Thursday, January 30, 2020

BWorld 406, GDP growth and Fidel Nemenzo support growth

* My column in BusinessWorld, January 28, 2020.

The good news about the Philippines’ GDP growth of 5.9% in 2019 is that it is high by global and regional trends. The bad news is that growth is decelerating since 2016 and our GDP size remains small. With a low economic base, if we keep growing by just 5-6% yearly, it will take us many decades to be at par with the per capita incomes of our neighbors Malaysia, Singapore, Hong Kong, and Thailand even if they grow only 2-3% yearly. (See Table 1).

And an ironic thing about growth in 2019 is that while government consumption was sizzling at 10.5% growth, capital formation or private investments was contracting at -0.6%.

Obviously, more politics, more government taxation and interventions were among the big reasons why private investments are contracting and overall growth is decelerating: 6.9% in 2016, 6.7% in 2017, 6.2% in 2018, 5.9% in 2019. High inflation and decline in household consumption (which makes up about 65% of GDP) immediately followed when various tax hikes were implemented under the TRAIN law of 2017.

Now we see the selection of the UP Diliman Chancellorship being colored by more politics. There are only two nominees — Dr. Fidel Nemenzo, Professor at UP Institute of Mathematics and known regionally for his research output and Math leadership, who is also the current Vice-Chancellor for Research and Development, and Prof. Ferdinand Manegdeg, Dean of the UP College of Engineering, who has no PhD.

UP Diliman (UPD) would have the highest concentration of PhD faculty per 100 students in the whole country. Having a PhD is the minimum requirement to be an Associate Professor. So if UPD is at the forefront of advancing academic excellence in many disciplines, how could a would-be head, an aspiring Chancellor of UPD, be non-excellent academically? That is a lousy situation. Only more politics, not more academic achievements, would push this kind of situation.

That is why many units and faculty members are alarmed and they take explicit positions of supporting Dr. Nemenzo. A letter by UPD faculty members submitted to the UP Board of Regents (BoR) had 452 signatories including at least five Professors Emiriti, 70 Professors, 65 Associate Professors, 182 Assistant Professors, 89 Instructors, and 28 Lecturers. The growth of his support base is accelerating — unlike the Philippines’ GDP growth which is decelerating.

Consider also my alma mater, the UP School of Economics — 100% of its faculty members are PhD holders and I cannot see anyone there supporting someone who is not excellent in academics as UPD Chancellor.

Recently two pieces of fake news were being spread by desperate groups who cannot cite academic excellence as an important factor for UPD Chancellorship.

One is red-tagging, saying that Dr. Fidel Nemenzo is a communist and if he becomes the Chancellor, lefties and commies will have a grand time in UPD. Garbage. The Chancellor would be busy positioning UPD in the forefront of advance science and technology research, and teaching to help prepare the country in the current Fourth Industrial Revolution (FIRe) and artificial intelligence (AI) advances. Outmoded claims of commie ideology would be far from his concerns.

The secondpiece of fake news has been dragging former UP President Francisco “Dodong” Nemenzo, Jr. — Fidel’s father — into the UP-Ayala Technohub deal. They say that a “leftist UP President” has produced an “onerous” deal.

I will quote UP College of Law Professor Jay Batongbacal in debunking this. Jay wrote in his public post on Facebook on Jan. 26: “The contract was signed upon authority of the Board of Regents by UP President Emerlinda Roman… These liars and idiots then rely on innuendo, implying that since the process of converting the former idle lands of UP began during the term of UP President Francisco Nemenzo, it was the Left that selected Ayala, and therefore the contract is by the Left.”

More politics, more government taxation and policy reversals midway have resulted in the country’s growth deceleration. We hope that UPD will not be dragged into more politics. Academic track records and vision by the nominee, support and respect by the academic faculty, alumni, non-academic staff and students, should guide in the appointment of the next UPD Chancellor when the BoR meet and decide next week.

See also:

Makati government and police vehicles with no plate

I took these photos last January 28, 2020. Makati City government vehicle, no plate. Govt exempts itself from its own "No plate, no travel" policy that govt strictly implements vs civilian motorists and drivers.

