Thursday, March 31, 2016

Myanmar is back to civilian government, after half century

While Thailand moved from civilian to military government, Myanmar moved from military (for more than half century) to civilian government. Congrats Myanmar people.

A friend suggested that Myanmar will be back to military dictatorship in 6 months and noted that Su Kyi refuses to acknowledge the persecuted Rohingya crisis.

Being a "rational optimist", I believe that if ever Myanmar will go back to a military dictatorship, it will be a 2 steps forward, 1 step backward, and hence, the civilian government -- with all its warts and imperfections -- will prevail. Meanwhile, it is true that Su Kyi is silent on the Rohingya issue. Now that her buddy is in power, let us see how they will deal with this issue.

There should be some credit to the ASEAN efforts at promoting human rights. Myanmar's generals and dictators dislike human rights protection. But being with the ASEAN for many years and seeing other countries in the region that are under civilian leadership and things are fine, no frequent riots or demonstrations when there is civilian supremacy over the military, the military softened and allowed elections and they were defeated.

Compare the state of human rights respect or violation, South East Asia vs South Asia or Middle East or Africa or S. America, SE Asia is better. Here in the PH for instance, things are not exactly heavenly but freedom of speech is more protected, almost anyone can curse the President or legislators or the Supreme Court, etc. without going to jail.

There are still remnants of the military dictatorship, but there are changes. From nearly 100% to 25% military presence in the Parliament, that is still an improvement.

"A key challenge for Suu Kyi's administration will be maintaining smooth relations with a military that locked her and many of her colleagues up for years.

The charter ring fences a quarter of parliamentary seats to unelected soldiers and gives the army chief control over the home affairs, border and defense ministries -- and with it sweeping powers over the civil service."

A good and brief timeline. The military dictatorship was in power from 1962-2015, 53 years.

Meanwhile,  here's one proof of economic liberalization in Myanmar, coinciding with political liberalization that allowed elections. Myanmar made the biggest reduction in total tax rate among the 10 ASEAN countries, from the PWC "Paying Taxes 2016" report, in just one year. There is momentum in economic and political liberalization in that country.

From my article in BusinessWorld today.

Finally, I believe that the Thai military dictatorship won't last long. They should be gone from power within two years or less.

See also: 
On Myanmar, Letter to Sec. Romulo, October 05, 2007 
Migration 24: Rohingya Boat People to SE Asia, May 12, 2015

Wednesday, March 30, 2016

EFN Asia 58, Conference 2014 in Hong Kong, part 3

Continuation of notes made by Karthik Chandra during Conference 2014. The full 25-pages notes are posted in

Day 1, November 6, 2014

(Photo, from left: Ken Scholand, moderator; Andrew Work, Barun Mitra, Thitinan Pongsudhirak)

Case Study of Hong Kong in IPRI
Michael Wong & Andrew Work
Lion Rock Institute (LRI)

• Hong Kong enjoys a special status and unique advantages. HK has legacy property rights regime rooted in the British colonial system and adds to it the economic dynamism from the Chinese.

• HK was a member of the British Commonwealth till 1997 and many HK laws are rooted in British laws. HK copyright law is one of the first in the world. After becoming the SAR under China, HK has a new IPR regime.

• HK has a mini-Constitution, which mandates that HK has to separately protect property rights in HK. This regime means that property rights recognized in HK are not automatically protected in mainland China.

• HK is also a signatory to various (international?) regimes/understandings. A comparison of HK with other countries in the IPRI rankings (and its individual subcomponents’ ranking) shows that HK is favourably ranked against several other countries like Singapore.

• One of the few countries HK is not exporting IP to is mainland China. This is because of the unfavourable IPR regime. Current developments related to new laws, etc. to PR laws – “secondary creations” issue? Issue of property rights protection versus right to freedom of speech. If done well, these IPR regime reforms can help bring in more foreign investments into HK, in the field of intellectual property.

• We also have to take note of the current developments, the “Occupy HK” Movement. This is taking place in the backdrop of certain inherent advantages and opportunities in HK. There are also definite and large threats and risks for HK – if China is not happy with the HK Movement’s demands they might deny easy access to Chinese markets.

China & Property Rights
Prof. Michael Feng, Institute for Public Affairs, China

• The Chinese Property Rights issue:

* There are certain misconceptions about the ‘Chinese Miracle’ especially that it is based on no human rights or poor human rights (for workers/labourers). But this is simply not true: the Chinese growth story includes in itself a major improvement in working conditions for the workers/labourers themselves.
* At the same time we have to take note of the other side of this story. For instance, the former World Bank Vice-President who happens to be from China had said that there is no need for property rights in China. The justification being that ownership is separate from management and good or successful companies now have different owners and managers. But this is a false argument as it does not realize that even in the example given (i.e. about well-run successful companies), the ownership is completely clear and well defined. Hence the benefits to owners too are well defined.

• The current Prime Minister Le Keqiang is an economist and has taken a six-fronted approach to economics:
* No stimulus (later modified to micro stimulus)
* No bail out, Structural reforms
* Opening up, Development economics
* (…sixth approach??)

