Thursday, October 19, 2017

BWorld 159, Electoral reforms and the President

* This is my article in BusinessWorld last Monday.

President Rodrigo Duterte has been on a rampage recently, repeating his warnings about declaring a “revolutionary government,” as if he has the authority to issue laws and orders without consideration or fear of opposition from independent-minded legislators.

Among his previous rants include his order to his loyal leaders in Congress to (a) impeach the Commission on Elections (Comelec) Chairman Andres D. Bautista, (b) impeach Chief Justice Maria Lourdes P. A. Sereno, (c) impeach Ombudsman Conchita Carpio-Morales, and (d) create new rules in electoral exercises such as postponing and resetting the barangay elections.

Speaking of electoral reforms, some things are better retained and while others should be changed. Among these are the following.

1. Retain automation and do not entertain the proposal by certain sectors to go back to manual counting of the votes. The number of voters in the country is rising and machines should take care of the counting and processing of results (see table).

The lobbying of the son of a former dictator, Ferdinand “Bongbong” R. Marcos, Jr., to discredit the results of the 2016 national elections and canvassing for vice-president has been rejected by the Supreme Court — good riddance. It was a dangerous attempt by Mr. Marcos to unseat the elected VP so that he can be the second highest official in the country, a position that is just heartbeat away from the Presidency, a position held by his father for 20 years (1965-1985) via deception and large-scale military coercion.

2. Elections of barangay officials should be as scheduled and not subject to postponement by the President or Congress.

Elections should held at regular and predictable intervals to give space and opportunity for the people to directly demand accountability from their elected leaders. Existing laws mandate fixed terms of office for elected national and local leaders.

3. No to state subsidy to political parties as proposed by certain sectors. This is a wasteful use of taxpayers money. Politicians and political parties have resources of their own or have access to a network that allows them to solicit big donations from their friends and supporters. Keep the tax money for direct subsidy to the poor, or cut taxes instead so that people can enjoy the fruits of their labor.

Meanwhile, if the proposed charter change (cha-cha) should materialize, the following reforms should be considered.

4. Abolish the party list system. This is wrong in both theory and practice. In theory, there are no marginalized sectors, only marginalized individuals. Women are not a marginalized sector. The country had two women Presidents already, a number of senators and House members are women. Youth is not a marginalized sector as many young leaders are occupying very high political and corporate positions. Farmers are not marginalized as there are many rich farmers and agri-business entrepreneurs, although many farmers are indeed poor. Electric cooperatives do not belong to the marginalized sector.

In practice, many non-poor individuals and groups have entered the legislature through the backdoor afforded by the party-list system.

5. Abolish the Sangguniang Kabataan (SK). Young people should not be encouraged to enter the world of politics early because government, by nature, is force and coercion. Young people should focus instead on voluntary and civil society action and learn the arts of entrepreneurship early.

6. Elect only the political party, not candidates, should the Philippines become parliamentary. Once put in effect, parties will stay focused on their political ideologies and advocacy and not on personalities.

7. Go back to the two-party system. Very often, debate on public issues can be limited to whether there should be increased government interventions and regulations or fewer, whether there should be more and higher taxes or less, whether there should be free trade or protectionism. Candidates and voters can align themselves on either of two opposing positions.

Many candidates can be accommodated by the two parties and they will all go through primaries and knock themselves out until only one will represent the respective party. This could have prevented a Duterte win because many candidates in the 2016 elections talked about respecting the rule of law while Duterte repeatedly argued for breaking the law and short cut the process of winning the drugs war.

8. Or retain the multi-party system but have a round two elections where only the top two candidates will contest and “knock out” the other candidate in an open electoral system.

Again, this could have prevented a Duterte win because supporters of the 3rd, 4th and 5th placers can rethink their position and choose only either the 1st or 2nd placer. This will avoid having a “minority President.”

See also:

Energy 100, Bjorn Lomborg on World energy mix

I am reposting here a post by Bjørn Lomborg in his fb wall early today. Thanks for this great piece, Bjorn.

The world is mostly run on fossil fuels (81.4%). Nuclear makes up 5% with 13.6% from renewables. Solar panels and wind turbines contribute less than 0.7%.

When you hear 13.6% renewables, you will likely think 'wow, things are going pretty well with the change-over to renewables'. But these are not the ones you hear about. The biggest contributor is wood, used in the poor world to cook and keep warm. This leads to terrible indoor air pollution – it is actually the world's deadliest environmental problem, killing some 4.3 million people each year. We should definitely hope the poor will have to use *less* polluting wood in the future.

The other main contributors of renewables are biofuels (e.g. the American forests, cut down and shipped across the Atlantic to be burnt in European power plants to be called green and CO₂ neutral) and hydropower. In total, that makes up 12.1%. The last 1.5% comes mostly from geothermal energy (0.54%) and wind turbines (0.53%) along with solar heaters in China, tidal power etc. (0.29%) and solar panels (0.13%).

Contrary to the weight of news stories on how solar and wind is taking over the world, solar panels and wind turbines really make up a very small part of the global energy mix. (I started out coloring solar panels yellow, but the thin sliver at the top became invisible.)

