Sunday, July 21, 2019

BWorld 350, Logistics, infrastructure and the consumers

* My column in BusinessWorld last Thursday, July 18, 2019.

Last Monday, upon the invitation of the Department of Trade and Industry (DTI), I attended the 2nd Logistics Services Conference and Exhibition at the Philippine International Convention Center. I was invited as media and I attended the press conference led by Department of Trade and Industry (DTI) Secretary Ramon Lopez, flanked by leaders of various private industry associations and government officials from the Philippine Economic Zone Authority, the Technical Education and Skills Development Authority (TESDA), the Export development Council the International Finance Corp. ), and the DTI.

I am unfamiliar with the major issues of this sector, hence my curiosity about the conference. I was also intrigued by the World Bank’s Logistics Performance Index (LPI) so I checked that biennial report. The index is composed of six factors — Customs, Infrastructure, International shipments, Logistics quality and competence, Tracking and tracing, and Timeliness.

I extracted from the Excel database the numbers for major Asian economies for the years 2010, 2014, and the latest report 2018. Germany is included in this list because it is the consistent No. 1. The Philippines has a bad trend — a declining score and declining global rank out of 160 countries and jurisdictions covered. In particular, its rank in Customs has fallen from 47th in 2014 to 85th in 2018. The good news is that its rank in infrastructure has somehow improved (see Table).

I know Secretary Mon Lopez — we are both members of the UP School of Economics Alumni Association and I spoke with him a few times. I know that he is solutions-oriented as the private sector and business competition had been his home for many years before joining the DTI.

Listening to him and many other speakers at the press conference, I was surprised that while it was the DTI that led this conference, many of the issues that cause headaches to players in the sector are outside the mandate and core concerns of DTI. Like lack of drivers for trucks, forklifts and heavy equipment (TESDA training), port congestion (Customs bureau, Department of Finance), truck ban and numbers coding ban (Metropolitan Manila Development Authority), long period to get vehicle franchises (Land Transportation Franchising and Regulatory Board, Department of Transportation), etc.

During the open forum, I asked if the advocacies by various stakeholders cover the wider macro-economic and intra-industry reforms like airlines and shipping lines liberalization, seaports and airports modernization, tollroads expansion nationwide. Secretary Mon said they do, that the administration’s Build, Build, Build programs address these infrastructure challenges, and investment liberalization measures are being advanced.

My impression now is that the DTI has become a sort of intermediary for many government agencies that tend to over-bureaucratize logistics players like truckers, freight forwarders, cargo handlers, airlines and shipping lines, to temper their itch to demand too many requirements and simplify these instead.

This should extend to infrastructure development. Too many permits and requirements — from local governments to various national agencies — to build or expand seaports, airports, tollways, power plants, dams and water sources, etc.

The goal of policy reforms should be the betterment of the consumers. More goods and services at lower cost and prices, reduced waste due to faster mobility of commodities from manufacturers and traders to end-users. Less government bureaucracies and more private competition, these will favour the consumers. Happy to see the DTI leading this.

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On Vaping

These are some of the slides by Dr. Colin Mendelsohn during the 7th ALSFC and 17th WTA Conference in Sydney last May 24-26, 2019, panel on Plain Packaging & Tobacco Harm Reduction. Dr. Mendelsohn is a tobacco treatment specialist and Conjoint Associate Professor, School of Public Health and Community Medicine at the University of NSW, Australia.

Then I just saw this article by a friend, Nick Sallnow-Smith, former Chairman of the Lion Rock Institute, Hong Kong. Then a recent paper by Peter Wallace. Reposting portions here.

Live and Let Live
Nick Sallnow-Smith  31/10/2018

… Let’s take a current example in Hong Kong; the CE’s proposal to outlaw “vaping”. The reaction from commentators in the media, both here and abroad, typically centres on the technical details. Is vaping “safer” than smoking? Does the damage from tobacco come from the tar, not the nicotine? Might it lead to youngsters moving on to cigarettes later? Shouldn’t we have years of testing to establish whether it is “harmful”. (No doubt there will be many arguments about what “harmful” means in this context.)  And so on.

What none of this does is apply the social test of my title. Why not live and let live? If someone wants to vape, what basis is there in a truly free society for stopping them? Many will argue that “we” (who is that group?) should protect the “vapers” from themselves. But it is none of the business of anyone to “protect” other citizens from their own decisions. I possess my own body (otherwise I am a slave), why therefore should I not be free to inhale anything into my body that I choose?  It is the height of arrogance for anyone to claim that their own judgment about whether vaping is a “good thing” or not, is a superior judgment to that of the person they are, in effect, judging. Yet few people discuss the matter in “live and let live” terms, rather they are keen to explain why they are in favour or against the ban, without even considering whether it is anyone’s business except the”vaper”.

