BWorld 152, Cronyism in Renewable energy, gas sectors?

* This is my article in BusinessWorld last September 7, 2017.

Last week, the National Transmission Corp. (TransCo), the administrator of feed in tariff (FiT) — which guarantees high prices for 20 years for variable renewable energy (solar, wind, biomass, run of river hydro) filed a petition at the Energy Regulatory Commission (ERC). It sought for an increase in FiT-Allowance to be paid by all electricity consumers nationwide.

FiT-All is one of roughly 12 different charges and taxes in our monthly electricity bill and the one with the fastest increases in recent years: four centavos/kWh in 2015, 12.40 centavos in 2016, 18 centavos this 2017, and 29.32 centavos next year. It is a clear example of renewables’ cronyism that penalizes electricity consumers and rewards renewable energy (RE) developers supposedly to help “save the planet.”

Also last week, I attended the Energy Policy Development Program (EPDP) lecture at UP School of Economics, entitled: “Natural gas: Addressing the energy trilemma and powering our energy needs.” The lecture was delivered by Mr. Giles Puno, President and COO of FirstGen, a big Lopez-owned power company. Mr. Puno covered many topics but I will only focus on the lecture’s three aspects.

One, the lecture mentioned that the cost of wind-solar keeps decreasing so efforts to decarbonize the economy is improving, away from coal power which cannot remain cheap in the long-term.

During the open forum, I said that this is not exactly correct because while it is true that the technology cost of wind-solar is declining, the FiT rates given to wind-solar keeps rising actually. FiT rates for wind batch 1 (2015 entrants) were P8.53/kWh in 2015, this went up to P8.90 in 2016, and P9.19 in 2017. Wind batch 2 (2016 entrants) were P7.40/kWh in 2016 and P7.71 in 2017.

Solar batch 1 (2015 entrants) FiT rates were P9.68/kWh in 2015, P9.91 in 2016, and P10.26 in 2017. Solar batch 2 (2016 entrants) FiT rates were P8.69/kWh in 2016 and P8.89 in 2017.

FiT revenues collected by all RE firms given FiT privilege were P10.22B in 2015, a figure that rose to P18.54B in 2016, and P24.44B in 2017.

Two, to address the energy trilemma (energy security, energy equity/affordability, environmental stability), the lecture questioned the 3,500 MW worth of coal supply in the Meralco power supply agreements (PSA). These PSAs were anathema to environmental stability and energy equity since power rate hikes will be expected since coal prices are expected to rise over the long-term. That government should instead prioritize natural gas development.

I mentioned in the open forum that I saw the World Energy Council (WEC) World Energy Trilemma Index 2016 and out of the 125 countries covered, the Philippines was #1 in environmental sustainability, thanks to our big geothermal and hydro, plus recently added variable REs. But Philippines was #92 in energy equity because of our expensive electricity, 3rd highest in Asia next to Japan and Hong Kong.

So it is wrong to demonize coal (nearly 35% of installed capacity but 48% of actual electricity production in 2016) that contributed to declining prices in generation charge in recent years. For instance, the load-weighted average price (LWAP) at the Wholesale Electricity Spot Market (WESM) was declining from about P5.40/kWh in 2012 to only P2.80 in 2016.

Consider also the fact that Philippines’ coal use is small compared to what our neighbors in the region consume. Vietnam consumes twice the amount of what we use, Taiwan three times, Indonesia five times, South Korea and Japan six times — for 2016 alone (see graph).

Power companies like FirstGen should focus on ensuring that electricity consumers have cheap and stable electricity available 24/7 without any brownouts, even for a minute. Instead of demonizing and suggesting the stopping of more coal power to come on stream.

Third, Mr. Puno and FirsGen want “government support crucial for LNG development and (1) Holistic and defined energy mix to direct planning and investments, (2) Incentivize LNG through fiscal and non-fiscal policies, (3) Secure LNG Off-take, similar to how Malampaya was underpinned.”

The first two items I consider as cronyist or seeking a crony status from the government. Setting the energy mix should be done by the consumers, not government. The previous Petilla/Monsada plan of 30-30-30-10 energy mix for coal-natural gas-renewable energy-oil respectively is wrong and has no sensible basis. It is good that new DoE Secretary Cusi has dumped it in favor of 70-30-10 energy mix for baseload-mid merit-peaking plants, respectively.

Government taxes should apply to all technology — coal, natgas, hydro, geothermal, etc. — no special privileges of tax breaks and other non-fiscal sweeteners. To ask for tax and non-tax privileges for LNG is asking for crony privileges.

