive deaths by tens or hundreds of thousands, no overwhelming of the country's healthcare system. There is only overwhelming alarm, panic and hysteria.

We should have ended this indefinite lockdown. Since end-April or May.

Tuesday, July 28, 2020

Covid 16, Philippines having the strictest lockdown policies in the world

The Philippines has the strictest lockdown policies perhaps in the whole world. And this is the main reason for the terribly limping economy.

I got data from Google Covid-19 Community Mobility Reports as of July 21, 2020. The report covers six areas measuring the degree of restrictions from the baseline day, the median value from the 5week period Jan 3 Feb 6, 2020. These areas are Retail and Recretation (R&R), Grocery and pharmacy, Parks, Transit stations, Workplaces, and Residential. For brevity purposes, I use the figures in only three – R&R that covers restaurants, malls, libraries, museums, movie theaters; Transit that covers public transportation like buses, trains, taxi, jeepneys; and Workplaces for obvious reason.

GDP growth and contraction (negative change) data are added to show economic trend of countries. I arranged the countries on four blocks of major economies by region: ASEAN-6, rest of Asia-Pacific, North and South America, and Europe. Comparing the Philippines with these countries, the result is interesting, or depressing (see the table).

Sources: (1) Restrictions,; (2) GDP growth, IMF WEO 2019;  Trading Economics.

Google likely does not trust China figures so it did not show restrictions data for that country.

For GDP growth decline from either full year or fourth quarter 2019 to first quarter 2020, the Philippines is second to China in having the steepest decline.

Many countries and governments imposed less restrictions, gave more freedom for their people while they manage the spread of the virus. In the process they have not unnecessarily choked their economies.

The results so far in Europe show that heavy lockdown countries and no-lockdown Sweden have similar flattening of death curves through time. If we keep that in mind, we should realize that we need to relax these strict and hysteric lockdowns. 

Meanwhile, a good article, 

Open up the economy, wide and clear.

See also:
Covid 13, Hard lockdown and hysteria caused the 17.7% unemployment rate, June 09, 2020 
Covid 14, Selected articles by Mahar Mangahas on the pandemic, July 05, 2020 
Covid 15, False positives and Sweden success in "flattening the curve", July 18, 2020.

Agenda One News, Part 5

Another bravado-filled State of the Nation Address (SONA) by President Duterte yesterday. Some good news but many bad news, anti-business pronouncements.

This morning I was the second of three guests of Cito Beltran in his program, "Agenda", One News, Cignal TV. Here's the recorded fb stream, my interview at around 40 minutes mark, 

PRRD talked about expropriating the two telecoms, attacked also the M.Mla water companies, electricity, etc. I said the implications on business will be negative. Yesterday even before the SONA, PH has the worst stockmarket performance in AsPac.

For 2022 elections, PRRD team can no longer campaign on anti drugs, anti corruption platform. Palpak  failure, he implicitly admitted it, in his words,

"...illegal drugs, hiding in the shadow of COVID-19, have stepped up their activities. The amount of shabu valued at millions of pesos seized…
drug syndicates continue to operate just like the countries of Colombia, Mexico, and it is being played inside the national penitentiaries....
The corrupt, the grafters and the influence peddlers also take advantage of the fear and confusion that the coronavirus generates...."

To win, they will use populist anti oligarchy, anti multinationals platform, like Chavez-Maduro in Venezuela. Explicitly attacked the Lopezes, Ayalas, MVP. Who's next? Plus drug price control of multinational pharma. New owners of ABS frequencies and assets will be on their side.

On anti-Covid vaccine and EO 104 or drug price control that he discussed in the SONA, I will post a separate blog article about it.

Meanwhile, I was also interviewed by Cito last July 3, mainly on the economic impact of continuing, indefinite lockdown (hard or mild) in the country. I don't have any screenshot of the interview, also the link, sorry.

See also:
Agenda, One News, Part 2, July 04, 2019 
Agenda, One News, Part 3, August 30, 2019 
Agenda, One News, Part 4, February 11, 2020.

Saturday, July 25, 2020

BWorld 444, Economic hardships worse than virus risks

* My column in BusinessWorld last July 16, 20202.

The Philippines needs to open up the economy fast and not prolong the lockdown, hard or mild. It has some of the worst economic indicators compared to its Asian neighbors.

First, in industrial/manufacturing production. The country has the worst, steepest decline in May 2020.

Second, in the stock market. The country has the worst performance both in the year to date (Ytd, Jan. 1 to July 14) and the past 52 weeks.

Third, in GDP growth. While it had the second highest growth next to Vietnam in the fourth quarter last year (Q4 2019), it experienced the second deepest decline by Q1 2020 next to China. Bad economic performances despite having one of the lowest death rates from COVID-19 in the world (see the table).

Two ASEAN countries reported GDP growth or contraction in Q2 2020: Vietnam with 0.4% and Singapore with -12.6%. This is deep for Singapore.

The Philippines’ GDP data for Q2 2020 will be reported on Aug. 6 and my own projection is -10% or deeper. I based this number on the deep decline in electricity demand in the Luzon-Visayas grids from April to June vs. the same months last year, of -14.7%. The data on monthly megawatt (MW) consumption I got from the Independent Electricity Market Operator Philippines (IEMOP). They conducted the first Market Participants Update (MPU) for 2020 on July 3.

If we open up the economy much wider and clearer, will we not court more COVID-19 deaths?

No. For two reasons. One, as shown in the above table, the feared explosion of death as expected by many people did not happen after five months of scare and alarm. Our 15 deaths per million population is just 1/7 of Germany, 1/28 of the US, 1/44 of the UK, or just 1/5 of the global average of 75.

Two, with or without this pandemic, we expect deaths as part of nature. From the Philippine Statistics Authority (PSA), average deaths per day: 1,591 in 2016; 1,587 in 2017; 1,618 in 2018; 1,658 in 2019 (January-September).

The 2020 projection is 1,684 per day. COVID deaths from March 11 (the first Filipino death) to July 14 is 1,603 over 125 days or 13 people per day. It is possible that with comorbidity, many of the COVID fatalities are largely due to cancer, pneumonia, heart or cardiovascular diseases and the patient got severe virus infection later because of their weak immune system but were registered as COVID-19 deaths.

The economic hardships have been severe so far and we expect the hardships to continue because of the indefinite, no timetable lockdown. People count the COVID-19 cases and deaths but they do not count the poverty- and hunger-related diseases and deaths.

It is true that the virus can evolve and mutate but it is also true that humans also adapt and mutate. On average there are 38 trillion bacteria and 380 trillion viruses in each human body (See “Meet the trillions of viruses that make up your virome” by David Pride, Associate Director of Microbiology, UCSD, and Chandrabali Ghose, Visiting Scientist, The Rockefeller University, Adding a few mutated viruses will not cause severe imbalances in our biological make up.

Open up the economy. Wide and clear. Those scared can wear double masks, double the recommended six feet of social distance to 12 feet, stay home, take the “better Praning than Libing” attitude (“better paranoid that buried”). These are individual actions and are 100% fine. But the healthy and not scared should be allowed to go out anytime anywhere, observing basic hygiene, mask-wearing, and minimum distance of three feet.

See also:
BWorld 441, Decline in pneumonia incidence, June 30, 2020 
BWorld 442, GDP, CO2 emissions, and coal-gas consumption, July 06, 2020 
BWorld 443, Vaccine to avert more IPD, pneumonia deaths, July 19, 2020.