Below, I took this picture last Nov 20, 2019. If it's a civilian motorist, that motorcycle must have been towed/clamped by Makati City Hall people already for obstruction of pedestrian path.

Last August 2019, this Makati policeman was in front of me in a gas station. Motorcycle with no plate.

Government, national and local, make many laws and prohibitions. Then government people themselves violate those laws. Lousy.

Wednesday, January 29, 2020

BWorld 405, Coal, gas, renewables, and growth

* My column in BusinessWorld, January 22, 2020.

Recently it was reported that the growth rate of Germany, Europe’s largest economy and the world’s fourth largest, fell to only 0.6% in 2019. This caught my attention because it is a significant drop from 1.5% in 2018 and 2.2% average for 2014-2017. The UK and France managed to grow 1.4% in Q1-Q3 2019 so far, while Italy has crawled to only 0.1% growth (see Table 1).

From 1998 to 2018, or two decades, China, India, and South Korea have managed to expand their GDP size from four to 13 times while others have expanded only by 2.3 times at most. So we may ask, what are the “secrets” of China, India, and South Korea for the big expansion of their GDP sizes?

There are a dozen plus factors, but for this paper, I want to test the hypothesis that “stable, cheaper energy is stable growth.” Thus, I will leave out other factors (rule of law, property rights protection, global openness, lower taxes, etc.) for now.

First I checked the consumption of fossil fuels coal and natural gas — stable, predictable, dispatchable on demand — in power generation, units in million tonnes oil equivalent (mtoe).

China, India, and South Korea have indeed expanded their coal capacity by 2.4 times to 2.9 times while the four Europeans and the US have decreased their coal consumption. But the US has increased its already high consumption of natural gas while China and South Korea have also expanded their gas use but not at the level of the US (see Table 2).

Then I checked their consumption of intermittent, unstable, and non-dispatchable energy sources like wind and solar. China, the US, and Germany are the world leaders, with India, Japan, and the UK trying to catch up (see Table 3).

The total consumption of wind and solar, despite their rapid expansion in recent years, remain very small compared to use of coal and gas for many countries. For instance, the wind and solar of China (123 mtoe), India (20.6 mtoe), and South Korea (2.6 mtoe) in 2018 were only 6.4%, 2.8%, and 2.9% respectively of their coal consumption. The US’ wind and solar (84.8 mtoe) in 2018 was only 12.1% of its natgas consumption.

It is safe to say that the reason why China, India, and South Korea have expanded their economies faster than the other seven large economies is partly (or largely) because they relied more on stable and cheaper fossil fuels especially coal, and never relied on intermittent, unstable wind and solar in their continuing march towards modernization and industrialization.

The US has escaped the anemic growth pattern of the Europeans because it increased its reliance on natgas, also a fossil fuel, even though its coal use has declined.

US President Donald Trump is correct in his opening speech at the ongoing 50th World Economic Forum (WEF) in Davos, Switzerland, that US will pursue its energy independence (and dominance) in fossil fuels and not be swayed by climate scare and doom stories, and embrace the energy of low and anemic growth — wind and solar and other variable renewables.

See also:

On PH's growth 2019

Before, the main driver of high growth like 2016's 6.9% was household consumption (C, about 65% of GDP) growing high. Now the main driver of low growth like 2019 is high government consumption (G, about 12% of GDP) with double-digit growth in 2018-2019 but at the expense of C and investments (I) suffering low growth.

Indeed, capital formation or private I experienced contraction in 2019 while net exports (exports less imports) was crawling.

Philippines GDP growth by expenditures, %

Expenditure type
Household Consumption
Government consumption
Capital Formation (Investments)
Less Imports

Source: Philippine Statistics Authority (PSA)

The last time there was contraction in private investments were in 2009 (-8.7%) and 2012 (-4.3%). So the 2019 growth is ironic: government spending was sizzling at +10.5% while private investment was contracting at -0.6%.

The Duterte administration’s high spending, high taxes, policy reversals in certain sectors is good for government but bad for private investment. This is clear in 2019.

