Free Trade 65, On the US withrawal from the TPP

Last month, US President Donald Trump issued this Memorandum to the US Trade Representative. Part of it said,

“it is the intention of my Administration to deal directly with individual countries on a one-on-one (or bilateral) basis in negotiating future trade deals. Trade with other nations is, and always will be, of paramount importance to my Administration and to me, as President of the United States.

Based on these principles, and by the authority vested in me as President by the Constitution and the laws of the United States of America, I hereby direct you to withdraw the United States as a signatory to the Trans-Pacific Partnership (TPP), to permanently withdraw the United States from TPP negotiations, and to begin pursuing, wherever possible, bilateral trade negotiations to promote American industry, protect American workers, and raise American wages.”

Global media outlets, even free market groups and leaders called this act as "US protectionism" and I disagree with this assessment. The US, the EU, ASEAN countries, all other countries in the planet have their own sets of protectionism, usually in the form of non-tariff barriers (NTBs) or non-tariff measures (NTMs). But withrawal from a regional free trade agreements (FTAs) = protectionism?

The purpose of regional  FTAs is to have free trade, freer mobility of services/people among member-countries in the region while retaining or expanding protectionism to non-member economies. Thus, the Trans Pacific Partnership (TPP) is free trade, zero tariff among the 12 member countries across the Pacific but not to other countries outside the agreement.

I see four implications of this move by Mr. Trump.

1. "Trade diversion" from non-members to TPP-members won't happen anymore. TPP is US + 11 other countries, of which 4 are from the ASEAN (MY, SG, VN, BR). So others not included in the TPP (ID, TH, PH, CM, SK, TW, etc) that are supposed to experience lower trade with the US will be spared of some negative effects due to trade diversion. http://www.bbc.com/news/world-us-canada-38721056

2. The biggest winners may be Asian countries that were left out of the  TPP (PH, TH, ID,...) and not China, so this article is wrong. https://hbr.org/.../if-trump-abandons-the-tpp-china-will...

Papers by Dr. Ramon Clarete of UPSE, Dr. Cesar Cororaton (formerly with PIDS, now in a US university) have computed the trade diversion effect. Something like -0.3 to -0.6% of potential GDP reduction in Asian countries not part of TPP.

3. More countries will realize that they need to push the multilateral, global free trade agenda under the WTO, instead of creating or expanding regional FTAs. If they can't do (a) multilateral free trade or (b) regional free trade, then (c) unilateral trade lib will become more attractive to them. ASEAN countries have done this step, across the board reduction in tariff even for non-ASEAN countries, but not towards zero tariff though, unlike SG and HK.

4. Japan will be pushed to the front to lead the TPP, http://www.wsj.com/.../japan-to-keep-pushing-free-trade....While China will continue pushing for RCEP, much bigger than TPP.

So, does stepping back from a regional FTA like TPP automatically means protectionism? If yes, how to explain HK which does not seem to belong to any regional FTA in the planet except with China, and HK is the most free trade economy in the world?

Stepping back from a regional FTA (TPP, TTIP, EU, NAFTA, AFTA, MERCUSOR, etc) may mean expanding free trade with more countries outside the region. Of course it may also mean further protectionism.

Bilateral FTA means that trade deals will be customized with each country's security and diplomatic offers or services. I think this means that there will be more trade and business diplomacy, less military/climate/political diplomacy. The top US diplomat, State Sec, is a big businessman, not big politician or big foreign affairs bureaucrat.

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See also:

Free Trade 62, IDEAS supports TPP Agreement for Malaysia, January 30, 2016 

Free Trade 63, Dealing with anti-trade lib, anti-TPP activists, February 06, 2016 

Free Trade 64, PH experience in manufacturing growth, November 04, 2016

BWorld 110, Should we go federal or not?

* This is my article in BusinessWorld last February 02, 2017.

Whether to move from devolved unitary to a formal federal state, this is among the big political questions in the Philippines today. There are two related questions here: (1) If federalism is the answer, what is the question? (2) if federalism is not the answer, is a reformed devolution the solution?