We need less government regulations in setting the energy mix, less government favoritism for expensive wind-solar resulting in more expensive electricity. Government should focus on having energy laws and taxes that apply to all technology and players without any entity enjoying special privileges.

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See also:

BWorld 148, Energy Trilemma Index 2016, September 16, 2017 

BWorld 149, Free tuition and irresponsibility, September 17, 2017 

BWorld 150, Rising state-inspired murders and budget 2018, September 18, 2017 

BWorld 151, Mining taxes per hectare of land, September 22, 2017

EFN Asia 66, Meeting 2017 in Kuala Lumpur

The Economic Freedom Network (EFN) Asia held its meeting 2017 last September 11 at the Intercon Hotel Kuala Lumpur, Malaysia. The Institute for Democracy and Economic Affairs (IDEAS, KL) and the Friedrich Naumann Foundation for Freedom (FNF, sponsor) co-hosted it.

Small group. Main agenda was some reorganization of the network as there is now an annual Asia Liberty Forum (ALF) mainly sponsored by Atlas with support from the Center for Civil Society (CCS, India), FNF, Templeton Foundation (I think), and local partner think tank/s in an Asian city where the 3-days annual conference is held.

Productive discussions, became intense and extended in late afternoon. Will discuss later when final decisions have been made by key sponsors.
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See also:
EFN Asia 63, Day 1 of Conference 2016, November 26, 2016 
EFN Asia 64, Day 2 of Conference 2016, February 16, 2017 
EFN Asia 65, EFN panel at Jeju Forum 2017, June 20, 2017

BWorld 150, Rising state-inspired murders and budget 2018, September 18, 2017

BWorld 151, Mining taxes per hectare of land

* This is my article in BusinessWorld last August 30, 2017.

A repeated argument by many sectors clamoring for suspension or closure or higher taxation of large mining projects is that the taxes, fees, and royalties they pay is very small. So there is a need to further raise the tax.

At the House of Representatives, there are bills proposing to raise the mining excise tax from 2% to 10% to generate bigger taxes from the industry.

However, is it really true that mining taxes and fees are “very small” so government should raise them (or even shutter their operations to preserve the environment?)

Table 1 was constructed to test their arguments’ validity. Please have patience reading what the numbers in various asterisks mean.

  

These numbers show two important points.

One, of the Philippines’ 30 million hectares total land area, only 700,300 hectares have mining permits from 319 companies, of which only 81,000 hectares are in active mining. The balance of roughly 620,000 hectares are for the various structures like offices, housing, school buildings, hospitals, sports, and training centers for personnel; roads, mined out areas for rehabilitation; future mining sites.

Two, these 81,000 hectares or 0.27% of total land area contributed an estimated of P420,000 per hectare in taxes, fees, and royalties to the national and local governments in 2016. That is more than six times the overall national taxes per hectare of the country.

Hence, the argument by many anti-mining groups that “government tax revenues from big mining is small so government should overtax, suspend, or close as many big mining firms as possible” is wrong. It is invalid.

Note further that the numbers on mining taxes and fees do not include mining expenses that go direct to the communities as mandated by law, not to the government. These include spending like (a) Social Development and Management Program (SDMP), (b) the annual Environmental Protection & Enhancement Program (EPEP), (c) Community development program (CDP), (d) Environmental work program (EWP), (f) Safety and health program, others.

Plus mandatory environmental funds like (a) Rehabilitation cash fund, (b) Mine monitoring trust fund, (c) Mine waste and tailings fees reserve fund, (d) Final mine rehabilitation and decommissioning fund, (e) Environmental trust fund, (f) Mine rehabilitation fund (MRF), and several others.

Two of several fiscal reforms in the mining industry to make the taxation system more transparent and easily understood would be the following:

One, MGB is required to disclose in its regular “Mining Industry Statistics” the annual cost of various mandatory/obligatory programs and funds as mentioned.

Two, the mining excise tax of 2% can be raised to 6% or 10% or even higher but other taxes and regulatory fees, mandatory programs, and funds should be reduced or abolished. It is not possible to keep raising the taxes, fees, royalties, mandatory programs and funds without resulting in business distortion. Like honest firms closing down or going bankrupt while others will be forced to become dishonest just to remain in business.

MGB should show more updated data about small scale mining — estimated land area covered, gold production, taxes and fees paid, others. Lots of environmental damage with zero mine rehabilitation or reforestation after are done by small-scale mining, like those in Mt. Diwalwal as mentioned by President Duterte during his second SONA last July 24.

Government should always bear in mind the importance of the rule of law. Mining laws should apply to both big and small players, foreign and local. Creating exceptions and favoritism makes a mockery of the law.

