BWorld 147, Sugar tax and health alarmism

* This is my article in BusinessWorld on August 03, 2017.

“To what extent will the poor merely replace more expensive colas and 3-in-1 coffee with unsafe sugared water in plastic bags, samalamig, or home-brewed sugared coffee, none of which are covered by the tax? … there is simply a great deal we do not know, which is all the more reason to proceed with reserve and caution.” -- Emmanuel de Dios, “Just take it, it’s good for you”

Among the tax-tax-tax plan of Dutertenomics to finance the budget swell is premised on health alarmism, that government is concerned about public health and dangers of obesity so it will confiscate more money from the public via the sugar-sweetened beverage (SSB) tax.

Simple joys of the poor like 3-in-1 coffee, mango or guyabano powdered juice, softdrinks, etc. add flavor to meals and whet more appetite so people eat more, which help their nutritional intake. But the government says this is bad and must be taxed.

Before you know it, the government will increase taxes twice, thrice, or even four times, citing whatever health alibi is handy when the real goal is to collect more money for the state, for the politicians, for the bureaucrats and their consultants, not to mention those who are already dependent too much on welfare.

There is one paper from Harvard Heart Letter that said: “Eating too much added sugar increases the risk of dying with heart disease” by Julie Corliss (updated Nov. 30, 2016).

“Sugar-sweetened beverages such as sodas, energy drinks, and sports drinks are by far the biggest sources of added sugar in the average American’s diet. They account for more than one-third of the added sugar we consume as a nation. Other important sources include cookies, cakes, pastries, and similar treats; fruit drinks; ice cream, frozen yogurt and the like; candy; and ready-to-eat cereals.”

Since this seems an authoritative article, then the SSB tax of Dutertenomics suffers from an old disease of selective harassment and taxation.

If they have to be consistent, they should tax not only soda, powdered juice, energy drinks but also cakes, ice cream, chocolates, cookies, yogurt, candy, pastries, samalamig, banana-Q, etc.

If all the claims of various health and environmentalist groups are true -- that there are more diseases, morbidity, and mortality due to high sugar consumption, man-made climate change, high maternal death, etc. -- then life expectancy of Filipinos should be declining, not rising.

Numbers below show that this is not the case -- that life expectancy among Filipinos and other people in the region are rising (see table).

Life expectancy at birth  in the ASEAN, years 

Source: WB, World  Development  Indicators database 2017

From only around 61 years in 1970, Filipinos are living longer and healthier compared to the past and they can expect to live to 68 years old, as of 2015. This, despite the fact that more Filipinos are eating and drinking more “unhealthy” products.

So, what to do?

One, the government should not impose a sugar tax. No to selective harassment and taxation of sugar-sweetened drinks and food and confiscation of more money from the pockets of ordinary Filipinos.

Two, if they have to tax some sugar-sweetened beverages, they should tax all of them without exceptions. Just keep the tax as low as possible.

Three, proceeds from the substantial sin tax revenues should be enough to promote health awareness and finance the fight against infectious and communicable diseases on top of regular DoH and LGUs’ health budget.

Health is not just a “right” but more importantly, health is also a personal responsibility.

It is very likely that proceeds from the tax are designed more to pay the multitrillion-peso loans to Duterte-beloved China-funded infrastructure programs. And since this government is run like a one-party state, they will get what they want from Congress.

Tax-tax-tax mentality and policy is wrong and ugly. And this is the philosophy that Dutertenomics wants to impose on the whole country.

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See also:
BWorld 136, Income tax and the politics of envy, June 12, 2017
BWorld 144, Individual liberty vs state coercion and taxation, August 10, 2017 
BWorld 145, Energy agenda of China’s Belt and Road Initiative, August 11, 2017 
BWorld 146, Mining and industrialization in Duterte SONA 2017, August 12, 2017

Drugs War 3, Dr. Noel de Dios on Duterte's war

My former teacher at UPSE undergrad in the 80s, Dr. Emmanuel "Noel" de Dios wrote a very good paper in BusinessWorld yesterday. It has gone viral, with 3.6k fb likes and shares combined as of this writing (Tuesday, 8:15pm).

His concluding paragraphs:

The true scandal of the current drug war is that it is run by old men who operate on old ideas and obsolete knowledge. It therefore subjects citizens to what is ultimately an unnecessary -- and therefore unjust -- ordeal. Our predicament is not far from the episode of bizarre lobotomies performed on thousands of patients in Europe and the US during the 1950s. Ordered by authorities who thought they were treating “mental disorder,” these procedures led not only to unneeded deaths during the operations themselves, but also to suicides, and the permanent mental maiming and “surgically induced childhoods” of thousands of citizens. With the introduction of anti-psychotic drugs, this practice was almost universally abandoned and regarded as cruel and unusual, though not before thousands of lives had been ruined or lost.