The first question I borrowed from a big forum several months ago from my alma mater, the UP School of Economics. The second question is my reformulation of the arguments by the anti-federalists.

By definition, federal states are those whose national governments share power with semi-independent or semi-autonomous regional or provincial governments.

To further contextualize the national debate, let us view some global data about federal states compared to non-federal states.

Other federal states and economies that are too small (GDP size less than $1B) and not included in the list are Saint Kitts and Nevis, Comoros, and Micronesia.

The above numbers tell us that while there are huge and rich federal economies like the US, Germany, and Canada, there are also huge and rich non-federal economies like Japan, United Kingdom, and France. And there are many poor federal economies like South Sudan, Nepal, Ethiopia, Sudan, and Venezuela.

So the promise of “more development if we go federal” is highly questionable. There are more important factors that are directly related to the economic wealth and prosperity of countries other than the forms of government like federalism vs. unitary, presidential vs. parliamentary, centralized/socialist vs. decentralized. And those factors always include the rule of law, the sanctity and respect for laws, laws that apply to both rulers and ruled, to both governors and governed.

A debate on federalism will take place on Feb. 2 at Vivere Hotel, Alabang. It is organized by the Rotary Club of Muntinlupa North, PCCI-Muntinlupa, both presided by Ms. Elvie Sanchez-Quiazon, and the Muntinlupa City government.

The generally pro-federalism speakers will be Dean Pacifico Agabin of UP Law Center and Jonathan Malaya of PDP. The generally anti-federalism speakers will be Ambassador Hermenegildo Cruz, Prof. Gene Pilapil of UP Political Science Dept., and Solicitor General Florin Hilbay. Dean Ronald Mendoza of the Ateneo School of Government will also speak but he considers himself as more on the listening mode than being identified as pro- or anti-federalism.

I will be there as one of two reactors. This role is cut out for me because I am agnostic about the issue, so I can listen more to the two camps with no personal bias.

My bias is towards disintegration of huge countries -- huge population, huge land area -- into newer countries, to accommodate competing cultures and political and religious beliefs.

Consider Brunei with only 0.4M people, Maldives with only 0.5M, and Bhutan with only 0.8M people. They are fine as countries, they have their own currencies, tax system, national governments, international airports, etc.

Contrast with huge countries like China, India, Russia, USA, Brazil, Indonesia, Mexico and the Philippines. The US in particular and its 320M people remain heavily divided for many months now over the Trump candidacy and presidency. The idea of initiating a secession of their states from the US like the California exit (“Calexit”) was revived again by some quarters.

If I were to answer the two questions above they will go like these: (1) If federalism is the answer, then the question is who are the better central planners, the national or regional/provincial planners? (2) If federalism is not the answer, then having rule of law and limited government is the more appropriate solution regardless of the form of government.

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

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See also:

BWorld 107, Top 10 myths for oil tax hike, January 28, 2017 

BWorld 108, Rising feed in tariff (FIT) due to more wind-solar power, February 06, 2017 

BWorld 109, Asians' march to liberty and progress, February 16, 2017

ALF 9, Conference 2017 in Mumbai, India

The Asia Liberty Forum (ALF) is an annual 2-days conference jointly sponsored by the Atlas Network (US), Center for Civil Society (CCS, India) and the Friedrich Naumann Foundation for Freedom (FNF, Germany). Five ALF events so far from 2013-2017 and I have attended the last 3 -- 2015 in Kathmandu, Nepal; 2016 in Kuala Lumpur, Malaysia; and 2017 in Mumbai, India.

Some photos of the ALF 2017 last week, February 10-11 held at The Leela Mumbai Hotel. Below, Baishali Bomjan, a superwoman at the CCS, formally opening the conference on Day 1.

 

Speed networking, a traditional Atlas conference activity where participants introduce to each other one on one for 2 minutes, then move to the next person in front. Notice the background, "Freedom" translated in various Asian languages.

About 250 people registered, some they come and go. About 200 max at any one time.

