Saturday, March 23, 2024

BWorld 691, On a huge budget surplus and long-term privatization revenues

On a huge budget surplus and long-term privatization revenues
March 19, 2024 | 12:02 am

My Cup Of Liberty
By Bienvenido S. Oplas, Jr.

A number of good economic reports came out last week. See for instance these stories in BusinessWorld: “US firms to invest over $1B in PHL” (March 12), “PHL secures $4B in German pledges” (March 14), “Philippines’ budget surplus at $1.58B in January” (March 15), “PHL to grow 6.4% this year — Fitch” (March 15), and “GOCC subsidies down in 2023, PhilHealth top recipient” (March 17).

I checked the Bureau of the Treasury (BTr) data on the latest cash operations report (COR) of the National Government. The January 2024 data showed that the National Government (NG) experienced a budget surplus of P88 billion. That is huge. So I checked the January data of previous years — turns out that this year’s budget surplus could possibly be an all-time high and almost twice the surplus of P46 billion in January 2023.

This is largely because revenues have expanded big time, from P278 billion in January 2022 to P348 billion in January 2023 to P422 billion in January 2024. Meanwhile, government expenditures were timid at P302 billion in January 2023 to P334 billion in January 2024.

Financing or borrowing was significantly controlled, from P587 billion in January 2021 and P366 billion in January 2023, to only P118 billion in January 2024 (see Table 1).

I must extend my congratulations to Budget Secretary Amenah F. Pangandaman and Finance Secretary Ralph G. Recto. The fiscal consolidation policies are bearing fruit so far.

The rate of increase in revenues, even without a major tax hike, should stay higher than the rate of increase in expenditures. Public spending should be targeted at expanding and better infrastructure, like more provincial and barangay roads than cash subsidies. Rural infrastructure will encourage the poor to be more productive while endless subsidies will encourage more people to not work hard enough or understate their real incomes so that they can qualify for many subsidies and freebies like free tertiary education, free healthcare, free monthly cash, and so on.

One big piece of news last week was reported in the Philippine Star: “Recto revives plan to sell NAIA assets” (March 14). At the sideline of his Senate confirmation hearing last week, on March 13, Mr. Recto said that he wants to get a huge one-time revenue bump from the privatization of the assets of the Ninoy Aquino International Airport (NAIA). A brilliant and rational proposal, sir.

This column has argued in three previous articles that NAIA assets should be privatized: “NAIA privatization is good, legislated minimum wage is bad” (Feb. 20, 2024), “Financing sustained growth: NAIA privatization” (June 27, 2023), and, “NAIA closure, passenger rights, and MIAA responsibilities” (Aug. 21, 2018).

If I may add, also consider privatizing the land holdings of the Bilibid Prison in Muntinlupa City, and the Iwahig Prison in Palawan, Puerto Princesa — get the money and retire a big portion of the public debt, do not earmark it for any agency or program.

In Table 2, I attempted to quantify the potential revenue from the privatization of three government assets (NAIA, Bilibid, and Iwahig). I assumed a compounded annual growth rate (CAGR) of 10% yearly in the value of these lands. The potential revenues from the privatization of NAIA and Bilibid land would be P8.38 trillion, plus P3.81 trillion or P12.19 trillion (see Table 2).

The New Manila (Bulacan) International Airport is supposed to start initial operations by 2027 and should be fully operational by the early 2030s. So, the closure of the current NAIA is feasible and viable.

Bilibid Prison operations should be decentralized and scattered to various regions. Selling the land will help bankroll the construction of new prisons and correctional facilities in all regions of the country.

The Iwahig Penal colony is composed of four zones or districts. The central colony is made up of 14,700 hectares and there are three other zones: Sta. Lucia with 9,685 hectares, Montible with 8,000 hectares, and Inagawan with 13,000 hectares. Existing inmates of the penal colony can be moved to any of these zones.

Less public debt and lower interest payments (P429 billion in 2021, P503 billion in 2022, and P628 billion in 2023, with principal amortization not included yet) would mean that more resources can be devoted to more physical and social infrastructure for Filipinos and Philippines-based businesses and foreign investors and visitors.

Meanwhile, I want to congratulate my friends and fellow University of the Philippines School of Economics alumni, new Finance Undersecretaries Joven Balbosa and Rolly Tungpalan. Their appointments were approved by the President last week.

See also:
BWorld 688, On the nuclear mission in Canada, the AP-MGen-SMC partnership, and electric cooperatives
BWorld 689, Nuclear energy to sustain Philippines’ high economic growth
BWorld 690, Why we need to grow by 8-9% yearly

Macroecon 25, Realistic growth and revenue target

A report today in the Inquirer, "Recto seeks ‘more realistic’ growth target", Secretary Recto said,

“I think we should come out with something more realistic— not only this year, but for the medium term. Because if you project a very high GDP, then you’re projecting a very high revenue. And if you miss it, your deficit will increase and your debt-to-GDP [ratio] will also increase. Underpromise and overdeliver. That's what I believe."

"Underpromise and overdeliver" is a wise move. A 6.0 to 6.5% target is more realistic than 6.5 to 7.5%. Although I believe that a 7-8% growth is possible because of our huge domestic market that can provide internal econ dynamism, provided that the usual obstacles -- business bureaucracies and red tape, corruption -- can be reduced.

Notice that the fast-growing economies in 2023 -- IN, Iran, PH, CN, ID, VN, etc -- are all big population countries except Malaysia. Their big population is an asset, not liability as peddled by the population control advocates like the authors and campaigners of RH law. More people means more workers and entrepreneurs, more producers and consumers.

Iran and China high growth 2023 was mainly due to low-base in 2022 whereas India, PH, Indon, VN  were high growth 2023 on already high base 2022.
Below, the 3 columns are GDP growth for 2021, 2022 and 2023. 

See the Europeans -- save the planet, ESG, net zero, decarbonization, climate drama, plus endless war in Ukraine is beautiful no negotiations -- degrowth and deindustrialization trend is clear. PH and other Asian economies should never never follow the European path.

Again the 3 columns are GDP growth 2021, 2022, 2023.

WEF planet-saving, jet-setting corporate leaders are bullish about the PH, said PH GDP size (they should refer to PPP values) can become "a $2-trillion (around P112-trillion) economy in the coming decade"

In 2023, PH GDP size at PPP (purchasing power parity) was around $1.279 trillion. If PH will grow at sustained 6% yearly, our GDP size PPP will reach $2.039 trillion by 2031, or just 7 years from now.

I just wonder why these jet-setting, high fossil fuel-using but fossil fuel-lambasting and net zero-campaigning corporate guys would push their failed decarbonization experiment in Europe to be applied in the PH and other emerging markets.

See also:
Macroecon 22, Econ performance of Marcos Jr administration in year one, July 30, 2023
Macroecon 23, GDP forecasting and the forecasters, February 01, 2024
Macroecon 24, Sir Gary Teves' proposals to reduce public debt, March 09, 2024

Friday, March 22, 2024

BWorld 690, Why we need to grow by 8-9% yearly

Why we need to grow by 8-9% yearly
March 14, 2024 | 12:01 am

My Cup Of Liberty
By Bienvenido S. Oplas, Jr.

The Development Budget Coordination Committee (DBCC) is considering revising the Philippines’ annual growth target until 2024, from 6.5% to 7.5%, down to 6-7%. I think this is a practical adjustment because the global and regional economic environment is deteriorating, not improving, as shown by the generally lower growth of countries in 2023 compared to 2022, and with high inflation persisting in many countries this year.

I updated my table monitoring the GDP growth of major economies in the world, those with a GDP of at least $700 billion in purchasing power parity (PPP) values projected for 2023. Several countries were not included because there was either no GDP data or it was incomplete. These countries are Bangladesh, Pakistan, and the United Arab Emirates.

