BWorld 249, Reduce fares and increase passenger convenience by increasing supply

* This is my article in BusinessWorld last September 11, 2018.

Economics is the study of proper allocation of limited resources mainly via market mechanism. If there is rising demand for a particular commodity or service, the price goes up as indicator of consumers’ willingness to pay for more services or goods, and this tells existing and potential providers to increase the supply as there is more revenue and profit to be made.

When the supply outstrips the demand due to rising competition, the price begins to flatline or decline, telling producers to stop expanding the supply, otherwise the price will keep declining further and they will lose money and may go bankrupt.

The role of government as regulator and prohibitor in this case should be limited unless a commodity or service can directly and adversely affect public health and safety, like the sale and distribution of guns, ammunitions and bombs, toxic and poisonous substances, and substandard or expired medicines, food and drinks.

When government intervenes and regulates a lot even for very useful services like providing convenient public transportation to people who have no cars or have cars but do not want to drive because of frequent heavy traffic, that is a signal or red flag that government becomes abusive and is engaged in corruption and cronyism, directly or indirectly.

The Land Transportation and Franchising Regulatory Board (LTFRB) is among the most bureaucratic and prohibitionist agencies in government. It issues plenty of NOs, prohibitions and restrictions to entrepreneurs and companies that want to provide convenient and safe rides to the public.

  

The long lines of people daily in many areas and cities who cannot get fast and convenient rides are the result of LTFRB bureaucratism. The franchise of legal and accredited air-con vans, buses, ride-sharing services is limited and capped or controlled at low levels. This seems a calculated move so that there will be more illegal and “colorum” vans, buses, ride-sharing cars as passenger demand is very high. And that is where lots of apprehensions, driver harassment, corruption and extortion can come in.

Last week, there were two news reports in BusinessWorld about continuing LTFRB bureaucratism of transport network vehicle service (TNVS) or transportation network companies (TNC):

(1) “LTFRB junks order for Grab to reimburse passengers” (Sept. 5), and

(2) “LTFRB approves P2-per-minute TNVS charge” (Sept. 6).

Report #1 is the agency taking back its previous order that Grab should reimburse future passengers but it should still pay the agency P10 million for “overcharging” its passengers and failure to inform the board of its P2-per minute charge.

Report #2 is the agency allowing the per minute charge and ordering TNVS to give detailed and unbundled breakdown of fares — flag down rate, per kilometer rate, travel time rate and surge price.

The P2-per minute charge is an important incentive for drivers to endure heavy traffic or flooded areas and pick up, bring passengers to their destinations.

In a deregulated environment, TNVS should be allowed to charge whatever amount as their per minute charge so long as passengers know their rates via online transactions. So a TNVS can charge P5, P10 per minute or higher — because it is fielding an SUV or a BMW or Benz to passengers who can afford.

I checked the LTFRB budget, the biggest item is on its “service” for issuing the Certificate of Public Convenience (CPC), granting of permits and establishment of routes.

One can interpret it as we taxpayers giving the LTFRB hundreds of millions of pesos yearly so that it can choose who among the entrepreneurs and businesses can expand and who should be choked. We are giving them lots of money so it can harass and even confiscate and impound private property that provide services to wary and harassed passengers but has no accreditation precisely because the agency has capped and limited the number of accredited vehicles to small numbers.

LTFRB bureaucratism seems to be doing the exact opposite of what government should do — to respect private property and allow market mechanism to respond to passengers’ rising and changing demand.

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See also:  

BWorld 246, LTFRB command and control, September 08, 2018 

BWorld 247, E-smoking, smoked rice and ASEAN integration, September 11, 2018 

BWorld 248, Inflation, energy prices and mini-greed, September 12, 2018

US-CN 'trade war' 3, stockmarkets divergence

The China Communist Party (CCP)-led stockmarkets continue to be the worst-performing in the world for several months now. As of September 12 closing, Shenzhen is -26% ytd, Shanghai is -20% ytd. Data from https://markets.wsj.com/.