Sources: The International Energy Agency has released their latest Renewable Energy Information 2017, It contains 488 pages of data, with preliminary data for the rich world for 2016, but for the entire world for 2015. Unfortunately, the data is not free.

Since solar PV constitutes such a small part of the energy supply, the International Energy Agency combines it with tidal, solar CSP and solar thermal (the water heaters on rooftops for direct hot water). In 2014, the split was 34% for solar PV, 0% for tidal, 6% for CSP and 60% for thermal, so I applied the same split to the data for 2015.

All data is Total Primary Energy Supply, which is the International Energy Agency's own main measure, also used in all their graphs for global energy balances.

See also:

Monday, October 16, 2017

Mining 57, More photos during Mining PH 2017 conference

Posting some of the quotes-with-photos made by the Secretariat during the Mining 2017 Conference last September 5-7, 2017.

Some of my photos at the farewell dinner.

With the Stratbase-ADRi group.

And in a brief karaoke segment, I sang on stage, "Twist and Shout" by The Beatles :-)

Meanwhile, reposting this article today by JB Baylon.

Who’s afraid of open pit mining?
By Jose Bayani Baylon
October 16, 2017

THERE’S a lot of brouhaha about open pit mining these days, spurred by Ma’am Gina Lopez alleging that they create acids that will bedevil all of humanity for life. And you know how convincing she can be, so even the President has expressed apprehensions about open pit, apprehensions that could extend to actually banning this form of mining.

While listening to my mining colleagues discuss the issue, my genetic make up (I am the son of a doctor and a nurse and brother to two more doctors) kicked in and a very medical image cropped up.

Mother Earth and many women have something in common - they are gifted with blessings that need to be brought into the world so that life can be better. For Mother Earth these are her mineral wealth; for many women, this is a child.

Now women who are blessed with a child have two ways of bringing God’s gift into the world - the normal laborious method, or the sometimes quicker Caesarian section. These are two accepted methods that are used depending on the situation of the mother or the child, or both; the fact is some women can be at risk - and the child in their womb as well - if an OB Gyne does not resort to the “C-section.” My mother, for one, had to go through the C-section three times; thankfully she had the late great Dra Gloria Aragon watching over her.

Again: whether a woman gives birth via the normal way or by C-Section is determined by the situation and managed by the experts. No one can say we will ban Caesarian because it leaves an ugly scar and puts a woman at risk with her anesthesia etc etc etc.

Similarly the ore deposit determines which form of mining is done in order to bring out into the world the mineral wealth with which Mother Earth is blessed. An ore deposit or body near the surface of the earth is therefore mined using surface mining or open pit; an ore body that is in the form of veins or goes deep into the recesses of Mother Earth is mined via underground mining. Like a pregnant woman, Mother Earth’s situation determines the way her gifts are brought out into the light. Again one cannot force only one method of mining because the ore deposit or body determines what is used.

Are there risks? Of course there are. But that’s why you have experts who require pre testing and constant monitoring during the procedure. Are there accidents? Of course there are. But they are few and far between and sometimes they just happen. Are there examples of successes? Well, my brothers and I are just three of hundred of millions of examples of successful C-Section births, while for mining there countless examples around the world of open pits rehabilitated into such destinations as golf resorts.

The point is, in life, one can always choose to focus on the dangers. But then what happens? “Oh my gosh an airplane crashed! We should ban flights and shut down all airlines!”. Or “ An elevator got stuck! Let’s do away with lifts and use the stairs!”.

That’s why there are tests: for humans these range from blood tests to BP monitoring, while for environmental projects you have Environmental impact assessments and clearances. Once a patient or a project passes these tests then it means the experts are more than confident everything will turn out fine.

So: it’s right to worry about open pit mining just like it’s right to worry about Caesarian operations. But trust your experts. That’s the reason they’re there.

And if you like, pray or do yoga.

See also: 

Inequality 33, Decline in global poverty

Cool, useful chart below. Global poverty has declined, significantly. To read it, choose a level of annual income on the vertical or y-axis and then use the blue and red lines to find on the horizontal or x-axis the corresponding share of the world population living with less than that income.

If you think the poverty line should be $1,000 per person per year, the 2003 line shows that 48% of the world population was below this poverty line; and ten years later, in 2013, 29% was below this line. A decline of 20 % points in one decade relative to this poverty line.

Source: "No matter what extreme poverty line you choose, the share of people below that poverty line has declined globally", April 05, 2017 by Max Roser,

The rich are getting richer, the poor are getting middle class status. Not all of course but many of them. The poor used to ride bicycles or cow de carabao, now they ride motorcycles or 2nd, 3rd-hand cars.

See also:

BWorld 158, Why a carbon tax is wrong

* This is my article in BusinessWorld last week.

Coal power produced nearly 48% of Philippines’ actual electricity generation in 2016 despite having only 34.6% share in the country’s installed power capacity of 21,400 MW or 21.4 GW, Department of Energy (DoE) figures show.