Among the tweets on Day 1 under the hashtag #AsiaLF17:

"Trade and exchange is not a zero sum game ... both sides can be better off"…

"When you have free markets & property rights, you open up lot of opportunities" - Linda Whetstone

"After the collapse of the Soviet Union, we were intoxicated, thinking that our ideas had won...

I am a free market fundamentalist, I am also a democratic fundamentalist....

Populist trends did not happen on their own, they have been rising over the last ten years.... 

There is a huge political convergence that has taken placeThe traditional left and right agree on one point- use the state." -- Barun Mitra

Why #property rights matter for #India's poor: Give them rights and they turn rocks into a garden. -- #liberal activist Ambrish Mehta

One more #liberal bonmot: "Government is like air, it is all around you in #India." -- Rajesh Jain @freeabillion 

"Technology equalises power of communication and lowers role of money ... there would be no Tea Party without Facebook... "Every human being is fundamentaly a #liberal at heart. #Freedom is built into our DNA." -- Matt Kibbe @mkibbe

"why do we still turn our backs to private schools despite data that these schools are preferred choice for many?" -- Brajesh Mehra

Our panel on Deregulation, 4pm of Day 1.

From left: Vivek, Syed Mizanur, Seetha, Alex, me.

"Incentives for politicians have to be changed; data doesn't support reelection for good eco stewardship" --  Vivek Dehejia

"Standardised containers did more to reduce trade costs than lowering trade tariffs…  Exits are important for Liberty because it disciplines firms." Alex Tabarrok

My 19-slides presentation, Electricity deregulation and re-regulations in Asia, Philippines in particular.

My article in BusinessWorld last February 15 about the ALF17, The public sector is the private sector of those in public offices. It is reposted at the EFN Asia website.

A good keynote speech during the farewell dinner, Day 2 of ALF given by Amit Varma, The landscape of freedom in India.

Thanks to Simon Lee for this photo, with Parth Shah, President of CCS. I met Parth for the 1st time in April 2004 during the Mackinac Leadership Conference in Michigan conducted by Lawrence Reed, Joe Lehman, other great Mackinac guys. Andrew Work, Ellen Sandig Cain, Manali Shah were also our batchmates in that great conference. Andrew is represented in this photo by Simon who was 1 of 3 co-founders of the The Lion Rock Institute in HK.

Below: standing are me and Barun Mitra. Seated are Mohit Satyanand and Julian Morris. In June 2005, the International Policy Network (IPN, UK) organized the Global Development Forum in London, a conference in support of more free trade, less aid. It was held 2 weeks before the G8 summit in Scotland where the main agenda was more foreign aid (or simply more govt to govt aid) to "make poverty history". IPN Exec Dir then was Julian, I and Mohit Satyanand were 2 of about 6 speakers.

Flashback 2014, EFN Asia Conference in HK. Parth, Andrew and me, batchmates in Mackinac Conference 2004. Barun joined us.

I am very thankful to EFN Asia for providing me the travel grant to attend ALF 2016 (KL) and ALF 2017. Thank you Pett, Siggi. My attendance of ALF 2015 (Kathmandu) was courtesy of Media 9/Business 360, thank you Charu; and partly by Samriddhi, thank you Robin.
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See also:

ALF 6, Panel discussion on property rights, February 23, 2016 

ALF 7, Panel on TPP, RCEP and other RTAs, March 18, 2016

ALF 8, Toast to Douglas North, March 19, 2016

Tax Cut 29, Culture of exemptions and culture of envy

An article by Dr. Ciel Habito last week was shared in fb by several friends yesterday. Ciel wrote,

Why is it that we have a lower tax effort (tax revenues in proportion to gross domestic product) than most of our neighbors, and yet have higher tax rates than they do? Consider the following: In 2014, Philippine government revenues as a percent of GDP was 15.1 percent. The corresponding percentage was 19.9 for Malaysia, 18.5 for Singapore, 19.7 for Thailand, 16.5 for Cambodia, and 21.5 for Vietnam. And yet, among our neighbors, we have the highest rates of corporate income tax and value-added tax, and one of the highest for personal income tax.

