Saturday, August 31, 2019

BWorld 363, IPR protection in the ASEAN

* This is my article in BusinessWorld on August 27, 2019.

The fastest-growing sub-sector in the Philippine economy over the past 5-1/2 years — 2014 to the first half of 2019 — is intellectual property products, under Capital Formation (or private investments). It was growing at 28% per year, with capital formation growing at 14% and GDP at 6.3%.

And this points to the need to further protect intellectual property rights (IPR) because they are easier to copy and counterfeit, unlike physical property.

The Philippines is not ranked high globally when it comes to innovation and IPR-related businesses. See this result from the World Intellectual Property Organization’s (WIPO) annual report, the Global Innovation Index (GII).

In WIPO’s GII, “Knowledge creation” includes patents and industrial design by origin, and “Intangible assets” include trademarks and industrial design by origins.

In the overall innovation index, the Philippines ranked 54th out of 126 countries and jurisdictions, and lower in knowledge creation and intangible assets (See table 1).

Then in the US Chamber of Commerce’s Global Intellectual Property Center (GIPC) International IP Index 2019 report, the Philippines ranked 37th out of 50 countries covered.

Low or poor IPR protection means there are more fakes, counterfeits, smuggled and illicit products passing around and sold.

True enough, in the Economist Intelligence Unit’s (EIU) Global Illicit Trade Environment Index (GITEI) 2018 Report, the Philippines ranked 64th out of 84 countries covered. GITEI measures how countries and economies enable (or inhibit) illicit trade through their policies to fight smuggling and illicit trade and the index is composed of four main categories or indicators, each of which have sub-indicators — government policy, supply and demand, transparency and trade, and the customs environment (See Table 2).

So the recent fast growth of IP products means there is some catching up going around in the Philippines, which is good.

In the new 18th Congress, House Bill 1597 by Congressmen Michael L. Romero and Enrico A. Pineda was filed, Amending RA 8293 (Intellectual Property Code of the Philippines), increasing penalties and sanctions, rationalizing its power and functions.

The authors say that their bill seeks to “streamline all administrative procedures of registering patents, trademarks and copyright, to liberalize the registration on the transfer of technology, and to enhance the enforcement of IPRs in the Philippines.” Good move then.

On Sept. 24, Geneva Network (UK) and Minimal Government Thinkers (MGT, Manila) will jointly launch a new report, “The Importance of IPR in the ASEAN.” The report will be jointly signed by five independent (non-government) free market think tanks from Indonesia, Malaysia, the Philippines, Thailand, and Vietnam, and will be launched in their respective capital cities. Geneva Network is coordinating the study.

And on Oct. 16, the Property Rights Alliance (Washington, DC) will launch the International Property Rights Index (IPRI) 2019 Report in Manila. MGT and the Foundation for Economic Freedom will be the local sponsors of this event. The IPRI annual report measures the degree of respect and protection of both physical and intellectual property of many countries and economies. The Philippines ranked 70th out of 125 countries in IPRI 2018 Report.

At both events, Department of Trade and Industry Secretary Ramon Lopez will be the keynote speaker. Mr. Lopez is a standout among Cabinet Secretaries of the Duterte administration because of his consistent advocacy for a competitive, innovative, non-bureaucratic economy and ease of doing business. Price control, IPR tweaking and weakening are far out from his work and department agenda.

Keeping the sanctity of private property, physical or intellectual property, is an important ingredient to attract and keep more private investments and job creators, both local and foreign.

Climate Tricks 85, Sachs and UN anger at Trump

Jeffrey Sachs, among the main inventors of the UN's Social Developments Goals (SDGs) that replaced the Millenial Devt. Goals, is angry at Trump because he has caused less rain and more rain, less flood and more flood, less snow and more snow, less storms and more storms -- in just 2 1/2 years. And more importantly, because Trump does not want to milk further US taxpayers to give xx billions to the UN and its gangs of $100 billion/year climate money, yearly. Sachs and many UN officials are entitled bureaucrats who want huge climate money, endlessly.

Jeffrey Sachs Goes Full Retard on President Trump and Climate Change
David Middleton / August 30, 2019

“Hansen’s estimated Altithermal (Holocene Climatic Optimum) and Eemian are about 0.5 °C too low. Here’s what the “the temperature range that supported the entire 10,000 years of civilization” looks.

If the climate models are accurate (they aren’t), the warming that supposedly moved Earth’s temperature above the range “that supported the entire 10,000 years of civilization”, has barely lifted it above “The Ice Age Cometh”…

Meanwhile, during the G7 climate meeting last Friday...

One empty chair at G-7 climate meeting: Trump’s

Trump, on climate, says he won't jeopardize U.S. wealth on 'dreams'
Jeff Mason  AUGUST 27, 2019 / 12:07 AM /

“I’m not going to lose that wealth, I’m not going to lose it on dreams, on windmills, which frankly aren’t working too well,” he added. 

