Sunday, November 03, 2024

Tobacco Taxation 3, Maldives' smoking and vaping ban

My previous papers on this subject can be considered as Tobacco Taxation 1 and 2:


Last October 15, Dr Mohamed Muizzu (@MMuizzu), President of the Republic of Maldives, President of Peoples' National Congress (PNC) | PPM-PNC Coalition Leader – Maldives, tweeted this:


This is weird. If the real goal is "tobacco free society" then they should have just prohibited smoking outright. But they just raised the cigarette (a) import tax from 3 Rufiyaa (R) to R8, and (b) advalorem tax by 50%. This implies a partial cigarette ban.

A day before that, President Muizzu tweeted this, then reposted the reaction of WHO:



So it's partial cigarettes prohibition, and total vapes prohibition. How feasible or realistic is Maldives' President in aiming for this?

I created this table, I chose comparable countries with Maldives -- below 1 million in population, per capita income not less than $13,000. Then I checked their cigarette smoking prevalence. See the result.


Rich Europeans that are usually woke and have strict health regulations and high tobacco-alcohol taxes like Luxembourg, Iceland, Malta and Cyprus, their smoking prevalence is not far from Maldives', Cyprus even has higher smoking prevalence than Maldives. 

These countries may have aimed for zero-tobacco or very-low-tobacco-use society but they never succeeded. People smoking, vaping is no different from people doing sky diving, rock climbing, fast downhill cycling, sedentary and couch potato, drinking and partying, etc. -- they do what gives them pleasure without causing harm on other people.

And assuming that higher tobacco tax rates will bring more revenues to government while reducing smoking incidence -- people may be going for disappointment. In the case of the Philippines for instance, as tobacco tax rate increases, government tobacco tax revenues decline. The chart is from my column last June.


Why this is happening -- because many smokers shifted to smuggled and illicit tobacco that are cheap, prices are just 1/4 to 1/2 of legal tobacco. Others have shifted to vape and smuggling incidence here is also high.

Perhaps Maldives' President should reconsider his new policy. People will keep smoking, drinking, vaping, fast downhill cycling, etc. because it gives them pleasure somehow, without harming other people. If legal products are restricted and prohibited, then illegal, illicit products will simply fill in the vacuum, and government loses regulation capacity with regards to tax revenues and product quality monitoring.

Prohibitions will not work. High taxation supposedly to discourage certain actions and hobbies will not work. Respecting individual freedom and actions that do not harm others will work.

Posted by Bienvenido Oplas Jr at 11:59 PM 0 comments

BWorld 743, Interest rate cuts and credit ratings upgrade

Interest rate cuts and credit ratings upgrade

September 24, 2024 | 12:02 am


My Cup Of Liberty

By Bienvenido S. Oplas, Jr.

https://www.bworldonline.com/opinion/2024/09/24/623268/interest-rate-cuts-and-credit-ratings-upgrade/ 


Among the important events that happened over the last few weeks was the big interest rate cuts in the US and Canada, with the Philippines, Indonesia and few other countries following with smaller interest rate cuts.

 

In Asia, the Philippines had, until the second quarter this year, the highest interest rate set by monetary authorities or central banks at 6.5%. Despite this policy, which was supposedly to control high inflation, the Philippines endured the highest inflation rate in the ASEAN-6 in 2023 at 6%, and the second highest in the region from January to July 2024 at 3.7%, next to Vietnam’s 4.1%.

 

So it was good that the Bangko Sentral ng Pilipinas (BSP) finally realized that its high interest rate policy should be reversed even if at a piecemeal rate.

 

Meanwhile, Japan raised its interest rate from -0.1% to 0.25% (see Table 1).

 


I bumped into the president of Meralco PowerGen Corp. (MGen), also the former president of Aboitiz Power Corp., Manny Rubio. He has a bright finance mind because two big conglomerates have trusted him. I asked Manny about the huge recent US Fed rate cut and its microeconomic impact to households, he replied that “Broadly it signals that the government is less worried now about controlling inflation and is now prepared to shift to an expansionary policy. For companies with substantial funding requirements to support their capex plans and new projects, this would mean a substantial reduction in their funding costs. Such savings would allow energy companies to complete new generation capacities and distribution facilities more cheaply which would eventually reduce the cost of electricity for the consumers.”

 

In a Viber message, Budget Secretary Amenah F. Pangandaman welcomed the interest rate cuts of the US Fed and BSP, saying, “this will have significant reduction in our interest payment which is now a significant share of our total annual budget. And this will eventually lead to efficient budget allocation to sectors that need more funding and help expand our economy.”