In contrast, the US stock markets continue to experience double-digit growth in the past 52 weeks. See for instance DJIA and Nasdaq composite.

Protectionist Xi Jinping and the CCP feel the pain but they are not showing or admitting it publicly.
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See also: 
US-CN 'trade war' pummels CN the protectionist, August 3, 2018 
US-CN 'trade war' 2: DJIA vs Shanghai stockmarkets, August 19, 2018

BWorld 248, Inflation, energy prices and mini-greed

* This is my column in BusinessWorld on September 06, 2018.

INFLATION has further jumped to high levels. Only 2.9% in December 2017 (no TRAIN law yet), it became 3.4% by January 2018 (first month of TRAIN law), 3.8% in February, 5.7% in July, and now 6.4% in August 2018.

While high world oil prices and peso depreciation against the US dollar were among the important factors, it was the energy tax hikes in the TRAIN law — oil, LPG, coal, plus coverage of VAT in electricity transmission charge — that triggered and sustained the inflationary pressure.

And talking about inflation and energy prices, the recent Pulse Asia Research’s “Ulat ng Bayan Survey,” June 15-21, 2018 is among the misleading surveys that will indirectly justify higher electricity prices. How?

See two of their three questions, loaded and leading:

1. How satisfied or dissatisfied are you with the price of your electricity?

3. Are you in favor or not in favor of increasing the use of renewable energy in the Philippines such as energy from the sun or solar energy?

On #1, Pulse Asia did not explain to respondents that there are nine different charges in our monthly electricity bill that contribute to higher overall rate: generation charge, transmission charge, distribution charge, supply charge, system loss charge, metering charge, universal charge, feed-in-tariff (FIT) subsidies, taxes. Loaded question with an expected high answer of Dissatisfied.

On #3, another loaded question as it does not clarify that even with more solar energy, the eight different charges will remain and worse, the FIT subsidy for solar will further rise.

So the result of their survey was: Question #1, 64% dissatisfied and only 27% satisfied, 14% undecided. Question #3, 89% in favor, 9% not in favor and 2% volunteered/undecided.

Having more intermittent, unstable and unreliable solar and wind power in the national grid can lead to higher prices because of the higher need for backup power, ancillary services that are mostly oil-based, and huge batteries. This is shown in both Europe and the US where in many cases, countries and states with high reliance on wind + solar also have higher electricity prices.

Then two House bills sprang up out of nowhere. HBs 8013 and 8015 entitled “An Act Granting Solar Para sa Bayan Corporation a Franchise to Construct, Install, Establish, Operate and Maintain Distributable Power Technologies and Minigrid Systems throughout the Philippines to Improve Access to Sustainable Energy” were filed only last month, Aug. 6, and were quickly approved by the House committee on legislative franchise on Aug. 29. The committee report was approved last Sept. 3 and will go to plenary this week or next week.

This is a very anti-EPIRA bill and, hence, an attempt to legalize many illegal provisions. While all players in the generation, distribution and supply sectors comply with specific requirements of the EPIRA law, this newbie, no track record corporation wants to do anything they want — can connect anywhere, can build their own grid anywhere, can carve out to DUs franchise areas, will pay only 3% franchise tax in lieu of all taxes, exemption to universal charges, COC and local taxes.

In a position paper by the Philippine Rural Electric Cooperatives, Inc. (PhilRECA), some parts reported in BusinessWorld last Sept. 4, PhilRECA observed that:

“Solar para sa Bayan Corp. said that it could offer electricity at an equal or much lower cost compared with the ERC approved rates of ECs… Paluan was cited as an example with P8.00 per kWh. However… the company is actually charging more at P10.37 to P15.29 per kWh… such misrepresentation… that corporation could not afford to offer lower rates.”

This newbie corporation whose franchise is all ready for a congressional plenary is owned by a son of a sitting “environmentalist” senator.

To have cheaper and more stable electricity, we need more competition, less government cronyism and favoritism, and less energy taxation.

