Government and Taxes: January 2013

Saturday, January 26, 2013

Human Freedom, 2013 Report

* This is my article today in thelobbyist.biz,

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The freedom from summary execution or abduction, or being imprisoned or physically attacked for expressing one’s view, is often absent in the consideration many global economic freedom or competitiveness annual reports. In these reports, the Philippines never ranked high worldwide.

This week, an important report was released, Towards a Worldwide Index of Human Freedom, January 08, 2013. It is a joint project of three big think tanks advocating more individual freedom and limited government – Fraser Institute in Canada, Liberales Institut in Germany, and Cato Institute in the US. It has a big and ambitious goal, to produce the world’s first comprehensive and conceptually consistent index of human freedom, composed of personal freedom and economic freedom.

Freedom is defined in the “negative” – the absence of barriers or coercion that prevent individuals from acting as they might wish. While government is the main source of external coercion, like people can not start any business unless they get permits from various local and national agencies and pay various taxes and fees, other sources of coercion were also identified. Below are the factors in constructing personal freedom index.

Table 1. Structure of the Personal Freedom Index

Source: Ian Vasquez and Tanja Stumberger, Chapter 3, An Index of Freedom in the World, Towards a Worldwide Index of Human Freedom, January 08, 2013

It is amazing how the authors have gathered such kind of data where a global comparison among many countries can be made. Check the link above how those concepts are defined, where the data were lifted, and how scores were made.

There were 123 countries included in this new report. The data used for personal freedom are from 2008 while data for economic freedom are from 2010-11. Here is the result.

Table 2. Freedom Index and Sub-Indexes

Source: same as above.

Generally, countries that have high scores in economic freedom also have high scores in personal freedom, at least for those in the top 10 or top 20. Singapore though is a big exception. While it is #2 worldwide in economic freedom next to Hong Kong, it ranked very low on personal freedom with a score of only 6.6, should put in the 70+ in global rank. This report will definitely make the Singapore government unhappy.

Many big European economies like Spain, Germany, France and Italy have high scores in personal freedom but low score in economic freedom, reflecting their heavy business bureaucracies and taxes, that consequently pulled down their overall freedom index.

The Philippines is #67 overall. It ranked low in I. Security and Safety with a score of 5.6, and III.Expression, 6.3. But it ranked high in II. Movement with 8.6, and IV. Relationship Freedoms. Reports of extra-judicial killings, torture, political imprisonment and disappearances during the past administration significantly pulled down the country’s score in I.

There are at least two good news for the Philippines in this report. One, its average score in the three indexes is slightly higher than the global average. Meaning we have more personal and economic freedom compared to many people and countries around the world.

Two, compared to other major Asian neighbors, we have high degree of personal freedom, much higher than those in Singapore, Malaysia, Indonesia, India and China. Vietnam, Laos, Cambodia are among the Asian countries that were not included in the report yet.

As mentioned, the information on personal freedom were lifted from 2008 data. Future reports that will reflect 2010 and succeeding years of the current administration would generally produce higher score for the country.

The bad news is that economic freedom remains rather restricted in the country until now. The local and national governments here tend to think that entrepreneurship and job creation is a potentially criminal thing to do, so they imposed plenty of business permits, taxes and fees, that sap significant time and resources of entrepreneurs and investors. This is on top of a very protectionist Constitution that prevents foreign competition to many local business elites and oligarchies.

We hope that the Philippine government, local and national, will heed this type of international comparison. They add to either optimism or pessimism of Filipinos and foreigners alike, seeing where the Philippines ranks compared to other countries around the world. The government should learn to reduce business bureaucracies, reduce the itch for more taxes, permits and fees, and focus on going after real criminals that bully and victimize the average citizens.

Over the short to medium term, the paranoia against foreign competition in many aspects of the country’s economy should be lifted via constitutional change.

See also:
Rule of Law 13: Freedom Barometer 2011, March 23, 2012
Rule of Law 13: Freedom Barometer 2011, August 16, 2012
Pol. Ideology 38: Central Planning vs. Free Market, October 30, 2012

Wednesday, January 23, 2013

Business 360 3: Fiscal Cliff and Government Irresponsibility

* This is the article that I submitted to B360 late last month, when the "fiscal cliff" in the US was being discussed worldwide.