Renewables (hydro, geothermal, wind, solar, biomass) produced 24.2% of total power generation in 2016 despite having 32.5% of installed power capacity. In particular, wind + solar combined contributed a small 2.3% of total power generation.

At a forum organized by the Energy Policy Development Program (EPDP) at the UP School of Economics last Oct. 5, the speaker Dr. Francisco Viray, former DoE secretary and now president and CEO of PhinMa Energy Corp., showed in his presentation a screen shot of Dr. Ciel Habito’s article, “Let’s get the carbon tax right.” Ciel was arguing among others, that the carbon tax for coal power should be raised from the current P10/ton to P600/ton and not P20/ton as contained in Senate bill No. 1592 of Sen. Angara.

I commented during the open forum that Ciel’s article in reality has a wrong title, it should have been “A carbon tax is wrong.” And here are the reasons why.

One, as mentioned above, coal power was responsible for nearly 48% of total electricity generation nationwide in 2016 and it is wrong to restrict its supply and/or make its price become more expensive. Kill coal or even drastic cut in coal power would mean massive, large-scale, and nationwide blackouts for several hours a day, something that consumers wouldn’t want to endure. After all, even a one minute brownout can already cause widespread disappointment.

Two, the Philippines’ overall coal consumption – in absolute amount and in per capita level – is small compared to the consumption of its neighbors in Asia (see table).

The Philippines has only 100 kilos or 0.1 ton per head per year of coal, the smallest in the region. There is no basis to suggest restricting further coal use given the fast demand for electricity nationwide.

Three, it is wrong to advocate more expensive electricity via high carbon tax given that subsidies to renewables via feed-in-tariff (FiT), among others, are already adding upward price pressure. A higher carbon tax may be more acceptable to the consumers if the FiT scheme is discontinued and ultimately abolished. If this is not done, better to keep coal excise tax as low as possible.

The proposed P600/ton excise tax on coal power would translate to P0.24/kWh hike in power generation charge. Using Ciel’s numbers, one ton of coal can generate 2,519 kWh electricity on average. So P600/2,519 kWh = P0.24/kWh. That is equivalent to FiT-Allowance that each electricity consumer from Luzon to Mindanao must pay monthly for many years to come.

Four, it is wrong to demonize and over-regulate carbon dioxide (CO2) as a pollutant because it is not. CO2 is invisible, colorless, and odorless unlike those dark smoke coming from vehicles and chimneys of old manufacturing plants.

CO2 is the gas that humans and animals exhale, the gas that flowers, trees, rice and other crops use to produce their own food via photosynthesis. More CO2 means more plant growth, faster greening of the planet. CO2 therefore is a useful gas, not a pollutant gas that the UN, Al Gore, and other groups and individuals would portray it.

While the hike in coal excise tax from P10 to P20/ton as contained in the Senate version is somehow acceptable, there is danger that the P600/ton proposal will spring out of nowhere during the bicameral meeting of the House and Senate leaders. This should not be allowed to happen.

Continued demonization of coal and rising favoritism of variable renewables like wind-solar would mean more expensive electricity, more unstable grid, and darker streets at night. Dark streets would mean more road accidents, more robbery, more abduction and rapes, more murders as criminals benefit from anonymity provided by darkness.

Energy irrationality can kill more people today, not 40 or 100 years from now. The irrationality and insensitivity of rising government taxes should be restricted and limited.

Tuesday, October 10, 2017

PPP vs ODA tax-tax-tax

Related to my BWorld article yesterday, Build-build-build is possible without new taxes, are the following articles and reports, all from BWorld.

1. Last week, an article by a friend Romy Bernardo. I disagree with his position of course. Hi Romy :-)

2. Related article from another friend, Karla Michelle Yu of AER. I disagree also with AER's  "halleluiah tax-tax-tax Dutertah" position.

3. Two weeks ago, this paper was well-shared and circulated because of the hard facts narrated by the author -- many foreign investors are taking the wait-see or abandon-PH stance. Mainly because of Du30.

4. No need for tax-tax-tax in this huge, multi-billion CALAX project. The private consortium has the money, eng'g expertise and other corporate network to finance, build and operate these big infra.

"The P35.43-billion CALAX project involves the construction of a 44.6-kilometer four-lane toll road between the Cavite Expressway (CAVITEx) in Kawit, Cavite and the SLEx-Mamplasan Interchange."

5. Also the Cavite-Tagaytay-Batangas Expway (CTBeX), 49 kms long, P22.4 B.

6. And the P18.7 B Kaliwa dam, zero need for tax-tax-tax as it will be an integrated PPP project but Du30 insists we should pay more taxes because we will pay more China loans. BBB (build-build-build) can also mean Beijing-borrowings-barkada ni Dutertah.

7. The Mactan-Cebu airport new passenger terminal is a PPP, Megawide contract, P17.5 B project cost. Bigger, construction period shorter, compared to ODA-funded Iloilo airport project. Zero need for tax-tax-tax to build this big, modern, passenger terminal.