How the Media Help to Destroy Rational Climate Debate
August 25th, 2019 by Roy W. Spencer, Ph. D.
The Amazon forest is wildly burning...
Greenland is rapidly melting...
July 2019 was the hottest month on record...
Climate models' predictions are facts, not guesses...
Greta Thunberg’s sailboat trip has zero carbon emission...

True? No.

Forbes decided to push the limits of responsible journalism with a story title, Greenland’s Massive Ice Melt Wasn’t Supposed to Happen Until 2070. But the actual data show that after this very brief period (a few days) of strong melt, conditions then returned to normal.

And see another UN hypocrisy,

UN flies in 5,000 people to Salt Lake to complain about fossil fuels
charles the moderator / August 31, 2019

See also:

Friday, August 30, 2019

BWorld 362, More expensive electricity via climate tax

* This is my column in BusinessWorld on August 21, 2019.

“The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary”

— H. L. Mencken, December 1921

The main purpose of climate alarmism is to expedite government environmental and energy taxation to further expand government and the United Nations (UN). Scare the public endlessly, like declaring a “climate crisis/emergency” whatever the weather and climate: less rain and more rain, less flood and more flood, less storms and more storms, less cold and more cold.

There is a legislative proposal to impose a “climate tax on electricity” (CTE) for residential customers under HB 1245 of Congressman Luis Raymund Villafuerte, Jr. The proposed CTE will be P1 per kilogram of carbon dioxide (CO2) emission. It claims that since CO2 emission comprises 0.553 kg per kWh of electricity, then CTE = 0.553 x electricity consumption in a month.

In our house for instance, our average electricity use from May to July was around 280 kWh/month. If the Villafuerte bill becomes a law, then we must pay P155/month extra for this CTE, on top of feed in tariff allowance (FIT-All) of around P65-P70/month that goes to the favored and privileged mostly solar-wind companies.

This year, we experienced frequent “yellow alert” warnings (thin reserves) from the National Grid Corporation of the Philippines (NGCP) for five months, March to July. There were few days where “red alert” was raised, meaning short rotating black-outs were made to forcibly reduce power demand.

The good news is that new big power plants will begin operation in the Luzon grid starting August-September 2019 until 2021.

I made a short-term projection of power supply-demand, limited to the Luzon grid due to space constraints. Peak demand from 2015-2018 was rising by 5.7% a year on average, so for 2019-2023, I projected a 5.5% annual increase due to GDP growth deceleration recently. From there, I computed the projected reserves (see table).

Now, since most of those new big power plants run on fossil fuels especially coal, then Rep. Villafuerte and allies will likely push their lousy and idiotic proposal to further raise the cost of already costly electricity in the country. The Philippines has the third most expensive electricity in Asia next to Japan and Singapore.

Note also that the high reserves percentage can be deceiving because many existing power plants are old, especially coal and hydro plants, they tend to experience unscheduled and forced outages, and extended maintenance shutdown. Thus, actual reserves can be lower than these projections.

The House Committee on Ways and Means and Congress as a whole should junk this and related bills that intend to make electricity more expensive.

Things can worsen though if the triumvirate of the Department of Finance, Department of Budget and Management, and National Economic and Development Authority support this bill in the name of helping “save the planet.” Recall the hike in the excise tax on oil under the TRAIN law by P6/liter over 2018-2020 was pushed by the triumvirate to finance various welfare programs and partly to “save the planet” by discouraging more oil use. Oil consumption of course did not decrease because it is a necessary and useful commodity that is used in many sectors and machines from tractors and fishing boats to cars, busses and airplanes.

The triumvirate should learn their lesson that more expensive energy means higher inflation, which helped pull down overall GDP growth. They plus the Department of Energy should call for the junking of this and related bills in Congress.

Cheaper electricity, lower inflation, sustained high growth, more investments and job creation, no additional and distortionary energy taxes, these should be the primary goals of the administration in its last three years.

See also:

Agenda, One News, Part 3

Last Monday, August 26, 8-9am, I was a guest again of Cito Beltran in his program "Agenda" at OneNewsPH, Cignal TV. Fellow guest was Marichu Villanueva, Associate Editor of Philippine Star. It was my 4th guesting at Cito's program. Topics: Sogie bill, Sanchez the rapist, dengue, Duque, rice tarrification, GDP growth, budget deficit, taxes, POGO.

On Sogie bill, I am not following that bill enough and when Cito asked my opinion about it, I said it is about granting certain "gender rights" to people who declare themselves as such,  thus I don't think people should go for legislation. When there is legislation, there is nationwide mandate, coercion, that people should follow. If it is indeed a bright idea, it can prosper and get implementation even without political coercion.