Bienvenido S. Oplas, Jr. is the President of Minimal Government Thinkers and a Fellow of SEANET and Stratbase-ADRi.

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See also:

BWorld 148, Energy Trilemma Index 2016, September 16, 2017 

BWorld 149, Free tuition and irresponsibility, September 17, 2017 

BWorld 150, Rising state-inspired murders and budget 2018, September 18, 2017

Atty. Florin Hilbay's tweets on government and Du30

Among my favorite tweetters is former Solicitor-General Florin Hilbay. UP Law graduate, faculty member.

Some of his tweets, 3-5 weeks ago:

(1) He said the plunderers will return some gold bars. A daughter of the plunderer-in-chief denied it. Nag-usap ang sinungaling at magnanakaw.

(2) A leader can't be Hitler to poor citizens, enemies, & dissidents and be a constitutionalist when it comes to family, relatives, & friends. (Sept. 3)

(3) The goal of politics is to make itself irrelevant so citizens can focus on philosophy, sciences, the arts, the mundane & the transcendent. (Sept. 1)

(4) Proposal. The Jon Snow Anti-Political Estafa Law.

20 years imprisonment for making false promises during election campaign.

(5) If you're not for human rights, then you're for human wrongs.

It's really as simple as that.

(6) The dead are inarticulate. The people are afraid.

Let their voices be eloquently heard through the nation's poets. (Aug. 31)

(7) I hope one of our senators do a Theon Greyjoy & realize that it's possible to have balls even after losing one's dick. (Aug. 30)

(8) How to distract an angry nation? Make outrageous statements, claims, threats. A raging river, controlled thru estuaries. Estero Politics.

(9) Regardless of what Kian's parents do to seek justice for their son, we must seek accountability for Kian's death & those of 13K others. (Aug. 30)

(10) Losing hope means giving up. Not. An. Option. (Aug. 29)

(11) The Wall that stands bet the Night King & his murderous army is the Constitution. We must fight together in this long night. For the realm. (Aug. 25)

(12) Sa isang basurang abugado, WALA.

In academic terms: You expect police to protect; the criminal, to hurt. It's about rational expectations. (Aug. 25)

--> Replying to @inquirerdotnet @dzIQ990 and 2 others

Aguirre: "Ano ang diperensiya ng bata na pinatay ng addict sa bata na pinatay ng Pulis,"

(13) Just a special shout-out to hardworking, competent, professional, decent gov't employees. You're the silent majority.

(14) The basic function of gov't is to enhance the human capacity to love the world--its details, contradictions, beauty, & power--not hate it. (Aug. 24)

(15) The basic function of gov't is to enhance the human capacity to love the world--its details, contradictions, beauty, & power--not hate it. (Aug. 23) --> 6.1k likes, 2.5k retweets, wow!

(16) What do you call a person with authority & obligation to respond to incursions into our territory, but won't? A threat to nat'l security. (Aug. 23)

--> about news that China's fishing fleet makes a move on Sandy Cay.

(17) Any investigation that will not look into the accountability of the President over Kian's & so many others' deaths will have no credibility. (Aug. 22)

BWorld 150, Rising state-inspired murders and budget 2018

* This is my article in BusinessWorld last August 25, 2017.

The second week of August 2017 would possibly be the bloodiest in the drugs war of the Duterte administration. More than 80 people were murdered mostly by the Philippine National Police (PNP) in various drugs-raid and victims were described as “nanlaban eh (they fought the police).”

Perhaps 99% of all countries and governments in the world have their own “drugs war,” like the Philippines. Punishment range from imprisonment to death penalty. Many of our neighbors in the ASEAN have death penalty for drug crimes like Indonesia, Malaysia, and Singapore.

The “war on drugs” therefore is not a unique program or policy of the Philippine government, the Duterte administration especially.

What makes the Duterte drugs war unique is the absence of due process for poor victims.

True, there is due process for very rich drug suspects like those implicated in the P6.4-billion drugs smuggled from China and passed through the Bureau of Customs. Not one of the personalities implicated including the President’s son, Davao City Vice-Mayor Paulo Duterte, were shot or murdered. They enjoyed due process of investigations, filing of affidavits, dismissal of allegations, if proof is weak.

It is the poor or several middle class or rich but not-politically connected people who get murdered on mere suspicions of being drug users or pushers. Of the roughly 9,000 estimated casualties in the Duterte drugs war, majority are labeled by the PNP as death under investigation (DUIs). However, for those who were killed outright by the PNP because they supposedly resisted arrest, no police investigation is expected.

These are state-inspired murders. The President himself is urging the police to have more deaths for drug suspects, warning the Commission on Human Rights (CHR) and other human rights advocates that he will order the police to shoot them.