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See also:  

BWorld 245, Renewables illusion and coal realism, September 7, 2018 

BWorld 246, LTFRB command and control, September 08, 2018 

BWorld 247, E-smoking, smoked rice and ASEAN integration, September 11, 2018

The fast rising price of ‘Dutertenomics’

* This is my first article in the Asia Times, published last month. More than 2,700 shares as of today, thanks readers.

http://www.atimes.com/article/the-fast-rising-price-of-dutertenomics/

Inflation is finally catching up with Philippine President Rodrigo Duterte’s high octane economic stimulus measures, a fast growth-geared policy push known locally as “Dutertenomics.”

Statistics released this week showed inflation rose 5.7% in July, the fastest rate in over five years, according to the National Economic Development Authority, a state agency. It marked the fifth consecutive month that inflation breached the central bank’s 2%-4% target band, leading to market speculation that it will soon hike interest rates.

The surge in prices has sparked a local debate over whether global or local factors are more to blame. Economic analysts note that inflation rates were modest as recently as late last year, clocking in at 3% and 2.9% in November and December respectively.

However, Duterte’s controversial Tax Reform for Acceleration and Inclusion (TRAIN) law came into force in January, a broad-based tax hike that many believe has driven the inflationary trend. Indeed, inflation has steadily risen in recent months: 3.4% in January, 3.8% in February, 4.3% in March, 4.5% in April, 4.6% in May, 5.2% in June, and 5.7% in July, or almost double the December 2017 level of 2.9%.

Duterte’s tax law was passed to help finance the government’s ultra-ambitious infrastructure spending plans, estimated at 8 trillion pesos (US$150 billion) over six years, as well as social welfare programs that aim to reduce poverty from 21% to 15% by the end of his term in 2022. While taxes have risen, widespread infrastructure-building has largely failed to materialize.

Still, the Philippines has recently been among Asia’s fastest growing economies, with gross domestic product (GDP) growth of 6.9% in 2016 and 6.7% last year. But that growth is now decelerating as inflationary pressures start to weigh against consumption and investment. Second quarter GDP growth fell to 6%, from 6.6% in the first quarter. That means first half GDP growth was only 6.3%, down significantly from the government’s full-year target of 7%.

Duterte’s economic managers, including officials at the Department of Finance (DOF), National Economic Development Authority (NEDA), Department of Budget and Management (DBM) and Department of Trade and Industry (DTI), have played down the TRAIN tax’s impact on galloping prices while at the same time scrambled to offer credible alternative explanations for the inflationary surge.

They have generally pointed to three main factors supposedly beyond their policy control, namely rising global oil prices, a recent fast depreciation of the peso which is currently among Asia’s worst performing currencies this year, and “profiteering” by big and small private businesses that have allegedly unscrupulously marked up their prices.

While the TRAIN law has cut personal income taxes, it has raised several other levies, especially for energy sources such as oil, liquefied petroleum gas and coal. Sin taxes for sugary drinks and tobacco have also been upped, while an expanded 12% value-added tax (VAT) now covers more economic sectors, including electricity transmission and foreign currency-denominated sales.

Official attempts to mostly blame higher global oil prices for the local surge in prices, however, doesn’t hold statistically when compared with other net-fuel importers in the region. Indeed, other oil-importing nations such as Thailand, South Korea and Sri Lanka have all seen a decline in inflation in the first half of this year compared to their full year 2017 rates.

The inflation differential for developed countries between January-June 2018 vis-a-vis 2017 is also statistically miniscule, measuring -0.1 for the United Kingdom, 0.1 for Germany, 0.4 for France and the United States, and 0.6 for Canada.

Instead, it is mostly domestic factors that are driving the Philippines’ inflation situation. First and foremost, inflation is hitting the poorest 30% of Filipino households harder than other demographic groups. In the first half of 2018, overall Philippine inflation was 4.3% but for poor households it was higher at 5%.