Some countries revised their quarterly growth data for 2023. Still, the Philippines remained the third fastest growing country after India and Iran. And our growth of 5.6% in 2023 is high over  a high base in 2022.

Practically all European economies except Turkey and Spain were crawling at 0.1% to 1.5% growth. Some were contracting — Germany and Ireland (see Table 1).

The good thing for us is that our economic growth rate is faster than that of many other countries in the world. The bad thing is that our economic base, our GDP size, is still “small.” Our projected GDP size of $1.28 trillion in 2023 is smaller than those of Thailand, Vietnam, and Taiwan and they have smaller populations than we do.

We actually need to grow 8-9% yearly for at least a decade to drastically expand our economy — our roads and physical infrastructure, both toll roads and rail, our power supply and electricity generation capacity, and so on.

Our frequent heavy traffic is an indicator that there are not enough roads despite the expansion of new toll roads. Our high electricity prices are an indicator that the power supply is not enough despite the favoritism in fiscal incentives and priority dispatch for intermittent renewables.

Assuming we can grow at 8.5% yearly from 2024-2034, the Philippines’ GDP size at PPP values would rise from $1.28 trillion in 2023 to $3.14 trillion in 2032, or at the level of Italy or South Korea in 2023.

I went to Hong Kong last January, then Toronto, Canada last week, and I observed their road infrastructures. I estimate that it would take us at least 40-50 years of steady infrastructure modernization to be at their level now in 2024. Traffic congestion is an engineering problem with engineering solutions, not bureaucratic solutions like hiring thousands of “traffic enforcers.”

Engineering plus the enforcement of the rule of law. The law applies equally to unequal people. No one is exempted and no one can grant an exemption. The law should apply to both governors and governed, both administrators and administered, both government officials and ordinary people.

Here’s hoping for continued growth and prosperity for our country and our people.

See also:
BWorld 687, High budget deficit and wage subsidy
BWorld 688, On the nuclear mission in Canada, the AP-MGen-SMC partnership, and electric cooperatives
BWorld 689, Nuclear energy to sustain Philippines’ high economic growth

Transport Econ 25, Traffic congestion is an engineering problem with eng'g solutions

I find this argument from the Management Association of the Phils. (MAP) funny.

Calamity declaration needed to deal with road congestion — MAP
March 21, 2024 | 9:07 pm

"He (Eduardo Yap, MAP) added that electric vehicles (EVs) should be encouraged through incentives and that public buses on the EDSA Busway be progressively converted to electric power.
Exempting private EVs from road congestion charges..."

Awww. These business leaders are only interested in pushing the EV business, not in "solving" heavy traffic congestion. Traffic is an engineering problem with engineering solutions, not bureaucratic or cronyism solutions.

HK should be traffic-choke. So many people and visitors/tourists (about 25 million/year pre-lockdown dictatorship) in few flat lands including reclaimed and artificial lands as HK is largely mountainous. Yet little congestion. Lots of trains, about 200 meters long each and can accommodate hundreds of passengers each trip. And the trains leave every 5-10 minutes. 

Photos below I took when I and my family were in HK last January.

And many bridges, long tall sturdy bridges connecting islands. Within the city there are many overpass, underpass, tunnels for vehicles. These are all engineering solutions. 

You hardly see a "traffic enforcer" on the roads or bridges or tunnels. In the PH we have so many "traffic enforcers", bureaucratic solutions that hardly work.

Now MAP and Eduardo Yap want to introduce another non-engineering solution -- EV cronyism, plus declaration of "traffic calamity." Ewww. Nasaan ang eng'g solution dyan?

Yes, city trains should run on electricity, whether above ground like our MRT/LRT or subway.  Not cars running on electricity. And train stations should be right in commercial centers and bus stops, not 200-300 meters away then make the public walk far. 

Underground walkways between train stations, shops.

Walkalator underground, HK Central station. Just like an airport.

By 2029, the Metro Manila subway system -- 33 kms long with 17 stations from Valenzuela to Bicutan and a spur line to Terminal 3 of NAIA -- will start operation. It will be the first modern subway system in this country. Long trains running on electricity.  And we'll be needing huge new supply of electricity, those that produce power 24/7, even if the Sun is not shining (night, cloudy, rains) and even if the wind is not blowing, zero blackout or power fluctuation even for a minute. 

Subway trains and their stations are very energy intensive. Intermittent wind solar cannot provide reliable power. Only thermal plants (coal, gas, oil, geo), big hydro, or nuclear.

See also:
Transport Econ 22, Uber's merger with Grab, April 04, 2018
Transport Econ 23, Penalizing commuters with far away bus/LRT stops, February 12, 2020
Transport Econ 24, Trains, tricycles and government-created route monopolies, March 16, 2024

Tuesday, March 19, 2024

BWorld 689, Nuclear energy to sustain Philippines’ high economic growth

Nuclear energy to sustain Philippines’ high economic growth
March 12, 2024 | 12:02 am

My Cup Of Liberty
By Bienvenido S. Oplas, Jr.

TORONTO — The Philippines’ Nuclear Trade Mission to Canada ended the three-day Toronto leg last Friday, March 8. It was a very educational tour filled with meetings for me and other Philippine participants, headed by Energy Undersecretary Sharon Garin and Science Undersecretary Leah Buendia.

On those three days, we saw the McMaster University Nuclear Reactor, we went inside the research reactor that provides neutrons for medical isotopes, imaging service, and power generation (five megawatts), and many other services. The reactor is in the middle of the sprawling university and students, staff, and visitors casually walk outside it without fear or alarm.

We also visited a big CANDU (Canada Deuterium-Uranium) mock-up reactor — not a real nuclear plant but containing all the basic components and various chambers — owned by Ontario Power Generation (OPG). OPG owns and operates the Darlington nuclear generating station, four CANDU reactors that can produce up to 31 terawatt-hours (TWH). This is almost one third of the Philippines’ total power generation of 114 TWH nationwide in 2022.

The top corporate leaders of Bruce Power, the biggest operating nuclear power company in North America, met us in their office in downtown Toronto. Their eight CANDU reactors can produce up to 48 TWH of electricity yearly, or 42% of total Philippine power generation in 2022.

If our Bataan Nuclear Power Plant (BNPP) had been allowed to operate and not killed by politics and health alarmism in 1986, it could have generated about 4.6 TWH/year (assuming 85% capacity factor) for the past 38 years. This is much larger than the output of wind + solar of 2.9 TWH combined in 2022.

As a developing country, we need to overcome our perennial low power generation and low reserves margin relative to demand, which leads to high electricity prices. I checked again the power generation of several countries and compared it with their economic performance over a seven-year period, 2016-2022. I grouped the countries into three: Group A are the G7 industrial countries, Group B are the major East Asian economies, and Group C are the major South Asian countries.

The G7 is characterized by low, if not contracting, power generation and low GDP growth of between 0.2% (Japan) to 2.1% (US). The East Asian and South Asian countries are characterized by high growth in power generation and high GDP growth, except for Thailand (see the table).

The Philippines’ average yearly growth of 4.9% in power generation was equivalent to a 4 TWH/year increase, and our GDP was growing at an average of 4.3% yearly average. In 2023, we grew at 5.6%, and the increase in power generation could be at least 5 TWH. And since the government targets growth of 6-7% yearly from 2024-2028, I strongly believe that we should produce 6-7 TWH/year of power, otherwise the growth target will not be attained due to blackouts, with supply unable to meet high demand.

Meaning if we produce only 5-6 TWH/year of power, our economy will grow only at the 5-6% range. We actually need to grow 8% yearly through the next decade if we want to, a.) drastically reduce poverty, and, b.) reduce the public debt/GDP ratio from the current 62% to 50% or less. The denominator, GDP size, must grow at a high level and be sustained for a decade or more, for us to attain those two big social and economic goals.

