BWorld 182, Asia Liberty Forum 2018 in Jakarta

* This is my column in BusinessWorld last January 22, 2018.

“There is no evidence that fuel and electricity subsidies benefited the poor. There is no evidence that trade protection benefited the poor. Elimination of subsidies if compensated by reduction of cost doing business (corruption) will help the poor.”

— Muhamad Chatib Basri,

presentation about Indonesia energy and food subsidies,

EFN Asia conference September 2004, Hong Kong

Those conclusions were made by Dr. Chatib “Dede” Basri in his presentation, “Can subsidy and protection do any good for the poor?” at the Economic Freedom Network (EFN) Asia conference in 2004. At that time, he was a faculty member of the University of Indonesia and individual member of EFN. He used an econometric model and the Grosman and Helpman (G-H) model (trade protection is the result of bargaining between government and various lobby groups). The inevitable conclusion of his paper was that market reforms and the reduction, if not removal of dependence by the poor on the state will actually help them and taxpayers over the long term.

Dr. Basri later became Minister of Finance from May 2013 to October 2014 when the administration of Indonesian President Susilo Bambang Yudhoyono ended. Dr. Basri will be among the keynote speakers in the Asia Liberty Forum (ALF) this coming Feb. 10-11 at Mandarin Hotel Jakarta, Indonesia. The event is sponsored by the Atlas Foundation and co-hosted by the Center for Indonesian Policy Studies (CIPS).

Aside from Dr. Basri, other important speakers in this year’s conference will be the following:

1. Saidah Sakwan, chairwoman, CIPS; also a commissioner of the Indonesian Business Competition Commission (KPPU).

2. Brad Lips, CEO of Atlas Network, Washington DC, USA.

3. KH Yahya Cholil Staquf, general secretary of Nahdlatul Ulama (NU) Supreme Council, world’s largest Muslim organization with 50+ million members.

4. Siegfried Herzog, Regional director for Southeast and East Asia, Friedrich Naumann Foundation for Freedom (FNF), Thailand.

5. Suraj Vaidya, chairman of SAARC Chamber of Commerce and also chairman of Samriddhi Foundation, Nepal.

6. Rainer Heufers, executive director of CIPS.

7. Razeen Sally, Prof. at Lee Kuan Yew School of Public Policy, National University of Singapore.

8. Ronald Meinardus, Regional director, FNF South Asia, India.

9. Parth Shah, president of the Centre for Civil Society, India.

10. Lorenzo Montanari, exec. director of Property Rights Alliance (PRA), Washington DC, USA.

11. Barun Mitra, founder and Director of Liberty Institute, India.

12. Junjie Ma of Unirule Institute, Beijing, China.

There are many other interesting speakers to talk on many topics — policy reforms to broaden support for classical liberal principles, education policy, Ease of Doing Business Index, Protection of private property rights, Intellectual Property Rights (IPR), micro-enterprises, entrepreneurship in e-commerce, state-owned enterprises (SOEs).

Are Asian economies getting more market-oriented or state-distorted? Is there greater rule of law now or greater rule of men? Are public institutions more protective or more confiscatory of private property rights?

There are many studies and annual reports that track and monitor various indicators and parameters to help answer these and related questions. Among the important annual reports are Fraser Institute’s Economic Freedom of the World (EFW) reports, Heritage Foundation’s Economic Freedom Index (EFI), PRA’s International Property Rights Index (IPRI), World Bank’s Doing Business, and World Economic Forum’s (WEF) Global Competitiveness Index (GCI).

The GCI is composed of 12 pillars and the first pillar are Institutions. These are composed of 21 sub-pillars like property rights, IPR protection, diversion of public funds, public trust in politicians, irregular payments and bribes, judicial independence, favoritism in decisions of government officials, burden of government regulation, efficiency of legal framework in settling disputes and challenging regulations, transparency of government policy making, and reliability of police services.

I checked the latest WEF 2017-2018 report for East Asian economies and compared with the report two years ago for pillar #1, Institutions (see table).

So for Institutions, the numbers above show three important results: One, out of the 144 countries and economies covered, many East Asian nations land in the first half (i.e., 1st to 72nd), 11 of the 15 economies mentioned above. Singapore and Hong Kong are in the top 10.

Two, the biggest gainers in global ranking are India (+21!), South Korea, China, and Laos. And three, the biggest loser in ranking is the Philippines, dropping 17 places or notches.

In the WEF Executive Opinion Survey 2017, the most problematic factors for doing business in the Philippines were: (1) inefficient government bureaucracy, (2) inadequate supply of infrastructure, (3) corruption, (4) tax regulations, and (5) tax rates.

For Asian countries outside the first half like Thailand, Vietnam, Philippines and Cambodia, there is an immediate need to improve the rule of law and further debureaucratize, deregulate and depoliticize the economy.

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See also:

BWorld 179, Federalism dream vs centralized government, January 15, 2018 

BWorld 180, Has East Asia liberalized its trade enough? January 19, 2018 

BWorld 181, Effects of Supreme Court TRO on RCOA, January 22, 2018

China Watch 25, Benham Rise/ Philippine Rise and Chinese exploration

These were some of the news last January 22-24, 2018.

So President Duterte would keep his kow-tow humiliation to China?

Last January 24, these are just two of the many news reports on the subject.

This irked Prof. Jay Batongbacal of UP College of Law and a friend from UP Sapul student org. So last January 24, Jay posted this in his fb wall, it was shared by 8,000+ people.
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FILIPINOS HAVE BEEN EXPLORING THE BENHAM RISE REGION FORYEARS

by Jay Batongbacal

January 24, 2017.

[Fair warning: for the first time, i am about to really rant about something]

I was going to write on this MSR brouhaha again and try to do something that could actually help this government clarify some things they just don't get, but then I am outraged by a huge hollow-block thrown against the entire FIlipino nation.