The continuing murders from mid-2016 — when the Duterte administration was inaugurated — to the present has coincided with the big increase in the government budget, P667 billion in 2017 and P417 billion in 2018. I checked the PNP’s budget and I wondered why its allotment for this year fell by P17B despite the increase in personnel from 184,000 to 194,000 during the same period. What explains this discrepancy?

In interviews by various media (local and foreign) and human rights groups of self-confessed but anonymous murderers, the murderers claimed that they get cash from the PNP for each murdered victim, usually previous or current drug users or pushers but people who are generally poor. Remember also the testimonies at the Senate of several ex-Davao policemen (Lascañas, et al.) who claimed they got paid by then Davao City Mayor Duterte for the murders they made.

If this claim is true — and I hope it is not — where would the government get extra resources given the decline in the PNP budget?

I checked the other items of the proposed 2018 budget and there were five big items that stand out. They get P566B of the P667B total increase in 2017 budget, and P260B of the P417B increase in 2018 budget (see table).

If the claims of the anonymous hired murderers, of Lascañas et al. are true, then the extra resources may be sourced from “Miscellaneous personnel benefits fund” and from “Gratuity fund.” But since this is only surface data, this is hard to prove.

On another note, the Economic Freedom Network (EFN) Asia will hold its annual meeting and conference this coming Sept. 11-12 in Kuala Lumpur, Malaysia. While the focus is on economic freedom and trade, political freedom will also be tackled among network members because there are instances of decreasing political freedom and rising dictatorial trends in the region. These include the continued rule of military junta in Thailand and the rise of murders in the Duterte government.

Economic freedom cannot prosper well in an environment of threatened political freedom and decline in the rule of law. Rise in public health care spending to save the lives of sick and weak people becomes a farce when the same government is engaged in state-inspired murders by the thousands.

Bienvenido Oplas, Jr. is the head of Minimal Government Thinkers, a member of EFN Asia.
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See also:

BWorld 147, Sugar tax and health alarmism, August 15, 2017
BWorld 148, Energy Trilemma Index 2016, September 16, 2017 

BWorld 149, Free tuition and irresponsibility, September 17, 2017

IPR and innovation 37, US-China dispute on IP

Last month, there was a high profile dispute between the US and China, the former accusing the latter of having policies and practices that discriminate US companies' IP rights and innovation. Here's one story from Fox, August 03, 2017.

Weeks after that, this news from Lexology, August 22, 2017.

The China government, its state-owned enterprises and perhaps many private enterprises, have the tendency to act like business monopolies because of their political monopoly, one-party-state character. So Mr. Trump is checking this behavior.

The WTO and its relevant agreements like TRIPS should play a role in resolving this and many related disputes among member-countries.
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See also:

IPR and Innovation 34, When 95% of WHO's EML are off-patent, May 08, 2016 

IPR and Innovation 35, Letter to WIPO on World IP Day, May 06, 2017 

IPR and Innovation 36, Plain packaging from tobacco and soon to soft drinks, alcohol, ice cream products, May 31, 2017

BWorld 149, Free tuition and irresponsibility

* This is my article in BusinessWorld last August 17, 2017.

There are many reasons why the new law providing for free tuition for all students — rich and poor alike — in all state universities and colleges (SUCs) is wrong, but for this piece, we will limit them to only four arguments.

One, the government has no extra cash to cover extra spending on these already substantial expenditures. This means the deficit — which happens when revenues are lower than spending — that will require new borrowings will become bigger. The projected budget deficit rose from P353 billion in 2016 (during the Aquino government) and projected to rise to P482B this year to P524B in 2018, P576B in 2019 (see Table 1).

Note that the deficit is based on the cash budget, “the actual deposits and withdrawals of cash of national government agencies from the Bureau of Treasury (BTR) for payment of current and previous year’s obligations.”

If the obligation budget, “the proposed amount of commitments that the government may incur or enter into for the delivery of goods and services in a fiscal year” is considered, the deficit will be much bigger: P923B in 2017, P927B in 2018 and P968B in 2019. The law calling for free tuition in SUCs — enacted in August 2017 while the proposed 2018 budget was submitted to Congress in July 2017 — would fall in the obligation budget.

Two, spending in public elementary and secondary education is still limited and it is unwise to further expand spending in public tertiary education.

Numbers below show that out of the 16 countries and economies (10 in the ASEAN, six in Northeast Asia), hiring of teachers in the Philippines was 2nd lowest in primary/elementary education, second only to Cambodia. In secondary education, Philippines was 3rd lowest, next to Cambodia and Myanmar (see Table 2).