POGO (PH Overseas Gaming Operations) in the PH catering to CN gamblers because the CN Communist Party has declared gambling as illegal, sort of counter-corruption to CN as it is the main source of shabu and other illegal substances in the country.

Meanwhile, I will attend this cool conference on September 10.


See also: 
Agenda, One News, Part 1, June 13, 2019 
Agenda, One News, Part 2, July 04, 2019

Sunday, August 25, 2019

BWorld 361, PCC, LTFRB, MMDA and transportation woes

* My column in BusinessWorld on August 20, 2019.

There is more proof that Metro Manila traffic is among the worst in the world. Numbeo has quantified a “traffic index” for major cities around the world, shown in the table below. For brevity, I removed two columns — Time expended index and CO2 emission index. The definitions are as follows:

• Traffic Index — is a composite index of time consumed in traffic due to one’s job commute, estimation of time consumption dissatisfaction, CO2 consumption estimation in traffic, and overall inefficiencies in the traffic system.

• Time Index — is an average one way time needed to transport, in minutes.

• Inefficiency Index — is an estimation of inefficiencies in the traffic. High inefficiencies are usually caused by the fact that people drive a car instead of using a public transport or long commute times.

As of mid-2019, Metro Manila is 5th worldwide, the highest ranking among ASEAN cities; 8th is Jakarta, 26th is Bangkok (see table).

The good news is that there are some big road-rail projects that are nearing completion and will help reduce Metro Manila traffic. Plus there are innovations like the P2P buses which are modern, convenient and safe, fast and not expensive. People take taxi or air-con vans, or transport network vehicle service (TNVS) from their residence or village to P2P terminals, say Trinoma QC to Makati, then walk or taxi or TNVS again to their final destinations.

TNVS is preferred by many passengers because it is technology-based, there is transparency, people know the name of the driver, the car model or plate number, and the fare before the car arrives.

Enter government agencies and they make simple things complicated by creating new regulations and prohibitions.

First, the Land Transportation Franchising and Regulatory Board (LTFRB). It imposed a vehicled cap — a maximum number of authorized TNVS — even if demand is much higher than supply. It also imposed fare control, a fare cap, and a surge cap even if passengers are willing to pay higher prices just to get to their destinations faster and safely during rush hour or during street flooding. It disenfranchised hatchback cars as TNVS, but later gave way to pressure by these middle class Filipinos who just want an honest livelihood.

Second, the Philippine Competition Commission (PCC). First it penalized Uber and Grab because they quickly merged in April 2018 without getting its permission first, even if it was a global decision by Uber to exit the ASEAN region quickly as it was bleeding financially. Then it restricted the surviving entity, Grab with an Uber minority, when it issued its “Commitment Decision” on Aug. 10, 2018. The fines were P2 million per breach of commitment.

These commitments were: a Service Quality Commitment, a Fare Transparency Commitment, a Pricing Commitment, a Driver/Operator Non-Exclusivity Commitment, an Incentives Monitoring Commitment, and an Improvement Plan Commitment. These were binding for one year, to expire Aug. 10, 2019.

Then last week, on Aug. 13, the PCC extended the Commitment Period for 71 days, from Aug. 11 to Oct. 20, because it found “competition has not improved in the ride-hailing market” and “Grab has the ability and incentive to raise its prices and reduce the quality of its services.”

The law of unintended consequences always kicks in. When government over-regulates a sector supposedly to expand competition, potential big entrants are discouraged from coming in because the same restrictions will apply to them when they become bigger and successful someday.

And if dominant player raises its prices while service quality declines, then people can simply stop patronizing it. There are many alternatives — regular taxis, smaller TNVS players, drive their own cars or motorcycles, the motorcycle ride-hailing app Angkas, aircon vans, etc. There are no guns pointed at people’s heads forcing them to ride only the dominant TNVS, whether they like it or not.

The PCC is wrong and misguided in creating and expanding the regulations and restrictions.

Third is the Metro Manila Development Authority (MMDA). It will soon prohibit provincial buses from entering EDSA, they will have to stop and unload passengers in Valenzuela or Bulacan in the North, and in Sta. Rosa, Laguna or PITX in ParaƱaque.

The MMDA does not realize that some or many passengers of those provincial buses are car/motorcycle owners. They leave their vehicles at home or at their offices and take the provincial buses because it is convenient, they get off in Cubao or Pasay then take a taxi or TNVS to their final destinations.

When these provincial buses stop only in Bulacan or Laguna, then it will be more inconvenient so many of these passengers will drive their cars or motorcycles to Metro Manila, and this will further worsen traffic congestion. Again, the law of unintended consequences kicks in.

Government should step back from creating more regulations and prohibitions. They distort the individual and corporate incentives system and we get the unintended consequence — more traffic congestion.