In fact the vaping debate is even worse than that. The proposal has naturally triggered some eager souls to claim that smoking tobacco should also be banned, because obviously tobacco smoke is more harmful than vaping. In other words, the vaping proposal did not so much trigger a debate about whether government bans too much, rather people look for more activities to make illegal! This is often the consequence of a highly regulated society. Few resist the existing level of regulations; most people simply argue for more. Assuming the position of the “anointed”, they propose that any set of activities that they happen to dislike in others should be banned (for the benefit of others of course). The list of activities ripe for regulation is endless.

One great benefit of a “live and let live” approach (which Hong Kong used to enjoy), apart from the personal freedom that it would allow, is that it would neutralise ( “vapourise”?) much of the political dissension in our city. So many political issues arise from one “anointed” group attempting to impose their policy ideas on the rest of us. Whether this involves the public school curriculum, regulating cyber currencies, imposing a minimum wage, forcing property owners to sell what they do not wish to do so; to select just a few of recent debate,  the inevitable consequence of denying free market choices in any of these areas is political infighting over which “policy” is to be imposed, when in fact no policy is needed.

I suggest that all of us, when hearing of yet another “public policy” proposal, apply the following test; why not “live and let live”?

Smoking kills, vaping doesn’t
By: Peter Wallace  / 05:08 AM July 11, 2019

I know, my two best friends died an agonizing death over it. For you kids, it is not cool to start smoking, it’s stupid.

For those who smoke: Stop. But if you can’t, and it is an addiction that is very hard to forego there’s a much less harmful alternative: Vaping. And that’s what e-cigarettes are all about, convincing smokers who can’t stop to shift. They are not, and shouldn’t be allowed to be designed to attract new smokers, the young. This, to me, is the most important point. E-cigarettes are a much safer alternative for those who must smoke. And government should encourage smokers to shift to vaping. Not make it just as different to do.

E-cigarettes are far less harmful than cigarettes. They heat the tobacco, not burn it and it’s the burning that causes all the damage. Tests of cigarettes versus e-cigarettes show a 90-95% reduction in exposure to toxins. Tests have been conducted by the World Health Organization (WHO), the USFDA, Health Canada, Public Health England and other countries. They all show the same thing vaping reduces harmful chemicals by 90% to 95%. But tests are still on-going so more certainty can be expected. So I can’t quite understand why the same severe restrictions as to where you can smoke are being applied to vaping. An e-cigarette only emits steam with negligible other things. Vaping affects only the smokers, and that in a minor way, so why restrict it.

The Cigarette smoke from burning creates some 6000 chemicals a number of which cause the illnesses and death smokers suffer. Without the smoke those chemicals won’t be created...

Thursday, July 18, 2019

BWorld 349, Solar Para sa Politika, Part 3

* My article in BusinessWorld on July 16, 2019.

Among the promises of the Solar Para sa Bayan Corp. (SPBC) franchise bill now awaiting President Rodrigo Duterte’s signature are 24/7 electricity in far away villages, and cheaper electricity because the sun’s rays are free.

True, the sun’s rays are free, but the solar panels, the power conditioning unit, main panel, AC and DC disconnect, other components are not free. Transportation and installation in far away areas and connection to the grid are not.

Add to that the cost of a battery to extend the power for few hours at night, plus the cost of backup diesel gensets since solar does not generate power at night and hardly produces power on days with thick clouds and rain. Solar components plus battery plus gensets cannot be cheap and power stability is not assured.

In a site inspection by the Philippine and Rural Electric Cooperatives Association Inc. of some barangays in Occidental Mindoro served by SPBC in November 2018, they found that residents experienced an average of two- to three-hour brownouts plus frequent on-and-off power outages every day, resulting in damaged appliances, and that the rate charged started at a low P2.34/kilowatt hour (kWh) which later rose to around P11/kWh.

Instead of favoring one particular energy firm, we need more big conventional power plants. Compared to more stable economies in Asia, the Philippines has among the lowest installed power capacity and, by extension, among the lowest electricity generation. Our capacity in 2016 was just one-half of that in Thailand, Vietnam, and Taiwan (see table). 