Three, students who are absolutely destitute do not reach university level. They drop out after elementary or after high school and start working, especially now with the K+12 years of pre-college schooling. So those who reach universities are lower middle class to rich students.

If one sees the cars and SUVs in the University of the Philippines and many other SUCs, one will wonder why these students are getting subsidies. Budget Sec. Ben Diokno even oppose this new law and said that this welfarist program alone will cost P100B/year — on top of existing deficit and high spending.

Four, people’s values will be corrupted because personal and parental responsibility will be assumed by the state. As a result, children’s education from elementary to university level will no longer be the responsibility of their parents but of the state.

Health care is already largely a state responsibility. Soon more parents will be drinking or partying or gambling more often because their children’s education will no longer be their responsibility.

Before you know it, proponents and supporters of this lousy free tuition law will demand that each student in SUCs should be given free laptops and free Internet access. Or that the monthly water and electricity bills of the poor be paid for by the state as well.

The number of free riders, irresponsible people, and tax-hungry bureaucrats and consultants, welfare-dependents and people pretending-to-be-poor will increase.

For any problem, their “solution” is more government, more “tax-the-rich” schemes. Then people will complain of massive wastage, inefficiency, and plunder in government. As government expands, stupidity and irrationality expands.

There are several remedial measures about this new law. One is that it can be questioned and rendered void at the Supreme Court for being anti-taxpayers, anti-fiscal responsibility.

Second, it can be replaced with a new law that will void or drastically revise it, like no free tuition for rich students in SUCs while extending limited subsidies to poor students in private universities.

Three, taxpayers should remember the main authors in the House and Senate and penalize them in the next round of elections.

As someone said: “A government that’s big enough to give you everything you want is also big enough to take everything you’ve got.”

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See also:
BWorld 146, Mining and industrialization in Duterte SONA 2017, August 12, 2017 
BWorld 147, Sugar tax and health alarmism, August 15, 2017 
BWorld 148, Energy Trilemma Index 2016, September 16, 2017

On the CHR P1,000 or $20 budget for 2018

The House of Representatives led by Speaker Pantaleon Alvarez passed the proposed 2018 budget and it gave the Commission on Human Rights (CHR) a mere P1,000, less than $20, budget for 2018. Key Duterte officials are displeased with the CHR, headed by Atty. Chito Gascon (a friend since the 80s in UP Diliman) because of its investigation of many murder cases where the main suspects are policemen.

Last Wednesday, September 13, while I was queuing at NAIA for my flight to the US via Korean Air, Chito called me, he would be on the same flight as mine. Picture muna :-)

The CHR was created by the 1987 Constitution, not by Congress and much less by the House of Alvarez. Alvarez wants Chito to resign as CHR head, then he will reinstate the proposed P600+ million 2018 budget. Now look at his reasoning below. Low life logic.

Another lawyer-friend from UP, Gigo Alampay, explained it well in his fb wall the other day.

It is the responsibility of the Commission on Human Rights (CHR) to protect the rights of the people from abuse BY STATE AGENTS such as the government, police and the military. As a response to our experience with Martial Law, the CHR was created to ensure that the government will not abuse and violate its duty to protect the primary rights of the people.

It is NOT the job of the CHR to investigate violations committed by a non-state or non-government actors, such as criminals. This is not because the CHR condones those heinous acts. Rather, it is simply because investigating crimes is the job of the police. Requiring the CHR to expand its responsibilities to these violations is not only redundant. It would also be a massive waste of manpower and resources. (Is Congress prepared to add the equivalent of the PNP's billion-peso budget to the CHR?)

Do not fall for what appears to be a systematic effort by the President, legislators in the majority, and by Pro-Duterte apologists to discredit the CHR by confusing the public on this issue, and insisting that the CHR must investigate ALL cases of human rights violations.

A former tv clown and entertainer and now Senator Tito Sotto added his equally low-life argument. Suggesting that all government officials including those heading constitutional bodies (CHR, COA, Comelec,...) should always obey the President's orders and wishes.

When I posted my photo with Chito in my fb wall, a certain Manuel Saludadez jumped in with this accusation.

The man did not provide any proof, even news link. I have a term for this type of attitude -- emotional or arrogant idiocy. If one should make a serious accusation of robbery or plunder ("nakulimbat"), one should present some reliable proof. Otherwise, remove the comment or say "sorry, I do not have proof, I take back my words" or similar statements. If there is humility. There is none.

Meanwhile, I think the Senate should also give a P1,000 2018 budget for many agencies that are favored by the President and the Speaker, like the DOJ. That way, a compromise can be made between the two chambers.