The DOF and Dutertenomists are sad in this report, that they cannot confiscate more money from the pockets of citizens. They badly need hundreds of billions of new tax money per year on top of trillions of tax money, so there will be more economic central planning, more social engineering. After all, they are very bright people.

The tax-tax-tax policy will further sour the business sentiment here. Less money in the pockets of citizens, more money in the coffers of Du30, Alvarez, and thousands of their minions in the Executive and Legislative branches.

See also:
BWorld 142, PPP vs ODA, Part 3, August 08, 2017 

BWorld 156, Integrated PPP vs hybrid PPP, October 04, 2017 
BWorld 157, Build-build-build is possible without new taxes, October 09, 2017

Monday, October 09, 2017

Hong Kong and John Cowperthwaite, Part 2

I have heard about Sir John Cowperthwaite for the first time about 2004 or 2005, from my friends at the Lion Rock Institute in Hong Kong and I was impressed of him. Prior to that, I thought that it was deliberate on the part of the British government to institute a free market colonial economy in HK after WW2. No, it was not the case. The man as Britain-appointed Administrator of HK simply has a firm conviction of positive non-interference by government in encouraging individual and enterprise innovation and entrepreneurship.

A book was recently published about the man and here are two of many book reviews.

Adam Smith in the finance ministry
The Economist, October 5th 2017

Sir John Cowperthwaite is that most unlikely of things: a bureaucrat hero to libertarians

Architect of Prosperity: Sir John Cowperthwaite and the Making of Hong Kong. By Neil Monnery. London Publishing Partnership; 337 pages; £24.50.

DURING the 1960s, governments were responding to political unrest and economic challenges with nationalisation, centralised planning and public spending (financed by heavy taxes and debt). There was intense pressure for Sir John Cowperthwaite, the financial secretary of Hong Kong, to join the crowd.

Civil servants in Whitehall had been urging their counterparts in Hong Kong to introduce high taxes for some time. Locals demanded spending to address a lack of housing for crowds of poor immigrants fleeing the horrors of post-revolutionary China, and a territory-wide shortage of drinkable water. Meanwhile, the territory’s export-driven economy was threatened by rising global tariffs, prompting demands for public incentives to reorient production towards the domestic market.

A new biography of Cowperthwaite by Neil Monnery, a former management consultant, tells of a man who replied to these demands with a qualified “no”, and in the process became that most unusual of things: a bureaucrat hero to libertarians. His approach would subsequently be labelled “positive non-interventionism”, meaning governance stopping just short of laissez-faire. Public housing would be funded, but only for tiny flats; reservoirs would be built, but users would be charged. Much of the rest was left to individuals and businesses to sort out, unfettered by government directives. “Money,” Cowperthwaite said, should be left “to fructify in the pockets of taxpayers”.

Cowperthwaite’s ability to resist bigger government was born in a lost era. He was educated in classics and economics at a time when the insights of Adam Smith prevailed. That gave him the foundation to debate with free-spending colleagues influenced by John Maynard Keynes.

In 1945, he arrived in a Hong Kong in ruins from a brutal Japanese occupation. A combined military-colonial administration engaged heavily in economic management, and Cowperthwaite’s early jobs included managing the trade in food and raw materials and administering price controls, roles that defined a heavy government hand. But he knew that the territory’s lack of natural resources meant that post-crisis prosperity depended on its ability to attract entrepreneurs and capital.

That meant government’s role was to provide freedom rather than help. Requests by industry for subsidies were routinely rejected. So too was deficit government financing, which could merely push costs to a future generation and make the territory vulnerable to financial upheaval. Some of his ideas were radical: to ensure that temporary fluctuations in business conditions were not used to justify government controls, he banned the collection of macroeconomic statistics....

When Cowperthwaite stood down in 1971 his tenure was reckoned a huge success, but that provided only limited protection for his policies. The embargo on data collection was reversed by his successor. Subsequent administrations, both British and Chinese, whittled away the restraints on government intervention.

One persistent objection to limited government particularly rankled Cowperthwaite—that it was callous. He was convinced that “the rapid growth of the economy…produces a rapid and substantial redistribution of income [and] makes it possible to assist more generously those who are not, from misfortune temporary or permanent, sharing in the general advance. The history [of Hong Kong] demonstrates this conclusively.” As that history becomes increasingly remote, a biography of a key architect becomes ever more valuable. There are few other examples.

Another review is from the Adam Smith Institute.

By Eamonn Butler

the small cadre of civil servants, like Sir John, whose job it was to run Hong Kong, fixed on the objective of making it economically prosperous, and knew that the best way to do that was to do exactly the opposite of what the home country was doing—with its nationalisations, controls, economic planning, high taxes, trade barriers, deficit spending, and all the rest. The Hong Kong administrators by contrast rejected the idea of government planning and spending to invest, believing that entrepreneurs knew how and where to invest, and how to manage their businesses, better than any government officials. They kept the government’s books balanced for nearly every year; they resisted high taxes, believing that low taxes would encourage private investment and would expand the long-term tax base.