People who want “green energy” and do not want to use electricity from fossil fuels without putting up a rooftop solar system (and cut or murder nearby tall trees that provide shade and reduce solar output) can actually get their wish via the retail competition and open access (RCOA) provision of the EPIRA (Electric Power Industry Reform Act) of 2001 (RA 9136). Contestable customers can choose their own licensed retail electricity suppliers (RES) and specify that they should be provided only renewable energy like hydro, geothermal, biomass, solar, or wind. The price might be higher but they get what they want. This will also send a signal to power investors to develop more renewables because customers are willing to pay the higher price without the need for subsidies from all electricity consumers nationwide, without need for new legislation.

We need more market competition in power generation and retail supply. We need more big power plants, conventional and renewables, more gencos and let them compete for customers.

We should not have enacted a law that gives a guaranteed price for renewables for 20 years via feed in tariff (FIT) as this violates market competition and disempowers consumers — they cannot say “No” to additional charges like the FIT-Allowance slapped into their monthly electricity bill for 20 or 25 years.

The law is there — RE Act of 2008 (RA 9513) — and it resulted in the upward price distortion in energy prices.

We should not add more energy distortions by having that “Solar para sa Politika” franchise bill become a law. President Duterte should veto it.

Finally, the Supreme Court should lift its TRO on the Energy Regulatory Commission resolutions on RCOA’s implementation. The threshold for contestable customers should have been down to 500 kilowatts or lower by now. The number of competing RES should be plentier by now. And the choices of consumers for their power generators and suppliers should be many, not few and restricted.

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Wednesday, July 17, 2019

Classless society because of far away storm

Local government units (LGUs) in M. Manila, other provinces and regions, are silent communists -- they want a "classless" society, as frequent as possible, with or without typhoons. Lousy. Should be among the results of climate alarmism. No rain or more rains, no flood or more floods, no cold or more cold, be alarmed, be scared, and we send more money to government and UN.

Today, NO storm signal in Metro Manila yet classes are suspended in ALL levels, kinder to college, wow. People are scared of rains? But June to October is rainy season, yearly, since thousands of years ago. July to Sept esp are months of bad rains and storms. If people are scared of rains, then classes should open in October or November, not June or July or August.

The typhoon is in Cagayan, hundreds of kilometers away from M.Manila, and a "classless society" is declared today all over M.Manila.

The old and existing rule on class cancellations:

Not even signal #1 in M. Manila and classes in ALL levels are suspended. One more reason why governments should not expand. Their expertise is social paralysis. Things should not move unless they give permits. Meanwhile a neighbor is drying clothes outside, no rains, not even shower, since around last midnight.
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Sunday, July 14, 2019

China Watch 37, US is winning the trade-IPR conflict with China

As of last Friday, US' DJIA was at all-time high at 27,332, Nasdaq and S&P 500 also all-time high. In the past 3 years, DJIA is +50%, Nasdaq +65%; China's Shanghai is -2%, Shenzhen -22%. 

In Nov. 4 2016, days before the US Presidential elections, Shanghai was +5%, Shenzhen was +4%.
Conclusion -- Trump is good for the US, bad for China.

Many Trump-haters will be unhappy with this fact, they argue that Trump is bad for the US economy, bad for US agri and stocks, that he should have not "started the trade war" with their (silently beloved) China. But investors on both countries speak louder than these haters. Investors speak with their money and investments, not just with saliva.

Related to the SCS or WPS territorial conflict, Trump will prevail over Xi Jinping. Frequently sending his battle ships in the area, inviting Australia, UK, Japan to do the same, is an outright statement that the area is international waters, not China waters. They are on the side of the weaker SE Asia countries.

On the lesser known US vs OPEC+Russia oil war, Trump also wins. OPEC+Russia want oil to be in $70 a barrel or higher, they jointly cut their output by 1.2 million barrels per day (mbpd), extended till March 2020. But US oil output is rising, only 8.8 mbpd end Obama period, this week 12.3 mbpd. Trump and US want cheaper oil, OPEC+Russia want expensive oil. Duterte too via TRAIN law.

Some US academics like Martin Jacques will be unhappy with that chart too. He keeps spreading the fake news that "US is now a declining power. The Soviet Union failed: China is the antithesis of failure."

I have personally heard him say that in Jeju, S. Korea forum last May 30, and he repeats that in his articles. He's anti-US, pro-communist China. Which is the obvious loser in the ongoing trade/IPR conflict with the US. Loser guy.

A good lesson here -- if you are a US ally, you will likely benefit from its current trade/IPR conflict with China. Like Vietnam, Malaysia, Myanmar, other ASEAN countries. A number of companies which are leaving or already left China are now in Vietnam, Myanmar, Malaysia.