That’s because while “food and non-alcoholic beverages” comprise only 38% of the overall Consumer Price Index (CPI) basket, used for calculating the national inflation rate, the products constitute 61% of the poor’s consumption. The telling statistics were calculated by Dr Dennis Mapa, dean of the University of the Philippines School of Statistics (UPSS).

Nor is there any near-term relief in sight. Fare hikes for taxis, buses and point-to-point air-conditioned vans will soon come on-stream, as will phase two tax hikes on oil, LPG and coal in January 2019. A third phase tax hike on energy will be imposed in January 2020 as part of the Train tax reforms. Firms are also expected to start raising wages due to labor demands over TRAIN’s impact on prices, leading to a potential virtuous cycle of inflation.

BWorld 247, E-smoking, smoked rice and ASEAN integration

* This is my article in BusinessWorld last September 04, 2018.

TOBACCO, alcohol and fossil fuel products are among the most demonized, most bureaucratized, most taxed products in the country and abroad. Thus, the excise tax for them on top of VAT, income tax and related taxes.

The hypothesis is that more smoking and drinking prevalence means more diseases for the people and hence, people live less healthy, live shorter and more miserable.

Some official data, however, would douse cold water on this claim. Some countries with high smoking incidence or prevalence like Singapore and Japan have higher life expectancy than countries with much lower smoking prevalence like Australia (see Table 1).

The Institute for Democracy and Economic Affairs (IDEAS), a free market think tank in Malaysia, in partnership with Minimal Government Thinkers, our counterpart free market think tank here in the Philippines, will organize a seminar, “Alternative Tobacco Product Regulations: The Role of the Consumers” on Sept. 14, 2018 at the Holiday Inn Makati.

This small-group, by-invitation-only event aims to bring together stakeholders to discuss ways where government regulation of tobacco and alternative products can be optimized — lesser public health harm, government gets revenues, and not encouraging illicit and smuggled products that are cheaper and product quality is unregulated.

Focus will be on e-cigarettes and heated products — should rising restrictions and taxation of the usual tobacco products apply to these alternatives?

Some government officials like the National Tobacco Administration (NTA), Congress, independent researchers, and various consumer organizations will speak.

Whenever the free market is severely curtailed and restricted, the black market always comes in and thrives. This is true for drugs, certain gambling, smuggling, gun-running, prostitution. All these products and services are legally banned and prohibited and yet all of them exist until today. The black market and illicit trade makes it very lucrative for government regulators and enforcers to allow the prohibited in exchange for handsome personal and financial favors.

In the afternoon of the same day, IDEAS and the Economic Freedom Network (EFN) Asia will hold another small group, by-invite only roundtable discussion on “Economic integration within ASEAN” also at Holiday Inn Makati.

IDEAS is conducting a research project on two areas related to ASEAN. First, the implementation of the ASEAN Economic Community (AEC) 2025 Blueprint, and second, the prospects for deepening trade relationship between ASEAN and the EU.

Talking about ASEAN economic integration, a good data to look is the direction of trade — how much of ASEAN countries’ exports go to fellow members and the rest of Asia, and how much of their imports come from fellow members and the rest of Asia (see Table 2).

As shown in the numbers above, many ASEAN countries are trading more with themselves and the rest of Asia, reducing the share of trade with North America, Europe, Oceania, South America and Africa.

For the Philippines, our high-trade dependence with the US before has significantly declined. Philippines exports to Asia rose from 48% of total exports in 2000 to 66.5% in 2016.

Which leads us to the current issue of “rice crisis,” “bukbok/weevil rice,” and “smoked/fumigated rice.” It is foolish for the government through the Department of Agriculture and National Food Authority (NFA) to retain rice protectionism when the two biggest rice exporters in the world are our neighbors, Thailand and Vietnam.

We should have free trade in rice, get cheaper rice from our neighbors, give cheaper rice to our poor consumers, instead of asking them to endure bukbok/weevil and smoked/fumigated rice. Abolition of NFA as a huge and costly bureaucracy is a good proposal.