See also:

Free trade 69, US-UK FTA

Among the advantages of Brexit. UK can have FTA with many countries outside the EU like the US and its former colonies in Asia like MY, SG, HK, ID. Trump and Bojo now in G7 meeting in France.

But this report title, "secret talks", why call it a secret when everyone knows that they are meeting in France?

Boris Johnson and Donald Trump set to agree September 'free trade deal' after secret talks
PUBLISHED: 00:01, Sun, Aug 25, 2019 | UPDATED: 08:16, Sun, Aug 25, 2019

“With Boris Johnson due to hold talks today with Donald Trump at the G7 summit in Biarritz, allies of the US President have made it clear that the two countries are on the verge of a major deal. The prospect of a UK-US deal also appears to be putting huge pressure on the EU to compromise and yesterday there were signs that Brussels’ hard stance against renegotiating a deal was wavering. European Council President Donald Tusk made a volte face on his uncompromising position early in the week where he refused to discuss removing the Northern Ireland backstop….

Speaking to journalists in Biarritz, Mr Johnson said: “I’ve made it absolutely clear I don’t want a no-deal Brexit. But I say to our friends in the EU, that if they don’t want a no-deal Brexit we’ve got to get rid of the backstop from the treaty.

The UK-US trade agreement is expected to be signed when the Prime Minister and President Trump meet at the UN General Assembly in New York in September.”

Johnson says US will need to ‘compromise’ in a trade deal with UK
Sebastian Payne in Biarritz  August 24, 2019

“There are massive opportunities for UK companies to open up, to prise open the American market. We intend to seize those opportunities but they are going to require our American friends to compromise and to open up their approach because currently there are too many restrictions,” he said on Saturday.

Mr Johnson set out several areas in which he wanted to see trade liberalised between the UK and the US — including railway carriages, wallpaper, pillows, beef, lamb, cauliflowers, British peppers, bathroom fittings and pies."

The Ideal U.S.-U.K. Free Trade Agreement: A Free Trader’s Perspective
Edited by Daniel Ikenson (Cato Institute), Simon Lester (Cato Institute), and Daniel Hannan (Initiative for Free Trade), 2018. (239 pages)

“Free trade is a condition characterized by the absence of trade barriers. Establishing the most important conditions for free trade—the elimination of domestic barriers—requires no formal agreements between or among governments. It is misguided to believe that the economic freedom of people living in one sovereign nation should depend on the consent of a foreign government. But the benefits that accrue to producers, workers, consumers, and taxpayers when their own government eliminates or reduces its own trade barriers—regardless of whether a foreign government agrees to do the same for its citizens—are ample and well-documented.

The stories behind the compelling 20th-century economic turnarounds in places such as Hong Kong and Singapore, Australia and New Zealand, Chile and Mexico, and China and India have in common the commitments of those governments to deep and broad unilateral reforms. Those examples and others notwithstanding, trade liberalization throughout history—and especially over the past 85 years—has followed a model best described as “mercantilist reciprocity.”

Historically, free trade agreements have not been about “free trade” per se. These deals are
better characterized as managed trade agreements because they tend to simultaneously liberalize, divert, and stymie trade and investment flows. Whereas some parts of these agreements
clearly reduce barriers, other provisions work to insulate incumbents and the status quo from
dynamic, competitive forces….”

Donald Trump and Boris Johnson 'already working on' UK-US free trade deal
Monday 29 July 2019 10:54, UK

“The US president said the pair had spoken since Mr Johnson became prime minister and that they plan to spend time together to formulate an agreement.

Downing Street confirmed that talks between the two leaders had taken place on Friday evening and that they would meet at a G7 summit in Biarritz, France, next month.

Mr Trump told reporters: "We're working already on a trade agreement. And I think it'll be a very substantial trade agreement, you know we can do with the UK, we can do three to four times we were actually impeded by their relationship with the European Union. We were very much impeded on trade. And I think we can do three to four or five times what we're doing."

See also:

Monday, August 19, 2019

BWorld 360, Rule of law and property rights, Hong Kong vs China

* My column in BusinessWorld on August 15, 2019.

“… the rules must apply to those who lay them down and those who apply — that is, to the government as well as the governed — and that nobody has the power to grant exceptions.”

— Friedrich Hayek, Chapter 10, The Constitution of Liberty (1960)

This is the essence of the “rule of law” — that the law applies equally to unequal people, no one is exempted and no one can grant an exemption. Once exemptions are made, this automatically leads to the rule of men. The powerful and the mob are exempted from penalties for violating certain laws.

The nearly three months of protests and discontent in Hong Kong is centered over a subject related to the rule of law — the proposed Extradition bill, where suspected criminals and dissidents in Hong Kong can be extradited to China. And China, being a one-party communist government, is known for having little respect for the rule of law, little respect for the rights of suspects. It sends shivers down the spines of the people of Hong Kong to contemplate what would happen if some or many of them are extradited to China when Hong Kong has its own courts already.