Pres sPox Roque's claim that Filipinos cannot afford to explore Benham Rise, that "no one can do it", that the Philippines "needs China" to do it, and "only China qualifies" is completely wrong, based on ignorance, a serious disservice to Filipino scientists in particular and the Filipino people in general, and an over-exaggeration of China's potential role in Philippine ocean sciences.

In the first place, FIlipinos have been exploring the Benham Rise Region for years now:

1) From 2004-2008, then again in 2010, the DENR's National Mapping and Resource Information Authority sent BRP Hydrographer Presbitero on multiple bathymetric and hydrographic surveys of the Benham Rise Region, producing a highly detailed 3D digital bathymetric model (resolution of 1 meter for an area covering 30 million hectares) of the entire region compliant with the highest quality standards of the International Hydrographic Organization. That was a Philippine vessel with full Filipino crew (mariners of the Coast and Geodetic Survey Division) funded completely by the Philippine government. That batheymetric model was absolutely necessary for the Philippines to support its claim to the continental shelf beyond 200 nautical miles with 2D and 3D geomorphological analysis.

2) For the past decade, the DA's Bureau of FIsheries and Aquatic Resources has been annually conducting fisheries research and experimental fishing expeditions in the Benham Rise Region, particularly in areas between the coast of Luzon and Benham Bank, to determine the tuna fishery potential of its waters. This has been undertaken by the M/V DA-BFAR multi-mission research vessel for so long, that BFAR has confidence in promoting and opening the region as the country's new tuna fishing ground.

3) Two oceanographic research cruises have been organized, funded by the DOST, supported by DA-BFAR, and with the participation of the University of the Philippines, De la Salle University, Silliman University, and other academic institutions (apologies as I forget), which gave the Philippines its initial glimpse of Benham Bank, the shallowest portion of Benham Rise. These were done in 2014 and 2016. A third cruise is being planned for this summer 2018 (fingers crossed). All are crewed by Filipino scientists, marine science students, Navy and Coast Guard technical divers, and mariners. Supplementary support/assistance so far was provided by Oceana, a non-government organization advocating marine resources conservation, in the form only of a remotely-operated vehicle unit and technicians to control it, and additional scientists and technical divers to augment the 2nd expedition's personnel. Both previous expeditions were Philippine-funded, the same goes for the planned third cruise. The first people to actually descend and "touch" Benham Bank 50m below the Pacific, were Filipino technical divers. That's our "Neil Armstrong setting foot on the moon" historical moment.

4) Since 2016, the UP National Institute for Geological Sciences and UP Marine Science Institute have been collaborating with counterpart institutions from Korea and Japan, namely the Korea Institute for Ocean Science and Technology, and the Japan Agency for Marine-Earth Science and Technology, to begin initial exploration of the seabed in Benham Rise itself under separate memoranda of agreements. As I understand it, among other things, the Philippines intends to get seabed core samples through this arrangement, which push forward the resource assessment and exploration efforts for the Rise.

5) Geologists of the UP NIGS have acquired and reviewed available public domain data from multiple scientific research cruises by multiple nations that have passed through the Benham Rise Region, and produced academic papers and analysis of their own, which were used as evidence to support the claim to Benham Rise. The detailed tectonic history, geological characteristics, and underwater topography have been determined and analyzed by these Filipino scientists, and their findings tested and and papers validated by foreign scientific advisors as well as the scientific community through the continental shelf claim process and the academic press.

6) Marine biologists of UP MSI, UP SESAM, and other schools have been analyzing the many samples and observations that they gathered from the two research cruises, and making some interesting findings and potential discoveries on their own. These are Filipino researchers, earning salaries and wages from Philippine sources, and working in accordance with stringent scientific standards and procedures on par with anyone else in the world.

BWorld 181, Effects of Supreme Court TRO on RCOA

* This is my column in BusinessWorld last January 18.

“The real bosses, in the capitalist system of market economy, are the consumers… The entrepreneur profits to the extent he has succeeded in serving the consumers better than other people have done.”

— Ludwig von Mises, Bureaucracy

Geographical monopolies in electricity distribution are among the last remaining state-created monopolies in the country via congressional franchises because electricity distribution is considered a “public utility.”

As a result, factories, hotels, malls, or hospitals have no choice but to source their energy requirements from electric cooperatives (EC) or privately run distribution utilities (DU) which were given the franchise to serve these particular locations.

However, Rule 12 of the Electric Power Industry Reform Act (EPIRA) of 2001 (RA 9136) has changed this constitutional and legal guarantee of monopoly through the Retail Competition and Open Access (RCOA) provision.

RCOA breaks the geographical monopoly and allows retail competition in electricity to a contestable market composed of medium to big-ticket electricity consumers. Open access allows any qualified person or entity to use the transmission and/or distribution system and related facilities subject to payment of retail wheeling rates.

With rising power capacity addition yearly and RCOA implementation, average prices in the Wholesale Electricity Spot Market (WESM) have been declining.

In 2010, the cost of electricity in pesos per kWh was at 6.43. In 2011, it was 3.80; in 2012, 4.87; in 2013, 3.85; in 2014, 4.40; in 2015, 3.47; and in 2016, 2.84.

However, in early 2017, the implementation of the RCOA was suspended by a Supreme Court temporary restraining order (TRO). In effect, five resolutions issued by the Energy Regulatory Commission (ERC) from June 2015 to November 2016 were likewise suspended. Besides affecting the voluntary participation of contestable customers (CCs) for 750-999 kW, the suspension also reduced potential competition because many retail electricity suppliers (RES) — especially those whose licenses were expiring — were unable to renew them.

This decline in competition resulted in lower capacity demand by the contestable customers, from 3,456 MW in end-2016 to only 862 MW in November 2017 for the 1MW and higher customers, and from 351 MW end-2016 to only 78 MW in November 2017 for the 750-999 kW customers (see table).