Cowperthwaite was the most important person behind these policies, as a new book by Neil Monnery, Architect of Prosperity, demonstrates. He ran the trade and industry department after the war then became financial secretary in Hong Kong—effectively the colony’s Chancellor—until he retired in 1971.

One thing the book demonstrates is just how hard it is for any government body to prevent itself from interfering in an economy—with the inevitably counterproductive results. Sir John, it shows, fought off many such attempts. There is a story that the British government, then pursuing a full interventionist policy, sent a group of civil servants over to Hong Kong to ask Sir John why he was not keeping unemployment statistics, and to make him do just that. Sir John, goes the story, put them on the next plane back home, explaining that entrepreneurs know the precise state of the labour market from day to day, never mind quarter to quarter, and that if he kept unemployment statistics, people would want him to produce some counterproductive intervention to boost unemployment.

The story is not true, but it is not far from the truth. Cowperthwaite had to fight over and over to resist ‘enlightened’ interference with the Hong Kong people’s lives and businesses, and to maintain his doughty view that economic statistics were a double-edged sword and you should only collect the ones that are really essential….

See also:
John Cowperthwaite, Statistics and Central Planning, January 23, 2014
Free Trade 32: Hong Kong's Unilateral Trade Liberalization and John Cowperthwaite, February 12, 2014 

Hong Kong Democracy vs. China Dictatorship, September 25, 2014

BWorld 157, Build-build-build is possible without new taxes

* This is my article in BusinessWorld today.

Among the biggest alibis given by Dutertenomics as to why we need new or higher taxes is the fact that the government needs more money to bankroll “build-build-build” hybrid PPP (public private partnerships) plans. Then warnings were issued by both government and its nongovernment allies that “no new taxes, no build-build-build.” For me, this is blackmail and should not easily be accepted by the public. Here are my three reasons.

One, there have been many past PPP projects in operation and current PPP projects under construction that did not necessitate large-scale new taxes or tax hikes (see table).

Two, an integrated PPP (construction then operation and maintenance (O&M) under one private entity or consortium) will accomplish the task at little financial exposure and burden for the government and taxpayers. And there would be no or little need for many of these taxes. But Dutertenomics is inclined to favor hybrid PPP (construction is government via foreign loans/ODA and/or annual budget/GAA, O&M is private) for some unholy reasons like implicitly favoring China loans, China contractors, and banks. Or using administration cronies as contractors in exchange for big favors.

Compare the motive of an administration with only six years in office (only 4+ years in the case of the current regime) vs. big local companies which have been around for the past 30, 50, or 100+ years and intend to be here for the next 50, 100+ years. The former has the tendency to amass wealth quick and worry about political scandals later. The latter would try to avoid political and business scandals as they have corporate brands to protect and will bank on those brands for many decades to come here and abroad.

Three, more integrated PPP portfolio for big local firms and consortia means wider experience and more confidence in the field, bigger business opportunities to join PPP projects in our neighbors in the ASEAN and beyond. Philippine-based construction and infrastructure consortia will soon become big multinationals and players in the region and the world.

Reducing the country’s personal income tax (PIT) rate should be a social goal and a public service in itself. Earning P500,000 (little less than $10,000) or higher per year and be slapped with 32% income tax is very confiscatory and immediately qualifies the government as creator of poverty. This has been going on for many years now and should be changed asap — without raising or creating new taxes somewhere.

In Singapore, the 22% top PIT applies only for incomes of $240,000/year or higher. In Malaysia, the 28% top PIT also applies for incomes of $240,000/year or higher. The Philippines should have top PIT of 28% or lower and apply at $100,000 or higher.

Nonetheless, Dutertenomics’ TRAIN will be passed very soon because (1) Congress and Malacañang act like one-party state with no serious significant opposition or fiscalizer, and (2) dishonesty and even some blackmail were effectively used to make the public accept tax hikes. In short, coercion and deception were put to use.

After the current package of TRAIN, there will be TRAIN 2 to be introduced next year. The current administration will have been emboldened enough to create new taxes or raise existing ones anytime it wants to because Congress coercion and public deception are going well.

A government that intervenes the least, that taxes the least, is conducive to more growth, more job creation, more production of goods and services, and less inflation, less state dependence. We will hardly see that under the current administration.

See also:

Tax Cut 30, Trump's 20% CIT, deregulation

When the White House proposed a drastic corporate income tax cut (from 39% to 20%), 25% for single proprietorship, they did not suggest a tax hike somewhere to "compensate for lost revenues" like the Dutertenomics' tax-tax-tax.

Copy-pasting portions of these press releases and short blog posts from the WH.

"* The U.S. corporate tax rate has been higher than the OECD average for almost 20 years.
The average total corporate tax rate among OECD nations is 24 percent, while the United States is nearly 40 percent.

* The U.S. average corporate tax rate is almost 10 points higher than China’s, according to the Congressional Budget Office." -- Sept. 29, 2017.

"Our plan is based on four simple principles: reducing taxes for working families, simplifying the tax code, cutting taxes for businesses large and small, and making it possible for American companies to bring profits home to America to create jobs and opportunities here."
-- VP Mike Pence, Oct 03, 2017.