Our corporate income tax rate of 30 percent well exceeds the Asia-wide average of 22.5 percent, with Indonesia and Malaysia having 25 percent, Vietnam 22 percent, Thailand and Cambodia 20 percent, and Singapore and Taiwan 17 percent. We also have the highest value-added tax or general sales tax, with our 12 percent VAT being higher than the 10 percent for Indonesia, Malaysia, Vietnam and Cambodia; 7 percent for Singapore and Thailand; and 5 percent for Taiwan. Our individual income tax has a top rate of 32 percent, against the Asia-wide average of only 28.4 percent. While ours is lower than Taiwan’s 40 percent and Thailand and Vietnam’s 35 percent, it is higher than Indonesia’s 30 percent, Malaysia’s 26 percent, and Singapore’s 20 percent.

I commented that it is both a culture of exemptions and a culture of envy. Why would the government attempts to confiscate 1/3 of a company's income in the first place? Because govt thinks that all companies are making money and rich and wealthy and so they must pay as high as possible to the state.

Two rules of the politics of envy: (1) confiscate as much as possible from the private sector; (2) many of the latter will be hurt so they will ask for favor/exemptions, that's the time for rent-seeking, extortion, favoritism and picking winners. The central planners, legislators and bureaucrats decide who should be favored and who should not.

That is why most central planners would hate low taxes, it removes their arbitrary power who should be given exemption and who should not.

The culture of envy is reflected on the tax rates. 30% income tax is envy, why would govt have the "entitlement" to get such amount from the efforts of working people? The culture of exemptions is reflected on low collection rates.

I think a flat income tax rate of 10%, zero exemption, will be a good compromise. Look again the demand curve, the lower the price, the higher the quantity that consumers will buy. Same with income tax, the lower the income tax rate, the higher the number of entrepreneurs who will come to do business. Overall, low tax rate (t) x high number of taxpayers (Q) = t xQ = higher tax revenues (TR)

The Laffer curve is telling high tax rate-countries like the PH that their 30%, 25% or even 20% income tax rate is not optimal, high on the horizontal axis (tax rate) but low on the vertical (tax revenues). HK collects only 17%, SG about 16% and they have more businessmen, more taxpayers.

I wish to see a zero income tax. Like Monaco, Brunei, even Saudi, etc. Their govts earn from many other revenues like selling land (all lands are owned by the state until they are privatized; HK model somehow), selling natural gas or petroleum (Brunei, Saudi, etc models), selling mineral products, etc. Or collect other taxes like VAT/GST, property tax, etc.

One beauty of small countries, small governments. they are forced to become efficient, outward looking and more business friendly, less bureaucratic, less tax-hungry.
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See also:

Tax cut 26, Excise tax on petrol products should be reduced/abolished, not increased, September 12, 2016 
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

BWorld 109, Asians' march to liberty and progress

* This is my article in BusinessWorld last January 30, 2017.

“Progress by its very nature cannot be planned. It is knowing what we have not known before that makes us wiser men... Progress is movement for progress’ sake, for it is in the process of learning, and in the effects of having learned something new, that man enjoys the gift of his intelligence.”

-- Friedrich Hayek, Chapter 3,

“The Common Sense of Progress,”

The Constitution of Liberty (1960)

Many Asian societies have experienced economic and social upheavals and ups and downs in growth and political stability for more than the past two decades. These have been expected because people aspire for improvement and, as a result, they demand change.

After going through these upheavals, societies emerge somehow stronger, better, and more dynamic.

There are many indicators of growth and development and among them is the ability of the people in developing Asian economies to (a) travel by plane, (b) buy new models of mobile phones for communication and information, and (c) have access to the Web and the Internet.

Below are the numbers for selected Asian economies, grouped into three: (1) developing north and south Asia, (2) developing South East Asia, and (c) developed Asia plus Australia. For purposes of brevity, countries with small populations, those three million and below -- Bhutan, Brunei, Maldives, Mongolia -- are excluded from this list (see table).