I am flying back to Manila in several hours. Yesterday I asked Energy Undersecretary Sharon Garin about the major lessons from this nuclear trade mission. She said that, “The Canadian Embassy has graciously given us an opportunity to comprehensively understand the core competencies of Canada in nuclear power development. Canadians have completed nuclear power plants in time or ahead of schedule, these are competencies we hope to develop in the Philippines. The Philippine Nuclear Energy Program Inter-Agency Committee will likely pursue more targeted and responsive joint activities with Canada in the near future. It is one of the few countries [with whom] we already have an existing bilateral agreement on nuclear energy.”

I also talked to two fellow participants who are local energy players and have expressed explicit interest in developing nuclear power in the country soon.

Meralco’s First Vice-President and Head of Networks, Froilan “Froi” Savet, said that “the Philippines can establish a robust regulatory framework similar to that of the Canadian Nuclear Safety Commission (CNSC) to ensure safe and secure operation of its to-be nuclear facilities. [A] possible Memorandum of Understanding (MoU) with premier academic institutions like Ontario Tech and McMaster University where we could send qualified students on scholarships to study nuclear engineering.”

Aboitiz Power Corp.’s Head of Energy Transition Projects, Felino “Lino” Bernardo, seconded Mr. Savet’s observation, saying that: “In the near to medium term, the Philippine government should first enact enabling policies that would, among others, signal support to those in the power generation sector and enable a seamless but rational allocation of resources. Likewise, multi-sectoral collaboration amongst local stakeholders and extending to foreign ones — who will leverage their experience and expertise — should close the existing skills gap, the development of robust supply chains, and converging of public-private efforts towards harnessing the potential of nuclear technology. There is a need for human capital development via friendly bilateral relations that support knowledge and skills transfers of peaceful use of nuclear energy.”

All good points there. And great guidance and assistance from the Canadian embassy in Manila with the series of meetings and site visits. In particular, David Hartman, the Ambassador of Canada to the Philippines, and Guy Boileau, Senior Trade Commissioner, and Jesus Sanchez, Trade Commissioner. Mssrs. Boileau and Sanchez brought us on a post-event tour of Niagara Falls — a fantastic place. Aboitiz Power’s Mr. Bernardo estimated that the falls’ huge volume of water can possibly generate at least 1,000 MW of power and it is still winter. Expect more power to be produced during summertime when water volume is higher.

Now that new coal plants in “greenfield” investment are prohibited, with the continuing low and pathetic output from wind-solar-biomass, and with new gas plants which are still insufficient to fulfill high power demand, the government and the public must learn to appreciate the value of nuclear energy. Nuclear power will help avoid blackouts in the future, and provide clean and stable 24/7 electricity for the country’s rising demand and fast economic growth.

See also:
BWorld 686, On electric cooperative cases at the ERC, renewables, and food inflation
BWorld 687, High budget deficit and wage subsidy
BWorld 688, On the nuclear mission in Canada, the AP-MGen-SMC partnership, and electric cooperatives

Pol Ideology 87, No more purely capitalist or socialist countries, more of modern fascism

I like this definition by econlib:

"Fscism is socialism with a capitalist veneer.... Where socialism sought totalitarian control of a society’s economic processes through direct state operation of the means of production, fascism sought that control indirectly, through domination of nominally private owners."

In modern application, it's not Big Government with weak private enterprises (socialism) or Big business with weak role of the state (capitalism). Rather it is Big Government + Big Business (including big media, big tech) marriage. 

(this photo, John Stossel,

Regulatory capture -- a situation where government regulators are in bed with, or in the payroll of certain business conglomerates. The regulators issue regulations and restrictions that are unfavorable to existing competitors, or dissuade potential competitors from coming in, so that Big business or conglomerate can have more control of the economy or certain sectors of the economy.

I think almost all countries in the world now are mixed economies. No more purely capitalist ones (Adam Smith, John Locke definition of limited government) like the US or UK before. No more purely socialist/communist governments like China, Cuba and Vietnam before.

More of post-WW2, modern fascism tendency and trend.

Meanwhile, in 1987 I went to Europe, my first time to set foot in that continent. I went to Amsterdam to have elaborate study of Marx, Lenin and Trotsky for 3 months when I was still a Marxist. But I've abandoned Marx since the mid 90s and embraced Adam Smith and David Ricardo. A 180 degrees shift, but slow, about 4-5 years transition. See my presentation in 2009 about my transition,

While I was still in Amsterdam in 1987 I joined my Trotskyist friends in a big rally in Brussels NATO HQ, an anti-cold war rally (NATO vs Warsaw Pact). I wondered years after, why Marxists who campaign for working class revolution vs capitalism would be against NATO war plans, I didn't understand then.

In measurement of economic growth, I would delineate countries not whether they are largely capitalist or largely socialist. But rather how ecological socialist they are, it's clearer. Europe is where ecological socialism and central planning is strongest (decarbonization, net zero, ESG, etc), next strongest would be N. America and Japan, essentially the G7.

The less ecological socialist are largely the BRICS (Brazil, Russia, India, China, S. Africa), MidEast and ASEAN countries. Although Singapore is now following the G7 path. Degrowth is now creeping in Singapore.

See also:
Pol. Ideology 84, Capitalism and prosperity, June 28, 2022
Pol. Ideology 85, Austrian Economics and marginal utility, January 06, 2023
Pol. Ideology 86, Endless crisis narratives and authoritarianism, August 27, 2023

BWorld 688, On the nuclear mission in Canada, the AP-MGen-SMC partnership, and electric cooperatives

On the nuclear mission in Canada, the AP-MGen-SMC partnership, and electric cooperatives
March 7, 2024 | 12:02 am

My Cup Of Liberty
By Bienvenido S. Oplas, Jr.

TORONTO — It is my first time to set foot in Canada. Our plane from Hong Kong landed in the evening and I saw from the air how extensive the bright lights of Toronto are — amazing and fantastic! This is clear proof of a country’s level of development and industrialization — that it has a huge supply of power that is efficiently distributed at competitive prices to wide areas of the country.

I will be discussing four energy topics in this column.


I am participating in Canadian government-organized events in Ottawa, Toronto, and Saskatoon from March 4 to 12. The Philippine delegation is headed by Energy Undersecretary Sharon Garin, Science Undersecretary Leah Buendia, Energy Regulatory Commission (ERC) Chairperson Monalisa Dimalanta, Philippine Nuclear Research Institute Deputy Director Vallerie Samson, officials from the Philippine embassy in Ottawa, the Philippine consulate in Toronto, and officials from the Canadian embassy in Manila. There are also participants from Philippine private corporations: Aboitiz Power, Meralco, and Prime Metro BMD. And a few members from Philippines media, me included. But we will participate only in the Toronto leg, from March 6-8. The formal events will start today and I will write about them next week.

I believe that the small modular reactors (SMRs) will be viable in off-grid islands and provinces that currently have up to 99% of their energy needs provided by diesel/bunker oil gensets. They have frequent blackouts; their power cost is expensive and made “affordable” only via the subsidy that is the universal charge for missionary electrification (UC-ME) that is slapped on all on-grid consumers nationwide. Many potential investors fear blackouts and expensive energy and hence, job creation on these islands is limited.

There are many small industrialized countries which have big power supplies. They have been using nuclear power for many decades and have had no nuclear accidents (I list them in Table 1). Small countries like Slovenia, Slovakia, and Bulgaria generate 2,500+ kWh per capita from nuclear energy alone. Meanwhile, in 2022, the Philippines generated a total of only 1,000+ kWh per capita of power from all energy sources.


Last Friday, three of the largest power companies in the country — Meralco PowerGen Corp. (MGen), Aboitiz Power Corp. (AP) and San Miguel Global Power Holdings Corp. (SMGP) — launched the Philippines’ first and most expansive integrated liquefied natural gas (LNG) facilities in Batangas. AP and MGen will invest jointly in two of SMGP’s gas plants — the existing 1,278-megawatt (MW) Ilijan power plant and the new 1,320-MW combined cycle power plant which is expected to start operations by end-2024. See this report in BusinessWorld: “MGen, AboitizPower, and SMGP sign $3.3-B deal for Batangas LNG facility” (March 4).

I like this development as it further ensures our energy security, so I congratulate the companies. I like these quotes from the heads of the three power conglomerates from the press release that was issued.

“Apart from transforming the energy landscape of the Philippines, this symbolizes a milestone alliance among major players in the energy industry towards a more sustainable future. We are thrilled to have such reliable partners as we lay the foundation for a brighter, greener future,” said MGen Chairman Manuel V. Pangilinan.

AP Chairman Sabin M. Aboitiz noted, “Both LNG and renewables are needed to achieve a balanced energy mix and well-planned energy transition. Above all, this is a big win for the Philippines and the people. Economic development is impossible without energy security.”

SMGP Chairman and President Ramon S. Ang said, “For the first time, three leading power companies are working together to secure our country’s energy needs while transitioning towards cleaner power sources. This represents a major leap forward for our energy future, ensuring not just reliability but also cost-efficient power for many Filipinos.”

In a separate press release, AP President and CEO Emannuel Rubio was quoted as having said, “We continue to diversify our generation portfolio and increase our capability in energy security in the Philippines through a minority share in the first integrated LNG facility, to keep the lights on.”

For Table 2, I looked at the financial conditions of these three players and I included FirstGen as it is a big gas company too. I notice that the four big power companies have a combined gross revenue of about P1 trillion.

When converted to US dollars, that’s only $17.9 billion gross — “small” compared to most energy companies in the ASEAN-6 and developed East Asia.


From the monthly operations report by the Independent Electricity Market Operator of the Philippines (IEMOP) one sees that the average power margin (supply minus demand) is about 2,500 MW in the Luzon grid, about 1,200 MW in the Mindanao grid, and only around 300 MW in the Visayas grid. Thin reserves and small margins mean the grid is courting yellow-red alerts or near-actual rotating blackouts, that prices are high, and consumers are forced to cut their electricity use — not good.

Of the roughly 1,850 MW average demand in the Visayas grid, about half of it goes to Cebu alone, and the other half is shared by the sub-grids in Negros, Panay, and Samar-Leyte. Expansion of a coal plant in Cebu is being planned, but instead of welcoming it, some blackout-friendly environmental activists are lobbying that it should be discontinued because… climate. When there are frequent blackouts, the poor use more candles while the rich use more diesel-powered gensets. More candles often lead to fires, the destruction of property and injury or death. Today, not decades from now.

The national and local governments, local businesses and consumers should prioritize 24/7 electricity and job creation, not scare people about what will happen to the climate 50 or 100 years from now.


In my recent column “On electric cooperative cases at the ERC, renewables, and food inflation” (Feb. 29), I forgot to emphasize that many electric cooperatives (ECs) in the country are indeed abusing their consumers with expensive rates that have no regulatory approval, and that some of these ECs have already been penalized by the ERC but are still awaiting the implementation of fines and penalties. The ERC people might be over-worked since there are 120+ ECs to monitor monthly nationwide.

This is another reason why there should be mergers and consolidation of ECs nationwide. I wrote here before that in my province Negros Occidental, there are five ECs, plus another three in Negros Oriental, or eight ECs in just one island. Meaning that the ERC has to monitor and evaluate eight ECs every month in Negros Island. I believe there should be only one corporate distribution utility (DU) in Negros Island, another single DU in Panay Island, and so on. This would result in economies of scale for the DU, less work for the regulators, and lower electricity cost for consumers.

See also:
BWorld 685, The economic impact of 2 years of war in Ukraine, and the Philippines fiscal situation
BWorld 686, On electric cooperative cases at the ERC, renewables, and food inflation
BWorld 687, High budget deficit and wage subsidy

On charter change, make the Constitution short

About charter change, I think we should have a short constitution, maximum 25 pages from the current 91 pages. Mostly general principles, no details, like minimum age for those running for Senator, Congress; foreign equity limit, etc. All details should be done by legislation, by Congress.

The purpose of the Constitution especially the Bill of Rights is to protect the people from government. Executive and Legislative branches especially. Thus, the Bill of Rights explicitly state what areas that Congress can NOT legislate, Executive can NOT issue executive orders, adminstrative orders, etc.

The longer the constitution, the more details in the constitution, the more divisive it is for the people.

There are a number of details in the charter. Examples:

Article VI, The Legislative Department

SECTION 3. No person shall be a Senator unless... at least thirty-five years of age... 

SECTION 6. No person shall be a Member of the House of Representatives unless... at least twenty-five years of age...

SECTION 7. The Members of the House of Representatives shall be elected for a term of three years...

Age limit, terms of office, etc. are details that should not be in the Constitution. The 60-40 limit in domestic-foreign equity in investment in certain sectors of the economy should not be there. If these details are not in the constitution, there would have been less divisiveness in society. 

Most if not all legislation tend to subjugate the people or groups of people. Like a tax hike for sector A but not in sector B, subsidies for sector C but not for sector D, and so on.

A new constitution should instead focus on the Bill of Rights, expand it, protect people from government. For instance,

Article III, Bill of Rights.
Section 1. 

This section should be expanded.

Right to life includes freedom from state-enforced mandatory vaccination and inoculation (otherwise a person cannot go to school, office, mall, ride public transpo, etc).

Right to liberty includes freedom of movement, no prolonged lockdown and horrible mobility restrictions. During the lockdown dictatorship of 2020, even going to the next municipality requires a travel pass. This was relaxed a bit in 2021 but mobility restrictions persisted until about end of the year. Restrictions were relaxed because the national and local elections May 2022 was approaching and politicians, their staff and supporters were moving a lot.

Saturday, March 16, 2024

BWorld 687, High budget deficit and wage subsidy

High budget deficit and wage subsidy
March 5, 2024 | 12:02 am

My Cup Of Liberty
By Bienvenido S. Oplas, Jr.

Last week, on Feb. 29, the Development Budget Coordination Committee (DBCC) released the full year cash operations report (COR) for 2023. The good news from it is that revenues have expanded significantly despite the absence of a major tax hike, from P3.55 trillion in 2022 to P3.82 trillion in 2023, and that the actual collection was higher by P95 billion than the target or programmed P3.73 trillion.

The bad news is that the actual budget deficit of P1.51 trillion was higher than the programmed deficit by P13 billion because expenditures have expanded significantly. Last year’s actual spending of P5.34 trillion was P108 billion higher than the programmed spending of P5.23 trillion.

The average budget deficit has increased from P609 billion/year in 2018-2019 to P1.542 trillion/year in 2020-2023. Consequently, the average financing or borrowings have more than doubled, from P830 billion/year in 2018-2019 to P2.196 trillion/year in 2020-2023 (see the table).

See also these recent reports in BusinessWorld: “Gov’t debt hits record P14.79 trillion at end-January” (March 1), “NG budget deficit exceeds full-year ceiling in 2023” (March 1), and, “Gross borrowings hit P2.19 trillion” (March 4).

I think there are three major reasons why the deficit in 2023 continued to remain high.

1. On the revenue side there was a continued decline in excise tax collection, mainly from tobacco tax revenues. As the tax rate has increased from P55/pack in 2021 to P60/pack in 2022, and P63/pack in 2023, the price of legal tobacco has become more expensive compared to illegal or smuggled tobacco and thus many smokers have shifted to the latter and government revenues from this product have declined.

2. On the expenditure side, National Government subsidies for both the needy and non-needy keep expanding. Among the non-needy are non-poor households that declare themselves as poor to continue receiving subsidies and freebies with no timetable, and the military and uniformed personnel (MUP) pension. The latter was about P164 billion in 2023 and could reach P200 billion this year, when it should be zero. Government doctors and nurses, teachers and professors, engineers and agriculturists, etc. pay for their own future pension via deductions from their monthly salaries but MUPs pay zero. And the pension is tax-free, so zero contribution as active personnel, zero contribution as pensioners. An average tax of 25% on the P164-billion pension, or P41 billion, will help because it goes back to them in the succeeding years. Plus, there are the monthly contributions by active MUPs.

3. The high interest rate policy of the Bangko Sentral ng Pilipinas contributed to the high interest payment of public debt, from P429 billion in 2021 to P503 billion in 2022 and further up to P628 billion in 2023. I will add that the high interest rate policy has cooled some investments in the country and adversely affected potentially higher GDP growth.

These three factors are beyond the policy changes or interventions made by the current economic team. The “sin products” tax rate was made by Congress upon the prodding of the economic teams of the last two administrations. The costly and burdensome MUP pension scheme was crafted back in the Fidel Ramos administration (1992-1998), and the high interest rate policy is made by the monetary authority.

Given these constraints, what can the current economic team do?

Finance Secretary Ralph G. Recto must go beyond revenue mobilization and help raise overall economic productivity. For instance, on the Metro Manila Subway, which is funded by huge foreign aid, he correctly announced that “this administration will deliver top-notch infrastructure projects to modernize the Philippine mass transportation system. We are working non-stop to get all of these done as soon as possible.”

Budget Undersecretary and Principal Economist Joselito R. Basilio rightly observed that “the lower National Tax Allotment shares of local government units for 2023 weighed down on overall growth of spending. Nonetheless, other productive expenditures, particularly infrastructure and other capital outlays, helped buoy government disbursements in 2023 and contributed to propping up overall GDP growth.”


Earlier, there was a concerted lobby for Congress to legislate another minimum wage hike and, in the process, set aside the traditional tripartite negotiations among government (through the Department of Labor and Employment or DoLE), business and labor. See these recent reports in BusinessWorld: “‘Not the right time’ to raise wages — NEDA” (Feb. 23), “Legislated wage hike won’t benefit 80% of workforce — business groups” (Feb. 29), and, “Chamber warns prices will rise if wage hike bill becomes law” (Feb. 29).

Budget Secretary Amenah F. Pangandaman made the headlines in the Philippine Star, “DBM chief: Government can’t afford wage subsidies” (March 2). She was quoted as saying, “With its limited fiscal space the government is unlikely to find the resources to subsidize minimum wage earners… pushing through with such a subsidy would undermine consolidation efforts as well as the delivery of other social services. This is currently not in the budget approved by Congress. And it might eat up the budget for social services and other infrastructure priorities.”

That is a wise and rational position. As shown in the numbers above, the government keeps on borrowing a lot because domestic revenues are not enough, so we should avoid inventing new ways of spending. Rather, we should think of spending cuts in certain sectors, or the large-scale privatization of government assets to fund new or higher spending to unburden the taxpayers.

Meanwhile, I attended a lunch meeting organized by the President of the Federation of Filipino Chinese Chambers of Commerce and Industry, Inc. (FFCCCII), Dr. Cecilio K. Pedro, for business editors and columnists last week at the Makati Shangri-La hotel.

Dr. Pedro discussed the general activities for the upcoming 70th anniversary of FFCCCII, the local business sector’s desire for world peace and commerce, to have friends and not enemies in many countries so that more business and jobs can be created here, and that wages will increase with higher demand for labor and not with legislated minimum wage hike. I agree with the gentleman.

See also:
BWorld 684, The nuclear trade mission to Canada
BWorld 685, The economic impact of 2 years of war in Ukraine, and the Philippines fiscal situation
BWorld 686, On electric cooperative cases at the ERC, renewables, and food inflation

Transport Econ 24, Trains, tricycles and government-created route monopolies

On the never-ending traffic in Metro Manila and other cities, many people blame car owners then blame other agencies like MMDA, DOTr. I think these analysis are partly wrong and hence, their proposals are unwise or will not address the traffic problem. Why, well consider this situation.

If you live in UP Village, or Filinvest QC and going to Makati Ayala/Buendia or BGC and if you commute this is your route: (1) tricycle from house to Philcoa or COA, (2) jeep from Philcoa to MRT station, (3) MRT Quezon Ave to MRT Ayala station, (4) jeep to Ayala or bus to BGC. Going back home, reverse the process, total eight rides. Each day. If you are in formal barong clothes or carrying a laptop or valuable papers, endure this? Especially during rainy months? Most car-owning people will say No.

So even if we have the most modern MRT trains and stations by tomorrow, most people will still drive their cars.

LGUs create tricycle route monopoly. From house to Philcoa, no jeepney or aircon van, only tricycles.

LTFRB creates jeepney, bus route monopoly. So from Philcoa, only jeepney will serve, not sure if aircon vans are allowed to pick up short-distance passengers like Philcoa-MRT.

And many activists or even some government officials pushing for "inclusive transportation", "inclusive growth", etc will be averse to remove the tricycles, remove the jeepneys, diesel or electric.

Guys, do NOT blame car owners. They know their priorities, like their own or family safety, convenience, because government has created favoritism and transpo route monopolies, which make public transpo inconvenient, even less safe.

My own proposals for these two problems:

(1) Deregulate routes by bus/van companies. LTFRB will only give franchise to transpo companies, monitor their compliance but not dictate where the vehicles can go and cannot go. 

(2) Demonopolize routes within LGUs. So current routes by tricycles can be served by non-aircon jeeps or aircon vans. 

This way, I think tricycles will die a natural death because passengers will just stop riding them. No need for legislation or City ordinances to remove tricycles.

About tricycle drivers and operators who will lose their jobs, people are rational. Tricycle drivers who see that passengers no longer patronize them because their route monopoly has been removed, they usually find other jobs. Remember the former typewriters who lost jobs when computers became more accesible to people. Or telegram companies and employees when people shifted to pagers, and when people shifted to cellphone communication via emails or FB messenger, IG, twitter, etc. All of those people whose companies and sub-sectors have vanished, they found new jobs somewhere.

The previous lavanderas whose jobs have vanished with the introduction of laundry washing and drying machines, the previous manual dishwashers in restaurants whose jobs have vanished with the introduction of dishwashing machines. Many more old jobs now replaced by machines, people move on, upgrade their skills. Previously bicycle or motorcycle mechanics later become cars and trucks mechanics, even heavy machine mechanics with much higher pay. People are rational. Hunger did not happen to typewriters, pager operators, telegram delivery guys, lavanderas, etc. They see the trend and it's slow moving, they have time to adjust. Just don't introduce wider government endless subsidies, people can become lazy.

More about tricycles

If government will keep protecting tricycles by giving them route monopoly, we shall have tricycles in our roads for the next 100 years or more. Tricycles are among the major sources of traffic congestion because they often counterflow then cut the motorists with just 1-2 inches space, forcing other motorists to stop or slow down to give way.

Not immediate nor forcible phaseout of tricycles. Like typerwriters, pagers, telegrams, the phaseout was slow, taking several years. Current new tricycles will depreciate enough before the owners decide to set aside and sell at junk shops. Or convert as "garong", cargo only side car of motorcycles.

The rural tricycles are often worse than urban tricycles. Most provincial roads now are 4-lanes, 2 lanes each side. Inner lane shoul be overtaking/fast lane, outer lane for slow vehicles. Most tricycles in the provinces occupy the inner or fast lane, forcing cars to overtake at the outler lane, or go against the on-coming vehicles. LGUs are supposed to apprehend these tricycles bec they are the ones that granted permit but LGUs not doing their job, neither the local police. 

Tollroads are good. Exclusive transpo, not inclusive transpo. Tricycles, small motorcycles, bicycles, kariton, tractors, are prohibited. And travel is safer, faster, convenient. Mali yang mga "inclusive transpo", we often get inclusive chaos.

Friday, March 15, 2024

BWorld 686, On electric cooperative cases at the ERC, renewables, and food inflation

On electric cooperative cases at the ERC, renewables, and food inflation
February 29, 2024 | 12:02 am

My Cup Of Liberty
By Bienvenido S. Oplas, Jr.

I saw a copy of the “List of distribution utilities with violations under RA 9136 as determined by Energy Regulatory Commission (ERC) in 2023.” Some 30 electric cooperatives (ECs) and private distribution utilities (DUs) were listed there. The violations are generally about “The generation rate charges to consumers are beyond its load weighted average NPC TOU rates contrary to Section 2, Article II of the OU Rules.” The Orders to them are to “Submit Hourly Energy Purchases (in excel format) and copies of power bills,” and to “Immediately Refund all generation rate collected in excess of the load weighted average NPC TOU rate in Luzon from (period covered).”

Accompanying this piece is a list of the ECs and DUs with long-running cases. Most ECs have cases covering shorter durations, from 2020 to 2023.

I got curious about the San Fernando Electric Light and Power Co. (Sfelapco) and the huge amount of its reimbursement order: P654.4 million + P1,7 billion = P2.4 billion! Among the reports I saw about this was this one: “CA junks P1.4 billion refund order vs Pampanga power firm” (Inquirer, Jan. 27). It said that the Court of Appeals (CA) Special 17th Division declared that the ERC’s order to refund the P2.4 billion “lacked legal and factual basis and that it violated Sfelapco’s right to due process, among others.” The CA added that the DU was not given the “opportunity to ventilate matters involving the orders of refund adjudged against it.”

I checked the other ECs and DUs — they had similar violations: no approved or un-acted power supply agreements (PSAs). I am no fan of ECs and their Congress-granted geographical franchise monopolies, where captive customers have no choice but to pay whatever rates they impose. But I remember that under the previous ERC leadership, there was a huge backlog of un-acted, and hence un-approved, PSAs, so ECs/DUs and their old genco PSAs proceeded with the old arrangements and prices. And after many years, here the ERC comes penalizing ECs and DUs for unapproved PSAs that it itself did not act upon on time. So, it seems that at fault here was the ERC under the previous administration.

Last week, on Feb. 22, I attended the “Business to Business Matching Event to Support Energy Transition” (B2B SET) conducted by the Department of Energy (DoE) and the United States Agency for International Development (USAID) at the Grand Hyatt Hotel BGC. Among the speakers were DoE Secretary Raphael PM Lotilla, Ryder Rogers of USAID Philippines, DoE Undersecretaries William Fuentebella and Rowena Guevarra, ERC Chair Monalisa Dimalanta, officials from the Department of Environment and Natural Resources, Board of Investments, National Irrigation Administration, and the Asian Development Bank.

What struck me most were the huge planned capacities for solar (58.1 gigawatts or GW), onshore wind (254 GW), offshore wind (178 GW), plus ocean (170 GW). Wow! Compare that with the total installed capacity of only 28.3 GW in 2022, of which solar was only 1.5 GW and wind only 0.4 GW.

I follow and monitor monthly inflation data, both national and global. Among the things I notice are that overall inflation, even in rich countries, remains at high levels and that food inflation is much higher than overall inflation, and this coincides with rise in solar and wind capacities in many countries.

Foremost among the countries that have these trends are those in Europe. For lack of space, I have limited myself to only five European Union countries plus Australia and Japan in the data table here.

As more solar and wind capacity is added, food inflation rises, and total power generation either flat lines or declines. This is because solar and wind are priority dispatch in the grid, whether in Europe, America or Asia. So, more coal, gas, and nuclear plants are forced to retire because they cannot earn 24/7 anymore, or they are being forcibly closed earlier, and they are the real electricity producers, not wind/solar.

Let us look at GDP growth in Europe in 2023: Spain 2.5%, France 0.9%, Italy 0.8%, the UK 0.3%, and Germany -0.1%. They are technically crawling, if not contracting like Germany, Poland with -0.1%, and Ireland with -2.1%.

The Philippines should not follow the Europe path of deindustrialization and degrowth economics in pursuit of the amorphous and weird goals of “net zero” and “decarbonization.” We should prioritize our people’s desire to have more jobs, more businesses, more stable and cheaper electricity, more industrialization and prosperity. The gung-ho plan to inject more intermittent wind and solar into the electricity grid should be abandoned before it is too late.

See also:
BWorld 683, NAIA privatization is good, legislated minimum wage is bad
BWorld 684, The nuclear trade mission to Canada
BWorld 685, The economic impact of 2 years of war in Ukraine, and the Philippines fiscal situation

Rising car theft in Toronto and the role of government

I was surprised to see these reports,

Toronto Police Gives Advice on Auto Theft: Just Let Thieves Steal Your Car
Paul Joseph Watson 14th March 2024

Toronto Police have given advice to residents worried about the city’s spiraling auto theft problem – just let thieves steal your car by leaving them the keys.

Leave keys at the front door: Toronto police constable gives BIZARRE advice amid rising car theft
Toronto, Canada
Edited By: Heena SharmaUpdated: Mar 14, 2024

Toronto police advise locals to leave car keys near front doors to avoid confrontations with violent thieves
'Home invasions and break and enters for auto theft occurrences rose 400 percent in 2023,' police say
By Gabriel Hays Fox News March 15, 2024

(this photo from

So I asked four Filipino friends living in Toronto -- is this true? Their replies:

1. Oo, kainis Yan. (Yes, it's irritating)

2. Yup, it was announced by one of the toronto police member that to avoid being ransacked, just place car key/s near the main door para pag may magnakaw ng car sa drive way, makikita agad ang susi malapit sa main door.

3. I stopped watching news coz it's very depressing. Car theft, talamak. Ilang friends namin nanakawan ng car. May Mafia behind...they work inside the govt office.

4. This is not true, but it’s true that car theft is on the rise.

Then this is clear governmentt failure. The main purpose of government why it was invented, from a  classical liberal tradition, only 3 functions: protect the people's right to life, right to private property, right to liberty. A car is private property. If thieves can easily take other people's car, then government is not doing its mandate to protect the people's right to private property.

Trudeau and his team are busy protecting the properties of Ukraine, Palestinians?

Canada, US, etc. governments cannot control the invasion of criminals in the homes of their own citizens but are so concerned about Ukraine, Taiwan, N. Korea, etc. They cannot prioritize the protection of right to life, right to private property of their own citizens yet are so focused on right to life, property of other nationals thousands of kilometers away.

Same here. We are harassed by daily traffic, too many road intersections where  congestions occur. Govt can build more overpass, underpass, tunnels, avoid having intersections as much as possible so that vehicles can pass smoothly. But govt says it has no money to build more infra, rely on PPP. Then govt says it will have money to buy soon submarines, battleships, jetfighters, etc.

Meanwhile, I think the US, Canada, W. Europe will slowly implode socially and economically. Too many unvetted illegal immigrants and possibly with criminal or terror background from many countries are already there.

Saturday, March 09, 2024

BWorld 685, The economic impact of 2 years of war in Ukraine, and the Philippines fiscal situation

The economic impact of 2 years of war in Ukraine, and the Philippines fiscal situation
February 27, 2024 | 12:02 am

My Cup Of Liberty
By Bienvenido S. Oplas, Jr.

Last Saturday, Feb. 24, marked the second year of the Russian invasion of Ukraine. Immediately after that, the US and EU allies imposed more economic sanctions against Russia, on top of existing sanctions imposed when Russia annexed Crimea in 2014. The most severe sanction was the freezing, if not confiscation, of Russia’s foreign reserves worth $300 billion.

Important questions to ask: Did those punitive sanctions vs Russia really weaken it? And were those that imposed the sanctions better off?

To help answer these questions, I again checked the economic performance of the major players — the US and G7 countries plus other major EU countries on the one hand, and Russia and its economic allies in original BRICS (Brazil, Russia, India, China, South Africa) on the other. I added other East Asian countries to the list to see their performance.

When it comes to GDP growth in 2022 and 2023, all the European countries in the G7 and others in the list suffered consistent growth decline, even contraction (Germany, Sweden, Poland, Ireland), in 2023. In contrast, the BRICS economies retained a path of growth except for South Africa. Russian growth in 2023 was more of a “base effect” from a contraction in 2022.

When it comes to inflation rate, all the G7 and other Europe countries experienced decades-high inflation rates in some months of 2022. These declined a bit in 2023 but still high rates compared to their historical average rates. BRICS, however, just had fluctuating rates from 2021 to 2023. China, meanwhile, is close to deflation.

So back to the original questions. Did those punitive sanctions vs Russia really weaken it? And were those that imposed the sanctions better off?

The answer is “no.” The countries that imposed hard sanctions were the ones that suffered economically via low growth, if not contraction, plus very high inflation. Europe’s industrialization was largely powered by cheap oil and gas from Russia, and when they reduced, if not cut off, such a cheap energy source, they had to source expensive oil/gas from elsewhere.

Meanwhile, the East Asian countries have had a mixed experience — fast growth for the countries with big populations, namely the Philippines, Indonesia, and Vietnam; and growth deceleration for those closely aligned with the US like South Korea, Taiwan, and Singapore (see Table 1).

I asked Budget Secretary Amenah F. Pangandaman and other members of the economic team about the country’s performance. She replied that “the Philippines was able to escape the economic instability suffered by many countries, we even grew fast the past two years — 7.6% in 2022 and 5.6% in 2023. I believe our measures on fiscal consolidation, productive spending for socio-economic development and hard infrastructure via Build Better More, faster implementation of projects, more efficient public spending via digitalization in transactions and open government partnership, have contributed to our economic resiliency and dynamism.”

I think this is a solid assessment. We must just make sure that the big annual budget deficit and public borrowings are controlled so that less public resources are devoted to interest payments.

I also checked the cash operations report (COR) released monthly by the Bureau of the Treasury (BTr), particularly on revenues and how they perform given the huge yearly fiscal gap.

Revenues have recovered and by 2022 were higher than 2019 levels, except when it came to excise tax collections which declined from P318 billion in 2021 to P312 billion in 2022 and P278 billion January-November 2023 (see Table 2).

I asked Finance Secretary Ralph G. Recto about this trend, he said that “Excise taxes on tobacco are falling due to smuggling and illicit trade. When taxes are high, illicit trade and smuggling become very profitable. Furthermore, unregulated disposable vape products are being smuggled as well. I would support banning disposable vape products and penalizing e-commerce platforms selling them, including regulated vape products without stamp (excise) tax.”

Great points, Secretary Recto. I have written at least two pieces in this column about him before: “Senator Recto’s tax cut plan shadows Reagan, Thatcher, and Trump tax cuts” (Nov. 23, 2020), and “Revenue challenges faced by new Finance chief” (Jan. 16, 2024).

In my second article about Mr. Recto, I noted that for 2024, “The BoC may target collecting P1.8 trillion by significantly controlling smuggling and illicit trade. From the estimates Representative Joey Salceda gave last October, tobacco smuggling alone results in about P60 billion/year in revenue losses. The BoC plus other lead enforcement agencies like the Philippine National Police and the Coast Guard should work harder in controlling illicit trade because their annual budgets are huge and come from taxes, so they should strive to control tax leakage.”

The Philippines has gained the economic momentum, growing fast even when many countries were growing slowly if not contracting. Our economic team is composed of seasoned technocrats who have the wisdom to decide when to move forward with economic intervention and when to pull back. Thank you, Sec. Pangandaman, Sec. Recto, and Sec. Arsenio Balisacan.

See also: 
BWorld 680, The nuclear option to energize growth, Feb. 24, 2024
BWorld 681, Low inflation, low unemployment, high growth — this is the Philippines, Feb. 25, 2024
BWorld 682, The nuclear option for Asian industrialization, Feb. 27, 2024
BWorld 683, NAIA privatization is good, legislated minimum wage is bad
BWorld 684, The nuclear trade mission to Canada

Macroecon 24, Sir Gary Teves' proposals to reduce public debt

Sir Gary Teves was my former boss twice, at CPBO, House of Representatives in the 90s, then at Think Tank Inc. in early 2000s, his private consulting firm in Makati before he became Land bank President then DOF Secretary under the Gloria Arroyo administration. I did not join him in either LBP or DOF.

Yesterday he has a good article in PDI, 

Managing the national government debt
By: Gary B. Teves - March 06, 2024

... How can we reduce national debt? The government has to earn more revenues and/or decrease its spending to reduce our national debt. We recommend the following:

Step up efforts to improve tax collection efficiency.... We have the highest value-added tax rate (12 percent) but the lowest VAT efficiency rate (0.4) among our Asean peers.

In addition to the recently approved Ease of Paying Taxes Act, Congress should also consider pursuing amendments to the bank secrecy law to make the investigation and prosecution of tax fraud more effective.

The government should also implement a risk-based tax audit system which would allow the Bureau of Internal Revenue to focus on auditing high-risk taxpayers, or those who pay relatively low taxes compared to what they earn.

Pass priority tax reforms into law. The proposed VAT on digital service providers, excise tax on single-use plastics and pre-mixed alcoholic beverages, and package 4 of the Comprehensive Tax Reform Program, would help generate an estimated P32.4 billion in additional revenues for the government in 2024.

Engage in more public-private partnerships, sell select government assets, and privatize some government-owned and -controlled corporations. The recently approved bid of San Miguel Corp. (SMC) to improve the Ninoy Aquino International Airport is a good first step. The agreement requires SMC to pay the government up front and annuities a total of P80 billion, which could substitute foregone revenues from the scrapping of the proposed excise tax on junk foods and sweetened beverages worth P75.7 billion for 2024.

The government could sell assets such as those owned by the Bases Conversion and Development Authority in Clark and the Basay mining project in Negros Oriental. Privatizing the Philippine Amusement and Gaming Corp. and key facilities managed by the Philippine Ports Authority can also unlock additional revenues.

Remove the restrictive economic provisions in the 1987 Constitution to attract more investments, create quality jobs, and encourage technology transfer. More businesses mean more revenues from corporate tax and more jobs mean more revenues from increased personal income and consumption taxes. Additionally, technology transfer can help make the country more competitive and upskill and reskill the labor force, which would attract more job-generating businesses and further increase public revenues.

Pass key reforms to reduce government spending. We recommend for Congress to pass equitable and sustainable reforms to the pension system of military and uniformed personnel (MUPs). Unfunded MUP pension liabilities are now at P14 trillion, which is 45.8 percent higher than the P9.6 trillion recorded in 2019. Amending the bank secrecy law can also help reduce government debt as it would help the Bangko Sentral ng Pilipinas monitor corrupt and illegal financial actions.

Conclusion. Like a responsible family, our country should try as much as possible to live within our means. While parents strive to give the best for their children, they cannot always rely on borrowed money to pay for their family’s needs.

While borrowing can be a useful tool for necessary expenses and economic development, it is crucial to ensure that borrowed funds contribute to long-term growth. Maintaining a healthy debt-to-GDP ratio is a reflection of wise fiscal choices that safeguard the nation’s financial well-being in the long run.

I agree with many or all of his points, especially on privatization of many government assets. I will just add that he failed to mention the BSP's high interest rate policy as a "solution worse than the problem" it intends to solve of high inflation. 

High BSP int rates immediately raise the interest payment, which crowds out other public spending. Many potential investments also are not pushed through because of higher int. cost.

BSP (monetary authority) main concern is to "fight inflation" and interest rate policy is its main hammer.

DOF, DBM (fiscal authorities) main concern is fiscal consolidation, limit the budget deficit and high borrowings and sustain fast growth. And high interest rates adversely affect and push upwards interest payment on public debt domestic loans (about 3/4 of total public debt).

I think the midway solution bet the fiscal and monetary authorities is PH interest rates of around 5.5%, not the current 6.5%.

Indonesia has int rate of about 5.8% much of 2023, now 6%. Inflation rate was around 4% much of 2023.

Vietnam has interest rate of about 5.5% much of 2023, now 4.5%. Inflation rate was around 3.3% much of 2023. 

Philippines interest rate about 6% much of 2023, now 6.5%. Inflation rate about 6% in 2023.

ID, VN and PH are 3 ASEAN countries with high int rate, the other 3, TH, MY and SG have lower rates. VN points to a good balancing act.

Much of PH inflation is pulled up by food commodities. So whatever interest rate tinkering, people will keep buying food, whether in public market or SM or Rustans grocery or restaurants. The main causes of high food inflation and hence, overall inflation, are high farming costs related -- like expensive diesel to save the planet via diesel tax (from zero to P6/liter under TRAIN law of 2017). Plus  reduced rice land, corn land via more solar farms to save the planet.

It is time for BSP to step back and cut interest rates. The problem is in climate drama, not in Filipinos' high consumption of food commodities.

See also:
Macroecon 21, Tax revenues, PH outstanding debt, February 17, 2023
Macroecon 22, Econ performance of Marcos Jr administration in year one, July 30, 2023
Macroecon 23, GDP forecasting and the forecasters, February 01, 2024

BWorld 684, The nuclear trade mission to Canada

The nuclear trade mission to Canada
February 22, 2024 | 12:02 am

My Cup of Liberty
By Bienvenido S. Oplas, Jr.

The Canadian embassy in the Philippines has organized a Philippines Nuclear Trade Mission to Canada in early March this year. Officials from the Department of Energy, Energy Regulatory Commission, private energy companies, and some media people were invited.

Canada is a good place to learn more about nuclear power technology and economics. As of 2022, it had 19 operable nuclear power reactors with a capacity of 13,624 megawatts (MW). In comparison, the US had 93 operable reactors with a capacity of 95,835 MW, France had 56 reactors with 61,370 MW, China had 55 reactors with 53,286 MW, Japan had 33 reactors with 31,579 MW, Russia had 36 reactors with 26,802 MW, South Korea had 26 reactors with 25,829 MW, and India had 22 reactors with 6,795 MW.

Canada also plans to build 11 new reactors with a capacity of 6,100 MW. But China plans 42 new reactors with 46,110 MW, Russia plans 25 reactors with 23,525 MW, and India plans to build 12 reactors with a capacity of 8,400 MW. See this column’s piece last week, “The nuclear option for Asian industrialization” (Feb. 15).

The bulk of power generation in Canada comes from hydro, which made up 60% of the total in 2022, while nuclear contributed 13%. The most nuclear-intensive country in the world is still France with 63% of its total electricity production coming from nuclear plants. The big Asian countries remain coal-intensive in their power generation, including India, China, Indonesia, and the Philippines with at least 60% of their power generation coming from coal. South Korea is the most nuclear-intensive Asian country with 28% of its power generated from nuclear energy (see Table 1).

If the Bataan Nuclear Power Plant (BNPP) had been allowed to operate from 1985 until today, it could have generated at least 4,600 megawatt-hours or 4.6 terawatt-hours (TWH) yearly assuming a low-capacity factor of 85%, up to 5+ TWH at a higher capacity factor.

Among the activities that are planned for the nuclear trade mission to Canada by the Philippine delegation is a visit to McMaster University – University Network of Excellence in Nuclear Engineering (UNENE). It houses world class nuclear research facilities anchored by the McMaster Nuclear Reactor — a multi-purpose research reactor that provides neutrons for medical isotope production and scientific research. Their nuclear research facilities enable discoveries in medicine, nuclear safety, and materials and environmental science, while providing cancer treatments for more than 70,000 patients every year.

The delegation will also attend the NextGen2NetZero Nuclear Technology Forum, organized by the Organization of Canadian Nuclear Industries, at Ajax Convention Centre. They will also be meeting with Bruce Power at its Toronto Headquarters. The biggest nuclear plant in Canada and the world, it has eight reactors with combined capacity of 6,358 MW. In 2020 it generated 43.23 TWH.

The delegation will be making a site visit to the Darlington Nuclear Generating Station and meeting with Ontario Power Generation (OPG). Darlington station is Canada’s second largest nuclear facility with a capacity of 3,512 MW. It generates up to 31 million MWh (or 31 TWH) yearly. Its four CANDU pressurized heavy water reactors (PHWR), 878 MW each, are owned and operated by OPG.

There will be meetings with other groups: the Nuclear Waste Management Organization, OntarioTech University, New Brunswick Nuclear, ARC Clean Technology Canada, Inc. which develops Small Modular Reactors (SMRs), and with the University of New Brunswick – Centre for Nuclear Energy Research (CNER).

The combined electricity production of Bruce Power and Darlington Station was 74.2 TWH (43.2+31.0). In 2020, the total amount of power generated in the Philippines was 101.76 TWH, and in Luzon grid, 72.42 TWH. So, if the Philippines had only one-half of the capacities of Bruce and Darlington, almost one-third of the whole country would have cheap, stable electricity with no blackouts — except when the problems are on the transmission and distribution sides.

Among the questions that people ask about nuclear power generation — aside from the safety issue — is the price. How cheap or expensive will nuclear power be compared to other sources? Well, it is cheap, the reason being that nuclear has very high energy density — one pellet of 20 grams can produce the same amount of electricity as 410 liters of oil, or 400 kgs of coal (see Table 2).

More than half of the cost of nuclear power is due to construction of the facility due to redundancy of safety features, but once it is built, it has very low fuel cost and low maintenance because a nuclear plant has a lifetime of 60+ years. SMRs is bringing down the cost.

The Philippines would be interested in SMRs, especially for off-grid islands and provinces that are currently dependent on big gensets running on oil, a fossil fuel. Canada is now commercializing SMRs, up to 300-MW plants. Federal agencies like the Canada Infrastructure Bank, and Canada Strategic Innovation Fund (SIF) are investing to accelerate the development of SMRs, Integral Molten Salt Reactors (IMSR), and Micro Modular Reactors (MMRs).

The Maharlika Investment Fund (MIF) should consider funding some SMR projects in some parts of the country. If they bring down the cost of electricity in the provinces, reduce or abolish the threat of blackouts, then we can attract big commercial and manufacturing plants.

While Canada has offered and hosted this trade mission, perhaps other nuclear-generating Asian countries like Japan, South Korea, and China can make similar programs and invite Philippines energy agencies and power companies to see what they have got.

The Philippines has had an average increase in power generation of 5-6 TWH yearly until 2022. By 2023 it should have increased to 6-7 TWH. From 2024 to 2030, we should target an increase of 8-9 TWH yearly to sustain a GDP growth of 6-7% yearly.

More energy supply, more electricity generation from more sources, agnosticism in energy source, coupled with an improvement in transmission and distribution of electricity — we need these to propel the country towards more industrialization, and more growth and prosperity

See also: 
BWorld 679, Growth forecasts vs actual growth, and agriculture performance, February 20, 2024
BWorld 680, The nuclear option to energize growth, Feb. 24, 2024
BWorld 681, Low inflation, low unemployment, high growth — this is the Philippines, Feb. 25, 2024
BWorld 682, The nuclear option for Asian industrialization, Feb. 27, 2024
BWorld 683, NAIA privatization is good, legislated minimum wage is bad