This 2020 and beyond, we hope that government will step back from these economically regressive policies. Instead of more taxes, government should initiate tax cuts in many sectors. Like reducing the corporate income tax (CIT) to 20% in first year of implementation of the proposed CITIRA bill. And cutting VAT rate back to 10%, even 8% with little or zero exemption except raw agriculture and fishery products. Also abolish the travel tax, among others.

Friday, January 24, 2020

BWorld 404, Asian universities and UP Diliman chancellorship

* My article in BusinessWorld last January 21, 2020.

Philippine universities do not seem to fare well even compared to many of their ASEAN neighbors. The Quacquarelli Symonds (QS) world university ranking is a good annual report, its scoring is based on six indicators: Academic peer review, 40%; Faculty/Student ratio; 20%, Citations per faculty; 20%, Employer reputation; 10%, and International student ratio and International staff ratio, 5% each.

I checked the QS ranking of 2020 — many Asian universities have improved their global ranking from the 2015 to 2020 reports. The University of the Philippines (UP) ranked only #356 and the three next famous schools in the country ranked 600+ or lower (see Table 1).

Then I checked details of the top universities in the ASEAN. In terms of research output, they have high to very high output while the four Philippine universities have either medium or low output (see Table 2).

Clearly there is problem in the quality of Philippine universities, especially the other state universities and colleges (SUCs), taxpayer-funded with a budget of P51 billion (excluding UP) in 2019 and none of them in the global top 1,000.

For UP in particular, it seems to be spreading out thinly. UP’s 38,000+ students are the total in its many campuses: Diliman, Manila, BGC, Los BaƱos, Baguio, Clark, Cebu, Iloilo, Mindanao, and the Open University.

Now there is a big issue in UP Diliman (UPD), the main campus in the UP System. In February, the UP Board of Regents (BOR) will choose the next UPD Chancellor, the highest official in the campus. There are only two candidates and they seem to be worlds apart in terms of academic achievements.

Dr. Fidel Nemenzo is a Professor of Mathematics and currently UPD Vice-Chancellor for Research and Development. He got his BS Math degree from UP, his MS and PhD Math from Sophia University in Tokyo, Japan, specializing in pure mathematics. He is well-respected in mathematical academic circles here and abroad. Nemenzo was also a former President of the Mathematical Society of the Philippines, and the Southeast Asian Mathematical Society and has received awards in his discipline such as the Achievement Award in Mathematics from the National Research Council of the Philippines (NRCP).

The other candidate is Prof. Ferdinand Manegdeg, current Dean of the UP College of Engineering, the largest college in the university in terms of faculty and student population. He has a masters degree from the University of Leeds, but has no PhD, unlike many in his faculty. In the top universities in the region and the world, a PhD is the minimum requirement for acceptance into the faculty.

The campus Chancellor has two main functions — to further advance academic excellence, and address various community issues. UPD hosts the College of Science disciplines — Mathematics, Physics, Chemistry, Biology and Biotechnology, Geology, etc. — that provide the basic theories behind continuing technological modernization like the Fourth Industrial Revolution (FIRe), artificial intelligence (AI), and robotics.

So someone with expertise in the basic science and math and not just applied science, someone with higher regional and global academic exposure and leadership, is the most appropriate to head UPD.

I hope the BOR will choose Dr. Nemenzo as the next UPD Chancellor. As he envisioned, UPD will become an inter-disciplinary hub working with other government agencies, industry, and civil society, and become a strong graduate university especially in the basic sciences.

There is too much politics and government intervention in many sectors of our country. I hope the selection and appointment of UPD Chancellor will be guided by academic leadership and not by more politics.

See also:

Energy 132, US crude oil production now 13 mbpd

Yesterday and today, oil prices dropped significantly. WTI went down to $54+ per barrel. Until last Monday January 20, prices were $58+ a barrel. And days after the killing of Soleimani, "WW 3" and related hashtags became famous and oil prices went up to $64+ a barrel.

Now, war alarmism has faded. The US public's attention went to the impeachment, corona virus, etc.

More global oil-gas production, more supply stability, and lower oil prices. That's what we need.

