Monday, October 31, 2016

BWorld 88, Economic freedom and human rights

* This is my article in BusinessWorld last October 18, 2016

Economic freedom is the ability and privilege of people to engage in various social and economic activities without unnecessary restrictions and prohibitions. Such freedom is guided by voluntary exchange, open markets, personal choice and accountability, and clearly defined private property rights.

People are economically free if they can choose to buy or not buy certain goods and services from various sellers, when they are not forced and coerced to buy something expensive and/or poor quality. Freedom is not absolute though and free people have no freedom to harm other people nor destroy, burn or steal their private properties.

Human rights include the right to life, right to private property, and right to liberty and security of person. Thus, even a person who has committed a wrong act should be given due process to defend him/herself from false or exaggerated accusations. Murders of individuals based on flimsy or unsubstantiated accusations like what is happening in a number of instances in the on-going war on drugs are deprivations of those people’s human rights.

Combining these two concepts is very important for people to live with freedom and dignity.

And these two concepts will be tackled in a big international conference by the Economic Freedom Network (EFN) Asia on the theme, “Economic freedom and human rights in business” this coming Nov. 22-23 at Dusit Thani Manila Hotel, Makati City. The conference is jointly organized by EFN Asia Economic Freedom Network Asia (EFN Asia) and the Friedrich Naumann Foundation for Freedom (FNF), supported by four local organizations, the Philippine Commission on Human Rights (CHR), Philippine Economic Society (PES), Ateneo Human Rights Center (AHRC), and Bloomberg TV Philippines.

Among the key speakers and major resource persons in this event will be Siegfried Herzog, head of Regional Office, FNF South East and East Asia; Ms. Rosemarie Edillon, president of PES; Markus Loening, former German Federal Government Commissioner for Human Rights Policy and Humanitarian Aid, and Vice-President Leni Robredo.

Other speakers will be Wan Saiful Wan Jan, CEO of the Institute for Democracy and Economic Affairs (IDEAS), Malaysia; Chito Gascon, chairperson of CHR; Franz Jessen, ambassador and head of Delegation of the European Union to the Philippines; Nicholas Sallnow-Smith, chairman of the Lion Rock Institute, Hong Kong; and Peter Perfecto, executive director of the Makati Business Club (MBC).

So, how economically free are the people of the Philippines and big nations of the ASEAN? How free or unfree are they from heavy regulations that tend to restrict entry into markets and interfere with the freedom to engage in voluntary exchange?

The Economic Freedom of the World (EFW) 2016 report give scores to countries (0 most unfree, 10 most free) based on five criteria and areas: (1) Size of government, (2) Legal system and property rights, (3) Sound money, (4) Freedom to trade internationally, and (5) Regulations. Then they are ranked from the most free to the least free economies.

For this short paper, only the performance in Area 5 will be tackled and in particular, sub-areas on labor regulations and business regulations.

The Philippines has a modest score in both labor and business regulations, meaning not yet choked by those multiple bureaucracies and permits. In particular, the country has a good score in labor hiring regulations and enforcement of the minimum wage, but it has a low score in hiring and firing of employees.

From some existing policy debates in the Philippines today, we can apply the principles of economic freedom and human rights on these issues.

(1) On labor contracting including endo, being hired for short-term labor contracting is a privilege, a human right for new job entrants and the unskilled. It is much better than being rejected and not hired by employers because of the high cost of hiring new additional workers and the threat of government harassment for firing the un- or less-experienced, less skilled people.

(2) On a nationwide minimum wage and abolition of regional wage disparities, this one-size-fits-all policy will make hiring people in the provinces become more expensive, and, as a result, there will be fewer hiring of lesser-skilled, lesser-experienced people. There are now more machines and robots available that can slowly replace more laborers.

(3) On entrepreneurship, it is a privilege and human right for the more hard-working, more ambitious people and they should not be deprived or discouraged to try that route because of heavy government regulations, bureaucratism, and taxation.

Increased market dynamism and fewer government regulations and taxation are the keys to ensuring economic freedom and protection of human rights.

Bienvenido S. Oplas, Jr. is the head of Minimal Government Thinkers and a SEANET Fellow. Both organizations are members of EFN Asia.

See also:
BWorld 81, Property rights are human rights, September 30, 2016
BWorld 86, Philippine industrial policy, October 15, 2016 
BWorld 87, Economic, fiscal and energy policies of the Duterte administration, October 17, 2016

Sunday, October 30, 2016

The Students for Liberty - Philippines (SFL PH)

Last October 20, 2016, the Students for Liberty - Philippines (SFL PH) launched their facebook and twitter pages. Congrats guys.

I am happy that the liberty movement among the Philippine youth is taking shape formally. And when we say liberty, it is individual liberty, not national or class or clan liberty.

From Joseph Bautista, President of SFL PH, October 20:

We're pro-peace, pro-individual, pro-market, and pro-liberty.. We're part of the bigger Students For Liberty network around the world. We have students from the USA, Indonesia, Canada, Europe, New Zealand, Australia, Africa, and many others.

Here in the Philippines, we also have a growing local network, initially consisting of students from Ateneo de Manila University, the University of the Philippines, and San Beda College.

Interested in joining? Feel free to message me if you belong in any one of the universities, and I'll happily redirect you to the respective Campus Coordinator to get you started right away. If your university is not yet on our network, please do not hesitate to contact me. We'll help you start one there.

