* My article in BusinessWorld, January 9, 2020.
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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.
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