"In 1989, the year the Berlin Wall fell, the average statutory corporate tax rate imposed by central and sub-central governments in the OECD was 43 percent. In 1989, the comparable rate in the U.S. was about 39 percent. In the time since the Wall fell, the OECD average corporate tax rate has trended downwards to its current 24 percent, about half of its 1989 level. The U.S. corporate tax rate, however, is still stuck in the same place it was when the Berlin Wall crumbled almost 20 years ago.

There is now a broad consensus in this country that it is time to “Tear down this rate.”
-- Kevin Hassett, Chairman of the Council of Economic Advisers.

"The America First Tax Plan will bring historic tax relief to the American people through a framework that is “based on four key ideas,” said the President. First, the plan will cut taxes for every day, hardworking Americans, taking the burden off the middle class. Second, the tax code will be dramatically simplified, allowing Americans to file their tax returns on a single sheet of paper. Third, the business tax rate will be lowered to 20 percent, making business in America competitive again. And finally, the “American Model” will encourage businesses to return from overseas, bringing trillions of dollars to the economy." -- Sept. 28, 2017. 

Good summary of support from the Editorial Boards of WSJ, NYPost, WTimes, WExaminer, Inv Business Daily, National Review. Nothing from NYT, WaPo, CNN, BBC, etc. Perhaps they love more taxes, more regulations, more welfarism, more statism or state worship.

Accompanying drastic tax cut is drastic deregulation and de-bureaucratism.

"* In 2000, completing paperwork for Federal regulation cost an estimated $236 billion (up from $143 billion in 1980). Assuming the same proportion of compliance officers’ salaries out of total paperwork cost, the cost of paperwork increased to $881 billion in 2015.

* Regulation is especially burdensome for small businesses: the cost per employee of complying with regulations was higher for small firms ($11,724) than it was for firms with over 100 employees ($9,083)...

* There were approximately 45,000 more pages in the Federal Register, which reflects the flow of new regulations, than 40 years prior." -- October 02, 2017.

I wonder why many "libertarians" and free marketers would be silent or even implicitly attack this tax cut plan by Mr. Trump as "favoring the rich" or "favoring Trump businesses". Perhaps the quick answer is that many libertarian-anarchists argue that "taxation is theft" and hence, the tax rate should not be 39%, not 20%, not even 1%, but zero. Zero taxes, zero government as we know it.

Fine, if one is talking to students or fellow anarchists. But if one is involved in public policy debates, engaging government officials, legislators, etc. is necessary and inevitable. It is not possible to advocate "zero government" while engaging government for lesser regulations, lower and fewer taxes, lower non-tariff barriers in trade, and so on.

For now, I just like what I see in the Trump fiscal policies.

See also:

Tax Cut 27, The Furusato tax in Japan as possible model in citizen empowerment, October 14, 2016 
Tax Cut 28, On Trump's planned 15% income tax, January 23, 2017 
Tax Cut 29, Culture of exemptions and culture of envy, February 06, 2017 

Trump's Joint Address at US Congress today, March 01, 2017
BWorld 136, Income tax and the politics of envy, June 12, 2017 
Tax-tax-tax, Free-free-free, August 09, 2017

Thursday, October 05, 2017

Mining 56, Presentation at Mining PH Conference 2017

Last month during the Mining Philippines Conference 2017, I was one of 6 panel discussants in one focus group discussion.

First I discussed the recent rants vs. open pit mining by ex-DENR Sec. Gina Lopez and why many of her points are wrong or non-sensical at the least. Then I discussed other issues about soil degradation, the coming global cooling and the need for more water catchments like mined-out open pits, then briefly about mining taxes.

Some open pits have become eco-tourism attractions.

My conclusions:

(2) Mined out or decommissioned open pit mines should as much as possible be left as is, not covered with soil then reforested. Multiple purposes: (a) as man-made dam and lake to catch excess water and flash flood, (b) reduce flooding downstream during heavy rains, (c) use the lake water for fishery, irrigation, hydro-power, even possible drinking water source someday, (d) or simply for eco-tourism.

(3) Current mining taxation (incl. royalties, regulatory fees, mandatory contributions) are high and plentiful. Any tax hike like raising mining excise tax from 2% to 10% should be compensated by a cut or abolition of other taxes and fees.

The 16-slides presentation is available here.
Meanwhile, some photos during our panel discussion that afternoon.

Photo credits: Mining Philippines (COMP) fb page.

See also: 

Wednesday, October 04, 2017

Energy 99, Germany's FDP questioning or ditching Energiewende

I like this man, head of German liberals Free Democratic Party (FDP), Christian Lindner. The man mainly responsible for the FDP resurgence in the German Bundestag elections last September 24.

"The project of the century Energiewende [transition to green energies] has failed. None of the agreed targets will be reached. Climate protection is stalled, energy prices are rising and they are burdening us as electricity consumers, just as they are the industry and middle class. And not least of all it is becoming increasingly difficult to guarantee a secure power supply during the winter months.” -- Christian Lindner.