The above numbers show the following:

(1) The pace of expansion in mobile phone subscriptions and Internet use in developing economies has been very fast over the past decade and a half, especially for India, Bangladesh and Nepal; Cambodia, Laos, Myanmar and Vietnam (CLMV). As a result, people now can learn new and more skills, or simply be regularly connected with their families, clans, and friends.

(2) The same pattern can be seen in air travel, as indicated by the number of airline passengers in the region. Indonesia and the Philippines experienced fast rate of growth in this area, along with China, India, and CLMV.

(3) Expansion in developed Asia + Australia is muted and modest compared to their developing neighbors.

Therefore, Hayek is correct in his observation about human progress. It is the less-planned and less socially-engineered economies that are experiencing faster improvement at least in these three indicators. This is partly because the developed economies are dealing with plenty and rising government regulations that tend to restrict faster growth.

The subject of human and social progress in Asia will again be discussed in the forthcoming “Asia Liberty Forum” (ALF) in Mumbai, India, Feb. 9-11. This big international conference will be jointly sponsored by the Center for Civil Society (India), Atlas Economic Research Foundation (USA) and the Friedrich Naumann Foundation for Freedom (FNF, Germany).

Among the important topics to be discussed will be (a) overview of what’s happening in the freedom/liberal movement around the world and Asia, (b) State, private sector and liberty in a digital world, (c) Regulations for a prosperous and innovative market economy, (d) Property rights as a human right, and (e) Education of choice for all: the role of budget private schools.

The Economic Freedom Network (EFN) Asia is also participating by sending some of its regular and long-time partners in the region to the ALF. Aside from holding its own annual EFN Asia Conference, EFN is also participating in the annual ALF and the Jeju Forum for Peace and Prosperity in South Korea.

Through continuing involvement in these three important regional and global annual meetings and conferences, EFN Asia is doing its share in securing a more prosperous, more developed Asia through the path of less government planning and more market competition, deregulation, and innovation.

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

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See also:

BWorld 106, Top 10 projections for Asian economies, January 23, 2017 

BWorld 107, Top 10 myths for oil tax hike, January 28, 2017 

BWorld 108, Rising feed in tariff (FIT) due to more wind-solar power, February 06, 2017

EFN Asia 64, Day 2 of Conference 2016

Sorry readers, delayed posting of Day 2, EFN Asia Conference 2016 in Manila last November....

New FNF-PH Country Director Wolfgang Heinze delivering the welcome remarks for Day 2.

Below are some tweets under #efnasia2016

(1) From ruben dieckhoff ‏@rdieckhoff, 22-23 Nov 2016

"All politics is local." To save free trade/globalization you have to win the battles at home first says @barunsmitra 

@razeensally wonders whether you can keep up economic growth while trampling on human rights of the citizens

When political families move from controlling to owning companies this is neo-cronyism and eventually fails. See: Arab Spring

.@laveeshbhandari: how you can be free without education? Highlights susceptibility to populism for people who feel left behind

First protect dignity and rights of all individuals. Then start talking about economic liberty. Strong stance by @LoeningMarkus

(2) from FNF Philippines ‏@FNFPhilippines, 22 Nov 2016

Peter Perfecto: There is a tendency to rely heavily on the business sector, but there is only so much that business can do.

Dr. Laveesh Bhandari: There are enough laws that try to inhibit crony capitalism, but they very rarely get implemented.

Fred McMahon: The real driver of poverty reduction is not CSR, but economic freedom.

Fred McMahon: You cannot find a stable democracy that does not have a high level of economic freedom.

(3) Barun Mitra ‏@barunsmitra  22 Nov 2016

The discussion over basic rights and freedoms, have got confused by including entitlements and aspirations: Nick Sallnow-Smith

#EFNAsia2016 Rich & poor nations, high & low growth ones, democracies or not, across the world are experiencing populist nationalist upsurge

(4) Others: 

Akash Shrestha ‏@aaktung  22 Nov 2016

"In an economically free society, you only get ahead by making other people better off" - Fred McMahon.