Posted by some SFL PH members:

From Jonathan Michael Vegamora, Public Relations Officer of UP Libertad:

I'm a libertarian because I believe individuals have the right to live their own lives as they see fit as long as it does not encroach on the freedoms of others to do so. This political philosophy has guided me for a long time and I want to keep it that way, especially in a time when many people in the Philippines and all over world believe more in the capacity of government to act for the greater good than their own selves.

In the face of what's happening at home and overseas - state-sponsored violence (and if you ask me for examples, I'll give you a dump truck load of 'em from US interventionism to Saudi airstrikes on Yemenis to AFP forces shooting up Lumad communities) - we need those basic classical liberal rights that have made our lives peaceful and prosperous more than ever.

From Emil Apostol, another member of UP Libertad and supporter of SFL-PH:

Because I believe freedom is the virtue by which all other virtues can be exemplified, I fight for it. Smaller government, fewer taxes, and the freedom to live my life the way I see fit without anyone forcing me to do otherwise; sounds great, if I do say so myself. :) 

Last May, UP Libertad held its first, inaugural and open house forum, I was one of two speakers, I talked about Friedrich Hayek. See the 22-slides presentation here.

UP Libertad will partner with Pan Xenia fraternity in organizing a forum on Foreign Trade Issues. Initially scheduled this coming November 09, it will be rescheduled for early next year. I will be one of several speakers and I will talk about the challenge of unilateral trade liberalization in the ASEAN, both tariff and non-tariff in goods, also in services.

Saturday, October 22, 2016

Weekend Fun 62, The invisible hand

I got this from an economist friend's fb wall. Brilliant humor.

“By directing that industry in such a manner as its produce may be of greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.” -- Adam Smith, The Wealth of Nations

This slide I got from an Indonesian friend presented at the EFN Asia conference 2004 in HK.

On another note, it will be the UPSE annual alumni homecoming later today. I will attend, as usual.

These 5 political personalities, either UPSE alumni or faculty member, will come today, except Ben Diokno whom I heard is abroad this weekend.


See also:
Weekend fun 23: Economist Jokes, September 24, 2011

Friday, October 21, 2016

Energy 80, Power outages in 2010

I originally wrote this on March 02, 2010, reposting to look back on some issues more than six years ago.

'Government failure' in energy

Recently, a number of power outages have re-occured in Metro Manila and the provinces. The usual explanation given by the government, the Department of Energy (DOE) in particular, is the "thin reserves" as there are not enough power supply while demand keeps rising every year. El Nino for instance, has been cited as a "cause" as many hydro-power plants could not function well due to low water level in many dams.

A friend in facebook posted this yesterday in his status:
"Secretary of Energy should resign. How is it possible that the Department of Energy did not forsee possibility of power shortage? Now he wants his principal to have emergency power without explaining how those powers will be used."

I actually thought that DOE Sec. Reyes has already resigned because he's running as a Congressman in the coming May 10 elections. Now we don't have enough electrical power, the DOE leadership and Malacanang want emergency political power?

An obviously staff of the Sec. reacted and argued that it's the lack of water for hydropower plants that is a big factor for the brown-outs. I find her explanation lousy. El Nino (and La Nina) occurs every 3-5 years, it's predictable. Population increases by 1.8M/yr, net of death, so demand for drinking, laundry, irrigation, other water uses keeps rising, it's predictable. Now they are implying that depleting water supply was unpredicted.

I agree that the DOE Sec. should resign. He made a lousy job of not predicting properly the power shortage. A better action on his part would have been to humbly accept his mistake, and step down if necessary. But he is asking the opposite. That he keep his job and that we the public give him and the President more political power to deal with power shortfall. Lousy. Get out, period.

This evening, I saw the Sec. on tv. He said, "if people should blame anyone, they should blame God", referring to the lack of water in hydropower plants. Us taxpayers are in deep s__t. We keep sustaining officials who are corrupt like the President, and arrogant like the DOE Sec.

Can't power suppliers or power aggregators just deal with power consumers directly, without going through government energy bureaucracies?

Another friend made a long comment. She said that it was the free market in general and the power deregulation (or EPIRA) law in particular, that contributed to the lack of power supply in the country.

Free market capitalism is rational, even radical and subversive. Why are there bar-bq or fishball or balut stalls on high density streets? Because there is profit and money to be made. Why are there no bar-bq or fishball stalls inside a cemetery? Because there are no buyers and no profit to be made.

Why are there not enough power plants or power aggregators or power transmission lines, etc. considering that power demand keeps rising, non-stop, every single year? Most likely there is not enough profit to be made. Before, energy bureaucrats decide how much profit rate power plants and petrol companies can make. With energy deregulation, energy bureaucrats decide how many signatures will be needed, how many weeks or months or years before those signatures will be affixed, how much taxes, fees, ECC permits, etc. will be paid, before a single power plant can be built. All of these require huge costs.

It is impossible not to make big money in power supply, transmission and distribution, considering the big power demand that becomes bigger every single year. But it is impossible to just build a power plant without passing through a maze of energy bureaucrats and politicians' interventions.

Meanwhile, I saw the DOE 2015-1st half 2016 Accomplishments, it talked a lot about "promoted clean energy" and very little on "unclean" energy that actually gives us electricity 24/7, stable and cheaper electricity, coal power. Here is one chart that is useful.