A BusinessWorld report last Jan. 8 entitled “DoE to seek SC guidance on retail competition” said that the department issued a new circular allowing the switching from captive to contestable consumers to allow greater participation from new players. It also allowed the ERC to continue issuing licenses to RES and renew the licenses of RES with expiring licenses.

Here is a summary of the benefits of RCOA to consumers and the Philippine economy in general. Many of these were discussed at the EPDP presentation last September.

1. Contestable customers will have more choices in pricing and power supply contracting — privileges that are not available to small and captive customers.

2. Small customers can aggregate their demand or allow an aggregator to pool their combined demand to become contestable customers.

3. Contestable customers can choose the type or source of power they want. Some simply want cheaper prices, others want stable 24/7 electricity even if costs are higher than those offered by their previous ECs or DUs, whose services may be unreliable. For their part, other consumers who wish to source all of their energy needs from renewables can also do so — as long as they are willing to fork out more money for the privilege.

4. Contestable customers can have full control of their generation costs and are not required to subsidize small and/or off-grid consumers, unlike traditional end-users. They can choose to have flatter load factors by using more baseload, an arrangement that is ideal for companies, especially those that use power 24/7 like manufacturing plants, big hotels, hospitals, and BPO centers.

5. Customers can shift demand to off-peak hours and can “peak shave” to reduce their electricity price. Consumers have big leeway and choices based on their needs and corporate philosophy and branding.

6. There are more than 50 RES to choose from, shown in the table above. Contestable customers can also engage in financial hedging or enter into contracts with any financial provider to hedge its existing contact structure and they need not necessarily be an RES.

7. More investments in power generation can be expected as power companies can contract directly with customers and bypass ECs, a number of which have issues with paying generation companies on time.

The SC TRO has therefore resulted in the following unintended consequences:

1) It disallowed many contestable customers in the 750-999 kW demand category to enjoy RCOA, forcing them to stay with their ECs or DUs and depriving them of the benefits discussed above.

2) Other eligible customers have been discouraged from availing the RCOA due to lingering uncertainties.

3) DUs also face uncertainties whether to get additional generation contracts or not for contestable customers because the latter can leave them anytime once the TRO is lifted.

4) New RES players and existing RES with expiring licenses cannot get new ERC licenses. This means lesser competition among RES, DUs, and ECs. Less competition means lesser choice for customers.

The SC therefore, should resolve this uncertainty soon — either lift the TRO and allow the various ERC resolutions to be implemented again, or strike down those resolutions so that the ERC can issue new resolutions and regulations to implement RCOA. RCOA has to be implemented because it is pro-choice, pro-consumers, and abandons monopolization and unreasonable subsidies.
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See also:

BWorld 178, Top 8 energy news of 2017, January 14, 2018 

BWorld 179, Federalism dream vs centralized government, January 15, 2018 

BWorld 180, Has East Asia liberalized its trade enough? January 19, 2018

WHO must go back to basics

I am reposting this good article by a friend, Philip Stevens, published in BusinessWorld last Thursday, January 18.
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To maintain relevance, WHO must go back to basics

AS one of 34 executive board members of the World Health Organization (WHO) meeting in Geneva next week, the Philippines shares a pivotal role in setting the global health agenda for the next year.

The WHO’s work has never been more important to address serious and evolving international health threats. It is only a matter of time before there is another global influenza pandemic to match the devastating outbreak of 1918, and, as recent outbreaks of Ebola and Zika have shown, new and deadly diseases can emerge at any time.

As a UN organization to which almost every country in the world belongs, the WHO should make strengthening national health systems and coordinating defenses against transnational disease its priority. But it’s often hard to know if the organization has any priority.

Superficial involvement in a ballooning number of health areas has made it a directionless, ineffective, and inward-looking player in an increasingly crowded global health scene.

The WHO’s tendency to do a lot poorly has seen it fail in its core business of leading international action on transnational disease outbreaks.

Take the organization’s response to the West African Ebola crisis of 2014.

An expert panel convened by Harvard Global Health Institute and the London School of Tropical Medicine criticized the WHO for its “catastrophic” delay in declaring a public health emergency.

The worry is that WHO will fail to handle the next inevitable global pandemic, leading to needless loss of life.

Funding is part of the problem: The WHO spent just 5.7% of its 2014-2015 budget on disease outbreaks, a 50% drop on the previous two years.

The WHO’s core budget, paid by member governments, fell from $579 million in 1990 to a feeble $465 million this year. To put this in context, this is considerably less than the Philippines receives each year in foreign aid earmarked for health.

The WHO has topped up its budget with project-based donations from countries and big charities, which now constitute 80% of its overall income. But that has cost the WHO its strategic independence.

Alongside global health staples like tropical diseases and immunization, the WHO now publishes recommendations on subjects from adolescent health and headaches to traffic safety and prisons.

Jeremy Farrar, director of the UK-based global health research charity the Wellcome Trust, argues the WHO is being undermined by its inability to focus on a few core issues.

“It’s so thinly stretched,” he told Reuters. “There’s arguably no organization on earth that could cover all those (topics) at sufficient depth to be authoritative.”

This lack of focus and mission creep will be on full display at next week’s WHO executive board meeting. Bizarrely, large parts of the agenda are dedicated to discussion of how to dilute the intellectual property (IP) protections that drive discovery of new health technologies.

Given the scale of today’s global health challenges, it’s not clear how repeating a tired and long discredited debate about IP and access to medicines will help. The vast majority of treatments prescribed in both developing and developed countries are off-patent and therefore unaffected by IP rules, yet far too many still do not have reliable access to them.

The real reasons for this have been well known for decades. There are too few doctors and clinics, and a lack of social and health insurance to protect people from the cost of health care expenditures (something WHO itself implicitly recognizes in its efforts to promote universal health care). In many places, weak supply chains and poor infrastructure separate people from the treatments they need.