When we do finally recover from our collective mania -- and we will -- we might well wonder, given what we now know, whether it was addicts who were not human, or rather we who were inhumane.

I posted this article in my fb wall, many friends shared and re-shared the paper, thanks guys.

Then out of nowhere, this person appeared, he's not my friend, and using the usual meme, "dogs bark..."

A quick "fuck you" even if he intruded uninvited in my wall, does not even know me or I don't even know him? Typical behavior of many Du30 fans.

And here, he justifies that he can frequently curse people. Frequent cursing is low life characteristic.

Then I learned that he is the son of former Solicitor General (SolGen) and now Department of Labor and Employment (DOLE) Secretary Silvestre "Bebot" Bello. I cautioned him about his manners, and his reply?

When people cannot debate on issues -- like this paper by Dr. de Dios -- they resort to meme posting, cursing, ad hominem attacks. 

Sec. Bebot Bello, I have some questions about your labor policies but that's for another topic. I think you are a gentleman and would not easily resort to low-life cursing and discourses, so remind your son. Thank you.
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See also: 
The PH drugs war, part 2, July 27, 2016

President Duterte and 'Pakyu' EU, October 13, 2016 

President Duterte and 'Psychopath' comment by Agot Isidro, October 17, 2016

President Duterte and hyperbole, December 19, 2016

BWorld 86, Philippine industrial policy

* This is my article in BusinessWorld Top 1,000 Corporations 2015, published in November 2015. I forgot to post this earlier, no online copy of that publication, only hard copy.
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Quo vadis, industrial policy?

A recurring question in the Philippines that crops up almost anytime anywhere is, “Why has the Philippines not industrialized as much as its East Asian neighbors?” It is a valid question, that opens up a plethora of valid and invalid explanations.

In a paper two years ago by former PIDS economist and now DTI Assistant Secretary Rafaelita M. Aldaba  summarized recent Philippine industrial policy as shown in table 1.

Source: Rafaelita Aldaba, “Twenty years after Philippine trade liberalization and industrialization: what has happened and where do we go from here,” PIDS Discussion Paper No. 2013-21, March 2013, Table 1.

  

It is a correct assessment, although it seems the import substitution industrialization (ISI) policy was just more than two decades (1950-72), not three. There was a “decontrol” policy or removal of quantitative restrictions (QRs) in 1962, and starting in the mid-60s, a revival of manufacturing was initiated but was not sustained. 

Export orientation on a limited scale was initiated in the mid-70s, coinciding with the world oil price shock in 1973 and the period of cheap foreign loans due to over-flowing petro dollars. It also coincided with some political stability because of political repression during the Martial Law regime.

There is a short but good literature on world and Philippines economic history from the late 1800s to the last decade written by Dr. de Dios of the UP School of Economics (UPSE) and Dr. Williamson of Harvard University. It shows that in Asia, the Philippines was third to Japan and China to attain fast growth of 5 percent or more a century ago. It was not sustained though, in the two decades before World War Two.

(Source: Bénétrix et al. (2012), Table 4. Cited by Emmanuel S. de Dios and Jeffrey G. Williamson, “Deviant Behavior: A Century of Philippine Industrialization”, UPSE Discussion Paper No. 2013-03, April 2013, Table 3.)

The post-World War Two ISI period pushed annual growth rates of Japan, Taiwan and S. Korea to double digits and the Philippines resumed its early century dynamism.

Messrs  de Dios and Williamson noted that “While the Philippines conformed to the industrial convergence pattern, it began to deviate sharply from the pack in the 1980s.”

The years between 1984‐1991 was a “period of large‐scale relocation to Southeast Asia of Japanese manufacturing industries in response to the yen revaluation following the Plaza‐Louvre Accords. This wave of foreign direct investments (FDIs) benefited Malaysia, Thailand, and Indonesia and led to the build‐up of a significant export‐oriented manufacturing in those countries”, the two academics added.

The Philippines of course could not optimize its FDI harvest that period because its Constitution made and ratified in 1986, does not welcome huge FDIs in many sectors of the economy.

Nonetheless, the government of then President Corazon C. Aquino in 1991 pursued a massive trade liberalization and official abandonment of protectionism when it reduced tariffs to a range of 3%‐30%. The Ramos administration continued the liberalization process capped by the Philippines joining the World Trade Organization (WTO), and undertook a new wave of tariff reductions in his last year in office in 1998.