There is proof behind the statement that China has little respect for the rule of law. In the World Justice Project’s annual “Rule of Law Index” (RoLI), countries and jurisdictions are scored and ranked based on their performance on eight factors and 44 sub-factors. The RoLI 2019 Report involved more than 120,000 household surveys and 3,800 expert surveys in 126 countries and jurisdictions.

China ranks low overall on RoLI, 82nd out of 126 countries; in contrast, Hong Kong ranked 16th. China scored particularly low on Factor 4: Fundamental Rights, like Freedom of opinion and expression, Freedom of belief and religion, Freedom of assembly and association, are effectively guaranteed. It is also low on Factor 8: Criminal Justice, like Criminal system is impartial, is free of improper government influence.

In property rights protection, both physical and intellectual property, again Hong Kong ranked high. We consider the annual study International Property Rights Index (IPRI) by the Property Rights Alliance (PRA), based in Washington, DC. The IPRI 2018 Report showed that Hong Kong ranked 17th while China ranked 52nd out of 126 countries and jurisdictions. In intellectual property rights (IPR) protection, the same pattern is observed (see Table).

The United Kingdom and its former colonies in Asia — Hong Kong, Singapore, and Malaysia — rank high in both RoLI and IPRI. The great minds of British classical liberal thinking like John Locke, Adam Smith, and John Stuart Mill, successfully influenced the legal and economic philosophy and practice of these countries.

Communist China in contrast, is still reeling from the influence and heavy-handed dictatorship of its founder Mao Zedong. Its tolerance for citizens’ freedom of expression is very low. Extended in foreign relations, its tolerance for international rule of law like respect of international waters at the South China Sea/west Philippine Sea is also very low.

I have great respect and admiration for the brave people of Hong Kong, especially its youth. You are fighting the lackey of the biggest dictatorial government for a noble cause.

On a related note, the UK-based Geneva Network and Minimal Government Thinkers (MGT) will launch a report on the “Importance of IPR for ASEAN” in Manila on Sept. 24. This joint report will be co-signed by the Institute for Democracy and Economic Affairs in Kuala Lumpur, Paramadina Public Policy Institute in Jakarta, Siam Intelligence Unit in Bangkok, MGT in Manila, and the Viet Nam Economic Policy Research Centre in Hanoi. The Geneva Network is coordinating the study.

The keynote speaker for the event will be Trade and Industry Secretary Ramon Lopez. Mr. Lopez is very explicit in his support for IPR protection being among the cornerstones of technological innovation and economic competitiveness for any country.

IPRI 2019 will also be launched in Manila later this year. MGT and the Foundation for Economic Freedom will be the local partners of PRA in launching this big event.

See also:

Sunday, August 18, 2019

On India's N-East provinces, Kashmir

I've been to India (Mumbai only), Nepal and Bhutan and I just realized why India won't just grant independence to those provinces and regions on the N-East? These areas are isolated from India mainland and much closer to Nepal, Bhutan, Bangladesh, China and Myanmar than to the capital New Delhi.

Also Kashmir, I think India and Pakistan should just leave this area to become an independent nation. Both governments cannot even develop their respective countries, why spend huge money on military and bureaucracies to claim ownership and control of this area?

Two friends do not support giving independence to Kashmir based on two scenarios.

1. A new Kashmir state would be equivalent to another Afghanistan in South Asia, another place for international and regional powers to misuse weaker countries. A political settlement between the two countries is a long lasting solution.

2. A new Kashmir state will be gobbled up by China.

On #1, it can be another Afghanistan, or another Latvia or Georgia or Ukraine or Kazakhstan of former USSR, or another Singapore. SG won't be as prosperous as it is now if it's just one of many states of Malaysia, like Penang or Sabah.

On #2, CN annexing/gobbling Kashmir is more of speculation. If CN does that, automatically it will have 3 enemies -- India, Pakistan and new Kashmir nation. The first two gave Kashmir independence only to be colonized by CN? No way. CN does not want too many enemies, it has lots already in SCS/WPS.

I advocate disintegration of big countries to many, smaller countries. Thus, I think Russia, Canada, USA, Brazil, China, India, Indonesia, Nigeria, Philippines, Pakistan, etc should disintegrate.

BWorld 359, Why is Philippines’ GDP growth decelerating?

* My column in BusinessWorld on August 13, 2019.

The Philippines’ GDP growth over the past 18 years has a beautiful and not-so beautiful story. Accelerating from 2001 to 2015, then decelerating lately: 6.9% in 2016, 6.7% in 2017, 6.2% in 2018, 5.6% in 2019’s 1st quarter (Q1), then 5.5% in Q2.