Merkel's CDU/CSU needs an ally to retain the majority. Almost impossible to ally with 3rd place AfD, 2nd place SPD already broke up with them. Merkel definitely needs 4th place FDP and very likely 5th place Greens but the FDP and Greens are now poles apart in energy policy. The latter wants Germany's expensive, unstable energy to become even more expensive, even more unstable because of their kill-coal, subsidize-endlessly-wind+solar policies.

Here's a possible opposition Watermelon (green outside, red inside) coalition:  SPD + Greens + Linke. All of them have the same hatred of fossil fuels, they just differ on the degree of their hatred, and all of them are users of fossil fuels -- in electricity, cars/inland mobility, planes and long distance trips.

I think Mr. Lindner is now asserting the liberal position of market competition, less government intervention. In particular, energy competition. Focus on price and power stability, a very important factor for industrial Germany producing world-class cars, robots, monster machines, etc. Energiewende is killing energy competition. Only wind + solar + biomass, hydro, others should be prioritized by govt energy central planning. The rest -- coal, nuke, gas -- decimate if not kill them. FDP now under Lindner is reasserting the classical liberal, freedom-oriented public policies.

FDP leadership is right and correct in moving into energy realism and competition and away from watermelon movement and energy leftism-cronyism.

A German friend noted that "there are contractual and legal obligations to be honored and rule of law in place. Dismantling the energy turnaround can only be a step by step process if the government wants to avoid massive amounts of litigation, much of which will be successful. this is the most problematical aspect of the turnaround: its partial irreversibility."

Good points, and its good that the FDP will try to stop these economic and energy lunacy of glorifying expensive, intermittent, unstable energy sources in an energy-intensive industralized econ like Germany.

Also the reason why Trump is leaving the Paris agreement, to help avoid possible multi trillion $ lawsuits from crony renewables, crony Tesla and related industries and firms.

Other related recent papers from NTZ:

3 October 2017

See also:

BWorld 156, Integrated PPP vs hybrid PPP

I have a video in BusinessWorld on public private partnerships (PPP), two minutes long posted some three weeks ago. So far 14k+ views, thanks readers/viewers.

One good example why a straight, integrated PPP (construction then O&M under one entity or consortium) is better than hybrid PPP (government/ODA will do or sub-contract the construction phase, then give the O&M function to local firms/consortium later).

I have two other videos in BW still under editing. Thank you.

See also:

Tuesday, October 03, 2017

Federalism or Disintegration of big countries: Catalonia, HK, Taiwan, other independence movements

A good model of citizen empowerment is that the size, taxes and regulations of the national/ central/ federal government should be as small as possible and allow the states or provinces to have their own set of taxes, agencies and regulations. If this is not possible as national or central planners think they are so bright, an alternative model is for a big country to disintegrate into many new, smaller countries. Long live independence movements in Catalonia -- and Hong Kong, Taiwan, Tibet, Macau, etc.

The rest of the country should be spared of madmen masquerading as statesmen, like the President from Davao. Federalism as currently designed by Du30 people will mean both huge federal/national and state governments. Very lousy and authoritarian combination.

Monday, October 02, 2017

BWorld 155, Electric cooperatives and system loss

* This is my article in BusinessWorld last Friday.

Three news reports published by BusinessWorld during the past few days indicated that the energy sector in the Philippines and its several neighbors is becoming more efficient, market-oriented, and less bureaucratic. These news articles were (1) “ERC declines to intervene in 4 Meralco power deals” (Sept. 20), “DoE says no plans to extend FiT for biomass, river projects” (Sept. 26), and “Malaysia, Thailand, Laos to sign energy-trading deal” (Sept. 26).

The first article says that the Energy Regulatory Commission (ERC) is upholding its own rule to stop intervention after a deadline for petition against any power supply agreement (PSA) has been met.

The second one says that the Department of Energy (DoE) will not extend the feed in tariff (FiT) or guaranteed high price for renewables for 20 years, for undersubscribed biomass and run of river hydro power. This move will protect electricity consumers from further high electricity prices.

The third story says that electricity trading in the three countries mentioned will mean greater power stability and more price competition among power producers. This is like expanding our Wholesale Electricity Spot Market (WESM) from national to regional trading.

To add to this list of positive news, it has also been reported that power transmission and distribution in the region have become more efficient, cutting down on system losses.

Within a decade, the Philippines, for instance, has managed to chop system losses from 12.9% to 9.4% of electricity output, an efficiency gain of 3.5% (See table).

Source: WB, World Development Indicators, Database 2017.

Based on the table, economies with low system losses have high electricity consumption per capita, except Hong Kong. And vice versa, countries with high system losses of at least 9% tend to have low per capita electricity use.

And this implies that the technology and administrative processes to bring down system losses are generally correlated with the wealth and industrialization of an economy.

There are several attempts both in Congress and the ERC to significantly reduce the distribution system loss by distribution utilities (DUs).