A narrow and divisive focus by WHO on IP may tick political boxes, but it does nothing to improve health and will only lead to more unproductive debate. It looks like a power grab by WHO staff to intervene in areas that are best left to national governments.

In 2017, former Ethiopian foreign minister Tedros Adhanom was elected as new director general on a mandate to reform and consolidate the WHO. Almost immediately, he appointed no fewer than 14 assistant director generals to oversee a huge number of program areas. This is not the work of a reformer.

Next week is the first executive board meeting under Tedros’s leadership. The Philippines and other member states need to steady the ship. To maintain its relevance, WHO must get back to basics and do a few things well, not many things poorly. It must therefore unite nations around practical solutions, not divide them in pointless debates.

Philip Stevens is director of Geneva Network, a UK-based research organization focusing on international trade and health issues.

Pictures from UP Diliman, 1985-1987

Mula sa baul ni Fidel Nemenzo at ibang mga friends sa UP, these photos strike nostalgia and happy memories. Below, in one of the group photos of the Independent Student Alliance (ISA) student party during the UP University Student Council (USC) elections. Among the people here: Agnes Camacho, Rowena Alvarez, Alan Ortiz, Marie Sharon Guerrero, Sheila Espine Villaluz, Doby Pineda, Jay Batongbacal, Alex Lacson, Ariel Nepomuceno, Bjay Angeles, Doyet Sevilla, Bong Belaro, Francisco Magno, Dulce Natividad, Sharon Dauz, Gilbert Caloza... 

ISA was formed around 1986 or 1987 as a 'third force" against the dominant student parties in UP Diliman. The nat-dems SAMASA and soc-dems TUGON. Many of the original members of ISA were former SAMASA member-organizations like UP Sapul, Alpha Phi Beta fraternity. Not sure if UP Buklod Isip was also former SAMASA member but they joined ISA. UP SURGE was a new organization, formed 1985 or 86 and also joined ISA.

Fidel Nemenzo, Dulce Natividad, Doyet Sevilla, Berting Garlitos (RIP), Kiko Magno, Ruben Coprado, Cresma Somera Reotutar, Lorenzo Ziga,  Ruena Bernardo, BJay Angeles, Jomar Oligario.

With Tess Ujano-Batangan (RIP), Mil Millora (RIP), Ted Te, Oggie Arcenas, Lisa Punongbayan, Dada Santos,...

Jay, Norman Roxas, Choy Libron. Norman and Choy were my roommates in Narra dormitory for one semester.

Sapul tambayan.

In one of the Kamia dorm "open house", non-dorm residents can visit and enter the rooms of residents who invite them.

Those were the days. We were young, wild and free :-)

Thank you for these photos Fidel, Winnie, other friends.

BWorld 180, Has East Asia liberalized its trade enough?

* This is my column in BusinessWorld last January 11.

Under a system of perfectly free commerce, each country naturally devotes its capital and labour to such employments as are most beneficial to each. By rewarding ingenuity… it distributes labour most effectively and most economically: while, by increasing the general mass of productions, it diffuses general benefit, and binds together by one common tie of interest and intercourse, the universal society of nations throughout the civilized world.

— David Ricardo, Principles of Political Economy and Taxation (1817)

Classical British philosophers and political economists were the pioneer thinkers in articulating the net benefits and advantages of free trade over autarky and protectionism. These include David Ricardo, Adam Smith (“A nation may import to a greater value than it exports for half a century… and yet its real wealth, the exchangeable value of the annual produce of its lands and labor, may, during the same period, have been increasing in a much greater proportion,”) and David Hume (“the increase of riches and commerce in any one nation, instead of hurting, commonly promotes the riches and commerce of all its neighbors.”)

Perhaps it is no coincidence that former British protectorates and colonies in Asia are among the most rabid free traders in the world such as Hong Kong, Singapore, and Brunei.

Among the important indicators of how free an economy to global trade and commerce are (a) the mean and average tariff rates, and (b) standard deviation of tariff rates, which show how wide the variations among tariffs are that indicate high protectionism of certain sectors compared to other sectors.

Hong Kong, Singapore, and Brunei have impressive numbers: zero or very low tariff rates and standard deviation is also zero or very low. This means that there is little or no favoritism and protectionism of certain sectors. As a result, consumers and local producers are given the greatest freedom to choose various products and commodities available from around the world to come into their shores.

Japan, Malaysia, and Taiwan have low tariffs but their standard deviations are in double digits. For their part, the Philippines, Myanmar, and Indonesia have declining tariffs and single-digit variations, which are good.

Thailand, Vietnam, and South Korea seem to have not liberalized fast enough because of their relatively high mean tariffs and high tariff variations (see table).

David Ricardo has articulated the classical definition and theory of “comparative advantage.”

This theory has a beautiful application for developing economies like the Philippines to avoid concentrating their resources — human, financial, and land, among others — on few goals like food “self-sufficiency” when they can diversify their resources and earn higher income from manufacturing, tourism, and other sectors.

These economies can then use surplus and savings to purchase food and other commodities from abroad, especially from neighbors that have better natural endowment in bigger food production.

From the numbers above, there is a mixture of results in trade liberalization by East Asian economies. Overall tariff rates have declined through time but tariff variations have also increased in some countries and economies.

We go back to choosing three pathways to trade liberalization: multilateral like World Trade Organization (WTO), Asia-Pacific Economic Cooperation (APEC), Regional Comprehensive Economic Partnership (RCEP) negotiations; bilateral like Japan-Philippines Economic Partnership Agreement (JPEPA); or unilateral like what Hong Kong, Singapore, and Brunei have done.

The best outcome would be via global and multilateral liberalization under the WTO but this is also the most difficult, most complicated, and most bureaucratic.

After 22 years (1995-2017) of regular global negotiations, there were no major achievements except the Trade Facilitation Agreement (TFA) which needs legislative ratification by all signatory countries.

Unilateral liberalization is the simplest and fastest route to take. Just consider the interests of local consumers and producers in general — to have the widest choices possible in terms of prices and product quality. More choices means more freedom, more savings and by extension, higher incomes.

Bienvenido S. Oplas, Jr. is President of Minimal Government Thinkers, a member-institute of Economic Freedom Network (EFN) Asia.
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See also:
BWorld 175, Trends in global and Philippine trade, January 05, 2018

BWorld 177, On MMDA car towing and impounding, January 07, 2018
BWorld 178, Top 8 energy news of 2017, January 14, 2018 

BWorld 179, Federalism dream vs centralized government, January 15, 2018

Interaksyon shutting down

Interaksyon's "Fat-Free Economics" column was my other home for two years, early 2012 to mid-2014. I wrote several dozen articles there with the support of my editor and friend, Arnold Tenorio. Am sad with this news... 

http://newsbytes.ph/2018/01/18/tv5-closing-down-news-website-interaksyon-com/

My first article in interaksyon, March 2012, Fat-Free Econ 1: Macroeconomics for Micro Concerns

My concluding paragraph:

"Main lesson: BIG government is bad for the economy. More taxation, more regulations and more bureaucracies often inhibit rather than encourage micro and corporate entrepreneurship and higher economic growth."

My last energy article there, January 2014, Fat Free Econ 53: WESM, Myths and Realities.

I debunked the claims that the big electricity price hike in December 2013 was caused by "collusion" by several power companies (hence, fake news).

Seems this was my last column in interaksyon, July 31, 2014, Fat Free Econ 55: The President's 5th SONA and Market-Oriented Reforms.

I concluded here, "The President is a Liberal, not a socialist like Bayan Muna or Akbayan, nor a populist like the other political parties. Let us expect more liberal and market-oriented policies from him and his team in his remaining year."

Goodbye interaksyon and thank you for the opportunity to spread the philosophy of limited/minimal government on those two years.

IPR and innovation 40, WHO health alarmism and IPR tinkering

Seven years ago, I briefly surveyed the various offices under the UN and I was surprised to see about 100+ different agencies. See UN bureaucracies -- too many! (December 20, 2010).

Among the huge and wide UN offices and bureaucracies is the World Health Organization (WHO). On its website, Media Center, News Releases 2017, these stories seem like we are still in the 90s or even the 80s, or the 70s -- there are many scary and alarmist stories in public health around the world until now.

It is already 2018 -- when illiteracy is already zero in many developing countries, when smoke signal and animal whistles are no longer used to communicate as hundreds of millions of poor people in developing and emerging countries now use smart phones with access to emails, facebook, twitter, youtube and other social media.

And the WHO and WB still declare that "half the world lack access to essential health services"? That measles "still kills 90,000 per year"?

Going back a few decades ago, the WHO was known for various health alarmism worldwide. Like the HIV/AIDS alarmism in the 80s to 90s and more recently, about NCDs (non-communicable diseases) alarmism.

Then the usual fare of the WHO -- blame directly or indirectly IPR and drug patents by innovator pharma and biotech R&D. Also blame free trade and FTAs for expensive medicines.

And I was surprised to see this.

http://www.who.int/medicines/EB142_13_shortage_and_access_medicines_vaccines.pdf?ua=1

"Global shortage of medicines and vaccines", wow. Since about 95-99% of WHO's essential medicines list (EML) are already off-patent, what stops the WHO and member-governments from mass-producing these drugs, directly or indirectly?

The WHO needs to shrink, both in size of bureaucracy and governments' funding. It has lots of health and economic global central planners that they want to plan-and-control many things and policies, forgetting that it was the private sectors and corporations' risk-taking that gave the world plenty of life-saving medicines since many decades ago.
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See also:

IPR and innovation 37, US-China dispute on IP, September 17, 2017

IPR and Innovation 38, Recent IP development in some ASEAN countries, October 24, 2017 

IPR and Innovation 39, Recent IP developments in CN, TW, KR, ID, November 05, 2017 

My first article in BWorld, Oct 2007, on IPR, December 29, 2017

BWorld 179, Federalism dream vs centralized government

* This is my article in BusinessWorld last January 5.

Repeated calls for federalism by the Duterte administration actually point to more centralization of the national government — the complete opposite of what they’re advocating.

Here are some examples.

1. National taxes have been rising, instead of declining, which could have helped prepare federal states to have their own income and value-added taxes, etc. Instead of lowering the top marginal income tax rate of 32%, it was even raised to 35%. Instead of reducing the VAT to 10% or 8% with few exemptions, the 12% was retained but many sectors were also exempted.

2. Expanding the number of departments and bureaus instead of reducing them. The Department of Transportation and Communication (DoTC) has become two departments — the Department of Transportation (DoTr) and the Department of Information and Communications Technology (DICT). Then there are proposals to create a Department of Housing, Department of Fisheries. A good federal set up is to abolish many existing departments (like NEDA, DA, DENR, DoH, DoT, etc.) and allow the state governments to create their own departments as they see fit, create, or expand local or state revenues to finance these state departments.

3. Forcing national legislative franchising like buses and taxi, instead of decentralized regional or provincial franchising. Speaker Pantaleon Alvarez and other House leaders are behind the proposal.

4. Reversing integrated public private partnerships (PPP) where government fiscal exposure is very limited to hybrid PPP where national government budget and foreign borrowings (especially China ODA) is much bigger. A meaningful federal set up will empower the state governments to deal with local infrastructure like airports, seaports, provincial tollways and inter-city MRT/LRT.