For brevity’s sake, we limit the possible factors to only two — external and internal factors. For external, we compare the Philippines’ growth with Asia’s big economies plus the US. For internal factors, we check the growth rates of GDP’s three components on the demand side: household consumption (C), government consumption (G), and private investments (I).

We can summarize the Table’s numbers for 12 economies as follows:

2001-2015: The global economy was generally good, except for the global financial turmoil in 2008-2009 that started in the US. Surprisingly, only the US and Japan performed badly while the rest managed to grow faster than the period from 2001-2005. The Philippines experienced consistent higher average growth over those 15 years.
2016-2018: The global and external economy seemed to be good. Seven countries have generally rising growth trends (the USA, Japan, Taiwan, Thailand, Singapore, Malaysia, Vietnam), three have flat trends (China, South Korea, Indonesia), and two have been declining (India and Philippines). But India’s “low” is still above 7%.

2019 H1: The external environment is bad. All have lower 2019 growth than 2016-18 levels except three countries — Japan, Indonesia, and Malaysia.

So if external factors have not been bad over the past three years yet the Philippines experienced consistent growth deceleration, the internal factors would explain it. The Department of Finance and National Economic and Development Authority pointed to high world oil prices in 2018, then the delayed approval of the 2019 budget as the main reasons for growth deceleration.

But this is not supported by the numbers. In 2017, growth of G was only 6.2% yet GDP grew at 6.7%, while in 2018, growth of G was double — 13.1% — and yet GDP grew only at 6.2%. In 2019 first half (H1), G was growing at 7.4% and GDP grew at 5.6%. G is not a big enough factor to pull overall GDP up or down compared to C and I.

What pulled down GDP growth in 2018 was low growth — only 5.6% — in C which is huge — it makes up about 65% of GDP.

In 2019, the main factor pulling growth down came from investments. Growth of I has been declining, from 25% in 2016, down to 13% in 2018, 8% in 2019 Q1, and a contraction at -8.5% in Q2. I is about 23% of GDP.

What caused the big decline of C in 2018?

The most proximate explanation is high inflation, 5.2% in 2018 from only 2.9% in 2017. This was largely due to higher oil taxes under the TRAIN (Tax Reform for Acceleration and Inclusion) law. High inflation adversely affected consumer confidence and hence, the decline in C.

What caused the big decline of I in 2018 and 2019?

The most proximate candidate is business uncertainty — from the proposed Endo bill (thankfully vetoed by the President in late July) and the TRABAHO (Tax Reform for Attracting Better and Higher Quality Opportunities) bill which was not passed and has been refiled in the present Congress. Many existing companies did not expand and some planned investments did not materialize. Then the reversal from integrated PPP (pubic-private partnership) to hybrid PPP kicked in. Some big infrastructure projects that could have been done by big local companies were instead given to China, Japan, other foreign contractors.

The new Congress should take note of these trends — the decline in C and I. Hence, they should not enact bills that will further erode consumer and investment confidence like higher taxes, higher regulatory fees, higher labor rigidities including higher mandatory minimum wages.

Congress should instead enact tax cut somewhere, reduced regulatory fees, and let companies give realistic labor pay. Expensive but repetitive work can easily be replaced by machines and robots now. Let the unskilled earn something, not zero by being unemployed and unhired.

See also:

Tuesday, August 13, 2019

China Watch 38, China Army to attack HK protesters?

My admiration and respect to the brave people of Hong Kong for protesting the long arm of the China Communist Party over them. It started with the protest vs the CN-inspired extradition bill where suspected criminals and dissidents can be extradited to CN and endure the lack of rule of law there.

Now on 3rd month of protests, the HK police are getting more aggressive and there are reports now showing that CN Army and police are assembling in Shenzhen, just across Hong Kong, and might come anytime to help the HK police stop the protests.

Hong Kong On The Edge: Chinese Troops Gather In Shenzen; 100s Of Flights Cancelled Over Protester "Terrorism"
by Tyler Durden   Mon, 08/12/2019 - 06:00

Global Times Shows Dramatic Video Of Chinese Army Preparing For Hong Kong Invasion
by Tyler Durden   Mon, 08/12/2019 - 10:44

Yesterday, HKIA authorities have cancelled all flights in the afternoon till evening as the airport was swarmed by so many people protesting police violence and Carrie Lam not listening to them. She only listens to Beijing, a puppet.