Trade liberalization in the 90s was not just a Philippines or Asian phenomenon but a global one.

After many decades of trade negotiations and deadlocks at the United Nations Conference on Trade and Development (UNCTAD), the WTO was formally created in 1994.

To summarize, the Philippines’ post-WW2 industrialization policy can be categorized into three major periods: (1) trade protectionism and import substitution from 1950-72, (2) limited liberalization and export promotion  from 1973-90, and (3) accelerated trade liberalization from 1991 onwards, with “blips”of protectionism in 1997-99 Asian financial turmoil, then 2008-2010 global  financial crisis that started in the US.

Philippine membership  in the ASEAN (Association of South East Asian Nations) Free Trade Area, Asia Pacific Economic Cooperation, various bilateral FTAs and Economic Partnership Agreements, emerging Regional Comprehensive Economic Partnership (RCEP, ASEAN + 6) and the lure of joining the Trans Pacific Partnership  (TPP), are important alliances to sustain trade and investment  liberalization.

There are two important challenges for the Philippines to optimize its membership  in those mega trade alliances: (1) remove investment protectionism by abolishing the “reserved only for Filipinos” (or zero FDI) in some sectors, and 60-40 restrictions to FDIs in other sectors. And (2) relax services protectionism especially in the practice of profession, where foreign professionals are barred from practicing here while Filipino professionals are allowed in many other countries.

Mr. Oplas is the President of Minimal Government Thinkers, Inc., a Manila-based think tank advocating free market economics, and a Fellow of the South East Asia Network for Development (SEANET), a Kuala Lumpur-based regional center advocating free trade and free mobility of people in  the region.

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See also:
BWorld 61, 100 indicators better than GDP, June 03, 2016 
BWorld 71, Free trade and higher income, July 11, 2016

BWorld 72, Economic integration and disruption, July 25, 2016 

BWorld 78, If the US becomes protectionist, who loses? August 11, 2016 

BWorld 84, Eliminate red tape in the Philippine energy sector, October 08, 2016 

BWorld 85, Drugs war morphed into war on critics of President Duterte? October 11, 2016

Middle Earth, the Middle Class and Growth

I like the play of words here: hobbit and habit, Middle Earth and middle class, JRR Tolkien and equilibrium theorists. Article written by my former prof. at UPSE, a math econ, institutional econ, econ history specialist, Dr. Noel de Dios. Bottomline: the need for rule of law.
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Adventure and fantasy -- not to mention Peter Jackson’s fabulous visual effects -- explain much of the recent popularity of J.R.R. Tolkien’s novels and characters, especially their movie incarnations. If one only looks very closely, however, one may also find a small parable relevant to Philippine society.

Tolkien’s Middle Earth is threatened by occult superpowers that seek total domination through their mobilization of brainwashed masses. Little resistance is offered, however, for lack of social cohesion. Human warrior-kings have been corrupted by petty divisions and their narrow ambitions that blind them to an imminent common threat. Dwarves, on the other hand, devote their lives to compulsive wealth-seeking in underground mines. Meanwhile the seraphic, almost-divine elves are only half-committed to this world and already have their eyes trained on the next.

In the end, however, Good still triumphs over Evil and Middle Earth is saved because the One Ring of Power is entrusted to the most unassuming and unambitious of creatures -- hobbits who have neither the desire nor the use for it. (Game theorists will be pleased to note the implied role of credible commitment.) Special meaning attaches to the nature of the hobbits themselves, who are moved neither by dreams of power, fame, exorbitant wealth, nor heavenly reward. Their concerns focus instead on the mundane: orderliness, security, peace, the freedom to attend to one’s own business and to secure one’s own (pipe-smoking) comfort. Embodying Adam Smith’s virtues of prudence, justice, and benevolence, the hobbits (in short) stand for civilisation and the bourgeoisie -- the middle class of Middle Earth.

In what sense can this be a parable for today? Like Middle Earth, if Philippine society is to progress, it too must ultimately hand over power to its middle class. Or more precisely, it must aim to reach the point where the majority of its people become middle class and are sufficiently numerous to set the tone of both polity and economy. (This insight is nothing new, by the way: the work by Easterly and Acemoglu, among others, shows the close causal association between the size of the middle class and economic growth.)

The strength and size of the middle class matters because it is the natural constituency for many of the factors known to make for economic growth and development. The most obvious fact is economic: a large middle class constitutes a diverse market that acts as a magnet for both domestic and foreign investment. It allows the domestic economy to escape the tyranny of Engel’s Law and produce diverse and higher value-added goods and services beyond food staples.