If President Duterte continues with his a__ licking of the Beijing govt, Trump might find a way to tell US consumers to minimize buying from PH.

Meanwhile In China, Beijing Is Losing Control Of The Economy
by Tyler Durden  Sat, 07/13/2019 - 15:15

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Saturday, July 13, 2019

BWorld 348, Private airports and government airport authorities

* This is my article in BusinessWorld on July 11, 2019.

As argued in previous columns, I advocate integrated Public–Private Partnership (PPP) — construction then Operations and Maintenance (O&M) all done and financed by one private entity — and not hybrid PPP — construction via foreign loan or national budget, O&M by local private entity. I like the development in some provincial airports that become bigger, more modern international airports, privately owned and managed, and helping attract more foreign tourism, investments and commerce.

I saw a paper, “Airport ownership, economic regulation and financial performance” (2016) by the Airports Council International (ACI). (See Table.)

ACI made four policy recommendations:

• No “one size fits all” approach to airport ownership;
• Create economic incentives and guarantee consistency in regulatory frameworks;
• Evidence-based policy making, and
• Fostering entrepreneurship and value creation.

Good. Private ownership and management of airports is consistent with attracting more private investors and traders, local and foreign.

Among the big, modern and privately owned airports in the Philippines are the Mactan-Cebu International Airport (MCIA) and, soon, the Davao or Francisco Bangoy International Airport (FBIA).

There are just some twists here. While the international airport is privately owned for 25 or 30 years or longer (after which it will be government-owned), there are government agencies that will “control, supervise, construct, maintain, operate and provide such facilities or services…”

These agencies are the Civil Aviation Authority of the Philippines (CAAP) for other provincial airports, the MCIA Authority (MCIAA, RA 6958 enacted in July 1990) and, soon, the Davao International Airport Authority (DIAA) under SB 2168 and waiting for President Rodrigo R. Duterte’s signature to become a law.

This seems confusing because the private owners of the new international airports are supposed to have overall control and management of the passenger terminals, the runway and plane taxi bay, etc. But there are government agencies that, on top of the functions quoted above, have the power to:

“Acquire, purchase, own, administer, lease, mortgage, sell or otherwise dispose of any land, building, airport facility, or property of whatever kind and nature, whether movable or immovable… levy and collect dues, charges, fees or assessments for the use of airport premises, works, appliances, facilities or concessions, or for any service provided by the Authority…”

The implementing rules and regulations (IRR) of such laws can be complicated but must clearly delineate where a government agency, its national and local bureaucracies, can or cannot intervene, in facilities and structures that were entirely built and funded by the private sector.

While the private sector has the incentives to develop modern international airports that they will operate for two to three decades or more, local and national bureaucracies do not have similar incentives as their outlook is short-term, dependent on their appointment for six years or less by the administration in power.

Let us hope that more investors, local and foreign, will expand current small provincial airports into big and modern international airports. More accommodating, more visitors-friendly international airports are often the gateway to more foreign tourism, trade and investments into the country.

So we wish for more modern, privately owned international airports and less-interventionist airport authorities and other government agencies, local and national. We expand the wish-list to include more budget terminals charging lower terminal fees, alongside main terminals by private contractors and airport owners; more airlines competition via the amendment and liberalization of the Public Service Act; and, abolition of the travel tax. The Philippines seems to be the only country in East Asia that penalizes its own citizens for travelling abroad.

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Climate Tricks 81, Disregarding the role of Galactic cosmic rays

Climate alarmism is based on political science that masquerade as climate science. The goal is global ecological central planning -- more UN, more governments, more foreign aid loans, more carbon taxes, energy rationing.

The role of natural factors like clouds, the Sun and its cyclical solar max-solar minimum, galactic cosmic rays (GCRs), etc. are disregarded. Five related articles here, enjoy.

(1) Physicists: Clouds ‘Practically Control’ Climate, Whereas Human Warming Amounts To 0.01°C Per 100 Years
By Kenneth Richard on 11. July 2019

Two University of Turku (Finland) physicists have determined a) the climate’s sensitivity to a doubling of CO2 is 0.24°C, b) the human contribution to the warming of the past century is only about 0.01°C, c) the IPCC and climate modeling dramatically overestimate CO2’s climate impact, and d) variations in low cloud cover control the climate….

When low cloud cover data from satellite observations are considered, a very clear correlation emerges.
As low cloud cover decreases, more solar radiation can be absorbed by the oceans rather than reflected back to space. Thus, decadal-scale decreases in low cloud cover elicit warming.
When cloud cover increases, cooling ensues.