PichuLo ‏@pichuuu  22 Nov 2016

Random thought:How can local small and medium enterprises compete if we're pushing for the free market to gain economic freedom? 

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FNF Philippines ‏@FNFPhilippines  21 Nov 2016

Wan Saiful Wan Jan: Definitions of human rights vary. What may be HR violations to some can be another's sole income source. #efnasia2016

Armin Reinartz ‏@Armin_Rz  21 Nov 2016

#TPP is dead. Trade agreements fail because of protectionist attitude, not #HumanRights provisions, Dr. LEE Taekyu,KERI Korea #EFNAsia2016

Siegfried Herzog ‏@biberacher  21 Nov 2016

Free Marketeers keep having to play catch-up to Human Rights concerns that are framed in a way hostile to markets #efnasia2016

My own tweets:

Economic #freedom means freedom of individuals to acquire, own, control, sell, donate private #property

Rising #inequality per se not prob but poverty. If poverty declined but inequal increased, fine. It's not good to stop excellence.

Some consider child labor as HR violation but some households, it is necessary. If sole breadwinner is gone, young need to work.

Corporate branding will help global firms stay the course in #HumanRights and econ freedom protection, respecting #ruleOfLaw. 

VP @lenirobredo was here day 2 #efnasia2016 conf. She talked abt rising inequality. Actually poverty declined, many poor became middle class.

No planner would know every indiv preference... Invasion of others’ freedoms, Liberal people end up illiberal - Nick Smith, LRI

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See also:
EFN Asia 61, Panel on TPP at Jeju Forum 2016, June 14, 2016
EFN Asia 62, Program for Conference 2016, Manila, November 20, 2016 
EFN Asia 63, Day 1 of Conference 2016, November 26, 2016

Debating with a Du30 or Pinol faceless supporter (or troll?)

As I posted below about DA's solar irrigation proposal for P20 B next year, one faceless stranger named Federico Reyes debated  me in my wall. First he posted the media release of DA Sec. Pinol, then a youtube clip about "solar deep water pumping in the PH", to which I commented that it's nice water from a small hose, good initiative. And this is expected to irrigate rice fields that require thousands of cu.m. of water, good luck.

Then he posted this PR from RTVM/Malacanang about irrigation for rice farms. Serious or joking, the background is a sugarcane plantation, and behind Sec. Pinol in the interview is a banana plantation.

In short, the Malacanang demo area is not a typical rice village stretching for hundreds or thousands of hectares. It is a sugarcane + bananas + other crops, just a pocket of rice land for demonstration. And this type is supposed to irrigate millions of hectares of rice farms, wow.

Huge taxpayers' money at P20 B next year, but actual sustained irrigation output is a question mark.

Another photo from Sec. Pinol's fb page as posted by Federico. This should be in another location/area. A solar farm occupying a substantial land area, to irrigate rice farms that economize land area? Speaking of contradiction.

A friend Joel commented in my wall, see Federico's reply, then my reply, below.

Later he suggested, “set your posts to private if you dont want "trolls" nosing around”. Nope, my wall is open. It attracts friends and strangers; bright minds and non-bright minds; facebook users and faceless users :-) Man, P20B is no joke, it's huge money. If people are going to defend it, they should endure hard questions. Besides, it’s them strangers who came to my wall, uninvited.

As usual, BIG government, big spending that require big and many taxes is lousy. Proponents can become onion-skinned when asked with hard questions, they are only interested in big money, not in debate that questions the rationality (there is none, in this case) of their proposals and actions.

BWorld 108, Rising feed in tariff (FIT) due to more wind-solar power

* This is my article in BusinessWorld last January 24, 2017.

Cheaper electricity and stable energy supply are among the important components to have fast and sustainable economic growth.

On Jan. 17, the Philippine Electricity Market Corp. (PEMC) sent a press release saying that “effective settlement spot prices (ESSPs) in the wholesale electricity spot market (WESM) plunged to P2.28/kWH for the December 2016 billing period which is the lowest since January 2011. ESSPs refer to the average prices paid by wholesale customers for energy purchased from the spot market.” That is good news as various players using fossil fuel sources like coal, natural gas, and oil, are fiercely competing with each other in generating electricity. WESM was created by EPIRA of 2001.