See also:
Energy 130, US crude oil and natgas productionoduction, October 31, 2019 

Thursday, January 23, 2020

BWorld 403, Smoking, vaping and the nanny state

* My column in BusinessWorld, January 16, 2019.

“To act on the belief that we possess the knowledge and the power which enable us to shape the processes of society entirely to our liking, knowledge which in fact we do not possess, is likely to make us do much harm.”

— Friedrich Hayek,
“The Pretence of Knowledge”, Nobel Prize lecture Dec. 11, 1974

Among the stories we hear and read in the debates on higher tobacco/alcohol tax, smoking/vaping ban, are that 1.) smoking prevalence remains high and rising, 2.) vaping is not a smoking-cessation tool but smoking-enhancement, and, 3.) more government taxation and prohibitions are good to protect public health.

These are all myths and not consistent with facts. Here are the numbers and reasons why.

On No. 1, in most countries, smoking prevalence is declining. There has been a big decline of 10-11 percentage points for South Korea, Japan, and the Philippines in a span of 16 years. And as of 2015, only 2% of Philippine adults and 4.5% of youths were users of smokeless tobacco or e-cigarettes, vaping products (see Table). 

On No. 2, vaping products have actually become smoking substitutes or smoking-cessation tools, leading to a decline in smoking prevalence of five to 10 percentage points in the Philippines, Malaysia, and Thailand as a portion of their smokers shift to smokeless, non-burning nicotine substitutes.

A “gateway theory” that vaping leads to smoking in young people is just a disproven hypothesis. In early 2019, a UK anti-smoking charity, Action on Smoking and Health (ASH), released a report showing that vaping remains uncommon among young people and is almost exclusively confined to current or past smokers, and that most teen vaping is experimental and short-lived.

Recently, the President, supported by the Department of Health, ordered a ban on vaping in public places. Government over-regulation follows the famous Newton’s third law of motion: “for every action there is an equal and opposite reaction.” Restated it becomes “for every government intervention and taxation, there is an equal and opposite distortion.”

Seven examples and cases below show why No. 3 above is wrong:

One, more prohibition means more corruption. Prostitution, drugs, certain gambling, gun running, etc. are prohibited, not just restricted and taxed in the Philippines. And these prohibited activities and products are all around. That implies that the police and government officials themselves, local and national, allow their proliferation in exchange for big bribes, other financial and political favour.

Two, more smuggling. The National Committee on Intellectual Property Rights (NCIPR) reported that full year 2018 seizures of pirated and counterfeit goods jumped to P23.6 billion. Of this, fake or smuggled cigarettes were P20.3 billion or 86% of total. Higher tobacco taxes under the TRAIN law of 2017 resulted in many smokers buying cheaper, smuggled tobacco.

Three, recent cases of coconut wine or lambanog poisoning in the Philippines. At least 23 people died due to suspected methanol poisoning, with over 500 hospitalized. As branded alcohol becomes more expensive due to more taxes, more drinkers shift to cheaper, untaxed, unbranded alcohol like lambanog, where products can include chemicals and prohibited substances.

Four, the Singapore vape ban has been in place for two to three years now. But instead of killing vaping, it sent it underground. There were seizures of $30,000 worth of illegal e-cigarettes in September, another $66,000 worth in November 2019.

Five, with misregulations around e-cigarettes in the US, illicit pods containing tetrahydrocannabinol (THC) oil together with Vitamin E acetate as a thickening agent have become widely available. Around 55 people have died after using these black market products rather than standard vape juice.

Six, when I was in southern Sweden in 2003 for two months, I noticed and read that Swedes who wanted cheaper booze would travel to Denmark to buy lots of beer and alcohol because Sweden’s alcohol taxes are very high. The same in Scotland after “minimum unit pricing” on alcohol was introduced in 2018 — Scot drinkers would go to England across the border to get cheaper alcohol.

Seven, in the UK, smoking data released after the implementation of plain packaging for tobacco products shows that for the first time in seven years, the smoking rate has risen. Illicit and smuggled tobacco became much easier because of the ease of copying the packs and cheaper prices. The same thing happened in Australia after its plain packaging policy was instated in 2012 — illegal tobacco use came in higher starting 2013, shown in KPMG study.