5. Centralized declaration of class suspensions. During the anti-martial law rallies in Sept. 21, 2017, Malacañang declared a Luzon-wide or nationwide class suspensions even if many provinces and cities did not even have scheduled rallies. Then during the PISTON jeepney strike in Oct. 16-17, 2017, Malacañang declared nationwide class suspensions, even if many provinces and cities did not even have planned jeep strike. President Duterte should have allowed the mayors and governors to decide, saying something like “the national government will step back from these decisions and it is up to the local governments to decide what’s best for their people.”

Beyond federalism plans contradicted by more centralization of powers and taxation, a long-term alternative would be for the Philippines to split into many new countries and allow these new countries to compete with one another in the field of taxation, governance, infrastructure, trade, and tourism to attract more investors and visitors from around the world. Peace and diplomacy will be retained as fellow ASEAN member-states as well as various multilateral formations and the United Nations.

Many existing Philippine island-provinces are actually comparable in size to existing countries and/or big territories (see table).

This is a far out view and may not be considered in the current decade but would appear more viable through time. Singapore will not be as dynamic and developed as it is now if it was just one of many states of Malaysia.

Under the current activities of the Duterte administration, there lies a danger that when federalism is finally enacted, local entrepreneurs and job creators will be walloped with both high national and high local taxes, fees, royalties and various mandatory spending. This will be a good formula to encourage more corruption and black market business operation, or get out of the country and do business elsewhere.

For the federalism plan to be more attractive to the people, the national government should learn to step back, to tax less, regulate less, bureaucratize less, build confidence among the people and investors in the provinces that indeed they will be given more leeway, more opportunities to craft their own political and economic identity.

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See also:
BWorld 115, Centralization and federalism, March 23, 2017
BWorld 171, Global vs national tax reforms, December 29, 2017 

BWorld 176, Road trips and PPP projects, January 06, 2018 

BWorld 177, On MMDA car towing and impounding, January 07, 2018 
BWorld 178, Top 8 energy news of 2017, January 14, 2018

Pol Ideology 72, You love capitalism

I am reposting this good article in Manila Standard by a friend, Eric.
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You love capitalism

posted January 05, 2018 at 12:01 am

By Eric Jurado

You love capitalism.  Really, you do.

And you can’t stand big government. Really, you can’t

Don’t believe me? Then I’ll just have to prove it to you.

Do you use an iPhone? Android?  Macbook?  PC?

Read on a Kindle?

Watch TV and movies on Netflix? Videos on YouTube?

Shop on Amazon? Zalora?

Listen to Spotify?

Search on Google?

Send money on GCash? Coins?

Grab a ride with Uber?

Drive with Waze?

Book a room with Airbnb?

Are you on Facebook? Or Instagram? Or Snapchat?

You probably use many, if not all, of these things, and, if you’re like me, you love them. In today’s world, they’re practically necessities.

Where do you think they came from?

From entrepreneurs with great ideas and the freedom to test them in the marketplace. That is what is known as . . . capitalism.

Now consider some other things you probably do:

Have you been to the LTO?

Gone through security at Naia?

Mailed a package at the Post Office?

Called the BIR customer service line?

Or called any government office, for that matter?

What’s the difference?

Why is going to Uniqlo so fun but going to the LTO so painful? Because one has nothing to do with government, and the other is the government. One needs to satisfy its customers to survive and grow. The other doesn’t.

The purpose of government is not to create products. And we don’t expect it to. But if you thought about it for a few moments, you’d realize you don’t want the government involved in just about anything private business can do.  That’s because profit-motivated individuals have to work hard to please their customers—you. Government agencies don’t have to please anyone.

Call that BIR service line or any government service line, if you doubt me.

Can you imagine if Steve Jobs had to seek government approval for every new design of the iPhone? We’d have been lucky to get to iPhone 3G.

Look at Uber. Just a few years ago, summoning a private car and driver in a few minutes that would take you where you wanted to go was truly a service available only to the wealthiest people. But now, thanks to capitalism, private rides are an affordable option for ordinary people all over the world.  Until Uber came around, if it started to rain in Manila and you wanted to grab a cab, good luck. Too many rain-drenched people and too few cabs available. Uber had a better idea. Rain falls. Demand for rides spikes. Raise prices to give more Uber drivers an incentive to hit the road. Ride-in-the-rain problem solved.

Airbnb is another example. Only a few years ago, if you were going on vacation with your friends or family, hotels were just about your only option. But hotels are expensive and often don’t provide all that much in terms of space, amenities or interesting neighborhoods.

If you wanted to find out if individual homeowners were making their homes or condos available for a few nights, you’d have to scour internet postings.

But then Airbnb came along, giving anyone with a computer or smartphone access to over two million homes in 190 countries. You can find places with hot tubs and pools; or, if you’re on a tighter budget, you can rent a room, or even just a couch.

Government never could have done this. What motivation would it have? How would it even know we wanted services like Uber or Airbnb?  We didn’t know it, until risk-taking entrepreneurs made it possible. Thanks to capitalism. And no thanks to government which, more often than not, just gets in the way.

Why?

Because the government’s knee-jerk reaction is to regulate and control everything it can regulate and control. Otherwise, what would be the purpose of many government agencies and all those bureaucrats?

Cities across the globe are putting up barriers to slow down or shut down services like Uber and Airbnb. Making rules may be the only area where the government shows creativity. Economic growth has the best chance of happening in the absence of that rulemaking.

According to economist Adam Thierer, the internet, to use just one important example, was able to develop in a regulatory climate that embraced what he calls “permissionless innovation.” This approach to regulating allows entrepreneurs to meet their customers’ needs without first seeking government approval.

In sum, almost everything you enjoy using is a product of capitalism; almost everything you can’t stand is a product of big government.

So, do you love capitalism? Of course you do. You practice it every day. It’s time to preach it.

Eric Jurado is an independent investment banker and economist.

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See also:

Pol Ideology 69, Math can show that small or minimal government is optimal, March 01, 2017 

Pol. Ideology 70, Socialism and the politics of envy, April 08, 2017 

Pol. Ideology 71, Georgism and the geolibertarians, June 22, 2017

BWorld 178, Top 8 energy news of 2017

* This is my article in BusinessWorld last January 2.

