* This is my column today in BusinessWorld.
The Philippines registered a 4.4% inflation rate for
January 2019. The good news is that it is a lot lower than the past four
months’ average of 6.1%, but the bad news is that compared to our neighbors
with January 2019 data, it is the highest. In the ASEAN-6, three have near-zero
inflation while Indonesia and Vietnam have below 3% (see Table 1).
Since Dutertenomics has penalized domestic consumers with
ever-rising inflation (1.3% in 2016, 2.9% in 2017, 5.2% in 2018), they should
give us a respite, have an inflation target of 1-2% in 2019 via significant tax
cuts somewhere, or suspension of any tax hikes.
The consumer price index (CPI) which is the basis for
computing the inflation rate is composed of 11 items or sectors. Five items
with biggest increase in 2018 are enumerated below, plus: Furnishings and
household equipment and house maintenance, Clothing and footwear,
Communications, Recreation and culture, Education, Restaurant and miscellaneous
goods and services.
TRAIN law tax hikes in tobacco, oil, LPG have pushed high
prices for those products including transportation. Notice that when world oil
prices were very low in 2015-2016, the transport sector experienced deflation
of -5.4% and -1.4% respectively, followed by electricity, gas and other fuels
(see Table 2).
Aside from oil tax hikes, there are other factors that
are largely politics and government-created, that distort prices upwards. I
limit the discussion to those pending congressional action.
1. House Bill (HB) 8885 or the “Student Fare Discount
Act” has been passed on 3rd reading last Monday, Feb. 4, 2019. It provides that
all Filipino students from elementary to tertiary, technical, and vocational be
entitled to a 20% mandatory discount for buses, jeepneys, trains, tricycles,
airplanes, and boats.
To compensate for big reduction in revenues, public
transportation operators will enjoy reduction or exemption from regulatory fees
and charges, and can also claim the granted discount as tax deduction.
2. Eight HBs for Committee Report, regulating the
transport network companies/transport network vehicle services (TNCs/TNVS),
with fees and penalties for violations. A TWG meeting was held at the House on
Jan. 22.
3. HB 7436, abolishing the Road Board and management of
the Motor Vehicle Users Charge (MVUC), amending RA 8784, was scheduled for a
bicameral meeting last Jan. 21. The road users’ tax will go to the National
Treasury to be used mainly for road maintenance.
4. Five HBs for Committee Report, allowing and regulating
the use of motorcycles as PUVs, amending RA 4136 (Land Transportation and
Traffic Code). Meeting held last Jan. 23.
Item #1 is wrong, it is government price control and will
lead to higher fares for non-students to compensate for the big discounts. DoF
will likely oppose 100% the “discount as tax deduction” scheme. DoF just wants
tax-tax-tax and dislikes tax deductions.
Item #2 is important but the provisions will likely
result in more restrictions like franchise cap, instead of more liberalization
of the modern and technology-based (not bureaucracy-based) ride-sharing scheme.
Congress and LTFRB should avoid more restrictions, leading to lower supply of
cars and drivers, which will lead to longer waiting periods, passenger
inconvenience, and higher fares. Liberalization like higher or no franchise cap
will lead to a better outcome: more cars and drivers, shorter waiting period,
passenger convenience and lower, competitive fares.
Item #3 is good because it will cut another layer of
bureaucracy but road maintenance can be privatized. Noted transport and
infrastructure consultant Rene Santiago observed that “Myanmar is ahead of us
in privatizing road maintenance. Think of five-year concession with performance
metrics, instead of annual bidding (and annual opportunities for extortion).”
Item #4 is good, it will expand the choices for commuters
but LTFRB accreditation should be via a corporate setup like the TNCs, not
individual units and operators like jeepneys. When motorcycle drivers abuse
their passengers, their company should be held accountable, which will put
drastic disciplinary measures against erring partner-drivers.
The Philippine transport sector should be unburdened with
more oil taxation, more bureaucratic regulations and more price controls or
mandatory discounts. The purported goal of lower fares, lower inflation for the
public, is almost always defeated as the actual results are higher fares,
higher inflation for the public.
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See also:
BWorld 289, Growth by elections and FDIs by PSA liberalization, January 31, 2019
BWorld 290, Universal charges and Solar sa Bayan franchise bill, February 4, 2019
BWorld 291, Mining, tobacco tax hikes, MACR and PSA liberalization, February 07, 2019
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