Friedrich Hayek has reiterated that “all-knowing” pretense and central planning of a nanny state can backfire. Thus, the state should step back from over-regulations and prohibitions. People own their bodies, not the state or NGOs. More state prohibitions only send people to seek illicit, even dangerous products and activities.

See also:

Ayalas, MPIC, ABS-CBN, even SM under attack by the President

President Duterte first attacked Manila and Maynilad Water companies by Ayalas and MPIC-DMCI, respectively, last month. Then last week the Light Rail Management Corp. (LRMC), operator of LRT1, also MPIC and Ayala owned, plus Macquarie. This week, the UP-Ayala Technohub. He also disapproved SM's reclamation project in Manila Bay, 360 hectares. 

Previously he attacked ABS-CBN of Lopezes, its legislative franchise expiring in March this year, two months away.

Is there a pattern? What's really going on? Who's next?

Some news reports here from BWorld:

ALI says land deal ‘beneficial’ for UP but market fears persist
January 22, 2020 | 12:08 am

Duterte gives go-ahead to review UP Technohub deal
January 23, 2020 | 10:11 pm

Operator of LRT-1 ready to face probe after Duterte’s new rants
January 21, 2020 | 12:05 am

Meanwhile, here’s another proof that Malacanang allegations of “onerous” provisions and rates by the two water concessionaires in Metro Manila are bonkers.

Metro Manila has lowest water rates compared to other big cities
January 21, 2020 | 12:03 am

Friday, January 17, 2020

BWorld 402, Taal, Cadiz City and Tapaz, Capiz

* My column in BusinessWorld, January 14, 2019.

Volcanic areas are among the most beautiful places to see in the country — Mayon, Pinatubo lake, Bulusan lake, Taal lake, etc. They are beautiful when the volcanoes are at rest, but when they rumble and erupt, they are among the worst places in the planet to be due to the many dangers they pose. Among the most active, most violent volcanoes in the Philippines and their explosions since 1600 are listed in Table 1. 

Residents and business locators around Taal volcano and lake in Batangas, Cavite, Laguna, and Quezon are suffering from the heavy ashfall. This is a big setback to business and tourism, but it is Nature taking its regular geological cycle of volcanic calm and eruption over decades or centuries.

Negros island has a huge, tall, active volcano — Kanlaon — that inspires plenty of tourism-related businesses around it. There are many waterfalls, big rivers, hot springs, then hills and flatlands below it.

I am from Cadiz City, Negros Occidental. We are at the northern tip of Negros island and somewhat far from Kanlaon. It has the third biggest land area in Negros island, which is composed of two provinces. In terms of population though, cities in Cebu island are the biggest (see Table 2).

Last December, I spoke with Cadiz City Mayor Salvador Escalante, Jr. in the new City Hall building about the economic environment in the city. He was joined by City Engineer Jose Lauro Napud and City Investment Officer Lyn Regodos. I was surprised to hear of the many private investments, existing and planned, for the city. For instance, the malls that are already there are Citimall, Puregold, and SM Hypermart. Coming soon is Gaisano, and Robinsons has expressed an interest to come in. Some manufacturing and processing plants are being planned because of Cadiz’ huge land area, long coast, and access to the island’s nearly 5 million people and consumers.

Cadiz’ main tourism attraction is Lakawon island resort, with its modern facilities and its white sand beach which is considered the “little Boracay” of Negros.

Water should not be a problem because the city has many rivers. The problem though would be power as Negros island relies heavily on old and ageing geothermal power plants. There are many solar farms but solar is intermittent, unreliable, and non-dispatchable on demand. Negros does not have a single coal plant and is becoming more dependent on power “imports” from Iloilo and Cebu coal plants. I wish that my province mates will soon realize that the real “dirty energy” are candles and gensets running on diesel when there are frequent blackouts — not coal.