Other stories below:

All flights cancelled out of Hong Kong as thousands of protesters besiege airport over police violence
12 August 2019 21:20 Kris Cheng

Chinese tanks on the streets of Hong Kong? Beijing keeps its options open, as protests continue
By China correspondent Bill Birtles in Hong Kong
Updated Fri at 6:44am  August 09, 2019

Would China risk another Tiananmen in Hong Kong?
PUBLISHEDAUG 12, 2019, 10:39 AM SGT

UK concerned at latest Hong Kong violence
AUGUST 12, 2019 / 7:11 PM /

Chinese armed police truck convoy rolls into city near Hong Kong
Phoebe Zhang    Published: 7:48pm, 12 Aug, 2019

Communism is evil. One-party dictatorship is murderous.

See also:

BWorld 358, How government restricts energy development

* My column in BusinessWorld on August 07, 2019.

In the first week of August this year, I saw seven energy-related stories in BusinessWorld Economy section alone:

1. “SolGen appeals Supreme Court ruling on power deal competitive selection” (Aug. 1).

2. “Solar Para sa Bayan franchise signed” (Aug. 2).

3. “MinDa added to energy investment council” (Aug. 2).

4. “PCC, ERC agree to cooperate to push competition in power sector” (Aug. 6).

5. “Energy efficiency firms call for new law’s IRR to reflect BoI perks” (Aug. 6).

6. “High court seeks Meralco, ERC comment on bill deposits case” (Aug. 7).

7. “DoE promises to seek other ways to make fuel prices more transparent” (Aug. 7).

The subjects within energy vary but there is one common trend in them — there are government agencies involved in all issues, which implies that electricity and petroleum concerns remain highly politicized until now.

Of those seven stories, the following stand out:

No. 2. What I call Solar para sa Politika. This is a very unique energy company in the Philippines: It is the only power generation company and distributor with a Congressional franchise; it is the only electricity distributor that covers so many provinces and encroaches on the geographical areas of other franchised electric cooperatives; it is the only renewable energy company opposed by almost all other renewable energy developers like Developers of Renewable Energy for AdvanceMent, Inc. (DREAM) because of certain privileges it gets that appear to be un-Constitutional; it is the only energy company whose franchise is questioned or outrightly opposed by other energy industry associations like Philippine Independent Power Producers Association and Philippine Rural Electric Cooperatives Association, major local business associations like Makati Business Club and Management Association of the Philippines, and foreign business groups like the American Chamber of Commerce; and, it is the only energy company whose owner is the son of an influential legislator. The ex-senator headed the Senate Finance Committee, the position alone could terrorize the Department of Energy (DoE) and Energy Regulatory Commission (ERC) and their budget if they join the chorus to oppose the franchise. Shameless corporation.

No. 5. Energy efficiency should be done even without legislation but this one sought legislation to target fiscal perks. The Department of Finance is the natural opposition because it wants to reduce perks and exemptions in exchange for lower corporate income tax (CIT). Another precedent, so other energy sub-sectors would also seek legislation to get their own share of perks and tax exemptions.

No. 7. The DoE knows that the “expensive oil is beautiful” policy under the TRAIN law (Tax Reform for Acceleration and Inclusion) is the biggest contributor to recent high oil prices. For diesel the excise tax, P2.50/liter increase in 2018, P2 this year, sub-total P4.50/liter increase plus VAT on excise tax. And another P1.50/liter increase in 2020. Yet the DoE instead turned its eyes on oil companies and imposed an implicit price control, prohibiting them from raising their prices unless they notify the DoE in advance and submit weekly reports about the components of their pricing. All players have trade secrets, like one has cheaper monthly land rent than others. These business secrets should not be divulged to others.

I also read in another newspaper that the leftist Makabayan bloc in Congress attacked Meralco for entertaining the competitive selection process (CSP) bid of its allied firms. Politicians as much as possible should stay away from the market dynamics of players once the government’s general rules have been issued, like the mandatory CSP instead of the regular bilateral power supply agreements with power generating companies.

So in the above stories, various government agencies aside from DoE and ERC — Supreme Court, Solicitor General, the Board of Investments, Philippine Competition Commission, Congress — are involved in various forms of regulations. Not mentioned there are other agencies that are also involved in power bureaucratization like the local government units, National Commission on Indigenous Peoples, Department of Agrarian Reform, Department of Agriculture.

The Philippines has among the lowest, poorest energy availability when compared with its many neighbors. See these numbers from the International Energy Agency (IEA), Key World Energy Statistics (KWES) 2018 report. (See Table).

The various energy regulators and law makers from the Executive, Legislative, and Judiciary should be aware and even be ashamed of this poor condition of Filipinos and Philippine-based businesses. Too much government intervention, regulations and prohibitions are bad for more energy development, more power supply addition, and cheaper electricity prices via more power supply addition and competition.

Private players should also avoid seeking new legislation for whatever bleeding-heart arguments they have and help depoliticize the energy sector. Many existing laws like the RE Act of 2008 (RA 9513) are already distortionary, let us not add any more.

See also:
BWorld 355, No climate crisis, August 03, 2019 

Monday, August 12, 2019

Climate Tricks 84, 97% climate consensus in Sicily

The UN, Al Gore, WWF, etc. repeatedly use the "97% consensus" by scientists of man-made warming. They should refer to themselves, 97-100% of folks like Al Gore, Obama, di Caprio, Prince Harry, Katy Perry, have a consensus, and ALL of them are “scientists.” 

These news reports were published mostly on July 31, 2019.

The UN climacrats would be unhappy. That distinction of gathering self-styled planet saviors arriving on private jets, choppers, SUVs and big limos guzzling on fossil fuels then lambast fossil fuels should be reserved for them.

These planet saviors should have traveled there via solar planes, giant kites, Uber brooms, witch-choppers, anything and everything huge that fly and have zero use of fossil fuels, zero CO2 emission.


Lots of wastes -- taxpayers' funded global climate junkets, climate bureaucracies like CCC, carbon tax like oil tax hike under TRAIN law, subsidies to renewables like feed-in-tariff (FIT), mandatory use of bioethanol, climate loans with WB-ADB, etc. Because there is "97% consensus" by Obama et al.

The Commission on Human Rights (CHR) of the Philippines also joins the fossil fuel junkets. Upon the prodding of Greenpeace, they investigate the "carbon majors" by flying to Paris, NY, London, The Hague, etc. Plus provincial investigations. Fossil fuel is so "evil", even its haters and investigators use it a lot, 

See also:

Saturday, August 10, 2019

BWorld 357, We need further FDI liberalization

* My column in BusinessWorld on August 06, 2019.

Foreign direct investment (FDI) is important because the benefits to the destination economy are not limited to capital infusion but also technology transfer, management systems, sources of more production inputs, and extra access to foreign markets. Thus, Japanese FDIs coming to the Philippines not only bring in Japanese capital and technology, but also additional access to Japan and other export markets.

Since we have not liberalized FDIs enough, and those FDIs from many rich countries are just seeking for more economies that will give them a friendlier environment, other neighbors in the ASEAN have optimized these FDI inflows. Singapore remains the top destination while the Philippines is a relatively late-comer. In the ASEAN-6, five countries — Singapore, Indonesia, Vietnam, Thailand, and Malaysia — would get double-digits of billion dollars for at least two years over the last six years. The Philippines experienced that only once, in 2017. That’s the bad news.

The good news is that the Philippines has gotten the momentum since the previous administration and has overtaken Malaysia in attracting FDIs in 2017 and 2018. Perhaps one reason is that Malaysia has become more of FDI source or exporter. (See Table 1.) 

For intra-ASEAN FDI, the favorite destination is Indonesia. Out of its $22 billion in 2018, $11.8 billion came from its ASEAN neighbors. The least favourite is Malaysia as only $0.5 billion came from neighbors last year. And this probably explains how Malaysia is becoming more of a net FDI source or originator than a destination.

The Philippines is also not a favorite FDI destination for its neighbors. Last year, out of $9.8 billion in FDIs, only $1 billion came from our ASEAN neighbors.
In terms of FDI inward stock — the net for inflows minus outflows over the years — Hong Kong, China, and Singapore are the topnotchers. Japan is more of an FDI source or exporter, not a destination.

The expansion of FDI from 1998 to 2018 or over two decades, the average for East Asia is around 8x expansion. The Philippines’ is 7.4x. Mongolia is an outlier with 207.5x because of its very low level in 1998. My data is from the UN Conference on Trade and Development (UNCTAD), World Investment Report (WIR) 2019. (See Table 2).

The continuing challenge for the Philippines is to further deepen and expand its attractiveness to foreign investments. Local investments immediately benefit and expand when FDIs increase because local investors are the partners of these foreigners in equity infusion and as suppliers of materials and services.

Among the important legislative measures needed to further liberalize FDIs in the country are the Public Service Act (PSA) amendment, the Foreign Investment Act amendment, the Lifting foreign equity restrictions, and the Retail Trade Act amendments.
The PSA amendment is important because it will liberalize transportation (land, sea, air) and allow more FDIs in rails, bus lines, shipping lines, and airlines. Also, liberalization in telecoms, although the entry of China Telecom in the third telco has become a source of suspicion and unease among legislators and the public.

Shipping lines and airlines liberalization, in particular, are very important because new foreign players with bigger capitalization and more modern technology will also help market the Philippines as a destination country for their tourists, traders, and investors. The ships bring goods in and out, both production inputs and finished products; the planes bring people and services in and out, both local and foreign.

More competition will also make local players more price-competitive, benefitting Philippine-based businesses and tourists. We should further liberalize the economy in commerce, investments, and tourism, not restrict it with nationalist, populist, even socialist sentiments.

See also:
BWorld 355, No climate crisis, August 03, 2019