The ERC Draft Rules intend to make high consideration if not outright favoritism of many electric cooperatives (ECs) by giving them (a) high technical loss (mainly conductor loss and no load loss) cap of 5.5-7.0%, (b) high cap on nontechnical loss (illegal connection, direct theft, meter error, billing irregularity) of 4.5%, total of 10-12.5% distribution system loss that can be passed to consumers. In contrast, (c) private DUs will be forced to have a low technical loss cap of only 2.75%, and low nontechnical loss cap of only 1.25% or total of only 4% distribution system loss by private DUs.

This is not a good plan for the following reasons.

One, it institutionalizes a double-standard. Favoring ECs and allowing them to remain wasteful and pass the additional cost of high system loss to the consumers vis-a-vis strict monitoring of private DUs and disallowing them to pass high system losses charges to their consumers.

Two, it does not pressure or discipline the ECs and force them to become more efficient in cutting their system losses. As a result, it is not possible to bring down the system loss to the levels of Thailand, Malaysia, China, Japan, Singapore if this attitude and policy is further adopted.

Three, it does not push many inefficient ECs to be corporatized, to behave like many private corporations that are forced by SEC regulations to be more transparent.

Four, it remains silent on transmission system loss of the sole grid operator, the National Grid Corp. of the Philippines (NGCP).

Government through the ERC should create rules that apply to all players — ECs in the provinces and private DUs in big urban centers — no exceptions or favoritism, and give consumers further reduction in overall electricity prices.

Forcing both provincial ECs and private DUs to have low system loss at uniform rates is consistent with enforcing the rule of law, consistent with encouraging more competition, consistent with the spirit of EPIRA law of 2001.

See also:

Sunday, October 01, 2017

Mining 55, Kaleidoscope forum by UP MINERS

Last Thursday evening, September 28, the student organization UP MINERS held a forum on "Kaleidoscope: Various Perspectives on Mining" held at the UP College of Engineering Theater. Just panel discussions, no powerpoints. There were six of us panelists -- two from the DENR Mines and Geosciences Bureau (MGB), Atty. Josephine Sescon and another officer; Atty. Ronnie Recidoro of the Chamber of Mines (COMP), Engr. Duday de Sales of Woodfield Consultants, Jaybee Garganera of Alyansa Tigil Mina (ATM) and me.

Mining is beautiful in the sense that it can create a lot of jobs, lots of community projects for many decades in a relatively small area via deep open pit mines. Instead of quarrying and digging over a wide area of tens or hundreds of thousands of hectares, one open pit will need only several hundred hectares and machines and trucks can dig there for many decades. Similar to a high rise condo, instead of needing dozens of hectares to house 500 households, one will need only half hectare to build housing for 500 households in 1 or 2 condo towers.

I like the Australian case. Mining occupies only 0.02% of total land area but the sector contributes 9% of GDP. Compare with the PH exporting millions of OFWs who contribute 10% of GDP annually. No "small scale" mining in Australia, the sector is heavily mechanized, monster machines and engines at work, giving jobs to tens or hundreds of thousands of people.

Among the points I discussed were the following:

1. Mining share of 0.65% of GDP is indeed small if compared with nationwide average, what Dr. Caloy Arcilla says as "the tyranny of national averaging". But if compared with a provincial or regional GDP, mining share for certain provinces like Surigao can be as high as 25%.

People who argue that "it's only 0.65% of GDP, we can close mining totally" should also consider a similar argument that "poultry, piggery is perhaps only 1% of GDP, very small they can be closed totally."

2. Raising the excise mining tax from 2% to 10%, sure but there should be corresponding reduction if not abolition of other taxes, royalties, fees and charges.

3. Do mining communities and municipalities benefit from the industry or they are only taken for a ride? No in many areas like what I saw in Rio Tuba and Bataraza, Palawan. Yes in some municipalities perhaps. In a presentation by Dr. Cuano during Mining PH 2017 conference at Sofitel last Sept. 8 or 9, he showed that a small town Claver in Surigao has a per capita resources (IRA from national govt, mining share, etc.) of about P13,000+. Quezon City has a per capita resources of only P5,700+, 2015 figures. Or a mining town has per capita income more than 2x than a rich, big, LGU in Metro Manila.

4. The Tampakan gold-copper project in Mindanao, the single biggest FDI in the PH at $6 B. Granted permit, cancelled, repermitted, cancelled. Government has created great investment uncertainty in this project alone. That is not how governments should manage an economy.

5. Mineral-rich lands are almost useless for agriculture, useless for forestry, useless for animal farming, even for settlements of indigenous people (IPs). Why -- I explained my experience in agro-forest farming in the farm in Pangasinan. Land that is silica- and other mineral rich, we planted mahogany, acacia auri, eucalyptus, etc. After 10 years, they either die or are very thin, very short, stunted growth. Even cogons don't grow well. Just 100 meters away, the soil is soft, same trees planted a decade ago, they are tall and big.

Good summary by Ralph Abainza later. Above photo with UP Miners officers, panelists, moderator. Thanks for the opportunity to share insights with you guys.

Photo credits: colored ones from Ralph, the black and white from UP Miners.

See also: