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.

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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.

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Drugs War 8, Duterte government as drug fighter, or facilitator?

While some 8,000 to 14,000 suspected drug users and small-time drug pushers have been murdered  over the on-going drugs war of the Duterte government, there was not a single "big fish" drug lord and drug pusher who has been arrested. Well, two municipal Mayors and their friends, family members have been massacred over the past few months, suspected of being drug pushers in their areas. But they are not considered as "big fish" enough.

The P6.4 billion worth of shabu that went through the Bureau of Customs (BOC) and was later raided at a warehouse in Valenzuela, not a single big personalities implicated in the Senate investigations was arrested or prosecuted. Then this news report from the Inquirer on August 09, 2017, Shabu shipments to Valenzuela warehouse began in June 2016, says caretaker.

From Bernard Ong, fb wall:

September 26

Shipments were made in June 2016, January 2017, March 2017, and May 2017 (intercepted). Not a moment wasted. The first one in time for Davao Group - the political cabal, not its namesake criminal syndicate - taking power in Imperial Manila.

Mr. Duterte won as President in May 2016. The next month, large-scale shipment of shabu started under President Duterte. Cool.

From 1.8 M estimated drug users, Dangerous Drugs Board (DDB) official study and survey until February 2016, it became 4 M drug users according to the President himself, and now up to 7 M users according to DFA Sec. Cayetano.

If the President and the DFA Secretary are correct in their numbers, then it means one thing -- the supply of drugs is expanding, the price of drugs is declining due to bigger supply, so the number of users is rising. Good business model.

More posts from Bernard Ong:

September 29

Who are the 'credible sources' behind these?

A) Taiwan Triads main source of Shabu to Philippines
UN Office for Drugs & Crime analysis traces most shabu in the Philippines, Asia & the world to China. Single biggest drug haul - P6.4B shabu smuggling came from China.

B) Marawi terrorism due by drug arrest warrant
AFP says it was triggered by sighting & attempt to arrest Abu Sayyaf chief Hapilon.

C) Fake Trillanes offshore accounts.
Duterte admitted he lied & made up numbers, then said 'real' numbers came from Mocha & Tulfo.

D) Teen killings are the work of saboteurs out to discredit Drug War

PNP cops are suspected of murder in both Kian and Carl cases. They invoke Duterte's standard 'Nanlaban' excuse for the killings.

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BWorld 154, Kuala Lumpur, Incheon, JFK airports and lessons for the Philippines

* This is my article in BusinessWorld last September 27, 2017.

“Manila’s Ninoy Aquino International Airport (NAIA) is the worst airport in the world” is a cliché that we often hear and read. But how true is this statement based on quantitative and technical criteria?

I have not seen technical reports on this yet but for this piece, I will make some anecdotal data based on my two foreign trips last week.

First I went to Kuala Lumpur (KL), Malaysia to attend the Economic Freedom Network (EFN) Asia meeting and conference 2017. Then I went to New York City, USA to attend a meeting on intellectual property and trademarks protection partly organized by the Property Rights Alliance (PRA). My think tank, Minimal Government Thinkers, is a member of both EFN Asia and PRA and my plane fare and hotel accommodations were shouldered by several organizations.

These were my travel dates last week: (a) Manila-KL-Manila, September 10 to 12; (b) Manila-New York-Manila via Incheon-Seoul, September 13 to 18.

Below is a summary of my experience, items #3 to 8. In parenthesis are years the airports have become operational.

Sources, #1 and 2: Airports Council International (ACI), wikipedia.

ACI’s top 10 busiest airports in 2016 were: (1) Hartsfield-Jackson Atlantata, USA; (2) Beijing Capital, China; (3) Dubai, UAE; (4) Los Angeles, USA; (5) Haneda-Tokyo, Japan; (6) O’hare-Chicago, USA; (7) Heathrow-London, UK; (8) Hong Kong; (9) Pudong-Shanghai, China; (10) Charles De Gaulle-Paris, France.

I have almost no complaints about the KLIA. It is big, wide, and modern. Aside from airport taxis, uber and grab cars, passengers can take the express or high-speed train to KL Sentral station in the city center (fare about 35 ringgit, 30 minutes) then take the cab or MRT/subway from there. I took the airport coach, which charged only 10 ringgit, and the travel time was about 60 minutes. I then took the MRT/subway, with a fare only 2.70 ringgit to Ampang Park, which is near the hotel venue of EFN meeting.

I have several complaints about the JFK-NY airport, mainly on the various delays as summarized in the table above. In addition, there is road congestion at the JFK airport’s passengers pick up area. Lots of waiting cars, frequent double parking, and no airport personnel at that time to restrain motorists from blocking the road. I saw these around 10 pm while waiting for the airport bus.

There was no free internet at JFK arrival area. At the departure area, there is one but it is hijacked by boingo, charging about $5 an hour. Boingo has “free 30 minutes” internet but one must watch the sponsors’ ads, and it is very slow. In short, I was not able to check the web there.

But one advantage of JFK is its connection to cheap mass transportation systems.

On my arrival, I took the airport bus to Manhattan, Port Authority terminal at 42nd street, paid $18 for the more than one hour trip. I then paid $2.75 and took the subway to my destination. When I left, I took the subway from uptown to JFK airport then skytrain, which cost me only $7.75. A taxi from uptown to the airport would cost about $70-75 including toll fees and tip to the driver.

I am not a frequent traveler, I take an average of only three foreign trips per year (all sponsored) mostly in Asia, and so my perspective will be limited compared to other people who make more than ten trips a year. Nonetheless, these are some things that the government and NAIA management may consider.

One, finalize the alternative airport to NAIA and start the work soon via integrated PPP, not hybrid PPP. While there is overall recognition of this need due to existing and future congestions, there is continued delay in the final decision as to where that airport shall be – at Sangley Point in Cavite, or Bulacan or Clark-Pampanga, or somewhere else.

Two, keep the freebies like free internet, have free drinking water fountains (currently there is none), keep the immigration entry/exit fast. And avoid scandals like “laglag bala” (of the past administration) and robbery/extortion of rich passengers. Just kick out and file charges against airport or immigration personnel involved in those scandals.

Three, expand the airport bus in all four terminals to more destinations other than Pasay-Makati. With heavy daily traffic in Metro Manila, passengers from far away cities like QC, Navotas, or Antipolo, should avoid being driven to or from NAIA.

Government should allow and encourage the energy, financial resources, and technical expertise of the private sector in finding various solutions to airport and road congestion.

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