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Fiscal Cliff and Government Irresponsibility

The US government’s public debt, currently at $16.3+ trillion, has touched the 100 percent of GDP mark in 2011. This does not include yet debt of local governments – states, cities and counties – which also have their own public debt. This huge debt and the huge interest payment to service the principal that keeps rising each day, is the main cause of its continuing fiscal and economic uncertainties.

Other rich countries which have reached the 100 percent or higher debt/GDP mark are Iceland in 2008, Portugal and Belgium in 2010, France and Ireland in 2011, United Kingdom in 2012. Greece and Italy have reached that mark early of the last decade. Heavy borrowing and fiscal irresponsibility is the main characteristic of these and many other economies. They have been living beyond their means, maintaining extravagant and populist welfare programs, aided by heavy military spending, even if taxes and other revenues are not sufficient to sustain these.

State owned BBC said in its “Q&A: The US fiscal cliff” that "The roots of the current crisis date back to 2001, when President George W Bush's administration was trying to pass a programme of tax cuts worth $1.7bn."

This statement is wrong on two counts. One, the "roots" of the fiscal crisis date back many decades ago, of heavy government spending and heavy borrowing as if there is no repayment of those debts tomorrow. And two, tax cut is not the villain, it is heavy spending. Tax cut means allowing people to keep more money in their pockets, bank savings or certain investments. It is their money, they worked for it, they should keep more of it. If they spend or invest it, it creates economic activities and jobs elsewhere, so there is little or no need for government spending to keep expanding "to create jobs" for the people.

Entrepreneurs and private businesses, their staff and employees, have been bailing out through various taxes and fees these bloated governments and their numerous bureaucracies for decades. America and Europe prospered on economic freedom, not on heavy welfarism. People before have welfare because they worked hard and kept ample savings for their enjoyment or future investments, and not because the state has fed and housed them for free or at huge subsidies, at money that were borrowed from elsewhere.

Unfortunately, many Asian governments are following the welfarism and fiscal irresponsibility example of the US and European governments. They too are living beyond their means as shown by persistent budget deficit annually (expenditures are larger than revenues).

Source: computed from ADB’s Key Indicators for Asia and the Pacific 2012, Table 7.1

http://www.adb.org/publications/key-indicators-asia-and-pacific-2012

Nepal government seems to be less extravagant compared to its four neighbors in the region. But this is no consolation as growth can be sustained at deficit of below 2 percent of GDP as shown by the governments of Thailand, Vietnam and Indonesia. The governments of Hong Kong, S. Korea and Singapore even run on fiscal surpluses.

Fiscal responsibility and economic sustainability can be done on a few simple principles.

One, live within one’s means. Do not persistently spend beyond one’s income. Set aside savings for the rainy days and in times of emergencies.

Two, there is big role for personal and parental responsibility in many social and economic services, and not everything is government responsibility.

And three, there is big potential for tax cuts, or at least not creating new taxes, and allow the people to keep more of their income and savings. They know their priorities better than government officials and politicians.

Let the new year usher in new thinking, away from the old thinking of more social engineering and economic central planning by the state, politicians and foreign aid bureaucracies. Modern technology has allowed people to learn new and more skills outside the formal school system, and opened up more economic opportunities beyond their country’s borders. Overall productivity should be rising and not stagnating. This is a good ingredient to create more jobs, fight poverty and have sustained inclusive growth.

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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

Tuesday, January 22, 2013

Fierce Competition is Fair Competition

"Fair competition" is a nice and neutral term that many sectors in society can identify with. People love competition, the way they like Manny Pacquiao competes with some of the world's great boxers on the ring, or the country's Azkals soccer team competes with great soccer players in Asia.

But people normally do not like to hear "fierce competition" even if that's the reality in sports and the same reality in many products that are internationally traded like mobile phones, laptops, flat tv and cars. For me, fierce competition is fair competition, the same way that free trade is fair trade. Government-managed or protected competition is not fair competition.

This Thursday, I will attend this forum organized by the Friedrich Naumann Foundation for Freedom (FNF). I believe in the formulation that competition is key to economic growth. This is similar to the Economic Freedom Network (EFN) Asia conference theme in Kuala Lumpur in October 2011, "Competition: Engine for Growth".

The line up of speakers and panelists for the forum on Thursday is impressive, below.

My thoughts on this subject is that no matter what kind of "Competition Law" that the Philippines will enact, there will be no fair or fierce competition in many important sectors of the economy like power generation, electricity distribution, airlines, shipping lines, bus lines, real estate, malls, water, media, agri-business, universities, hospitals, various professions, and so on.

Why? Because of the Philippine Constitution. Foreign business competitors are simply limited if not outrightly prohibited from competing with local businessmen and professionals in these sectors and sub-sectors. So we Filipinos and Philippine-based foreigners simply have to endure and be contented with whatever the local players can provide us. Where there is relative complacency due to limited competition, service provision by some if not many local players can be poor and mediocre.

Like internet speed. While we can buy modern cell phones, laptops and desktops from abroad as these are freely-traded commodities from many big global players and manufacturers (Samsung, Apple, HTC, HP, Toshiba, etc.), internet speed is slow if not unstable in many areas as there are only few ISPs and telecom carriers domestically.

The more crucial reform that is needed therefore, is to change the current Constitution created in 1987 and do away with the protectionist, anti-foreign competition provisions. Now this is easier said than done. A change in the Constitution can lead to either less protectionism or more protectionism, although the likelihood of less competition, less protectionism seems higher than the protectionist camp and scenario.

While such change in the Constitution is not yet here, I agree that we will have to tinker with some existing laws in order to remove rigid rules that tend to protect one group of players over the others.

But wait, this will also mean the creation of another bureaucracy, the Fair Trade Commission FTC or an Anti-Trust Commission or Competition Regulation Authority or other names.

I dislike the creation of more bureaucracies on top of existing bureaucracies. It would be more palatable if for every new bureaucracy that the legislators create, they also abolish one or two existing bureaucracies.

Will try to write another blog post after the conference on Thursday.
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See also:
Competition and Prosperity, EFN Asia 8: KL Conference, October 12, 2011
Free Trade 22: Freedom to Trade, February 10, 2012
Free Trade 23: FNF on Free Trade Agreements, February 10, 2012
Free Trade 27: Proposed EU-PH FTA and TRIPS Plus, September 24, 2012

Tax Cut 14: APTU Meeting in Bangkok, March 1-2

The Asia-Pacific Taxpayers Union (APTU) meeting will be held in Bangkok this coming March 1-2. I got this notice and invite from a good friend, the Chairman of APTU and Sec-Gen. of the World Taxpayers Association (WTA, http://worldtaxpayers.org/), Mr. Bjorn Tarras-Wahlberg.

I met Bjorn first time in Seoul, S. Korea in October 2006 for the APTU meeting. I was then an official of the Philippine Taxpayers Union (PTU) headed by Mr. Veredigno "Vernie" Atienza. Photo here from left: Bjorn, Grover Norquist of the Americans for Tax Reforms (ATR, http://atr.org) during the Pacific Rim Policy Exchange in October 2009 in Singapore.

I realized I could not do my function well with PTU as I was also busy with Minimal Government Thinkers, so I told Vernie that I have to leave PTU but will work with it in its main advocacy -- to have a low, flat income tax (corporate and personal) in the Philippines. Abolition of income tax is actually possible as the government has dozens of various consumption-based and business taxes and fees, both national and local government units.

Bjorn came to Manila a few times in 2009 and 2010. I was able to join him and Vernie in his meeting with former DOF Secretary Gary Teves (my former boss in Congress and in Think Tank, Inc.) and at Bjorn's talk at the Rotary Club of Rizal West, among his other activities here.

Additional photo also during the Singapore conference in 2009, Mr. Kim Sun-taek (middle), President of the Korea Taxpayers Association (KTA); the girl beside her was his English interpreter as Mr. Kim does not speak English. Next to Mr. Kim is Jargal Dambadarjaa of the Mongolians for Fair Taxes and Wise Spending, and Ms. Jamie White, then head of the Grassroot Institute Hawaii.

I told Bjorn that I cannot attend the Bangkok meeting this coming March due to my limited financial resources now. But I will try to blog and write about this important meeting. Below is the conference agenda and other details.
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Asia-Pacific Taxpayers Union Conference 1-2 March 2013
                      Hows to get Members & Money
                                  Pan Pacific Service Suites,
                  Eight Thonglor, Sukhumvit Soi 55, Bangkok

All taxpayers associations in the world, and their specialists, are invited to the Asia-Pacific Taxpayers Union Conference in Bangkok for a 2-days meeting, Friday-Saturday March 1-2.

No Conference Fee.

Arrival: Thursday Feb 28. Welcome Drinks from 7 p.m. followed by dinner.
Departure: Sunday March 3 or when it suites you. Earlier arrival and longer stays are possible.

Regional meetings for taxpayers associations in Asia and the Pacific have taken place since 1995. In this part of the world you find taxpayers associations in Australia, China, Georgia, Hong Kong, India, Indonesia, Japan, Kazakhstan, Kyrgyzstan, Malaysia, Mongolia, Nepal, the Philippines, Pakistan, South Korea and Turkey.

Agenda: Friday 1 – Saturday 2 March

1. Presentations with information of latest achievements from participating associations
2. The 100-years history of taxpayers associations (Mr Bjorn T-W, World Taxpayers Associations
3. “Replace Income Tax by Consumption Tax” (Mr Bjorn T-W)
4. Protect the Flat Income Tax - now under fire in many countries (Mr Bjorn T-W)

     How to get Members & Money
5. Creating a Strategic Plan that Works (Mr Troy Lanigan, Canadian Taxpayers Federation)
6. Different Techniques for Getting Members (Mr Bjorn T-W)
7. Empower your Donors to Fulfill Their Wishes - the different fundraising in Canada (Mr T. Lanigan)
8. How Beijing Taxpayers manage to get 170.000 members and how extensive service can finance the organization,
now developing independent taxpayers associations all over China (Mr F. Liu, China)
9. How South Korea has achieved 1.300.000 internet members and how these are used and managed (Mr. Kim Sun Taek, Korea Taxpayers Association)
10. How a taxpayers association can work in developing countries (Mr Otieno Igogo, Tanzania Taxpayers)

      Better communication
11. How to Get Free Publicity with Creativity. (Mr Raymond Ho Man Kit, Momentum 107, Hong Kong)
12. Establishing a better Communication system between all APTU-members (Mr Fengjiang Liu, China)
13. Opportunity for paying APTU-members to communicate with members in other countries (Mr Fengjiang Liu, Beijing Taxpayers)
14. News in the Chinese tax system (Ms Qiao Shuping)

      Exchange of printed material
15. Exchange of magazine, books and other material between the member associations.
      Bring your samples to Bangkok (Mr. Fengjiang Liu, Beijing Taxpayers)

      Formal Issues & Elections
16. Report from the World Taxpayers Conference in May in Kiev. Words of welcome to the World Taxpayers Conference in Vancouver, Canada 29 - 31 May 2014 (Mr. Troy Lanigan)
…. Other issues

Hotel & Conference in the same building
15 min walk from Sky Train Station “Thonglor” (Close to stations Asok and Nana).
We offer reduced hotel prices incl. taxes & service, big breakfast, internet, gym and pool etc.
- Executive Suites (Studio 37 sqm) Baht 3.500 net/night (USD 117).
- One bedroom Suites (61 sqm) Baht 4.200 net/night (USD 140).
Cheaper hotels are also available. Urgent booking of hotels are requested.

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Thursday, January 17, 2013

EMHN 5: Free Trade and Markets in Healthcare

Our regional network, the Emerging Markets Health Network (EMHN) has published a new book, hooray!

It was formally launched last week, January 11 at the Indian Institute of Foreign Trade in Calcutta. Among the major arguments of the book are:

* Free trade is a powerful agent of improved health, via higher incomes and ‘knowledge spillovers’

* Asian governments stand to benefit from enormous savings if they properly open their health sectors to international trade

* Intellectual property provisions within international trade regimes have little bearing on access to medicines by the poor, and recent attempts by government to expropriate the property rights of foreign pharmaceutical companies are motivated more by industrial policy than concern for patients

* New technology rather than new regulation is the most sensible answer to stemming the global trade in fake and spurious medicines.

A longer discussion about the book is found here.

Details of the launch are found here. Photos below lifted from that link. Upper photo includes the two editors, Debashis Chakraborty (left most) and Philip Stevens (right most).

The book has seven chapters from eight contributors including the two editors, and me. The book should be ready for sale and distribution in the next few weeks. The publisher made only a few copies for the book launch.

My paper is 14 pages long including tables and references. I am posting below the first two pages :-)
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Universal Health Care and Private Provision in the Philippines

Bienvenido “Nonoy” Oplas, Jr.

I. Introduction

The pursuit of universal healthcare (UHC) or “Kalusugan Pangkalahatan” in Filipino, of providing each of the nearly 100 million Filipinos, access to good healthcare when they need it, is a noble goal. It is a goal that is shared by all stakeholders in the country.

The big question is how to attain it at the most efficient and least costly way, both to the government and households and taxpayers. The dominant thinking is to follow the European and North American models of universal healthcare, in which government takes the dominant role in the healthcare system, and most costs are underwritten by the public purse. This explains the rising budget for the Department of Health at the national level, and health spending at the Local Government Unit levels. This is not sustainable as the Philippine government is still heavily indebted, even though the debt/GDP ratio has improved compared to a decade ago.

EFN Asia 15: Distortions of Welfare Populism

* (This is my article today in thelobbyist.)

As more countries around the world have abandoned socialism and economic central and embraced the market economy, their economies have progressed significantly and poverty has been drastically reduced. This is particularly true in socialist China and Vietnam, and the former Soviet republics and Eastern Europe.

One result of the free market economy and economic freedom though, is more inequality among the people. But this is not mainly due to “the poor being exploited and downtrodden” but rather the efficient and ambitious were without limit in economic mobility and prosperity. Consider these two situations.

Under socialism, if the average per capita income of the very poor was $1 per day and that of communist party officials and their cronies was $100 per day, then that’s a 1:100 income gap between the two extreme income groups.

Under a free market economy, if the average per capita income of the very poor was $5 per day but that of the very efficient and lucky was $50,000 a day, then that’s a 1:10,000 income gap between the two extreme income groups.

Inequality is worse under the latter but the overall condition of the poor is better than under a socialist economy. If this is not true, those countries that abandoned socialism two to three decades ago should have gone back to economic central planning and state ownership of all businesses, land and other means of production.

Nonetheless, social morality and even the politics of envy has taken the upper hand in most public policies around the world recently. The result is the expansion of welfare populism worldwide, from the developed Europe and North America to the middle income and poorer countries mostly in the south.

By giving more power to government to intervene almost arbitrarily in many aspects of entrepreneurship and ordinary lives of the people, welfare populism has resulted in economic and social distortions.

During the Economic Freedom Network (EFN) Asia Conference held in Hong Kong last November 6-7, 2012 attended by this writer, welfare populism was extensively discussed with some country case studies. The event was jointly sponsored by the Friedrich Naumann Foundation for Freedom (FNF) and the Lion Rock Institute, a free market think tank in Hong Kong.

Among the country experiences discussed were that of Thailand, South Korea, China, Europe and Latin America. Below is a summary of presentation for these countries and continents.

1. Thailand: by Dr. Deunden Nikomborirak, Thailand Development Research Institute (TDRI), “Welfare populism in Thailand”.

Among the prominent welfarist policies were the rice pledging scheme, first car, free computer tablets for first graders , minimum salary for bachelor degree holders, and senior citizen financial support.

The economic and social distortions were not good. In the case of the rice pledging scheme, the price tag was a hefty $35 billion benefitting three million not-so-poor farmers, it increased the public debt significantly, high corruption was suspected, many farmers did not care much about rice quality and productivity, and smaller rice traders were edged out.

For the first car program, the price tag was $1 billion and resulted in more traffic congestion as the number of new cars on the roads increased from 78,000 to 100,000 a month, the average road speed in Bangkok is only 16.7 km/hour and is declining by 1 km/hour a year. And Bangkok residents with asthma has increased from 5 percent to 10-15 percent.

The free tablets for first graders resulted in addiction to computer games by the young students, worsened by insufficient or no broadband access, and inability to write of these students.

2. South Korea: by Dr. Choi Byung-Il, Korea Economic Research Institute (KERI), “Welfare populism in Korea”.

The prominent populist policies were income support, public pension and insurance for all (health, employment, industrial accident insurance, etc.), minimum wage, free child care, universal school meal. All political parties, administration or in the opposition, promise a more welfare state if they are in power.

The results were indeed distortionary as the projected cost of these additional spending is estimated at $520 billion on top of existing welfare programs. This will require tax hike or public debt hike in the near future. These programs will spike welfare spending to reach 45 percent of GDP and public debt will reach 216 percent of GDP. Without welfare reform, Korea’s future will be similar to Greece and Argentina.

3. China: Dr. Mao Shoulong, Academy of Public Policy, Renmin University, “Welfare populism in China”.

The more recent populist programs or demands are school free lunch, free school bus, anti-chemical p-xylene. Dr. Mao discussed the policy priorities of the different China leadership.

During Mao Tse Tung period, continue global revolution and liberate other people around the world, but China degraded to poverty.

During Deng Xiaoping and Jiang Zemin period, cope with poverty, economic development through market economy.