The bulk of "renewables/RE" there are hydro and geothermal. In 2015, actual electricity generation by wind + solar + biomass combined was only about 1.0%. Very small, very unstable, expensive too, and yet getting lots of government favoritism. Government high intervention in energy development and pricing (like subsidies, guaranteed price via FIT for 20 years, for wind-solar especially) is wrong.

See also:
Energy 77, South Australia's blackout last September 28, October 08, 2016 

Energy 78, AEMO on the S. Australia blackout last Sept. 28, October 13, 2016 

Energy 79, Germany Energiewende's €520 Billion Cost By 2025, October 17, 2016

Monday, October 17, 2016

BWorld 87, Economic, fiscal and energy policies of the Duterte administration

* This is my article in BusinessWorld last October 07, 2016.

The new administration of President Rodrigo Duterte will turn 100 days old this week. The basis for its assessment is still sketchy and raw, so one way to further assess it later is to see some baseline figures when it assumed office.

Stratbase-Albert del Rosario Institute (ADRi) conducted a forum last Sept. 28 on “Raising the Next Tiger: The New Administration’s Economic Priorities” at The Tower Club in Makati. The main speakers were Mr. Aekapol Chongvilaivan, Country Economist, Philippines Country Office, Asian Development Bank (ADB); Department of Budget and Management (DBM) Secretary Ben Diokno; and Bangko Sentral ng Pilipinas (BSP) Deputy Governor for Monetary Stability Sector, Diwa Guinigundo.

The various reactors and discussants included Mr. George Barcelon, president of the Philippine Chamber of Commerce and Industry (PCCI); Mr. Calixto Chikiamco, president of the Foundation for Economic Freedom (FEF); Ambassador Donald Dee, president of the Employers Confederation of the Philippines (ECOP); and Mr. George Chua, president of the Financial Executives of the Philippines (FINEX).

These four reactors particularly mentioned the high prices and limited capacity of the Philippine’s energy sector. They pointed out that this factor, among others, reduces the country’s competitiveness compared to our ASEAN neighbors. Mr. Chikiamco and Mr. Chua in particular mentioned the problem of pushing more renewables wind and solar into the national grid as contributing to rising electricity prices and even affecting the grid stability.

Below are some numbers presented during the forum. I added the data on electricity generation (in terawatt hours) to further contextualize the points made by the four mentioned discussants (see Table 1). 

Sec. Diokno did not give comparative data for some ASEAN countries, only the Philippines’ fiscal data. He only emphasized the bigger focus of Duterte administration to expand and improve the country’s infrastructure to address the Philippines’ low rank in global competitiveness surveys.

Public spending by the national government for infrastructure are as follows: P165B in 2010, P175B in 2011, P216B in 2012, P307B in 2013, P346B in 2014, P576B in 2015, P756B in 2016, and P861B proposed in 2017. These numbers indicate a sustained increase in infrastructure spending from 2015 until next year.

So as baseline data: First, the Philippine economy has been growing rather fast until 2015 and the challenge is how to sustain this expansion. Second, overall global competitiveness is good enough but ranking in infrastructure quality is low. And third, growth of our power generation remained low, only 46% after one decade. In contrast, Indonesia’s power capacity has expanded nearly twice after a decade while Vietnam’s has expanded more than three times.

The big challenge therefore is to allocate more public resources for infrastructure development.

To get the additional funds, the new government will have to discontinue -- or at least significantly cut the budgets -- of some programs and projects that have questionable impact on poverty alleviation. These funds should then be reallocated to help bankroll more infrastructure projects.

Second, attract more private players and investors in coal and natural gas power generation, in road tollways, in seaports and airports, in rail-based urban transportation. This process is non-burdensome to taxpayers because these public goods are funded via user-pay principle.

For instance, only those who regularly use NLEx and SLEx pay for the capital expenditure and maintenance of those roads, not taxpayers who live far away who hardly ever use these roads.

It is also good that the President has explicitly declared that we cannot turn our back in using cheaper and stable energy from fossil fuels like coal and natural because of our fast rising energy demand that require 24/7 power. It is not possible to sustain fast growth without cheaper and stable electricity supply. Energy precedes economic development, it is not vice versa.

In the presentation by Mr. Guinigundo, he showed important reform measures from 1993 to 2016. I will show here some, especially those referring to enhancing more economic competition, liberalization and deregulation (see Table 2).

If we remove the uncertainties of murders and disrespect for due process related to the ongoing “war on drugs,” the Duterte administration is starting on good and relatively stable macroeconomic platform. It just needs to sustain the momentum while hastening development and expansion of public infrastructure, especially in roads and energy.

See also:
BWorld 74, Pres. Duterte's anti-corruption programs and Transparency Intl., July 30, 2016 
BWorld 84, Eliminate red tape in the Philippine energy sector, October 08, 2016 
BWorld 85, Drugs war morphed into war on critics of President Duterte? October 11, 2016
BWorld 86, Philippine industrial policy, October 15, 2016

President Duterte and 'Psychopath' comment by Agot Isidro

Last October 9, 2016, Filipina actress Agot Isidro posted in her fb wall 3 points about her opinion of the President, the 3rd of which was the most controversial, "you are not bipolar, you are a psychopath". It was shared several thousand times, re-shared further, picked up by local and foreign media.

Famous fb commentator Bernard Ong posted this in his wall that day:


Psychopathy consists of a specific set of personality traits & behaviors – first described by Dr. Hervey Cleckley in 1941.