I also visited Tapaz, Capiz last December, and spoke with Mayor Roberto Palomar. I was introduced to him by my fellow Cadiznon Niel Defensor who works as a consultant to Mayor Palomar. I was surprised to know that Tapaz has the biggest land area in Panay island (composed of four provinces), and its population density is among the lowest in the island (see Table 3).

The municipality of Tapaz hosts the beautiful and very peaceful Marugo lake. My daughters and I enjoyed the swimming pool overlooking the lake. Then in the barrios there are four small waterfalls.

Mayor Palomar proudly enumerated the new structures that have been built there in the last three years — a new public market, a bus terminal, a new four-storey municipal hall to be finished this year, and many new cemented roads going to far away barrios. Coming soon is a municipal hospital.

The single biggest project in the municipality will be the construction of the management office of the Panay River Basin Integrated Development Project (PRBIDP), a P26-billion multi-year project that includes the construction of several dams for hydro power, bulk water, and irrigation along the huge and wide Panay River. The 18-MW hydro power plant will help address the problem of frequent blackouts in the province.

Panay island is lucky to have no active volcano and still have many big mountains, many big rivers and waterfalls.

Economic development should start from local businesses and local governments that optimize whatever resources they have, and not be too dependent on the Office of the President and the various national agencies.

Meanwhile, volcanoes and earthquakes, strong or mild, are 100% part of Philippines’ “geological DNA.” No earthquakes and volcanoes, no Philippines. Our archipelago came from under the sea.

See also:

Thursday, January 16, 2020

Privatization 15, GOCCs, GLCs, SOEs

My friends in KL, IDEAS, posted today about privatization. Here are our short tweets:

IDEAS backs Cabinet decision not to sell PLUS. “A transparent divestment process should be in place before the government engages in privatisation”, said Ali Salman, CEO of IDEAS.

Do you agree with IDEAS on government having a GLC reform plan first before engaging in divestment?

Hi Ali, govt should get out of business as much as possible. Use privatization proceeds to retire portion of pub debt, reduce debt/GDP ratio, save on interest payment. Also help depoliticize toll roads pricing and mgt. Thanks.

We are for privatization but not without a transparent framework. Government should be out of business but the private sector should not allowed to benefit from tax payers money except where public goods are involved.

But doesn't privatization save taxpayers in the form of ending annual subsidies to the state Corp? Plus billions of revenues from privatization. Also a signal to other state Corps, they should be next.

Yes, it does. We are for privatization, but it must follow independent valuation process. It should also follow some policy criteria. Ultimately, privatization should create better markets, more consumer choice, and lesser government spending.

Thanks. More than valuation process, govt should just deregulate sectors then privatize as many state Corps as possible. Bidding of state Corps will set a better valuation too.

Malaysian case of ownership is quite complex. The shareholders are government linked companies who claim that they were not on board in this divestment talk which was started by the Prime Minister. Our main point is that it speaks of arbitrary decision making from the top.

Yes, I am not familiar with government-owned and controlled corporations (GOCCs) in Malaysia. Their term there is government-linked corporations (GLCs); in other countries they are called state-owned enterprises (SOEs).

Here in the Philippines, I still believe in the old proposal by Peter Wallace in 2005 -- just sell them all, at bargain firesale prices for some. We need less politics -- these GOCCs are often the dumping ground of some key political supporters of the administration in power who cannot be given regular posts like Cabinet Secretary, UnderSecretary, Presidential Adviser, etc. 

Below, see the revenue program of the PH government. Lots of taxes and fees, and fines. Mainly to sustain the wide bureaucracies, national and local, and populist, welfarist subsidies and freebies with no timetable, meaning forever unless explicitly terminated, which seldom or never happened. Only P2 B a year in privatization proceeds.

Source: DBM, BESF 2020.

See also:
Privatization 12: PH government corporations sold, retained as of 2007, February 07, 2016 
Privatization 13, Firesale of GOCCs, notes in 2005, December 30, 2016 

Privatization 14, Notes in 2005, December 3, 2019

BWorld 401, Inflation, transportation, and production

* My article in BusinessWorld, January 9, 2020.

Regional and global inflation has been generally rising over the last two months of 2019. The Philippines reached its lowest inflation since around 2016 of only 0.8% last October, then a quick uptick to 2.5% by December (see Table 1). 