This should have been a “Top 10” list but due to space constraints, I limited it to only eight, divided into four news stories each for global and national.

GLOBAL

 1 “Non-news” to many media outlets but good and big news to me: NO major energy catastrophes in 2017. No major oil spill, no gas blowouts, no reactor meltdowns, no major infrastructure destroyed by natural disasters, and energy prices did not rebound to their 2014-2015 levels.

2 In June 2017, the British Petroleum (BP) Statistical Review of World Energy 2017 was released and among the highlights of that report are: (a) China and US remain the planet’s biggest energy consumers, (b) increases in oil, natural gas, nuclear and renewable energies (REs) but decline in coal use, (c) for big Asian economies, coal use remain very high especially in China, India, Japan, South Korea and Indonesia (see chart).

3 In September 2017, the US Energy Information Administration (EIA) released its “International Energy Outlook 2017” and among its projections are (a) In 2040, fossil fuels (oil, natural gas and coal) and nuclear will supply about 83% of global total energy consumption; 8% from hydro and 9% combined from wind, solar, geothermal, other REs, and (b) coal use is projected to be stable until 2040 and declines in China to be offset by increased use in India.

4 In November 2017, the “America First Energy Conference” was organized by the Heartland Institute in Houston Texas to analyze US President Trump’s pronouncement of US global “energy dominance”. “Energy dominance” is defined on two key goals: (a) meet all US domestic demand and (b) export to markets around the world at a level where they can “influence the market.” The important lessons from the papers presented are that (i) the US can have energy dominance in oil, natural gas and coal, but (ii) US cannot and should not aspire to have dominance in nuclear and REs. It was a very educational conference and I was the only Asian in the conference hall.

NATIONAL

5 Hike in excise tax for oil products and coal under TRAIN but zero excise tax for natural gas even if it is also a fossil fuel. Diesel tax will increase from zero in 2017 to P2.50/liter in 2018, P4.50 in 2019, and P6.00 in 2020. Gasoline tax will increase from P4.35/liter in 2017 to P7 in 2018, P9 in 2019, and P10 in 2020. Coal tax will increase from P10/ton in 2017 to P50 in 2018, P100 in 2019, P150 in 2020. There was successful maneuver by some senators, a known economist and some leftist organizations to spare natural gas from higher taxation, benefitting a big energy gas firm.

6 The feed-in-tariff (FiT) or guaranteed high price for 20 years for wind-solar and other renewables keeps rising, from only 4 centavos/kWh in 2015, became 12.40 centavos in 2016, 18 centavos in mid-2017 and petition for 22 centavos by late 2017 not granted. A pending 29 to 32 centavos/kWh by early 2018 is awaiting approval by the Energy Regulatory Commission (ERC).

7 Continued exemptions from VAT of the energy output of intermittent wind-solar and other renewables but stable fossil fuel sources were still slapped with 12% VAT under TRAIN. Government continues its multiple treatment of energy pricing: High favoritism for wind-solar, medium-favoritism for natgas, and zero favor for oil and coal.

8 Supreme Court issuance of TRO in the implementation of Retail Competition and Open Access (RCOA) provision of the Electric Power Industry Reform Act (EPIRA) of 2001. In particular, the SC TRO covered five ERC Resolutions from June 2015 to November 2016, affecting the voluntary participation of contestable customers (CCs) for 750-999 kW and many Retail Electricity Suppliers (RES) with expiring licenses cannot get new ones yet, reducing potential competition. Data from the Philippine Electricity Market Corporation (PEMC) show that as of Nov. 26, 2017, there were 28 RES, 12 local RES, 862 CCs for 1 MW and higher, and only 78 CCs for 750-999 KW. There should be thousands of CCs in the lower threshold, there should be several dozens of RES nationwide to spur tight competition in electricity supply and distribution.

Overall, EPIRA of 2001 was a good law that introduced competition, broke government monopoly in power generation, broke private geographical monopolies in power distribution. The RE law of 2008, SC TRO 2017 and TRAIN 2017 are partly reversing the gains of EPIRA.

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See also:

BWorld 170, The Habito carbon tax distortion, December 28, 2017 

BWorld 173, Energy favoritism under TRAIN, December 30, 2017 

BWorld 175, Trends in global and Philippine trade, January 05, 2018 

BWorld 176, Road trips and PPP projects, January 06, 2018 
BWorld 177, On MMDA car towing and impounding, January 07, 2018

Energy 105, When both world oil prices and domestic oil taxes are rising

Dutertenomics' tax-tax-tax implementation is off to bad timing. Raising oil taxes on already high and rising global oil prices -- $64 a barrel for WTI, nearly $70 for Brent -- is insensitive. But then again, even if the tax hike is P20 or P50/liter, the "money will go to the poor" naman daw is always a convenient, hollow, cavalier and opportunistic alibi.

"Diesel tax will increase from zero in 2017 to P2.50/liter in 2018, P4.50 in 2019, and P6.00 in 2020. Gasoline tax will increase from P4.35/liter in 2017 to P7 in 2018, P9 in 2019, and P10 in 2020. Coal tax will increase from P10/ton in 2017 to P50 in 2018, P100 in 2019, P150 in 2020." http://bworldonline.com/top-eight-energy-news-2017/

"the DoF is often quoted as saying that “two million richest Filipino families consume 50% of oil products in the country.” This is one of the reasons why they pushed for high tax hike for oil products.