 

Secretary Pangandaman’s concern is correct because the amount of our interest payments has been rising fast, from P361 billion in 2019 to P429 billion in 2021, P503 billion in 2022, P628 billion in 2023, and P457 billion already in January-July 2024 alone. If this trend continues, then the full year 2024 interest payment will rise to P783 billion. Or a doubling of our interest payment in just five years from 2019 to 2024.

 

ROADMAP TO CREDIT RATINGS


There were a number of recent pieces in BusinessWorld on the subject of credit ratings:  “Recto says Philippines still on track to achieve ‘A’ credit rating” (June 10), “Philippines needs 6-7% growth to achieve ‘A’ credit rating — Recto” (Aug. 14), “R&I upgrades PHL credit rating to ‘A-’” (Aug. 15), “Public-finance roadmap to help elevate PHL to ‘A’ credit rating — Budget dep’t” (Sept. 17), “Philippine credit rating upgrade possible if GDP grows faster than expected” (Sept. 18). There was also yesterday’s column, Introspective, entitled “Philippine sovereign credit rating: An ‘A’ rating, how soon?” (Sept. 23) by Alex Escucha.

 

My column has also discussed this subject previously: “Declining borrowings and improving credit ratings” (June 18), “Fast growth towards better credit ratings” (Aug. 13), “MUP pension reform and ‘A’ credit ratings” (Aug. 20).

 

Finance Secretary Ralph G. Recto and Budget Secretary Pangandaman’s desire for the Philippines to attain a credit rating of “A” is understandable. An “A” means our capacity to service our loan obligations is high, so the cost of borrowing, both public and corporate, will be lower. And financing important projects like infrastructure will entail lower costs. 

 

Currently, the Philippines has credit rating of BBB+ “stable” under S&P, Baa2 “stable” under Moody’s, and BBB “stable” under Fitch. Then there are the ratings of BBB+ “positive” from R&I, and A- “stable” from the Japan Credit Rating Agency (JCR). An A- from the JCR is good but it is the Big Three — S&P, Moody’s, and Fitch — that matter most.

 

One thing I notice though is that high credit ratings can also lead to the problem of a “moral hazard” in economics. Since the cost of borrowing is low due to high ratings, there is a tendency by governments to over-spend and over-borrow. So, the high ratings do not lead to less public debt and lower Debt/GDP ratios, the reverse can happen. This is happening in the G7 industrial countries and other countries around the world.

 

For example, there is Canada which has had a high AAA “stable” rating for decades and its Debt/GDP ratio kept rising, from 76% in 2003 to 107% in 2023. The US, the UK, France, Japan, and Italy all suffered declines in ratings over the past two decades but still at high A levels, except Italy (see Table 2).

 


An upgrade in ratings to “A” is important. But more important is how we can control our spending, deficit, and borrowings in years where there are no economic or finance crises, like 2022 to the present. We should have a budget surplus, not a deficit; we should reduce, not increase, our public debt stock; and we should reduce, not maintain, our Debt/GDP ratio.

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Posted by Bienvenido Oplas Jr at 2:45 PM 0 comments

Climate 111, More oil consumption and declining frequency of storms

“Earth Day” was invented in April 1974 or 50 years and 7 months ago. It was invented to call for human attention vs “environmental damage” by oil and other fossil fuels, among other concerns.

In 1974, total world oil consumption was 55.3 million barrels per day (mbpd).

In 2007 when Al Gore and UN IPCC won the “Nobel Peace Prize” for their fight against “man-made” global warming and CC mainly caused by oil and fossil fuels, world oil use was 73.7 mbpd.

In 2023, it’s 100.2 mbpd. The world is not reducing oil demand despite all the climate scare mongering by the UN, Al Gore, Bloomberg, Greta, Obama, etc. The world keeps using more oil. And begging for more oil, and gas, and coal, and nuclear.

And yet the world is not plunging into horrible "unprecedented, unequivocal global warming," or "storms getting more frequent, getting stronger." An update from Dr. Ryan Made website tracking the number of storms worldwide from 1971 to Sept. 2024 shows a declining number of storms, both strong and average hurricanes.

https://climatlas.com/tropical/

The  latest data on El Nino-La Nina cycle also shows Nino region 3.4 going into La Niña with temperature anomaly or variation of -0.61 C as of last Monday, Oct. 28. A triple-dip La Nina in 2020-2022, global cooling. Then big and hot El Nino mid-2023-early 2024. And now it’s back to La Nina and there are rains and floods every week in many places in the PH alone.

The narrative “more oil, more fossil fuel consumption = more warming” (ie, more drought, more sea level rise,…) is not happening. Or "more fossil fuels = more storms, stronger storms" is not happening. The climate crusaders like Bloomberg been lying for decades. But they continue because… money. Trillions dollars money via carbon trading, subsidies to RE, etc. 

See this article by Mike Bloomberg himself:

The end of greenwashing is in sight
By Michael R. Bloomberg, May 30, 2024

"As a result, the market for carbon credits is much smaller — and far less productive — than it should be....
This is a market failure we can fix, and we should treat it like any other market failure....
A similar remedy is needed for carbon credits, because transparency does for markets what spinach does for Popeye. The story of Bloomberg is a testament to that..."

There. Mike Bloomberg himself is corrupt, advance climate scare mongering because his company will directly benefit via carbon market trading, among others. That is why practically all Bloomberg opinions and analysis on climate are on climate scare mongering. We should be scared of less rain and more rain, be scared of no flood and more flood, be scared of less cold and more cold, be scared of less dogs and more dogs. Whatever weather, whatever climate phase, we should be scared. And we should turn to the UN, and Bloomberg.

Trump ended US engagement with UN climate climate in 2017, all the woke minds including Bloomberg, their heads exploded. Walang raket pera pera under Trump. So Bloomberg people, from Mike himself down the line, must invent all scare mongering stories about Trump. Just make sure he does not go back to the white house and end climate climate racket, among others.
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Posted by Bienvenido Oplas Jr at 11:55 AM 0 comments

BWorld 742, The Atimonan coal project, energy transition, and the ERC

The Atimonan coal project, energy transition, and the ERC

September 19, 2024 | 12:03 am


My Cup Of Liberty

By Bienvenido S. Oplas, Jr.

https://www.bworldonline.com/opinion/2024/09/19/622417/the-atimonan-coal-project-energy-transition-and-the-erc/ 


One of the important recent developments in the Philippines power sector was the renewed plan by Meralco PowerGen. Corp. (MGen) to proceed with the Atimonan coal power project in Quezon province.

 

Here are some reports in BusinessWorld that show the evolution in the plans of the Atimonan project through the years: “Atimonan folk to critics of power plant project: Don’t block progress” (July 21, 2017), “Cusi defends CEPNS given to Atimonan coal power plant” (Oct. 4, 2018), “Meralco willing to undergo competitive selection process to allow Atimonan construction to start” (May 29, 2019), “Groups want MGen coal plant project’s ECC declared expired” (Oct. 19, 2020), “From coal to gas, MGen readies Atimonan plant’s conversion” (Aug. 2, 2023), “Meralco seeks to proceed with Atimonan power project” (Sept. 10, 2024).

 

This move towards coal by MGen is good and brilliant. Coal power is among the important work horses of the industrialized countries in the west and the new economic dragons in East Asia that helped in their fast economic growth and improved well-being of their people.

 

Developed countries like Australia, the US, the UK, Germany, Australia, Canada, and Japan have higher coal power generation per capita than three decades ago. The Philippines’ coal generation per capita remains small until today (see the table).

 

 

THE ENERGY TRANSITION


The constant pressure — if not bullying — by various groups who say that the Philippines should retire its coal plants early and shut them down is based on the fanatical belief that decarbonization and degrowth is good for our people. This is wrong.

 

The endless push for “energy transition” is misplaced. Coal, gas, and nuclear remain the most reliable, safe, and competitively priced energy sources that developing countries like the Philippines need.

 

At the Asia Power Forum in Singapore on Sept. 12, Aboitiz Power Corp. Chief Corporate Services Officer Carlos Aboitiz made a good presentation entitled “The energy transition: A perspective from Emerging Asia.”

 

According to the press statement they issued, Mr. Aboitiz said that “Energy is produced only if it is consumed… At the end of the energy value chain are individuals and the institutions that produce the hallmarks of modern society… Often, we hear pronouncements that renewables are cheaper than their fossil fuel counterparts… Unfortunately, the math doesn’t add up. Today’s math is based on incomplete accounting, using the levelized cost of electricity or LCOE as opposed to accounting for the intermittency and lack of resource[s] in solar and wind during different times of the day and year.”

 

He is correct. The LCOE is computed only when an energy source like solar or wind is running. When it is not running like when the sun is not shining and the wind is not blowing, a backup source (usually a gas or oil plant) must run and its cost must be included in the computation and the total cost per kWh in a day goes up.

 

THE TEMPEST AT THE ERC


Another important development in the energy sector was the order handed down on Sept. 5 by the Ombudsman to suspend Energy Regulatory Commission (ERC) Chairperson Monalisa Dimalanta for six months.

 

Among the recent reports in BusinessWorld about this development were: “Business groups urge quick resolution after suspension of ERC’s Dimalanta” (Sept. 9), “ERC chair exploring options after six-month suspension” (Sept. 9), “Dimalanta case resolution seen as critical to making progress on power projects” (Sept. 15).

 

Among the big business and professional organizations in the Philippines that issued statements of concern about the Ombudsman’s ruling were: the Philippine Chamber of Commerce and Industry, the Philippine Exporters Confederation, and the Employers Confederation of the Philippines. These groups issued a joint statement saying, “This decision along with other recent decisions by the Judiciary puts at risk the trust, independence and authority of the ERC… We advocate for a swift and transparent resolution of the suspension to restore the integrity of the ERC and its Commission.”

 

Said the Management Association of the Philippines: “The country needs a fully functional ERC, led by a competent and dedicated Chair like Chair Dimalanta who has demonstrated not only integrity and dedication, but also innovativeness and courage to make bold and prompt decisions.”

 

Said the Makati Business Club: “We believe that the six-month suspension order issued by the Ombudsman not only affects investor perception but also affects the certainty of the Philippine business environment given the critical role of power in business and investments.”

 

Said the Philippine Independent Power Producers Association, Inc.: “We generators hope that this matter will be resolved soonest since the suspension of our ERC chairperson affects the whole industry… The industry cannot afford a commission without its chair. We hope that all stakeholders unite in its support to the ERC chair.”

 

Said the Retail Electricity Suppliers Association of the Philippines: “The retail electricity suppliers are already facing complex issues on energy security, it is even more crucial that the Commission remains stable and effective to ensure continuous access to sustainable and reliable power solutions.”

 

The petitioner, the National Association of Electricity Consumers for Reforms, Inc. (NASECORE), gravely misrepresented what constitutes consumer interest.

 

NASECORE does not represent me as an electricity consumer myself. My concern as a consumer is having more choices. Whether I should consume 1,000 kilowatt-hours (kWh) or 600 kWh or 250 kWh per month depending on my needs and household budget, I want an electricity supply that is available when I need it, with no blackouts. I do not want my choices to be limited to using either candles or a diesel genset because of blackouts and an insufficient power supply.

 

Political drama in the energy sector is not among my concerns, so as I see it, NASECORE and its leadership are just pursuing their own personal and political agendas.

 

The Ombudsman should have had the wisdom to not be easily swayed by the arguments of this so-called consumer organization. But it failed to use that wisdom.

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Posted by Bienvenido Oplas Jr at 11:25 AM 0 comments

MidEast Africa 14, Trump and the Abraham Accords

Among Trump's records in his 4-years term 2017-2020, the most important for me was his "No new US war" policy. That is why even among the Republican Party, many dislike him. Like the Cheney father-daughter, Lindsey Graham, McConnel, etc are horrified.

The Abraham Accords, Israel peace pact with Arab countries initiated and facilitated by Trump started with "low hanging fruits" or those Arab countries with no direct conflict with Israel like the Israel-UAE, Israel-Bahrain, Israel-Morocco, Israel-Sudan. Build confidence, show to other Arab countries that such peace pact can be serious. Israel-Saudi, Israel-Syria, Israel-Palestine, Israel-Lebanon, etc, will take decades of confidence building. Under Biden-Harris, the Accords were technically discontinued. And UAE has become cautious of Israel again. 

(source of photo: Arab Center)

Trump's other peace initiatives other than the Abraham Accords was his engagement with N. Korea leader Kim Jung Un (KJU). The Trump-KJU meeting in Singapore in 2018 was a success, KJU developed some confidence to trust a US leader. Trump's National Security Adviser, John Bolton came for the Trump-KJU 2nd meeting in Vietnam, and things turned bad. I think Bolton sabotaged the talks because he wanted war, not peace with N. Korea. Anyway Trump fired Bolton.

With respect to wars abroad, the difference between Republican President George Bush Sr. and Democrat President Bill Clinton, the difference between Republican Pres. George Bush Jr. and Democrat Pres. Barrack Obama was... nothing, zero. Same war freak policy, endless wars abroad is beautiful, regime change abroad for certain leaders who do not follow the CIA and Pentagon diktat is beautiful.

Trump's No new US war policy angered both the mainstream Republicans and Democrats, the mainstream media like NYT, CNN, WaPo, Bloomberg, etc. Trump is evil, Trump is Hitler, because he has no new war for 4 years, horrible. If he wins again on Tuesday, no new US war for 4 years, 2025-2029. Horrible for them.
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Posted by Bienvenido Oplas Jr at 1:39 AM 0 comments
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