On the same day, the Department of Energy (DoE) posted a “Request for comments on the draft Department Circular entitled ‘Declaring the launch of WESM in Mindanao’ (on Jan. 26, 2016) and providing for transition arrangements.” Another good news because finally, there will be a formal spot market for power producers and electric cooperatives that will guide a competitive and deregulated market, benefitting the consumers.

Last Dec. 23, 2016, the Energy Regulatory Commission (ERC) posted a request for public comments until Dec. 30 regarding the petition of three wind developers -- Trans-Asia Renewable Energy Corporation (TAREC), Alternergy Wind One Corporation (AWOC), and Petrowind Energy, Inc. (PWEI) -- that their feed in tariff (FiT) or guaranteed price for 20 years of P7.40/kWh be raised to P7.93/kWh, citing various cost escalations. That was bad news because expensive electricity is never a virtue. I sent a letter to ERC Commissioner Salazar arguing that they say No to the petition.

And last Dec. 6, 2016, the ERC published in a newspaper a National Transmission Corp. (TransCo) petition asking for a FiT allowance (FiT-All) of 22.91 centavos/kWh starting January 2017. That’s also bad news because FiT payments by consumers keep rising fast. From an introductory price of only 4 centavos/kWh in 2015, became 12.40 centavos/kWh in 2016, and almost 23 centavos/kWh this year.

Now two factors will raise the FiT-All for 2017 beyond 23 centavos. (1) ERC will not be able to act on this by January or not even February 2017, that means there will be price underrecoveries that must be added to the original requested price. And (2) with low WESM prices the past few months -- P3.19/kWh last September, P2.91/kWh last October, P2.54/kWh last November (data from Meralco), and the P2.28/kWh ESSP last December -- this means that FiT-All will go up. This allowance is the difference between FiT rates (highest prices are solar of P10+/kWh this year due to price escalation, followed by wind, then biomass, cheapest is run of river hydro) and average WESM prices. Or FiT-ALL = FiT rates -- WESM prices

Expensive electricity is the hallmark of renewable energy favoritism anywhere in the world.

Understand that in my previous columns, it was shown that the main beneficiaries of expensive electricity from renewables in the Philippines are not ordinary firms but huge companies: the Lopez group (EDC Burgos wind) and Ayala group (Northern Luzon UPC Caparispisan wind, and Northwind Bangui) who got P8.53/kWh FiT and combined revenues of about P4.3 billion in 2015 alone.

Let us check Germany’s renewables output. The chart below is for the last three months, Oct. 23, 2016 to Jan. 22, 2017.

Last Jan. 8, its total electricity consumption was 57.4 GW and here are the renewables output that day: solar 0.23 GW, onshore wind 1.53 GW, and offshore wind 0.39, or a total output of only 2.15 GW from these three renewables (see chart).

A total of only 2.1 GW was generated by solar-wind sources or only 3.7% of 57.4 GW power demand. If Germany relied solely on wind-solar, that would have meant massive, large-scale, and catastrophic blackouts. Germany of course was saved by the power plants that it wants to banish someday -- fossil fuel sources like coal and natural gas plus nuke power, within Germany and from energy imports from its European neighbors -- and which it kept running. So we did not hear or read such massive blackouts in Europe’s biggest economy.

Aside from expensive direct cost of wind and solar in Germany due to FiT, there is additional indirect cost of higher transmission cost. From a news report, “The Energiewende is running up against its limits” last Oct. 21, 2016 (http://energypost.eu/energiewende-running-limits/)

“German transmission system operator Tennet recently announced an 80% increase in its transmission fees because of the high construction costs of new power lines to accommodate renewable energy. A study of the Düsseldorf Institute for Competition Economics found that by 2025 costs of the Energiewende could exceed €25,000 for an average four-person household.”

The Joint Congressional Power Commission should consider introducing a law in the future that will abolish the RE Act of 2008 (RA 9513). Penalizing the energy consumers to further enrich the favored and crony firms in renewable energy is wrong.