Psychopaths are superficially charming, make a good first impression on others. Self-centered, dishonest & undependable. Engage in irresponsible behavior. Devoid of guilt, empathy & love – they have casual & callous interpersonal & romantic relationships. Offer excuses for their reckless & outrageous actions, placing blame on others rather than taking responsibility. Rarely learn from mistakes or negative feedback. Have difficulty controlling their impulses.

Check. Check. Check. Check. Check. Check. Check.

Best-established test is the Psychopathy Checklist Revised (PCL-R) which requires standard interview plus review of criminal & educational history. Covers 3 overlapping sets of traits: interpersonal deficits (grandiosity, arrogance, deceitfulness), affective deficits (lack of guilt & empathy), impulsive & criminal behaviors (including sexual promiscuity, lying, stealing, killing).

Check. Check. Check.

Psychopaths are not psychotic or insane (dissociated from reality). Psychopaths are usually rational. They are aware that their irresponsible or illegal actions are wrong in the eyes of society. They just don’t care anyway.

Psychopathy is treatable, or at least manageable. Most psychopaths resist voluntary treatment. Even if core personality traits of psychopaths are difficult to change, their criminal & reckless behaviors may be amenable to treatment.

Now here’s the twist. Psychopaths are not the same as sociopaths. Both exhibit similar anti-social behaviors (law-breaking, lying & deceit, impulsive acts, fighting & aggression, disregard for safety of others, irresponsible, lack of guilt or remorse).

According to psychologist Michael Tompkins, the main difference is that a psychopath does not have a conscience, he does not feel any moral qualms. A sociopath has a weak conscience. He knows his action is wrong but will do it anyway. Psychopaths are considered more dangerous.

Researchers believe psychopathy is likely a genetic disposition (related to underdeveloped parts of the brain) while sociopathy is likely a result of environmental factors (e.g. upbringing, child abuse, childhood trauma).

A visit to a psychiatrist is advised. They can help diagnose which is which & subsequently plan proper treatment.

So the question is this: Should we be like the adults who pretended to be blind? Or the little girl named Agot who innocently said the obvious - "The Emperor has No Clothes".

During the campaign period last April, at least 2 newspapers carried a story about the findings of a psychologist of former Davao City Mayor and now President Duterte.

The volatile and abrasive character of PDP-Laban presidential bet Rodrigo Duterte has roots from a psychological imbalance based on a report made on his mental health 15 years ago which described him as anti-social and narcissistic.

A psychological assessment on Duterte which appeared in a television news report stated that he has an “Antisocial Narcissistic Personality Disorder” or what psychologists refer to as psychopathy.

The report said the assessment became the basis for the civil annulment of Duterte’s marriage to first wife, Elizabeth Zimmerman.
Because of this personality disorder, the report said Duterte tends to humiliate other people or violate their rights.

International Statistical Classification of Diseases and Related Health Problems, tenth edition (ICD-10), of the World Health Organization (WHO) called what afflicts Duterte as a dissocial personality disorder which is characterized by at least three of the following:
- callous unconcern for the feelings of others;
- gross and persistent attitude of irresponsibility and disregard for social norms, rules, and obligations;
- incapacity to maintain enduring relationships, though having no difficulty in establishing them;
- very low tolerance to frustration and a low threshold for discharge of aggression, including violence;
- incapacity to experience guilt or to profit from experience, particularly punishment; and
- marked readiness to blame others or to offer plausible rationali-zations for the behavior that has brought the person into conflict with society.

The WHO paper states that the diagnosis included “amoral, antisocial, asocial, psychopathic, and sociopathic personality.”

The assessment on Duterte’s personality, conducted in 2000, also showed that the mayor has difficulty controlling his emotions. He was also described as impulsive and because of this, he usually does not consider the implications of his acts.

The assessment was undertaken by psychologist Natividad Dayan, former president of the International Council of Psychologists, and concluded that Duterte was suffering from “Antisocial Narcissistic Personality Disorder,” a condition charac-terized by “gross indifference, insensitivity and self-centeredness,” “grandiose sense of self-entitlement and manipulative behaviors” and “pervasive tendency to demean, humiliate others and violate their rights and feelings.”
“For all his wrongdoings, he tends to rationalize and feel justified. Hence, he seldom feels a sense of guilt or remorse,” the assessment said....

And in ABS-CBN news,

President Duterte indeed exhibits a number of those 6 characteristics or symptoms as outlined by WHO-ICD. No or little feeling of remorse, keeps repeating past mistakes and violent behavior (physical or verbal like the frequent SOB or PI, Pakyu,...), always blame others never the self.

See also:
President Duterte and Hugo Chavez, September 30, 2016 
President Duterte and Hitler, October 05, 2016 

Energy 79, Germany Energiewende's €520 Billion Cost By 2025

Now clearer pictures of the cost of Germany's energy transition to the renewables are coming up, the huge financial burden to energy consumers because of heavy government interventions and cronyism -- subsidies to renewables, taxation and over-bureaucratism of coal, gas and nuke.  See these reports last week.

English translation from the original German news report:

German Energiewende To Cost €520 Billion By 2025, New Study Initiative 
Neue Soziale Marktwirtschaft, 10 October 2016

The total cost of Germany’s green energy transition (Energiewende) amounts to over €520 billion euros by 2025 in the electricity sector alone. This is the result of a report commissioned by the Düsseldorf Institute for Competition Economics (DICE) on behalf of the Initiative New Social Market Economy (INSM)....

By far the biggest cost driver with a total of €408 billion is the levy to finance renewable energy (EEG levy). The expansion of electricity and distribution networks totals €55.3 billion. The study is the first full-cost estimate which takes all the costs of the energy transition in the electricity sector into account. In addition to the direct costs of subsidising renewable energy, indirect expenditures such as the cost for the expansion of transmission and distribution networks were included in the calculations, as well as offshore liability expenses and network, capacity and replacement costs.

At the end of 2015, 150 billion euros had already been spent on the Energiewende, not including the cost for network expansion. The bulk of the costs (25.000 euros for a family of four) will have to be paid in coming years." -- Translation by The Global Warming Policy Foundation, UK

And aside from expensive, unstable electricity from renewables like wind and solar, they devour the natural beauty of the countryside. Many German environmentalists are now turning 180 deg, from support to attack.

More news reports:

Vahrenholt writes that already today Germany has the second highest electricity price (after Denmark) in Europe and that the so-called renewable energy feed-in tariff will rise from 6.35 €ct/kwh today “to an astounding 7.3 €ct/kwh in 2017“. Germany’s green energy feed-in act generates an additional cost to consumers of some 25 billion euros annually, paid by citizens via their power bill. This represents “a social transfer from bottom to top of immense dimensions“.

"often wind parks are approved by politician’s who have a direct interest and business dealings in them, meaning the industry is rampant crony capitalism – the very kind that Germans are typically famous for opposing. For example Rannungen mayor Fridolin Zehner had a wind turbine built where none is supposed to be built – on his own land – thus allowing the honorable mayor to cash in on lucrative leasing fees – to the tune of 10,000 euros annually."

"The Institute for Competition Economics at the University of Dusseldorf has calculated the total cost of Germany’s Green Energy Transition. The result: By 2025, an estimated €520 billion euros will be spent. A family of four will pay more than 25,000 euros for the Energiewende.

Seldom was a German environment minister more ridiculed and mocked than Peter Altmaier (CDU): Three years ago, the current Chancellery Minister warned that the cost of the Energiewende could, if nothing were done, “cost the country around one trillion euros by the 2030.”

Major magazines and weekly newspapers from Wirtschaftswoche to Die Zeit immediately snapped that the environment minister must have got it wrong. “Don’t scare the living daylights out of people with horror figures,” Baden-Württemberg’s Prime Minister and Green Party star Winfried Kretschmann demanded."

See also:
Energy 76, PEMC reply to my article on AEMO, WESM, September 11, 2016 

Energy 77, South Australia's blackout last September 28, October 08, 2016 

Energy 78, AEMO on the S. Australia blackout last Sept. 28, October 13, 2016

Saturday, October 15, 2016

The Philippines' 5 Presidents

After President Duterte's first State of the Nation Address (SONA) last July 25, 2016, he convened a security council meeting and all the four past Presidents were invited. Below from left: Joseph "Erap" Estrada (June 1998 - January 2001), Gloria Macapagal Arroyo (GMA, January 2001 - June 2010), Rodrigo Roa Duterte (June 2016 --), Fidel Valdez Ramos (FVR, June 1992 -- June 1998), Benigno Simeon "Noynoy" Aquino III (BSA3, June 2010 -- June 2016).

Not in the photo are two dead Past Presidents, Ferdinand Marcos (1965 -- February 1986) and Corazon "Cory" Aquino (February 1986 -- June 1992).

Of the past four administrations, the most scandalous in terms of corruption and plunder cases were those of Erap and Gloria. Erap did not finish his term, he was ousted in a "People Power 2" revolution and later imprisoned. His VP that time, Gloria, completed the rest of his term. Then she won in the 2004 elections, capped by highly suspicious results. She survived several impeachment proceedings in Congress mainly via technicality. After her term, various plunder cases came and she was jailed.

None of the past administrations were free marketers of course. They instituted several market-oriented reforms but these were diluted by further expansion of the government and bureaucracies.

PDu30 is an outlier among these Presidents. Lots of vitriol in his mouth, highly raw, vulgar and volatile. And in terms of promulgating the rule of law, especially the law on dealing with suspected criminals, he's a big violator as he explicitly and publicly called for murder by the thousands, even a "follow Hitler who killed 3 million" people.

BWorld 86, Philippine industrial policy

* This is my article in BusinessWorld Top 1,000 Corporations 2015, published in November 2015. I forgot to post this earlier, no online copy of that publication, only hard copy.

Quo vadis, industrial policy?

A recurring question in the Philippines that crops up almost anytime anywhere is, “Why has the Philippines not industrialized as much as its East Asian neighbors?” It is a valid question, that opens up a plethora of valid and invalid explanations.

In a paper two years ago by former PIDS economist and now DTI Assistant Secretary Rafaelita M. Aldaba  summarized recent Philippine industrial policy as shown in table 1.

Source: Rafaelita Aldaba, “Twenty years after Philippine trade liberalization and industrialization: what has happened and where do we go from here,” PIDS Discussion Paper No. 2013-21, March 2013, Table 1.
It is a correct assessment, although it seems the import substitution industrialization (ISI) policy was just more than two decades (1950-72), not three. There was a “decontrol” policy or removal of quantitative restrictions (QRs) in 1962, and starting in the mid-60s, a revival of manufacturing was initiated but was not sustained. 

Export orientation on a limited scale was initiated in the mid-70s, coinciding with the world oil price shock in 1973 and the period of cheap foreign loans due to over-flowing petro dollars. It also coincided with some political stability because of political repression during the Martial Law regime.

There is a short but good literature on world and Philippines economic history from the late 1800s to the last decade written by Dr. de Dios of the UP School of Economics (UPSE) and Dr. Williamson of Harvard University. It shows that in Asia, the Philippines was third to Japan and China to attain fast growth of 5 percent or more a century ago. It was not sustained though, in the two decades before World War Two.

(Source: Bénétrix et al. (2012), Table 4. Cited by Emmanuel S. de Dios and Jeffrey G. Williamson, “Deviant Behavior: A Century of Philippine Industrialization”, UPSE Discussion Paper No. 2013-03, April 2013, Table 3.)

The post-World War Two ISI period pushed annual growth rates of Japan, Taiwan and S. Korea to double digits and the Philippines resumed its early century dynamism.

Messrs  de Dios and Williamson noted that “While the Philippines conformed to the industrial convergence pattern, it began to deviate sharply from the pack in the 1980s.”

The years between 1984‐1991 was a “period of large‐scale relocation to Southeast Asia of Japanese manufacturing industries in response to the yen revaluation following the Plaza‐Louvre Accords. This wave of foreign direct investments (FDIs) benefited Malaysia, Thailand, and Indonesia and led to the build‐up of a significant export‐oriented manufacturing in those countries”, the two academics added.

The Philippines of course could not optimize its FDI harvest that period because its Constitution made and ratified in 1986, does not welcome huge FDIs in many sectors of the economy.

Nonetheless, the government of then President Corazon C. Aquino in 1991 pursued a massive trade liberalization and official abandonment of protectionism when it reduced tariffs to a range of 3%‐30%. The Ramos administration continued the liberalization process capped by the Philippines joining the World Trade Organization (WTO), and undertook a new wave of tariff reductions in his last year in office in 1998.

Trade liberalization in the 90s was not just a Philippines or Asian phenomenon but a global one.
After many decades of trade negotiations and deadlocks at the United Nations Conference on Trade and Development (UNCTAD), the WTO was formally created in 1994.

To summarize, the Philippines’ post-WW2 industrialization policy can be categorized into three major periods: (1) trade protectionism and import substitution from 1950-72, (2) limited liberalization and export promotion  from 1973-90, and (3) accelerated trade liberalization from 1991 onwards, with “blips”of protectionism in 1997-99 Asian financial turmoil, then 2008-2010 global  financial crisis that started in the US.

Philippine membership  in the ASEAN (Association of South East Asian Nations) Free Trade Area, Asia Pacific Economic Cooperation, various bilateral FTAs and Economic Partnership Agreements, emerging Regional Comprehensive Economic Partnership (RCEP, ASEAN + 6) and the lure of joining the Trans Pacific Partnership  (TPP), are important alliances to sustain trade and investment  liberalization.

There are two important challenges for the Philippines to optimize its membership  in those mega trade alliances: (1) remove investment protectionism by abolishing the “reserved only for Filipinos” (or zero FDI) in some sectors, and 60-40 restrictions to FDIs in other sectors. And (2) relax services protectionism especially in the practice of profession, where foreign professionals are barred from practicing here while Filipino professionals are allowed in many other countries.

Mr. Oplas is the President of Minimal Government Thinkers, Inc., a Manila-based think tank advocating free market economics, and a Fellow of the South East Asia Network for Development (SEANET), a Kuala Lumpur-based regional center advocating free trade and free mobility of people in  the region.

See also:
BWorld 61, 100 indicators better than GDP, June 03, 2016 
BWorld 71, Free trade and higher income, July 11, 2016
BWorld 72, Economic integration and disruption, July 25, 2016 
BWorld 78, If the US becomes protectionist, who loses? August 11, 2016 
BWorld 84, Eliminate red tape in the Philippine energy sector, October 08, 2016 
BWorld 85, Drugs war morphed into war on critics of President Duterte? October 11, 2016

Friday, October 14, 2016

Social media and politics

Last month, I was one of three speakers in a lecture sponsored by UP Sapul, one of my three student organizations in UP Diliman in the 80s.

Creating political awareness for less/minimal (not zero) government, free market and individual freedom

Free market – free trade, voluntary exchange, zero to little government intervention in many sectors of the economy. More individual freedom, personal and civil society responsibility.

*  3 types of free marketers:
(1) Anarchist – zero state authority, zero central (and local?) government,
      citizens’ self-government by voluntary organizations and individuals.
(2) Minarchist – small or minimal government, function is mainly to enforce the rule of law, protect the citizens against aggression, their right to private property, right  to liberty.
(3) “Minimax” – one side advocates minarchy, another side advocates more government, more or higher taxes. Confused free marketers.

NOT advocating “good governance” under a BIG government

* Advocacy is limited, minimal governance – small government, small and few taxes, few regulations and prohibitions.

* NOT good governance of a big, intrusive, prohibitionist and tax-hungry government. Like “No business, no job creation allowed unless entrepreneurs will first get the signatures and permits of regulators and officials, dozens of permits.”

* Free society: everything is allowed except for a few prohibitions:
No murder, No abduction, No rape, No stealing, No destruction of private property, etc. Drugs, alcohol, gambling, etc allowed so long as none of the NOs mentioned is committed.

* Unfree society: everything is NOT allowed except with government permits. Driving your car, putting up a business, building a house, renovating a house or office, having a pet, etc. – all of them require permits. Relatively easy to comply yet, but moving towards more complicated, more costly permits.

Concluding notes

* Social media provides information competition. Along the lines of anti-oligopoly, anti-central planning and centralized thought conditioning. Even the most well-thought lies and propaganda cannot succeed if they are not shared in social media. Seemingly ordinary fb posts that become viral, shared 5k+, 10k+ and reaching out to tens or hundreds of thousands of readers. (Talo pa ang maraming newspaper stories or columns)

* The free market system can guarantee this type of information competition. Not central planning and big, interventionist government.

* Big challenge now is how a creeping PH dictatorship with little respect for human rights and international rule of law can be countered by vigilant citizens through social media.

Below, the two other speakers were Marielle "Yeng" Marcaida (to my left, white dress) and USC Councilor _____ (sorry, forgot her name; beside Yeng).

The 13-slides presentation is here.

Tax Cut 27, The Furusato tax in Japan as possible model in citizen empowerment

A Tokyo-based Filipino friend, Jules, shared this article from Tokyo Weekender:

The program was launched in 2008 as a way for a person to make a charitable donation to a municipality or prefecture of their choice—whether or not it was their hometown. Donors can even specify the purpose for which they want the money to be used: educational projects and helping the elderly are two examples. Beyond the feel-good aspect, though, there are two benefits that make donating all the sweeter.

The first of these is that donations are tax deductible: depending on how much you donate and your household’s income, you can claim back almost the entire donation. In general, the more tax you pay, the more you can claim back under donations to the Furusato Nozei program.

The other benefit… The municipalities and prefectures often send back “thank you” gifts to donors, typically in the form of local products and specialties. A tax break and return goodies into the bargain—what’s not to like?

Jules added his experience, posted in fb last week:

Power over the purse. Taxpayers in Japan decide how their taxes are spent.

Yes that is right. Power over the purse, an authority granted only to politicians, members of Congress( House of Representatives) and local councils( I think) of municipalities, cities and provincial government.

Furusato Tax, as it is popular known in Japan, grants the same power to tax payers. Essentially, it let tax payers decide how their taxes will be spent. At the moment, it only covers a small percentage of ones income tax and limited only to allocating the tax to local government units and or villages.

It is done on an annual basis too. You can decided to donate to a different local government unit next time around. The main purpose of the program is to support development in the countrysides by channeling taxes away from big cities like Tokyo. However, the program also make the intended beneficiaries ( local government units) compete and be more accountable. They would need to 'sell' to tax payers the projects they intend to fund and explain how the money was spent.
As an added appeal to tax payers, local government units who receive your taxes, lavish the donor with 'tokens' of gratitude from as simple as a 'thank you' note to as enticing as a 2 kilograms of sirloin steak, a paraglading tour, and many more.

Just this year, our family was gifted with a 700.00$ voucher that can be use on any MontBelle strore( Japan's largest outdoor product company akin to NorthFace). Already, we've spent 200.00$ of that on a very nice and lightweight down sleeping bag. Tomorrow, we are travelling to a rural village next to the Japan Alps with a 2days/3nights paid for by the village that received our tax donation. Power over the purse.

Who says democracy is limited only to casting ones ballot?!

Good initiative indeed. But I think the best tax policy is zero income tax, governments to survive on their roughly dozen types of consumption-based taxes (VAT, excise tax, travel tax, property tax,...). Then people will have more money in their pockets and they can spend more, like buying more fruits and veggies from Cagayan Valley or Bicol, etc., or visiting those regions and provinces and spend money there. Those provinces and cities of course will be competing with each other to attract more tourists, local and foreign, knowing that people have more money in their pockets than before. A few countries have zero income tax policy -- Brunei, UAE, Monaco,... Some have flat 10%, flat 12%, tax.

The second best tax policy is this type. But I think the national central planners will hate this type of "power to the purse" by the taxpayers. Remember they are so bright, so intelligent, they have so many data, and they are backed by dozens of consultants with PhD, the foreign aid agencies, so they can't be wrong, right?

The third best tax policy perhaps is status quo but income tax will be as small as possible, like 5-10% flat rate.

Nonetheless, this "Furusato tax" would be one of the models in citizen empowerment. 

See also:

Thursday, October 13, 2016

President Duterte and 'Pakyu' EU

These are news reports from September 21 to 23, except the news on "Killings prompt 'hesitation' among European investors" which was published a month earlier, August 2016. I also include here the fb postings by a friend, famous commentator Bernard Ong. No further comments from me.

From Bernard Ong, September 21, 2016:

"China supplies almost 100% of the shabu to the Philippines. Coddles the international drug lords & their syndicates. Takes over our seas & reefs. Chases Pinoy fishermen away from their traditional livelihoods. Corrupts our local officials to extract minerals in irresponsible manner.

Sounds 1000x more damaging than other countries urging the Philippines to respect universal human rights. Something we ought to be doing without anybody's prodding.

If you must say Pakyu. Be brave, be smart. Point your Pakyus in the right direction.

Pity the die-hard followers who have to switch-on & switch-off their anti-US hatred and pro-China/Putin love.

Those who don't suffer from mood swings due to drugs, bipolar & other conditions will find it hard keeping up with whom to bash & whom to praise. Last time I checked, the Mochas & Sassots & ThinkingPinoys that feed their confused minds are still on bashing the West (govt, media, human rights) mode. Those guys have not received the memo. Slow. Andanar is sleeping on his job.

My suggestion to die-hards is not to wait for clues from Idol's speeches. Flip-flops do not provide useful guidance.

Just think for yourself. Think of what is best for the Philippines. Key word is think. Then you won't bash the UN, US, EU, international media. Not that they are saints. But it is against Philippine interest to do so - we risk losing a lot (investment, aid, trade, tourism, jobs, defense) for the shallow pleasure of petting one man's ego and venting anger. High cost, high risk, no benefit.

Ignore the leader's mood swings. Better yet, correct him when he goes off course. Maybe he will listen to you."

"EU is the Philippines' biggest foreign investor with an FDI stock of over 366 billion pesos.

EU investment is distributed among 600 companies, employing about 400,000 Filipinos, in relatively higher-paying jobs, in sectors like energy (e.g. Shell), manufacturing (e.g. Loreal, Unilever), finance (e.g. Deutsche Bank).

EU invests almost $400B overseas each year. Philippines gets only 0.1% of that. Could easily double or triple with our market potential - IF we don't create the perception of risk by behaving like a rogue nation ruled by thugs instead of laws.

To make these numbers digestible: If the Philippines misses out on $3 billion investment in next 6 years, that means 60,000-120,000 fewer high-paying jobs, less income, less buying power, less taxes, less money for infrastructure. There are multiplier effects. Ignore at your own peril.

So "Pakyu EU". Close the lights on your way out."


See also:
President Duterte and UNexit, August 22, 2016 
President Duterte and Hugo Chavez, September 30, 2016 
President Duterte and Hitler, October 05, 2016 

Energy 78, AEMO on the S. Australia blackout last Sept. 28

More on the huge, state-wide blackout for many hours in S. Australia last September 28. There was a storm, strong winds with gust at 100-120 kph, so the wind farms should produce more power, right? Wrong. Wind power suddenly went AWOL. Huge supply deficiency, plus some transmission towers were knocked down. And there was massive power blackouts.

The wind farms shut down their turbines and locked the blades from spinning as there is danger that the blades might go out of control, the turbine can overheat/burn?

SA energy mix is 48% from wind, 34% energy import from Victoria, and 18% from thermal/gas power. Data from the AEMO Report, PRELIMINARYREPORT – BLACK SYSTEM EVENT IN SOUTH AUSTRALIA ON 28 SEPTEMBER 2016.

From The Advertiser, 4 October 2016:

Australian Energy Market Operator Orders 10 SA Wind Farms To Limit Generation After Statewide Electricity Blackout
Paul Starick

TEN South Australian wind farms have been ordered to limit generation in the wake of the disastrous statewide power blackout because the national electricity market operator has declared they have not performed properly.

The state’s biggest wind farm, at Snowtown, is among those which the Australian Energy Market Operator has targeted in its “management and analysis” of last Wednesday’s unprecedented power outage as it gradually restores the power network....

And from The Australian, October 05, 2016:

Green Disaster: South Australian Blackout Due To Loss Of Wind Power
Graham Lloyd

A dramatic, sudden loss of wind power generation was the root cause of South Australia’s state wide blackout last week...

My Australian engineer friend, Bernd Felsche, commented last October 06,

The AEMO preliminary report released yesterday does not state specifically if any wind generators locked; only that the power generated declined over a short period.

The "wind farm" operators ought to be able to tell if their turbines locked up. But they've said nothing … in a week.

As you note; wind power will drop to zero when the turbines lock up; something of which the State government and energy operators must have been aware; but totally unprepared in any event; transmission line failure to the wind generators OR the generators themselves.

South Australia's government hasn't yet announced a Royal Commission into the grid infrastructure (failure). They must do so IMNSHO because the grid structures failed catastrophically at wind speeds well below what they are supposed to survive. Such failures are indicative of a failure of competence or corruption.

From September 28 to October 4, the wind farm operators were silent? wow. Silence is admission that they indeed locked up their blades. I think they were designed for winds of 100 kph max, so when the winds reached 90+ kph, they locked up their blades, zero output.

The irony of wind power -- when there is a storm with strong winds, instead of wind turbines producing more electricity, they instead produce zero. The huge blackout in S. Australia occurred even before some transmission towers were knocked down. Wind power simply went AWOL.

"Wind presents two engineering problems when it is hooked up to a grid that was designed before it was viable.

First, it is intermittent so all of it has to be backed up by baseload power for those days when the wind does not blow.

Second, for an electricity network to function, demand and supply have to be kept near the perfect harmony of 50 cycles (50 hertz) every second of every day. If the frequency gets out of tune it trips the shutdown switch.

This electrical harmony is called synchronous supply, and thermal power is very good at delivering it. Wind power is asynchronous as its frequency fluctuates with the breeze, so it has to be stabilised by the give and take of other sources of demand and supply."

The endless reminder: Governments should step back from energy rationing and cronyism, telling picking winners and losers, mandating which energy sources should continue and expand and which ones should be curtailed, if not discontinued and killed.

See also:
Energy 75, the PH solar confederation, electric coops and Meralco, August 01, 2016 

Energy 76, PEMC reply to my article on AEMO, WESM, September 11, 2016 

Energy 77, South Australia's blackout last September 28, October 08, 2016