The Philippines’ full year 2019 inflation was 2.5% and the “inflation valedictorian” position claimed by the Philippines with 5.2% in 2018 has been snatched by Indonesia with 3% in 2019.

I checked the commodities inflation of the country, and saw that three groups have experienced significant declines in 2019 vs. 2018 levels: alcohol and tobacco, food, and transport. All other commodity groups have been generally flat or saw mild declines in prices. While this affirms the statement that the rice tariffcation law (RTL) has contributed to a significant price decline in rice and other food items, this contradicts the claim by some government agencies like the Land Transportation Franchising and Regulatory Board and Philippine Competition Commission (PCC) that fares by less-regulated transportation like transport network vehicle service (TNVS) are rising too fast (see Table 2). 

If the PCC in particular thinks that there is “abuse of market power” by the dominant TNVS despite the presence of multiple choices for the passengers, then the PCC should also investigate coffee shops to see why brewed coffee is only P20 a cup in convenience stores like 7-Eleven but P100 to P120 in Starbucks. Or investigate the two dominant local airlines to see why their fares from, say, Manila to Cebu are at least P1,000 more expensive than the smaller regional airline.

Related to inflation or price changes from the perspective of consumers is the producer price index which measures selling price changes from the perspective of domestic producers. Indonesia and the Philippines are the outliers among their neighbors which have price indices of only 97 to 109 (see Table 3). 

Two headwinds face the Philippines in fighting high inflation in 2020. One is internal: the third part of the implementation of the “expensive energy is beautiful” policy via higher oil-coal taxes under the TRAIn (Tax Reform for Acceleration and Inclusion) law. The other is external: renewed political and military conflict in the Middle East with an immediate impact on world oil prices and the deployment of OFWs (Overseas Filipino Workers) to the region.

So two important lessons here: One, more government taxation of very useful commodities like oil and coal is anti-consumer and anti-producer; and, two, more government fines and restrictions on certain sectors like land transportation are often based on wrong premises and assumptions, and work to limit the supply of services, and are inimical to passengers’ welfare.

More tax hikes, fees, and new fines are being prepared this year by the administration to finance more spending and more borrowings. Not good. They should do the reverse. Step back and allow the people and private enterprises to keep more of their earnings to finance more household spending and enterprise investments.

See also:

BWorld 398, Culion in Christmas, December 28, 2019 

Wednesday, January 15, 2020

Climate Tricks 91, Silence on snow and ice in the Middle East

When many parts of Australia was burning, it was big news in many papers around the world. Now the fires have subsided there and there are scattered reports of snow, ice and severe cold in Saudi, Egypt, Pakistan, Afghanistan, etc. and these are not news in many big international media. Mainly because these stories do not conform with the "man-made" Gorebal warming narrative. Oh well....

VIDEO: Heavy snow blankets parts of Saudi Arabia
10 Jan 2020

Snow turns parts of Saudi Arabia into a winter wonderland
The National    Jan 13, 2020


In Photos: Egypt’s Saint Catherine Covered In Snow

Heavy rains, snowfall leave dozens dead in Pakistan, Afghanistan
13 Jan 2020
Severe winter weather kills at least 43 in two countries as authorities struggle to evacuate people to safer places.


Storm to unload heavy rain, mountain snow across Middle East
By Eric Leister, AccuWeather senior meteorologist
Updated Jan. 13, 2020 2:20 AM

"from parts of the Arabian Peninsula to Pakistan late last week and through the weekend.
The storm brought flooding to parts of Greece, Turkey, Syria and Israel during the second half of last week."

Flooding Wreaks Havoc At Dubai International Airport
By Chris Loh   January 12, 2020

Look: It took 3,100 workers in Dubai to clear up flooded roads
More than 600 engineers and inspectors worked 24/7 after heavy rains hit Dubai

Published:  January 12, 2020 09:46
Anjana Kumar, Senior Web Reporter

Last November, while the Iran govt was hot and heated killing hundreds of demonstrators, parts of the country was shivering in "fossil fuels-caused" snow.


See also:

BWorld 400, Top 10 energy news of 2019

* My column in BusinessWorld last January 6, 2020.

Here is my modest list of important global and national stories in the energy sector.

1. Stable world oil prices. After experiencing prices of around $100 per barrel in 2011-2014, prices have generally gone down. From 2015 to 2019, we never saw prices reaching $80 a barrel, even for a day.

2. Stable world oil balance. World oil demand is rising by 1.1 million barrels per day (mbpd) on average. Russia and Saudi-led OPEC production was flat or declining — this should have resulted in rising oil prices but it did not happen. The reason is rising US oil production, an average of 1.55 mbpd yearly in 2017-2020. OPEC non-gas liquids (NGLs) rose mildly (see Table 1). This is thanks to the US shale oil and gas revolution and Trump’s “energy dominance” policy which neutralized the oil output cut by OPEC and Russia.

3. No global carbon tax. The big annual climate fiesta — aka UN Conference of Parties (COP) meeting 2019 in Madrid — failed to create another scheme that would produce that elusive $100 billion/year of climate money that was promised in Paris Agreement 2015. Many rich countries will not agree to further bleed their people with more energy taxes.

4. US Congress phasing out wind-solar subsidies. The investment tax credit, which reimburses 30% of the cost of new solar systems will begin winding down in 2020, down to 10% for most companies by 2022. The energy production tax credit, which gives wind power generators a roughly two cent per kilowatt boost, will wind down in 2021, decreasing steadily until it becomes zero in 2025 (Houston Chronicle, Dec. 26, 2019).
5. Energy consumption is down in the West. A June 2019 report by British Petroleum (BP) showed that after two decades, primary energy consumption in the West is flat or declining but it is rising in Asia (except Japan). The data covers not only electricity generation but also oil-gas consumption for transportation (land, sea, air), agriculture, etc.

6. Coal consumption remains high. Despite rising global climate and anti-coal rhetoric, coal consumption remains high even in “greenie” countries like Japan, Germany, Australia, and South Korea. The Philippines remains bullied by anti-coal activists despite its very small coal consumption compared to its neighbors and greenie countries (see Table 2).

China in particular built 38 gigawatts (GW) of new coal power capacity in 2016, 35 GW in 2017, 43 GW in 2018 to June 2019, plus another 121 GW under construction.

7. Yellow-red alerts in Luzon grid from March-July 2019. Among the reasons for the alerts, No. 1 is there are many old, ageing big conventional plants, and unscheduled and longer maintenance shutdown. Some 40% of all power plants in Luzon are 20 years or older, especially oil and geothermal plants. Reason No. 2 for the many alerts is that many new additions in the power mix are intermittent, unreliable, weather-dependent wind-solar that cannot provide big, dispatchable power. (See Table 3). 

8. No new peaking plants constructed. That’s reason No. 3 for all the yellow-red alerts. New capacity additions and committed projects in Luzon grid are: 800 MW coal, 74 MW biomass and hydro in 2019; 1,336 coal, 12.6 hydro in 2020; 600 coal, 650 gas, 3 hydro in 2021; 31 MW geothermal in 2022. Not even a 1 MW oil-based peaking plant to address demand spikes during rush hours was built or under construction.

9. ERC-proposed lower secondary cap at WESM. That’s reason No. 4 for the yellow-red alerts and why no peaking plants were constructed — so the yellow-red alerts of 2019 will be repeated in 2020. And so many companies are buying big gensets as their own peaking plants in their backyard.

10. EPIRA TRO. The retail competition and open access (RCOA) provision of the EPIRA law of 2001 (Electric Power Industry Reform Act, RA 9136) remains suspended after the Supreme Court TRO of February 2017. Three years of continuing uncertainty in retail competition has greatly affected the power supply planning of generation companies while giving some pampered electric cooperatives zero competition in their localities.

More government energy intervention — in giving subsidies to intermittent renewables, in power price control at the Wholesale Electricity Spot Market, in limited retail power supply and competition, etc. — is not good for the consumers.

See also:

BWorld 398, Culion in Christmas, December 28, 2019