In this manner, Kauppien and Malmi (2019) find “low clouds practically control the global temperature,” which leaves “no room for the contribution of greenhouse gases i.e. anthropogenic forcing.”

(2) Bombshell Claim: Scientists Find "Man-made Climate Change Doesn't Exist In Practice"
by Tyler Durden   Fri, 07/12/2019 - 05:55

“During the last hundred years the temperature increased about 0.1°C because of carbon dioxide. The human contribution was about 0.01°C”, the Finnish researchers bluntly state in one among a series of papers.

This has been collaborated by a team at Kobe University in Japan, which has furthered the Finnish researchers' theory: "New evidence suggests that high-energy particles from space known as galactic cosmic rays affect the Earth's climate by increasing cloud cover, causing an 'umbrella effect'," the just published study has found, a summary of which has been released in the journal Science Daily.

Conclusions from the Finnish studies:

“During the last hundred years the temperature increased about 0.1°C because of carbon dioxide. The human contribution was about 0.01°C.”

“Because the anthropogenic portion in the increased carbon dioxide is less than 10 percent, we have practically no anthropogenic climate change,” the researchers concluded.


“The Earth is now cooling,” says geologist Dr. Roger Higgs.

“Man-made-global-warming believers will by 2021 have to admit they were wrong and that CO2 is blameless and that Svensmark’s sun/cosmic ray/cloud/temperature link is correct.”


Galactic Cosmic Rays are a mixture of high-energy photons and sub-atomic particles accelerated toward Earth by supernova explosions and other violent events in the cosmos. Solar Cosmic Rays are the same, though their source is the sun.

Both Galactic and Solar Cosmic rays hitting Earth’s atmosphere create aerosols which, in turn, seed clouds (Svensmark et al) — making them an important player in our weather and climate.

During solar minimum, like the one we’re entering now, the sun’s magnetic field weakens and the outward pressure of the solar wind decreases.

This allows more cosmic rays from deep space to penetrate our planet’s atmosphere:

(5) Reducing the future to climate: a story of climate determinism and reductionism.
charles the moderator / July 9, 2019

An excellent twitter thread by @RodgerPielkeJr concerning a paper by Hulme, M.

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Thursday, July 11, 2019

BWorld 347, Inflation and TNVS costs

* My column in BusinessWorld on July 9, 2019.

The Philippine Statistics Authority (PSA) has reported that the country’s lowest inflation rate this year and last year, or over the span of 18 months, was 2.7% in June. This is indeed good news and can be traced to two major factors.

One, lower world oil prices. The WTI (West Texas Intermediate) June average price was only $54.7 a barrel vs. April’s $63.9 and May’s $60.8 a barrel. Two, the implementation of the Rice Tariffication Law (RTL, RA 11203) where the quantitative restriction (QR) over rice was removed and larger supply of cheaper imported rice from our neighbors came in.

Still, the Philippines has the highest inflation rate among more mature East Asian economies year to date 2019 where six of the 11 economies listed have inflation rate of below 1% (see Table 1). 

China is feeling the pinch this year thanks to its trade conflict with the US — its inflation rate was rising consistently from 1.5% in February to 2.7% in May.

I checked the monthly inflation rate by commodity groups and compared the Philippines’ numbers with those of the National Capital Region (NCR). Of the 11 groups, eight have similar country and NCR values, but three groups diverge or look like outliers. These are Alcoholic Beverages and Tobacco (ABT), Transport, and Education. The difference between NCR and Philippine inflation is derived in Table 2.

Let me focus on the higher inflation for Transportation in the NCR vs Philippines overall, in relation to the transportation network vehicle service (TNVS) “strike” yesterday due to the more costly restrictions of the Land Transportation Franchising and Regulatory Board (LTFRB),

The inefficient public transport system in the NCR and other big cities in the country force many people who do not want the inconvenience of taking multiple rides from house to work, grocery or school and back, to drive their own cars or motorcycles. Which further worsens traffic congestion.

The alternative to driving one’s own car or motorcycle in heavy traffic (then endure the difficulty of finding often expensive parking) is to take a taxi or TNVS. Most car owners prefer TNVS than taxis because of transparency, safety, and tech-based convenience. When there are not enough TNVS around, the waiting time and fare go up, which contributes to high transport inflation in NCR.

Beyond the low world oil prices, RTL, reducing interest rates or certain taxes, there are administrative measures that can help bring down inflation. In this case, the LTFRB should expand, not restrict, the supply of TNVS, taxis, and buses with deregulated routes and fares. More competition will bring down public transport costs, and more people will leave their cars or motorcycles at home on weekdays.

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