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See also:  

BWorld 238, Trademark ban and health alarmism, August 4, 2018 

BWorld 244, Property rights and political lefts, September 2, 2018 

BWorld 245, Renewables illusion and coal realism, September 7, 2018 

BWorld 246, LTFRB command and control, September 08, 2018

Climate Tricks 73, Attacking Dr. Will Happer as 'CC denier'

See here: (a) A famous atomic physicist from Princeton U. has been appointed as Senior Director for Emerging Technologies on the National Security Council, (b) A 20s yo journalist with BA in Writing Seminars and believer of 'universally accepted science' criticized this 79 yo physicist, and (c) the Climatariat or Clinton News Network (CNN) bannered the story of this reporter.
https://wattsupwiththat.com/2018/09/06/william-happer-joining-trump-national-security-council-cnn-report-happer-climate-denier-trump-adviser/

There are 5 cool charts there too. And here's a description of Dr. Happer at the Princeton U. website, https://dof.princeton.edu/about/clerk-faculty/emeritus/william-happer

The CNN story using the stupid formulation "climate deniar", https://edition.cnn.com/2018/09/04/politics/happer-climate-denier-trump-adviser/index.html.

There was climate change (CC) for the past 4.6 B years since planet Earth was born, there is CC now and there will be CC for the next 4 B years or so -- how can anyone "deny CC"? Only low life and emotional minds will keep using that term.

From a world-famous US climatologist, Dr. Roy W. Spencer, posted few days ago:

Congrats to my friend and famous physicist Will Happer for accepting a position as Senior Director for Emerging Technologies on the National Security Council, under John Bolton,where he will have access to President Trump on climate change and energy policy issues. As we walked around the Capitol building one night, Will and I discussed the pressures on me to have my name put forward as Trump's Science Advisor, and his gentle warnings about working in that environment helped me decide against putting my family through it. I know he reluctantly accepted his new position, and his wife is not happy about it (Will was fired by Al Gore in a previous administration for questioning global warming). I hope he can do some good there.

Good reporting, http://www.sciencemag.org/news/2018/09/trump-adds-physicist-will-happer-climate-science-opponent-white-house-staff

See also a good interview with Dr. Happer here; portions:

"The DOE Office of Science had an annual budget of over $3 billion at that time, more than the National Science Foundation. It funded almost all of DOE’s non-weapons basic research, including a great deal of environmental science and climate science. This was my first encounter with the climate establishment, and I was surprised to find environmental science so different from high-energy physics, nuclear physics, materials science, the human genome, and the many other areas we had responsibility for....

"Greenpeace is one of the many organizations that have made a very good living from alarmism over the supposed threat of global warming. They are unable to defend the extremely weak science. So, they demonize not only the supposed “pollutant,” atmospheric CO2, but also any scientists who seem to be effectively refuting their propaganda."

https://thebestschools.org/special/karoly-happer-dialogue-global-warming/william-happer-interview/

Good debate, Will Happer (atomic physicist, Princeton U.) vs David Karoly (Meteorologist, U of Melbourne), 35 pages,

https://andymaypetrophysicist.files.wordpress.com/2018/09/the-great-debate-report1.pdf

Many anti-Trumpistas will have headaches with this development. It is hard to convince top caliber scientists to join the White House.

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See also:
Climate Tricks 70, Greenpeace and the Economist love fossil fuels, August 06, 2018 
Climate Tricks 71, "Rising ocean" when reality is rising rivers, lakes, August 13, 2018 Climate Tricks 72, Calling El Nino-La Nina as weather anomalies, September 02, 2018

BWorld 246, LTFRB command and control

* This is my column in BusinessWorld last August 31, 2018.

HERE’s a mixture of news for traffic-wary motorists and passengers in Metro Manila and other big cities in the country.

The good news: (1) more big infrastructure projects like skyway extension, M.Manila subway and Makati subway are either near completion or about to start construction, and (2) regular passengers of transport network vehicle service (TNVS) will soon experience shorter waiting time as the Land Transportation Franchising and Regulatory Board (LTFRB) has increased the number of accredited cars by 10,000 last August 24.