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See also:

BWorld 104, Top 10 positive news in Asian trade, January 14, 2017
BWorld 106, Top 10 projections for Asian economies, January 23, 2017 

BWorld 107, Top 10 myths for oil tax hike, January 28, 2017

Agri Econ 25, On DA's plan for solar irrigation

This news report today caught my attention. It smells like a huge racket and waste. On average, it takes 1.5 to 2 hectares of land to install 1 MW (or 1,000 kW) solar capacity, of which only around 180 kW of actual electricity output because of low capacity factor, only 18%. 

So DA plans to convert some rice land into solar farms to generate very little solar power? Lousy. And P20 B of taxpayers money for solar? Very similar to $500 M ADB loan (nearly P20 B) for 100,000 e-tricycles nationwide, which new DOE Sec. Cusi later has junked and saved future taxpayers of another source of huge public debt.

Pumping water from below the ground is energy intensive, you normally need a big and powerful water pump to draw water from below the surface. And solar is very intermittent. Power output is fluctuating by seconds, or by minute at least. Just a band of clouds passing by can significantly bring down solar output. Without a battery or voltage regulator or similar instruments, power fluctuation from a solar is a perfect formula to damage and shorten the lifespan of an appliance or an engine.

A friend posted this photo of solar irrigation. It seems a no-brainer. Irrigation water level is almost at same level as the rice field, then very little energy would be needed to divert the water. The quicker, less costly option is to raise the dam's or water impounding's height to divert the water anywhere you want it to go.

I think about 90% of all irrigation system in the country use surface water via dams, small and big.

Farmers economize on land space. That is why the pathway between the plots is narrow, only single file of people can walk. Now the DA's plan is to allocate a big area for solar farm. Again, 1.5 to 2 hectares/1 MW of solar installed cap, and actual electricity output is 180 kW, for 2 hectares of solar farm. Wasteful use of land.

The best, most economical irrigation system is to use surface water, not underground water, via dams and water impounding projects. Have more dams, more water impounding, let the law of gravity work on the water, little or zero need for electricity or irrigation pump/engine or solar.

Every year, every single year, zero exception, the problem of many people in the country is too much water, too much flood, water is not a problem. The problem is that huge volume of water is not stored and impounded, they quickly go down as flash flood and wreak havoc downstream.

For P20B in a single year, that can create many small and medium-size dams nationwide.

When I posted this in my fb wall, a number of strangers came and commented on my wall. Some of them do not like public criticism of public pronouncements of public officials who intend to use public tax money. For them, people should just say "amen" and accept the tax-tax-tax policy of the government to fund even idiotic proposals.

If the news headline is "DA to request P20B for more dams and water impounding projects in 2018", I would clap it, applaud it. There are at least 3 advantages of this option: (1) reduce flash flooding during the rainy days and months, (2) release some water when the rains have stopped, (3) have small fishery area or swimming pool for the locals. No need to pump water from below the ground because surface water is too much, too many floods during the moonsoon and typhoon season.

Back in 2004, I saw some of Japan's mountains from a plane, I saw one river with about 7 dams on various levels; another river in another mountain which have about 5-6 dams, and so on. So during heavy rains, potential flash flood is minimized because the water is impounded on those 7 dams. When the rains have stopped, there is option to release the water to allow more space for the dams to take in excess water in another round of heavy rains. Or to hold it there for mini-hydro power, or irrigation, or for fishery and recreation. We only have few dams in the country.

Dams need not be huge and gigantic and contain several million cu.m. of water. They can be small, even micro size if regular water intake is small.

Perhaps some groups or companies just want to be solar pushers (no different from drug pushers) and enjoy the P20B of tax money for a single year for this project alone.

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See also:
Agri Econ 22, Why "peak food" hypothesis is wrong, December 25, 2015 

Agri Econ 23, Why forever Agrarian Reform should stop, March 09, 2016 

Agri Econ 24, Greenpeace voodoo science vs GMOs, July 07, 2016