Sensational libertarians and solar power in the Visayas

I dislike irresponsible, sensational, alarmism journalism. And this article exactly belongs to that category, and it's from The Libertarian, sus ginoo. "Blackouts across the Philippines", when? what month and day? 

The article said,

“Solar power is wrecking the electrical grid in the Philippines, and the blackouts are only going to get worse, according to reports by power grid operators published Monday.

Data from the National Grid Corporation of the Philippines (NGCP) showed that solar power has caused ‘stress’ on the power grid, leading to brownouts and blackouts. The data show that solar power is frying the grid by producing either too much, or too little electricity, triggering failures and blackouts in the Visayas island group of the Philippines.”

"wrecking the electrical grid in the Philippines, and the blackouts are only going to get worse", wrong on two counts.

1. Only the Visayas grid, not the entire country.
2. Actual blackouts due to solar power in Negros I think has not happened yet. It may trigger but not caused yet.

That lousy article from The Libertarian was based from another lousy article from Renewable Energy which says,

"In Visayas,... too much solar on the grid may lead to blackouts during the election period, which begins today, March 28, and lasts until May 7."

Wrong on 3 counts.

1. It's not the whole Visayas and its 3 regions, but only in Negros island, where there are lots of solar farms.

2. Campaign period, not election period. The former is 90 days for national candidates, 45 days for local candidates. Election is only 1 day, not 90 or 45 days.

3. Official campaign period for locals started March 25, not 28. But the candidates did not go full blast on the 25th as it fell on a Holy Week and did not want to be accused of being epal.

Another source of that lousy article from The Libertarian is the Manila Bulletin, but the MB news item was careful and precise in the title "could trigger blackouts" and not "caused blackouts."

Irresponsible, alarmist articles from libertarian camp is one way to lose credibility. I told some Filipino libertarian friends not to be gullible and irresponsible as the people and groups that we criticize. 

The RE law (RA 9513) was enacted in 2008, Gloria Arroyo's time. The feed in tariff (FIT) was granted only in mid-2012, and was finally implemented in 2015. There is not a single administration to blame as ALL admins -- before, during and after the current Aquino admin -- will be singing halleluiah to "more expensive and unstable electricity via renewables please."

See also:

Tuesday, March 29, 2016

EFN Asia 57, Conference 2014 in Hong Kong, part 2

Continuation of notes made by Karthik Chandra during Conference 2014. The full 25-pages notes are posted in

Day 1, November 6, 2014
Opening Key Note Address: “Economic Growth and Income Inequality”
Dr. Razeen Sally
The National University of Singapore (NUS)

• As liberals, we always face this rather fundamental issue of why at all should we bother to address the issue of income inequality.

• Such inequality has two facets: inequality of outcomes (a “collectivist approach” of typical socialists, communists, or do-gooders) and the inequality of procedures/treatment (eg. rule of law, equality, etc.). We need to clearly distinguish between the two.

• There is also a need to go back to the basics (abstract approach) of Schumpeterian capitalism:

 * Capitalism is always dynamic. Schumpeter said that ‘capitalism is a perennial gale of creative destruction’. Enormous progress takes place due to this creative destruction. This is not just an economic cycle but the story of our civilization itself.
 * At the heart of this powerful engine of capitalism is the entrepreneur, who is not necessarily a rational, objective person. Several impulses and incentives guide him. This engine thrives on inequality.

• Capitalism and Asia & the Global Financial Crisis (GFC):

 * Originally, economic freedom and capitalism was primarily a European idea. Subsequently, it became an Atlantic idea. Later, Asia too has witnessed greater economic freedom and increase in prosperity.
 * However, after the GFC, we saw assaults on economic freedoms and increase in restrictions. Capitalism is currently under assault and therefore pessimism is back. GFC saw a shift in policies and approaches: now there is much greater state intervention in both macroeconomic policy (debt, interest rates, deficits, etc.) and microeconomic policies (in the form of governments intervening in the smaller
details of markets like car standards, energy, pollution, etc).
 * Note: we need to understand the contrasting takes of Schumpeter and Keynes on capitalism.
 * More importantly, what unites such macroeconomic and microeconomic anti-capitalist intervention is the ‘social engineering’ mindset among a small group of high-minded, smart people who think that they can intervene in the micro- and macro-economic and the institutions.
 * But such interventions are inevitably counterproductive and harmful because the assumption that these individuals are fully knowledgeable is incorrect because 100% of information is never at their fingertips (much of the real information is tacit and non-formal).
* Rarely are the individuals themselves disinterested in the outcomes. Such interventions (even if beneficial) are deeply offensive to the very concept of freedoms and individuals.

• Given the above, the classical liberal take on inequality runs somewhat like this:

 * Globalization has improved incomes but also has driven inequality upwards. Yes, there is currently greater income inequality.
 * New technologies (3D printing, automated data storage, management and analysis systems, etc.) are destroying jobs – not just the blue collar ones - but also middle class white collar jobs (accountants, analysts, etc.)
 * And, what about the solutions to inequality? The classic interventionists (typically, social democrats) talk about greater taxation, etc. to “fix this problem of greater inequality”

• However, we need to look at the issue of inequality from a different perspective:

 * Usually, when we talk about inequality, we usually talk about income inequality within a country and not between countries. While economic liberalization has increased inequality within a country (E.g.: China, city states like HK, Singapore, etc.) it has actually reduced global income inequality (see Surjit Bhalla’s article saying that global inequality is at its lowest since 1850) i.e. between countries.
 * Increase in consumption, arising from greater liberalization of economies, has depressed incomes in some areas/countries but has greatly reduced overall inequality both within a country and between countries.
 * Education (see S. Bhalla’s article/ppt) actually is a great improver of averages.
 * However, a major challenge is the lack of big innovation. Yes, innovation is taking place at a big level but in narrow sectors and benefitting a narrower group of people. The IT sector serves as a good example where companies are getting easy money from globalized markets, and are getting great profits, and therefore are not seeing incentives to invest in innovation in other sectors. For instance,
Apple spends more on lawyers than on innovation of new products. At the same time, even though some people say that innovation results in job destruction, in the long run, innovation actually creates new and better jobs.

• In summary, the current state of affairs, post GFC is as follows:

 * at a macroeconomic policy level:
 Greater state intervention
 Redistributive approach (taxes)
 Debt/deficit financing with the threat of inflation always hanging over the head
 Central banks interfering in fiscal policies
 * Similar state of affairs at a micro-economic policy level also.
 * But, such interventionist approach is wrong on a more fundamental, constitutional basis and is based on several false assumptions, etc.

• Therefore, the unfinished business and important pending items to be done to liberalize product and factor markets: Making systems inclusive. (See reformulation by Daren Acemoglu and team on inclusive vs. exclusive systems.) In exclusive systems, esp. in Asian countries, the political and economic freedoms are closely intertwined. One cannot happen without other. Even the city states of HK and Singapore are lacking in innovations. This is because their systems are still bureaucrat-dominated.

• Finally, there is good news and bad news:

 * Compared to the past century (1914 to 2014), we have a more prosperous world: we are enjoying greater incomes, better health and better lifestyle overall. While today’s interest groups are still a problem they certainly are not as big a problem as interventionists of World War I.
 * But in the short run, post GFC, the pendulum has swung in the wrong direction i.e. towards greater state intervention. However, we should have greater liberalism and lesser state interventions in both micro and macroeconomic policies.

Monday, March 28, 2016

Global ranking of my 5 blogs

Update, as of today from

So after nearly 2 months, this blog has improved its global rank by nearly 600k, seanet2 has improved by nearly 900k, while travelpinoy has declined significantly by 11 million.

I wrote this last January 31, 2015:

I have eight blogs, four in and another four in Five of them have global ranks in There are perhaps hundreds of millions of blogs and websites worldwide, both in English and in other languages, many of these don't have any global rank.

This blog used to have global rank of 3+ million last year. It fell to 8.8+ million. All rankings as of today.

(1) this blog, covers many topics.
(2) is about trade and investments in Asia, related topics.
(3) is about travel and tourism plus my notes about my two girls.
(4) is about conferences of the Economic Freedom Network (EFN) Asia.
(5) is about agro-forest farming.

Yesterday, this blog experienced a surge in page views. From an average of around 400 per day last month and 550 per day this month, it went up to 3,918. The surge came from viewers in Germany. Thanks guys.

No particular topic was read, perhaps viewers just scrolled down the home page, archives by month, etc.

This screen shot I took around 8:30am today.

SEANET2 blog also experienced a surge in viewership this month. From an average of around 350 views per month the past 3 months, this month it's nearly 800. Audience, many are from Venezuela.

My three other blogs which have no global rank in yet are the following:

(6), about energy and electricity issues in the Philippines and other Asian economies, plus some postings on energy policies in Europe and the US. It also experienced a surge in viewership this month.

(7), about intellectual property (IP) issues in Asia, other countries outside the continent.

(8), some rotary notes about our club and RI District 3830.

Thank you, readers.

See also: 
Asian free market websites, part 2, April 25, 2011 
Asian free market websites, part 3, May 10, 2011 

Asian free market websites, Part 4, July 19, 2015 

Asian free market websites, Part 5, September 01, 2015 
Free market sites in the ASEAN, July 29, 2015

EFN Asia 56, Conference 2014 in Hong Kong, part 1

The following are minutes and proceedings during the Economic Freedom Network (EFN) Asia Conference 2014, Hong Kong, on the theme, “Liberalism: Promoting Growth, Reducing Inequality”, November 2014. Major sponsors were the Friedrich Naumann Foundation for Freedom (FNF), a liberal political foundation based in Germany, and the Lion Rock Institute (LRI), a free market think tank in Hong  Kong.

These notes were made by Karthik Chandra of the Foundation for Democratic Reforms, INDIA. The 25-pages notes are posted in

I am reposting them by major segments and  installments, plus my brief personal notes on each segment. Here’s the 1st installment.

Day 1: November 6, 2014
Introduction to the EFN 2014 Conference by MC, Wan Saiful Wan Jan
Chief Executive, Institute for Democracy and Economic Affairs (IDEAS), Malaysia

Welcoming Remarks
Bill Stacey, Chairman, LRI

• Welcome to Hong Kong! Given the recent developments (citizens’ demands and mobilization) in Hong Kong (HK) serving as the backdrop, this certainly is a good and clearly an interesting time for all the participants to assemble in Hong Kong, especially to discuss about inequality, liberty and freedom.

• There is an image of HK in some quarters of the media that capitalism here is of the crony variety and that there is no true economic freedom or liberty for its citizens. But the reality is that for a city of 7 million population, there is a lot of economic freedom and enterprise.

• At the heart of the current political developments seems to be a vigorous debate about two freedoms – economic and political. But, there is no conflict between the two. Those institutions that ensure economic freedoms in the form of greater equality, growth, prosperity and overall economic freedom also underpin the political freedoms. A few such institutions are free flow of information and rule of law.

• ‘Liberalism’ as understood in the traditional sense should not be viewed as an end in itself. There is a difference between treating people equally and keeping/ensuring that they remain equal.

Siegfried Herzog
Regional Director, FNF, Southeast and East Asia

• Welcome to Hong Kong EFN Conference. EFN Asia Conference has become a long established tradition, this event being the sixteenth one; this is my first one as a Regional Director. Thanks to the LRI and the Frasier Institute for being our partners. LRI is also celebrating its 10th anniversary; congratulations to them.

• Events such as the EFN 2014 greatly help institutionalize the ideas, research, debates and international experiences help them become a part of the political and academic discourse on economic freedoms.

• This event is being held in the background of the furious debate over political and economic freedoms of HK vis-a-vis China. HK has long served as the global leader of economic freedom. Now, the debate is about its political freedoms; about ensuring the rule of law and independence from political interference in HK.

• Currently, there is also a great debate on economic inequality. The idea of ‘economic equality’ retains a lot of appeal despite the fact that communism and socialism have repeatedly failed to ensure the same, based on our experiences in several countries.

• At the same time, this debate also touches upon the issue of social mobility and how crony capitalists and well-connected gamers have managed to subvert economic institutions and thereby gain undue benefits.

• This conference therefore is a valuable contribution towards helping settle the above debate because it provides a platform for sharing of knowledge and bringing new ideas into an area that has been traditionally dominated by left-leaning thinkers or misguided activists.

Me: Right, the (classical) liberal definition of equality is equality before the law, equal  application of the law to unequal people, equality in access to opportunities with no exception or people giving exemptions. And inequality of outcome, of income and assets ownership, is the natural result because people have different attitudes in life. 

See also:
EFN Asia 43: Day 1 of Conference 2014, November 06, 2014
EFN Asia 53, Successful Conference 2015 has ended, November 25, 2015 
EFN Asia 54, On Hong Kong and China, free trade and CEPA, January 27, 2016 

EFN Asia 55, Presentation by Tom Palmer in Bhutan 2015, February 03, 2016

Sunday, March 27, 2016

IPR and Innovation 32, On tobacco plain packaging proposal in Singapore

This is my letter to the HPB yesterday. The auto reply said they have received it and will look into it.

Subject: Singapore's plan on "Standardized packaging" of tobacco products

Health Promotion Board
3 Second Hospital Avenue,
Singapore 168937

Dear Sir/Madam,

I have read your campaign to control tobacco use and promote good health among Singapore citizens, it is a good objective. But I notice that you also plan to introduce or legislate “standardized packaging” or “plain packaging” in tobacco products, and I think it can adversely affect Singapore’s good image on protecting intellectual property rights (IPR).

It is true that smoking is dangerous to one's health. I myself am not a smoker, never smoked a single stick in my whole life, never worked for the tobacco industry or its allied industries. But I think people have a choice for their body. They recognize the danger of smoking -- and drinking, drugs, over-eating, sedentary lifestyle, etc. -- and still they do it. They compare the health risks with the pleasure of those actions then they decide whether to continue doing it or not; if they continue, whether to smoke 1 or 20 sticks a day, drink 1 or 10 bottles of beer a day, etc.

Plain packaging (PP) is wrong for the following reasons.

1. Singapore is known for its clear and strong property rights protection, both physical and intellectual property. Abolition or significant reduction of the trademarks and corporate logo of tobacco companies via PP will dent this image and put Singapore’s adherence to IPR protection in a question mark.

2. If Singapore is to be consistent in its policy, then it will be pressured in the near future to also introduce PP for alcohol products like beer and whiskey, soda, chocolate bars, other high sugar, high fat content meals and snacks.

3. People who derive pleasure in smoking will continue to smoke despite PP and they will likely shift to cheaper and illicit products. Overall smoking incidence can either flatline or even increase because tobacco companies will produce cheaper but cool-tasting products, which will attract new  smokers or entice the few-sticks-a-day smokers to become one pack a day smokers. PP will only adversely affect the sale of known and premium products of the big multinational tobacco  companies but not the cheap products of lesser known companies.

4. If drawn in a graph, the supply curve of cheap cigarettes will move to the right as manufacturers of premium brands will soon produce lots of plain pack but cheap cigarettes. Equilibrium price goes down while equilibrium quantity goes up, even if the demand curve does not move.

Discouraging the people from smoking can be done via more public education. The graphic health warnings, campaigns by the  Ministry of Health and health NGOs or groups are part of such public education.

But some people will continue to  smoke – and over-drink, over-eat, over-sit in  sedentary lifestyle – despite learning more and new things  about the dangers of smoking, over-drinking, and so on. Government cannot micro-manage the lives of people all the  time. What Singapore should continue protecting is its image  as the bastion of IPR  protection, whether companies are in  IT, pharma, healthcare, hotels, food,  alcohol or tobacco.

Thank you very much.


Bienvenido Oplas, Jr.
President, Minimal Government Thinkers
Manila, Philippines

See also:

Saturday, March 26, 2016

Tax Cut 24, Tax reform forum in Ateneo

This coming Tuesday, 29 March, I will be one of four speakers in this event jointly sponsored by the Ateneo de Manila IgnITE Movement, in partnership with four other groups: Ateneo Economics Association, UP School of Economics Student Council (UP SESC), Center for Strategic Reform of the Philippines (CSRP), and Tax Reform Philippines.
It is also supported by the Tax Management Association of the Philippines (TMAP) and the OGP Fiscal Reform Coalition.

Briefly, my concept of "tax reforms" are in favor of taxpayers and not of the state or government. So minimum or zero income tax as much as possible and government can levy various consumption-based taxes (VAT, GST, excise tax, travel tax, amusement tax, property tax, vehicle registration tax,...) plus various regulatory fees.

I will discuss my two papers published in BusinessWorld, (1) A simple model of raising tax revenues if rates are cut, and (2) PH splitting into many new island-nations.

The latter is to encourage tax competition, governance competition, national stupidity reduction, among many new island-nations. This will spare the rest of the PH of plunderers and mass murderers like the Marcoses, Binays, Duterte as their "national leaders." 

A "national stupidity reduction" is simply reducing the geographical area that megalomaniacs, notorious central planners and dictatorship-prone politicians -- and their consultants and supporters -- can rule. This way, their chance of ruling the entire PH is significantly reduced because some if not many of them can be defeated in other (new) island-nations. My friend Bernard Ong called this process as “geofencing of nuts”. :-)

See also:

Photos during the lecture on Cheap Oil, DLSU

Last March 01, 2016, I gave a lecture on Cheap oil and the OFWs at some classes at De La Salle University (DLSU) Manila main campus. Here are some photos that afternoon.

Some 3 classes combined to attend this talk. Thanks to their teachers/professors, Gina, Grace and my wife Ella.


My lecture was divided into 2 parts. Part 1 about cheap oil and gas, Part 2 about employment and OFWs data, and some fiscal data for Saudi Arabia, the main destination of many OFWs in the Middle East.

Open forum. 

Certificate of appreciation. Thanks Chloe.

Meanwhile, world oil prices want to  reach and stay at the $40 level, but over-supply and under-demand concerns put some brakes to this seemingly slippery target.

Friday, March 25, 2016

BWorld 51, WESM as market-oriented, PEMC as bureaucracy-oriented

* This is my article in BusinessWorld last March 23, 2016.

Power generation in the Philippines generally kept up with its ASEAN neighbors in the 1980s up to the early 1990s. By 2000, power capacity in many of our neighbors have doubled or tripled while the Philippines’ has less than doubled. By 2010, Indonesia, Thailand, Malaysia, and Vietnam have kept doubling or tripling their power generation levels in just one decade while the Philippines’ has expanded by only 50%.
The figures for China and South Korea are similar, doubling or tripling power capacity every decade. It is not possible to sustain high economic growth without high and stable electricity supply for households and companies.

High power production means high or fast growth in power consumption per capita. Or the reverse, slow power capacity expansion means low consumption per capita, and this is what happened in the Philippines. Until 2000, our per capita consumption was higher than Indonesia and Vietnam, and only one-third that of Thailand. By 2010, things turned around: ours were lower than those in Indonesia and Vietnam and only one-fourth of Thailand. Cambodia is catching up with four times expansion of power capacity in just one decade from 2000 to 2010. 

Note that the Electric Power Industry Reform Act (EPIRA) was enacted in 2001. The law has deregulated and demonopolized power generation where before, Napocor was the single power producer and owner of power transmission nationwide.

So has EPIRA restricted power generation or has the law saved the industry from atrophy? Based on previous columns on the energy sector, various government bureaucracies, local and national, are major contributors to a soured business climate in power generation. Securing nearly 200 different permits and signatures from different agencies over a period of 2-5 years before one can start real power plant construction is no joke.

Power generation companies (gencos) secure bilateral supply contracts with different distribution utilities (DUs) and electric cooperatives (ECs). DUs and ECs are considered as “utilities” and hence, are described as natural monopolies. Zero competition allowed, they just need to secure a Congressional franchise for 25 years, an arrangement that can be renewed.

Outside the contracted power, gencos have extra capacity to produce and sell. DUs too need extra capacity during peak hours on weekdays, or during the hot months of March to May, during fiesta season in many cities and municipalities, and so on.

For such uncontracted power, both gencos and DUs go to the Wholesale Electricity Spot Market (WESM) to buy and sell electricity. The lead time for spot pricing is not one week or one day but only few hours before electricity supply need to be expanded or curtailed.

WESM is governed and administered by the Philippine Electricity Market Corporation (PEMC). It is a weird body because EPIRA of 2001 says there should be an Independent Market Operator (IMO) that should administer WESM, but PEMC has become a bloated government bureaucracy pretending to be a private bureaucracy.

PEMC Board is a 16-man body chaired by the Department of energy (DoE) Secretary plus 15 Directors: 4 from gencos (2 from government, PSALM and NPC, and 2 private), 4 from DUs (2 from ECs and 2 non-ECs), 4 independent of the power industry, 1 from WESM customers including suppliers, 1 from the National Grid Corporation of the Philippines (NGCP) representing the system operator and Transco, and 1 from market operator represented by PEMC itself.

I was able to secure the transcript of three Committee hearings of the Senate Committee on Energy (October and December 2015, and January 2016) headed by Sen. Serge Osmeña, thanks to his staff Vina.

From those transcripts and related readings, I gather these eight questionable or weird things in the PEMC Board and WESM.

First, PEMC is supposed to be an IMO yet there are several government officials sitting on its Board, including the DoE Secretary and representatives from the Power Sector Assets and Liabilities Management Corporation (PSALM) and the National Power Corporation (NPC). The NGCP is a private corporation but it is representing a government corporation, Transco. Then there are advisers to the Board, two of whom are from government, a DoE Undersecretary and the National Electrification Administration (NEA).

Second, the actual power production of PSALM and NPC are small, almost negligible from the genco mix of Meralco for instance, yet they are almost permanent members of the Board.

Third, those 4 independent directors and the consumer representative (5 total) are all appointed by the DoE Secretary and hence, should be friendly to the government.

Fourth, PEMC is regulated by the Energy Regulatory Commission (ERC) which is under the administrative control of the DoE Secretary. So the Secretary heads an agency that is regulated by a government body that is under the Office of the Secretary.

Fifth, all the income of PEMC and WESM is collected from the gencos, especially private gencos, and the private gencos have only two seats. No collection from DUs, from independent Directors, from consumers, from system operator and market operator. The ERC and DoE get a certain percentage from the total WESM revenues.

Sixth, PEMC is pretending to be a private corporation when in reality it is a government-owned and controlled corporation (GOCC). By virtue of its being DoE Secretary-controlled, the presence of several government corporations and agencies in the Board, it is a government-owned bureaucracy pretending to be a private bureaucracy.

Seventh, being a GOCC pretending to be a private corporation, part of its collections or revenues are being used by the DoE and ERC for their respective regulatory and policy formulation functions. PEMC budget is also approved by the ERC, then PEMC should be audited by the Commission on Audit but currently, private auditing firms do the job.

And eighth, gencos pay for all the market fees at WESM and they are subject to price control via primary and secondary price caps. Their peaking plants need to charge higher on those few hours they run to compensate for many hours a day that they are not running and still make a profit, and pay more market fees yet they are restricted from doing this via price control.

So if you are a genco and you are subject to these kinds of policy distortions and bureaucratic interventions at WESM -- and paying for all of it -- that creates another layer of disincentive to do business.

And that will further put some brakes on an otherwise huge demand for fast and high generation capacity so we can catch up with our neighbors like Vietnam and Indonesia. In this age of ASEAN economic integration, energy-intensive sectors can put up their manufacturing companies in cheaper-energy countries like Indonesia, Vietnam, Cambodia, and Thailand, then export to the Philippines at zero tariff. Also, energy-intensive services like hotels (lights, aircon and elevators running 24/7) and tourism can expand faster in cheaper-energy countries than in expensive-energy countries like the Philippines.

We need less government interventions and distortions in the energy sector. It is among the important prerequisites for the Philippines to grow faster and create more jobs and businesses to the people.

Bienvenido S. Oplas, Jr. is the head of Minimal Government Thinkers, a Fellow of the South East Asia Network for Development (SEANET), and a member of the Economic Freedom Network (EFN) Asia. All three entities support the philosophy of classical liberalism in politics and economics.

See also:
BWorld 34, Solar power and supply instability, December 24, 2015 
BWorld 39, Coal and renewables complement each other, January 26, 2016
BWorld 43, More on WESM, PEMC and DOE, February 14, 2016
BWorld 47, Renewable energy and the illusion of merit order effect, March 06, 2016
BWorld 49, John Locke and Jovito Salonga, March 18, 2016

BWorld 50, Adam Smith and Jovito Salonga, March 21, 2016

Road safety and pesky traffic enforcers

There was an article from Citylab 1 1/2 years ago shared by a friend, about road safety in Sweden. This part is particularly striking to me:

"And we don’t catch any people at all. We reduce the speed, but we don’t catch people. And we don’t earn any money. It’s an investment for us. We don’t want to get that discussion in our society that this is a revenue-raising thing. We want people to understand that this is for safety. So we nudge people to do the right thing."

That's the key. Here and in many countries, there are many prohibitions, laws, restrictions, especially in traffic rules -- all with fines and penalties. More prohibitions means more opportunities for violations and hence, more revenues for the government.But more importantly, more opportunities for extortion and harassment by so-called "public servants".

Very often, government is a way for double-cross and double highway robbery. It gets lots of taxes and fees from us, the money is largely used to hire more bureaucrats and officials whose main function is to create more restrictions and regulations that translate to more fines, penalties and extortion of the public. Government should not be called "public service" but plain "government regulators". It is the private sector that is really "public service". You need something, you pay for that service or product. You don't like anything, that person or business will go bankrupt. It is only through real public service that a private business can survive and expand.

When I was in Sweden in September-October 2003, I noticed those road safety regulations. Like all cars have their headlights on automatically when they turn on the engine, even at day time. This helps make all of them visible, especially during wintertime where the length of day is short, only a few hours then things become dark. The highways are also fenced so that wild animals like those huge elks, deer, do not wander accidentally in highways and cause accidents. Max speed is 100 kph even if one is driving a ferrari or benz.

Then when I went to Germany after my training seminar in Sweden, late October 2003, I noticed the big difference in road regulations. Many highways there have no speed limit, one can floor the accelerator to 200+ kph and don't get a ticket violation, except in some areas where max speed is controlled, like a big interchange or entry/exit to a big city.

Wednesday, March 23, 2016

Brussels bombing and new wars

The bombings in Brussels yesterday was horrible. More than 30 people died and several hundreds injured. And just a few months ago, several dozens also died when many areas in Paris were bombed. 

One problem I think is that nations, rich and poor, are still focused on those large-scale, country to country wars so they accumulate have huge tanks, jet fighters, warships, submarines, etc. New wars and terrorism are micro, house to house or buildings to buildings. Better weapons to secure are micro too -- CCTVs, drones, cyber intelligence, spies.

Flashpoints like the South China Sea or West Philippine Sea, Israel-Palestine conflict, are nice for selling huge, multi-billion dollars armaments and battleships, jet fighters. But those flash points don't kill people like you and me. It's terrorist attacks, them who blow up buses and cars, coffee shops and airports, that can kill you and me. And the criminals will do it not a decade or two from now, but within months or few years, depending on the "causes" of those terrorists.

Some good points made by a friend, Jemy Gatdula in his article in BWorld, War is what we make of it, March 04, 2016,

"At this stage of our country’s development we can’t fight a war hoping to beat the other country. This includes not making our defense strategy hinge on the assistance of allies. We shouldn’t waste spending and the developing of our plans on such thinking.

What we can do is build our national defense strategy around the idea of attrition and guerilla warfare: to make going to war against the Philippines an island per island matter, complicated, never-ending, so costly in terms of human and material resources that it would practically outweigh any benefit -- that any country would have to think twice if it’s worth attacking us at all."

Our Philippine National Police (PNP) cannot and do not catch too many thieves who can victimize us, our family members and friends, our office staff, our car or house, etc. Internal crimes and internal terrorism are much more dangerous, more fatal, than those "national wars" on territories. Paris and Brussels bombings are clear proof of that.

Terrorists have one clear goal: terrorize the people, both locals and foreigners, and inspire other militants. Tourists and investors should avoid Paris and Brussels, other big cities, hope for econ. slowdown as punishment for their governments for some "wrongdoing" somewhere.

That is why internal security should be efficient. Government failure here means govt failure in many other functions. In the Philippines, peace and order has been largely privatized a long time ago. Private security guards secure schools and universities, buildings and condos, shops and malls, airports and seaports, clinics and hospitals. The police are often busy catching motorcycle drivers with no helmets, motorists who make left turns or U-turns in non-U turn corners, or giving road assistance to VIPs, public and private.

Meanwhile, the rich countries would be in a quandary: more welfarism spending, or more internal security and peace and order? High welfarism creates high state dependency, high expectations and entitlement mentality, fueling more envy while punching huge holes in the budget and ever-rising public debt.

Soon, Belgium, France, other European countries will be peppered with lots of private security guards as the govt cannot secure internal security, too busy with welfarism and buying heavy armaments for "national wars".

Meanwhile, am waiting for this headline somewhere, "Climate change causes more suicide bombings like those in Brussels", heh heh.

Monday, March 21, 2016

BWorld 50, Adam Smith and Jovito Salonga

* This is my article in BusinessWorld last March 16, 2016.

Adam Smith (1723-1790) was a Scottish philosopher known for his treatise on “invisible hand” welfare effect of the market system. He was the author of two classic works, The Theory of Moral Sentiments (1759) and The Wealth of Nations (1776).

Smith and David Ricardo, along with the earlier thinker John Locke, were considered the “Fathers” of classical liberal philosophy and political economy.

Jovito R. Salonga (1920-2016) was a top-caliber Filipino lawyer, legislator, statesman, and civil society leader. With a string of law degrees (Bachelor, Masters, Doctorate) from the University of the Philippines, Harvard Law School and Yale University, and string of top notch victory in three Senatorial elections (1965, 1971, 1987).

There are some similarities in the ideas and writings of Adam Smith and Senator Salonga, especially on the role and purpose of government.

In the famous work, The Wealth of Nations (1776), Book IV, Chapter IX, Adam Smith argued towards the end that individual freedom in pursuit of personal happiness and advancement should be respected, and government should be lean and minimal, its function is focused or limited to protect such individual freedom from violence (local or foreign) and injustice, and to secure public goods like infrastructures.

In Paragraph 51 of Chapter IX, Smith wrote,

“Every man, as long as he does not violate the laws of justice, is left perfectly free to pursue his own interest his own way, and to bring both his industry and capital into competition with those of any other man, or order of men. The sovereign is completely discharged from a duty, in the attempting to perform which he must always be exposed to innumerable delusions, and for the proper performance of which no human wisdom or knowledge could ever be sufficient; the duty of superintending the industry of private people, and of directing it towards the employments most suitable to the interest of the society.

“According to the system of natural liberty, the sovereign has only three duties to attend to; three duties of great importance, indeed, but plain and intelligible to common understandings: first, the duty of protecting the society from violence and invasion of other independent societies; secondly, the duty of protecting, as far as possible, every member of the society from the injustice or oppression of every other member of it, or the duty of establishing an exact administration of justice; and, thirdly, the duty of erecting and maintaining certain public works and certain public institutions which it can never be for the interest of any individual, or small number of individuals, to erect and maintain...”

In a public lecture at UP Diliman on “Good Government,” July 3, 1962, Sen. Salonga argued that an important function of government is to guarantee a minimum standard of social without sacrificing individual freedom for personal advancement. He wrote,

“(T)he preservation of a minimal standard of order is basic in any organized society; without order, one cannot enjoy the essentials of life with some kind of assurance that someone will not deprive him by force of it. But too much stress on order may mean the dissipation of freedom -- the freedom to pursue our respective occupations, the freedom to trade and engage in business, the freedom to inquire and to know, the freedom to seek truth according to our best lights, the freedom to speak and to worship and to believe. Law, then, in a free society of tree men is a system of reconciliation -- the reconciliation of order with liberty, and it is for this reason that I defined law earlier as a system of ordered liberty, a system where there is security and where individual dignity and worth is recognized.

A Good Government, therefore, seeks to achieve order with freedom, security with human dignity. And at the very least, human dignity means a more equitable distribution of the basic values and goods of society wealth and power, knowledge and respect.”

On the rule of law and not rule of men, the good Senator wrote,

“It is often said that in a democracy the government is one of laws and not of men. The meaning is that the mighty and the weak should be under the law, with equal rights and equal protection. Justice is blind, without regard to whether one is poor or lowly. This is all fine and good, except for the fact that laws are made by men, interpreted by men, and administered by men. And as long as this is so, justice cannot be blind.”

When he retired from politics after he lost in the presidential elections in 1992, Sen. Salonga turned his sights on civil society work. In his Ramon Magsaysay Award Lecture, Aug.30, 2007, he wrote,

“After one term as a congressman and three terms as a senator, I retired from partisan politics in 1992 -- indeed I am no longer an active member of the Liberal Party, since my active involvement in civil society. I founded and organized Kilosbayan in 1993, mainly to arouse public interest and participation in important questions of public policy, in light of the right of the people to their own governance and on the basis of civilized norms of morality, justice, truth and ethics.

“On Recto Day, Feb. 8, 2000, ex-Secretary of Justice and ex-Ambassador Sedfrey A. Ordoñez and I founded and organized Bantay Katarungan, an NGO, to help improve and modernize our system of justice in the Philippines, with the help of young students of idealism and competence from the best law schools in Metro Manila...”

The good senator was known for advancing the rule of law, of having a well-functioning administration of justice, and not for advancing populism and welfarism, entitlement and citizen-dependence on the state. He was the principal author of the Code of Conduct and Ethical Standards for Government Workers, the law defining plunder as a crime, many others.

That makes him a cut above the average or almost all current breed of politicians and legislators, even among many NGOs and civil society leaders.

There are many things, many social measures and actions that can be done by self-reliant citizens and independent civil society organizations and do not need legislation and national coercion. That is the implicit message of the Senator when he and his friends formed KilosBayan (Citizens Action) and Bantay Katarungan (Sentinel of Justice).

Adam Smith has re-ignited the ideals of citizen self-reliance, freedom and responsibility, and limited government focused on securing the rule of law, two and a half centuries ago. Senator Salonga supported those ideals half century ago. Thank you, Sir.

We still have to find that new breed of politicians in the country who can follow the intellectual persuasion and integrity stamina of the Senator. Politicians who are not using political populism and welfarism to bribe voters’ support and instead, highlight the important role of having the rule of law in protecting citizens self-reliance, entrepreneurship and innovation, their private property and their right to liberty and self-expression.

Bienvenido S. Oplas, Jr. is the head of Minimal Government Thinkers, a Fellow of the South East Asia Network for Development (SEANET), and a member of the Economic Freedom Network (EFN) Asia. All three entities support the philosophy of classical liberalism in politics and economics. 

See also:
BWorld 47, Renewable energy and the illusion of merit order effect, March 06, 2016

BWorld 48, On unilateral trade liberalization, March 17, 2016

BWorld 49, John Locke and Jovito Salonga, March 18, 2016

Adam Smith's economic morals, August 28, 2009
Pol. Ideology 46: Misunderstanding Adam Smith, July 14, 2013
Pol. Ideology 48: Hobbes, Locke, Rousseau and Social Contract Theory, September 09, 2013
D.Ricardo, JS Mill, A.Smith and Bong Mendoza on Taxes, BIR vs. Doctors, March 14, 2014
Taxes, The Beatles and Adam Smith, January 26, 2015
Pol. Ideology 61: Raison d 'Etre of Government, January 30, 2015