The bad news: (3) many roads leading to and after exiting the skyway will remain congested because of the big volume of vehicles, (4) the 10,000 new TNVS cars to be accredited by LTFRB are not enough to significantly bring down waiting time and fares, and (5) many accredited but inactive, suspended, or booted out TNVS drivers and their cars are still not delisted in the LTFRB “masterlist” and hence, cannot be replaced by new ones who can help expand the number of available ride-sharing vehicles.

The LTFRB is ground zero of these endless problems not only with TNVS but also other types of public transportation in the country. Here are the reasons.

One, franchise control. Putting a small and fixed cap on the number of accredited TNVS, UV express vehicles, buses, taxis, resulting in huge numbers of people unable to get fast and safe rides. Queuing and waiting too long, or standing in cramped, heavily-loaded buses and jeepneys, force many people to drive their cars, which further worsens traffic congestion.

In the table below, when there was still Grab-Uber competition, total number of cars and drivers was 43,000. After the merger, it went down to 35,000 because LTFRB did not and would not accredit 8,000 former Uber drivers and cars to be absorbed by Grab. The immediate result is longer waiting time for passengers and higher fares as additional disincentives for limited drivers to go into heavy traffic or frequently flooded areas.

Two, fare control. Fare-setting is not a function of rise or fall of oil prices, or degree of competition per route per hour, but a function of the willingness of the Board’s bureaucrats to meet and decide on fares that hardly change for months or years.

Three, route control. Disallowing buses, UV express, jeepneys, etc. to serve routes that experience high passenger volume (there is a barangay or city or provincial fiesta, etc.).

Four, very bureaucratic and costly procedures to get LTFRB accreditation. For instance, if one would apply as a new TNVS driver/partner, applicant must provide (a) proof of existence/various IDs, (b) proof of sufficiency of garage, (c) TCT or tax declaration or contract of lease/Authority to use with TCT of lessor, (d) LGU Zoning Certificate for garage, (e) proof of financial capability, latest income tax return, proof of bank deposit of P50,000, (f) DTI business registration, (g) BIR certificate of registration, (h) Proof of publication, (i) affidavit by the publisher, copies of publication, etc.

Five, rising regulations and requirements. Which means rising cost of operating public transportation. Mandatory receipts in taxi, GPS for buses and taxi, unbundling and detailed breakdown of fares by TNVS. Soon mandatory CCTV inside buses and TNVS, other wild requirements.

LTFRB has become a wild-cannon bureaucracy that creates more inconvenience to passengers instead of making their travels more convenient, more safe.

LTFRB should be checked by Congress or the Office of the President. Providing safe and convenient transportation to wary passengers is not a crime that should be penalized with endless command and control culture, stiff fines and penalties, even confiscation of private property like a car, van or bus.

Bienvenido S. Oplas, Jr. is president of Minimal Government Thinkers, a member institute of Economic Freedom Network (EFN) Asia.

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See also:  

BWorld 241, Land transport modernization and the bureaucracy, August 21, 2018

BWorld 243, NAIA closure, Passenger rights and MIAA, August 24, 2018 

BWorld 244, Property rights and political lefts, September 2, 2018 

BWorld 245, Renewables illusion and coal realism, September 7, 2018

On the Peso depreciation

Lousy Dutertenomics. The previous day, the 6.4% August inflation rate report; yesterday the PSE was back to double digit negative, -10.8% ytd. Early today, the PH Peso/US$ is almost 54. Meanwhile, lousy Du30 politics focus on jailing its vocal critics. Mga bueng.

https://quotes.wsj.com/fx/USDPHP

BPI's Chief Economist Jun Neri commented that Rupee, Rupiah and CNY are in the same boat as PHPeso, data as of end August 2018.

Mid-2016 or days before Duterte was officially inaugurated as President, the PH Peso was generally on the same level as its neighbors' currencies. After 2+ years...