There are about 25 million Filipino families now. The DoF refers to the richest 2 million families, so the other 23 million middle class and poorer class Filipinos consume the other 50% of oil products.... I think the DoF displayed dishonesty and deception in making that claim to further justify the high oil tax hikes." http://bworldonline.com/energy-favoritism-train/

Among the lousy supporters of "more taxes for oil please" and among the chief rah-rah cheerleaders of tax-tax-tax is the Action for Economic Reforms (AER). See for instance,

"Excise taxes on fuel products will be justifiably raised after 20 years of non-adjustment to inflation except for fuel that is primarily used for air travel, which can only be maximized by those who have more disposable income." http://bworldonline.com/public-interest-vested-interest/

Yes, poor farmers moving away from cow de carabao and using oil-guzzling tractors, moving away from manual harvest to oil-guzzling harvester-thresher combine machines should be penalized with higher oil taxes. Fisherfolks moving away from banka de sagwan and using motorboats to increase their fish harvest should be penalized with higher oil taxes. Great NGOs.

In one Senate comm. Hearing by Sen. Sonny Angara where I was also invited, the domestic shipping lines, airlines, bus lines, truckers, etc were saying the same thing -- if govt will push the high oil taxes, they will follow and obey the law but they will pass any price hike to the public. So even vegetables, fish, chicken, rice, etc consumed by the poor will experience price hikes. And DOF, AER, etc think this is fine and pro-poor daw.

LPG, from zero to P3/kilo. So the 11 kg LPG tank will experience P33/tank increase. The original DOF proposal was increase to P10/kilo or P110/tank. Even carinderias will also increase their food prices, or the less visible option -- serve smaller viand for the same price.

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See also:

Energy 102, Germany's CDU/CSU and FDP rejecting the Greens' anti-coal agenda, October 31, 2017 

Energy 103, The proposed Jamaica coalition in Germany -- before the collapse, November 25, 2017 

Energy 104, Ric Barcelona on energy investment and subsidies, December 12, 2017

BWorld 177, On MMDA car towing and impounding

* This is my column in BusinessWorld last December 29, 2017.

“Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism but peace, easy taxes and a tolerable administration of justice: all the rest bring about by the natural course of things.”

— Adam Smith, lecture in 1755; author of The Wealth of Nations (1776)

This is the continuation of my article, “The MMDA towed my car even with my kids inside” published here on Dec. 21.

Through a mutual friend, I was able to talk to Mr. Mike Salalima, Deputy Chief of Staff of MMDA Chairman Danny Lim, last Dec. 20, a day after my car was towed by MMDA-accredited Fighter Towing Co. (not Tiger as I’ve previously written and for that I apologize.)

Mike said that my case was not a case of an “unattended vehicle” and hence, the penalty should have been a simple violation ticket of anti-illegal parking. Thus, the towing from Makati City to Tumana, Marikina City (which took three hours) and impounding of my car was wrong. So he arranged for the release of my car that day and canceled my towing fee, which I estimated would cost about P6,000 (P1,500 first 4 kilometers for light vehicles plus P200/km thereafter).

Mike asked me if I wanted Fighter Co. to tow my car back to Makati City but I refused since they caused my troubles in the first place and that they might damage my car on the way back.

After the meeting with Mike, I then took a long commute from the MMDA main office in Edsa Guadalupe to Marikina City. I saw the impounding area the day before and when I saw it again that day to get my car, I was aghast at hundreds of impounded vehicles — cars, vans, taxi, jeepneys, delivery trucks, tricycles, motorcycles. Those vehicles should be transporting people and goods, not gathering rust. Private properties, many of which were the result of years of savings and sacrifices such as working abroad for several years, were impounded for months and even years on end, wasting away.

Why would the state through an agency like the MMDA have the power to confiscate private property? And in large numbers at that? Is it not the protection and respect of private property an important function and purpose why governments were created in the first place?

As the quote from Adam Smith suggested, the state can rise from barbarism to opulence and wealth via peace not violence, few taxes, and permits, not more, confiscatory justice administration, however tolerable.

For sure, not all of those hundreds of confiscated vehicles were impounded during the time of Chairman Danny Lim. They have accumulated since many years ago as evidenced by the amount of rust, degree of physical deterioration and height of grasses and vines that have engulfed many vehicles. A number of those vehicles though looked like some of their parts have been removed or stolen.

The purpose of towing and impounding is to help reduce traffic congestion in Metro Manila by removing temporary or permanent obstructions in selected roads. But the act of towing a briefly parked vehicle with the driver just nearby and bring it to a place many kilometers away is already creating traffic in more areas of the metropolis.

I was inside my car while it was being towed and I saw the towing truck made several traffic violations, such as (a) counter-flowing traffic in a section of Makati Avenue towards Buendia and (b) beating the red light from the Green Meadows area turning left towards C5. It was a regular case of government-accredited vehicles to correct traffic violations being traffic violators themselves. Those trucks were rushing to tow and impound as many cars as possible in a day because of the big money involved collecting the towing fee.

Drastic changes need to be instituted by the current MMDA leadership on the system of towing and impounding of vehicles. Two of possible moves would be: (1) Stop the towing and impounding scheme unless vehicles were used in committing crimes like murder and robbery. Violations of anti-illegal parking should be slapped with fines, higher fines if they want, and/or clamping of unattended vehicles. Or (2) allow the process of towing to be subject to challenge by vehicle owners and when the MMDA personnel and private towing companies are found to be wrong in their judgment, they must pay the vehicle owner/s two to three times the estimated towing fee plus any damages to the vehicles.

Governments should go back to their classical raison d’etre or reason for existence — protect the people’s right to life, right to private property, and right to liberty. It is not government function to create many restrictions and prohibitions in society like so many “No Parking” areas, so many requirements and costly permits before people can do business like operating a van to transport people and goods. Having many restrictions and prohibitions means many violations, fines and penalties; many opportunities for harassment and extortion of often helpless and less-informed citizens.

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See also:

BWorld 174, MMDA towed my car even with my kids inside, December 31, 2017 

BWorld 175, Trends in global and Philippine trade, January 05, 2018 

BWorld 176, Road trips and PPP projects, January 06, 2017