During Hu Jintao period, from overcoming poverty to addressing inequality, from anti-poverty first to GDP first plus anti-inequality and stability.

4. Europe and Latin America: by Dr. Francisco Luis Perez Exposito, Tamkang University, Taiwan, “The surge of Neo-populism in Latin America and Europe in the XXI Century”.

Such neo-populism is characterized by being left leaning, anti-capitalist, rejection of austerity and welfare cuts, more welfare rights.

In Europe populism, they are allied with nationalism philosophy, anti-EU, anti-Islam, anti-foreign workers and anti-regional integration.

In Latin America, they are leaning towards nationalism and socialism, anti-capitalism, anti-imperialism and foreign interests, and anti-neoliberalism. These neo-populist groups in both continents have prospered by blaming others (foreign and locals alike), looking for scapegoats and virtual vengeance.

The economic distortion of welfare populism is clear in the ever-rising public debt of many developed welfare states, below.

High welfare programs even financed by heavy borrowings are supposed to increase the productivity of the people so they can later repay those debts plus interest. Unfortunately, the law of unintended consequences kicked in once again. What resulted was increased dependency of the people to the state and the corruption of individual values, relegated more personal responsibility to the background and pushed more government responsibility in many aspects of the people’s lives.

There is a need for many governments to stick to their primary function: to promulgate the rule of law and protect the citizens’ right to life, liberty and private property. Forcing social equality and promoting a culture of dependency and entitlement is not the way to encourage the people, poor and non-poor alike, to strive more to improve their own lives and that of their communities.

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See also:
EFN Asia 11: Populism vs. Economic Freedom, the HK Conference, September 11, 2012

EFN Asia 12: Day 1 of Conference 2012, November 07, 2012

EFN Asia 13: Welfare Populism and Poverty, November 13, 2012

EFN Asia 14: Conference 2012 Resolution on Populism, November 21, 2012

Wednesday, January 16, 2013

Agri Econ 8: On Rice Price Stabilization

Agriculture is among the sectors with heavy government intervention and subsidy. In some European countries like France, the number of government agri-related bureaucrats could be as many if not plentier, than their farmers.

During the Federation of ASEAN Economic Associations (FAEA) conference last November 28-29, 2012 held at the PICC, Manila, one of the panel discussions was on agriculture and food security. I did not attend that panel because I went to the panel on Competition policy. Nonetheless, I have some of the presentations in USB during the conference.

One of the papers in the Agri panel was "Strategies for Influencing the Rice Price Stabilization in Indonesia" by Wijoyo Santoso, Nurhemi, Guruh S. Rokhimah, all from Bank of Indonesia.

It's not a free market oriented paper, so I won't bother to copy their discussions, I just copy paste here some of their tables and illustration. These tables can be useful, especially the last one, I think the major rice importing countries.

Major rice producers and exporters are Thailand and Vietnam. We often hear that "their rice scientists only studied in IRRI and UPLB but look where they are now, more advanced in rice production than the Philippines.

My usual answer to such claim is this: Even without government support or subsidy or technology, Thailand and Vietnam have natural comparative advantage in rice production compared to the Philippines because of the following:

1. They have few typhoons a year, the Philippines has about 19 per year, mostly coming from Pacific Ocean. Should these storms reach Vietnam or China, they are generally weaker and less destructive compared to their landfall in the Philippines.

2. They have about 10 million hectares each of rice land, the Philippines has only about 4.5 million hectares, since the 60s up to the present. They also have one major landmass, vs. the Philippines' archipelagic geography.

3. They have huge rivers like Mekong that can irrigate millions of hectares of rice land in several SE Asian region. Vietnam also gets water from Ton :Le Sap (?) river that crisscrosses Cambodia-Vietnam. The Philippines has only a few big rivers as the water easily drains into the sea.

The comparative advantage of the Philippines is tourism, not rice production. We should not aspire for "rice self-sufficiency" but rather, "rice or food security." Hong Kong, Japan, Singapore, S.Korea, they have "food security" even if they are not rice self-sufficient, they have the money and resources to buy the type and quantity of rice that they want. But I digress.

Here's one graph or illustration from the same paper by the three authors, about buffer stock stabilization by the government. In normal condition, demand (D) meets supply (S1) and an equilibrium price is set at their intersection point. But during bumper or big harvest, the supply can move to S3 while during prolonged drought or bad storms or pest attack, supply can move to S2.

Government sets a base or "floor" price where it will intervene by buying the excess harvest of farmers to prevent the price from further going down. Government also sets a high or "ceiling" price where rice consumers will be adversely affected by very high prices, so government will sell its stored rice.

I labeled that graph as "implicit price control" via government purchase, storage and sale of rice. In both cases of government buying and selling, taxpayers money is used for such price stabilization goal. In the Philippines, the "buy high, sell low" price intervention is done via the National Food Authority (NFA) and this agency is one hell of public debt generator every year, losing billions of pesos every year.

One problem with this model is that it assumes that only the supply curve can shift while demand is stationary. If such government intervention is absent or kept to the minimum, rice D curve can also shift to the left (reduced consumption temporarily, shift to other staples) or to the right (higher rice consumption). Rice traders -- individual or corporate traders, rice farmers themselves via cooperatives, other NGOs -- and importers can fill the gap during the seasonal up-down-up-down in rice prices, and rice supply can be stabilized even with little or zero government intervention.

We are not talking about possible large scale corruption with this scheme. This is often done by "buying high" from crony farmers groups or cooperatives, often political supporters of local and national politicians. Then "selling low" to crony traders, again of local and national politicians.

Just leave the consumers' demand curve to shift and adjust to changes in the producers' and traders' supply curve. As shown by industrializing and industrialized Asian economies, people's consumption of rice declines relative to the rise of their household income. Wealthier people shift to bread, potato, pasta, vegetables and fruits for their staples and consume less rice. The latter's rice D curve therefore shifts leftwards, allowing rice supply to be dedicated more for the poor.

The main function of government is to enforce the rule of law, protect private property rights and the people's right to life and liberty. People will not be happy and would feel insecure if they get all types of subsidy (rice, tilapia, poultry, education, healthcare, housing, etc.) but criminals can steal their property or abduct, rape or murder their children anywhere.
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Monday, January 14, 2013

Healthcare Monopoly 6: Cuba Socialism

Cuba's healthcare socialism is being touted by some health NGOs and academics here as a possible "model" for the Philippines. They like the service monopolization and big spending on healthcare by the socialist government there.

Among those who gave praises for the Cuban state ~~monopoly~~ "political will" in healthcare was Dr. Reynaldo Garcia, a life scientist academic and manager of technology and innovation at the same time. He is the Director of the Technology Transfer and Business Development Office of the University of the Philippines (UP) System and a Full Professor at the National Institute of Molecular Biology and Biotechnology in UP Diliman. He got his PhD in Molecular Biology at the Australian National University (ANU) and his business degree (Master’s in Bioscience Enterprise) at Judge Business School and the Institute of Biotechnology of the University of Cambridge in England.

During the 9th Science, Technology, Innovation, Knowledge and Entrepreneurship (STIKE) Kapihan Series on the subject, Technology Transfer and Healthcare last September 27, 2012, at the Asian Institute of Management (AIM) organized by the Dr. Stephen Zuellig Center for Asian Business Transformation, Dr. Garcia showed these slides below, among others.. My discussion of his talk on tech transfer and IPR is here, IPR and Medicines 25: Patents, Diagnostics and Technology Transfer (October 08, 2012).

The four charts show that (a) illiteracy rate in Cuba declined fast, (b) infant mortality as of 2000 was as low as that in the US, (c) physicians per capita is more than double that in Latin America and the US, and (d) life expectancy at birth similar to that in the US as of 2004. Lower photo shows free healthcare in Cuba.

Dr. Garcia also said that Cuba has the biggest biotech facilities in the developing world. There was no year indicated, but I think this was in late 2000s level. In terms of vaccine development, Cuba was also high tech.

And more vaccine R&D capacity, as of 2007. Cuba is known for good quality cigar exports, smoking is prevalent, so its government developed a vaccine against lung cancer.

I have high regard for the academic and professional credentials of Dr. Garcia but I ~~cannot agree with him~~ do not think that state monopolization of various health services -- from medicines and vaccine innovation and invention to hospitalization care -- is a good thing. Here now are my comments to Dr. Garcia's points above.

One, the good health indicators in Cuba at least as of 2004, do not match with its economic development or degree of industrialization. So data sources may be suspect, not indicated in his slides.

Two, assuming that the high physicians per 1,000 population data is correct, more than twice that of the US, I think Cuban government hospitals may simply be bloated with many doctors relative to number of patients. They could be mostly general practitioners with very few specialists.

Three, free healthcare is being done in many developed economies with nationalized or government monopolized healthcare system, and the result is almost always the same: demand is much much larger than supply, resulting in ~~either~~ (a) healthcare rationing like some patients waiting for days, weeks or even months to get free healthcare, (b) lousy services like seeing patients only for two or five minutes, write drug prescriptions then call the next patient, ~~and/or~~ (c) huge fiscal deficit and public debt as healthcare is a bottomless pit of spending. Cuba could be suffering from any or both of such malady.

Four, it is good news that the Cuban government has invested in medicines innovation and almost surely, generic production. But not being subjected to competition and international healthcare accountability system, I doubt if cases of adverse drug reactions (ADR) and similar problems are being appropriately addressed, like drugs recall and compensation of the adversely affected patients. Patients have no or little options anyway, there is only the government as sole drug distributor and/or manufacturer.

In contrast, in a competitive environment, if an innovator company produces a new drug, supposedly effective but has several ADRs and side effects, the company does not wait for huge public outcry or multiple lawsuits, it has to recall and pull out such immediately before more damages can happen and its entire corporate brand will be destroyed.

In some reports though, hundreds of Cuban doctors have been migrating to other countries. From The Vincenton Post,

In 1998 there were already 400 Cuban doctors practicing medicine in South Africa’s rural areas. By 2004, there were about 1200 Cuban doctors working in African countries, including inAngola, Botswana, Cape Verde, Côte d’Ivoire, Equatorial Guinea, Gambia, Ghana,Guinea, Guinea Bissau, Mozambique, Namibia, Seychelles, Zambia, Zimbabwe, andareas in the Sahara.” (Source: Perez, L.A., Krull, C. and Marino, S.C., 2010, Cuban Studies 41. PA: University of Pittsburgh Press, pp. 92).

Meanwhile, Venezuela's dictator Chavez is drying of cancer in a Cuban hospital. From the Investors.com, Hugo Chavez Hit by Cuba's Surgical Strike.

In July 2011, during (a)... summit in Caracas, Brazil's President, Dilma Rousseff, told a few of her colleagues — in private — that Chavez was likely to die as a result of 'his excessive paranoia rather than as a consequence of his serious — yet treatable — cancer,'" wrote Venezuelan consultant Pedro Burelli in a newsletter.

"What she meant to say," Burelli added, "was that by choosing secrecy in Cuba over medical competence at the Sirio-Libanese Hospital in Sao Paulo (where she had been treated successfully for lymphatic cancer) Chavez had condemned himself to a shorter life."

Burelli noted that it corresponded to his own sources, who told him that Chavez's chosen successor, Foreign Minister Nicolas Maduro, flew to Brasilia to meet with Rousseff and her oncologist.

He presented the diagnoses from Caracas and Havana and the Brazilian specialist "considered it treatable under world-class protocols available in his center."

Maduro signaled interest. But the Chavista regime then demanded to pretty much take over the 400-bed hospital, which the Brazilians rejected. "From that moment on the patient was doomed," Burelli wrote....

Too bad for Mr. Chavez, He's got lots of money from petroleum socialism and when he became seriously ill, health socialism in Cuba may not be able to save him. Another news from yahoo:
Cuba to free doctors from onerous travel rules

By Andrea Rodriguez, Associated Press | Associated Press – Tue, Jan 8, 2013

HAVANA (AP) -- Cuba is eliminating longstanding restrictions on health care professionals' overseas travel as part of a broader migration reform that takes effect next week, an island doctor told The Associated Press on Monday.

Hospital directors learned of the new policy, which takes effect Jan. 14, in a Saturday meeting withHealth Minister Roberto Morales and word of the change was relayed in hospital staff meetings, according to the doctor, who attended one of the subsequent gatherings.

The minister's directive: "A doctor will be treated like any other citizen starting now and can exit freely, as long as the destination country allows it" by issuing an entry visa, said the physician, who spoke on condition of anonymity because he was not authorized to talk to foreign journalists.

"Apparently it has been completely repealed," he said. "No restrictions of any kind.

By indirectly imprisoning many Cuban doctors in their own country, their government has prevented them from acquiring more training and specialized education with more foreign practitioners, using more modern facilities, medications and other treatment.

I hope that more economic freedom for their people like free mobility across countries will be tolerated by the Cuban socialist leaders. Similar one-party system China and Vietnam already allow this.

Ultimately, I hope to see more political, economic and personal freedom be experienced by more people around the world. Especially from the clutches of dictatorial and totalitarian governments.
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