BWorld 164, PES conference amidst reduced risk and uncertainty

* This is my article in BusinessWorld last November 6, 2017.

The Philippine Economic Society (PES) annual conference is probably the most cerebral event in the field of economics and business in the country. The reason is that in the afternoon, there are eight simultaneous panel discussions on eight different topics within 1 ½ hours, each panel with 3-4 presenters giving technical papers. A coffee break then another 7-8 simultaneous panel discussions, a total of 15-16 different topics with a total of about 50 speakers and panelists, in just one afternoon.

The morning session is devoted to big personalities in government (Cabinet Secretaries, Congress leaders), multilaterals, and sometimes corporate leaders. Except on few cases, I don’t give these speakers much weight because their presentations are generally presented and discussed somewhere else and in media.

So I became a lifetime member of PES and I have attended all the past PES annual conferences in the past decade or more. The next PES annual conference will be this coming Wednesday, Nov. 8 at Novotel Hotel in Cubao, Quezon City.

This year’s theme is “Growing Amidst Risk and Uncertainty.” I have developed skepticism to subjects with generally pessimistic or alarmist titles so I checked certain numbers to see if indeed there are more economic and social risks and uncertainties now and the near future, both global and national, compared to the past few years.

My skepticism is justified because I found out that there are less risks and uncertainties, not more, now and at least next year compared to the recent past. In particular:

(1) Projected gross domestic product (GDP) growth among the world’s biggest economies US, Canada, Germany and Japan are faster than the last four years. There is projected growth slowdown in China and India, the world’s #1 and #3 biggest economies in GDP-PPP values but the rates are still high at nearly 7%.

In the ASEAN-6, the same pattern of higher growth this year and the next compared to the past four years except in Singapore.

(2) In consumer prices, projections for 2017 are higher than the last four years for the industrialized west but the uptick is not scary nor alarming. For Asia’s big economies, either there is projected decline or the rise will be mild.

(3) It is in fiscal irresponsibility, in the spend-spend-spend culture of many governments around the world, where long-term risks can materialize because of their persistent budget deficit (revenues lower than expenditures). Still, it is good to see that some welfare states like Germany and S. Korea are posting fiscal surplus this year. (see table)

For the Philippines, note that The Economist/EIU pool of forecasters project a crack in growth momentum next year. The past Aquino administration has managed to post really strong growth compared to many countries in the planet, growth momentum until this year but expected to somehow crack starting 2018.

Sadly, I cannot attend the PES meeting this year because I am going to the US for another conference this week and hence, first time in many years that I will miss this big event. If I could attend, of the 15 different topics in the afternoon, I would attend the Energy Policy Development Program (EPDP) panel on “Power Economics: Prices, Generation and Use” or Trade topic in session A. In session B, I would attend the Friedrich Naumann Foundation for Freedom (FNF) panel on “Climate Change and the Economics of Natural Disaster” or Ateneo School of Government (ASoG)’s panel on infrastructure.

I have written a number of papers in this column on the merits of cheaper, stable energy from conventional sources and the lousiness of unstable, intermittent, expensive renewables that depend on subsidies and priority dispatch to make them “viable.” In Germany, there is a growing momentum of policy reversal in climate and energy policies because the German liberals Free Democratic Party (FDP) and politically wild Alternatives for Germany (AfD) have surged high in the recent Bundestag/Parliament elections last September and these two parties are very explicit in questioning continued renewables cronyism and endorsing cheaper, stable energy from coal.

To summarize: (a) There are less risks and uncertainties now and the near future compared to recent years; (b) Endless fiscal irresponsibility by governments will create long-term risks with rising public debt; (c) Dutertenomics of tax-tax-tax aside from kill-kill-kill in its drugs war may crack starting next year; and (d) Climate and renewables alarmism will see slow policy reversals in more countries soon.

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See also:
BWorld 161, The sin of smuggling and corruption in the Sin tax law, November 02, 2017 

BWorld 162, Open pit mines and open economy, November 05, 2017 

BWorld 163, US energy policies and implications in Asia and Philippines, November 19, 2017

Mining 43: Mandy Armas, Christian Monsod at the PES Conference

The Philippine Economic Society (PES) held its 52nd annual conference last November 14, 2014 at the Intercon Hotel in Makati City. I attended it, I am a lifetime member of the PES.

Nice conference as usual, especially the simultaneous panel discussions in the afternoon. The morning keynote speeches were also good, with Sen. Sonny Angara, then House Speaker Sonny Belmonte. The heads of WB-PH and IMF-PH also spoke and they over-talked. The current PES President, Dr. Stella Quimbo + her team have good political connections to get these two high level legislators.

There were about seven simultaneous panel discussions in the afternoon in one batch, plus another seven total of around 14 panel discussions. In the first batch I attended the panels on energy, labor market and poverty (I was hopping from one room to another).

In the second batch, I attended the panel on mining. Here are the speakers. The moderator was PES board member and DOF Assistant Secretary Maria Teresa Habitan.  All the four speakers were given  15 minutes each to present, to be followed by an  open  forum.

The first speaker was Armando "Mandy" Armas, who was in his usual self – bombastic, bold, sensational, no holds barred. He showed several tables from his book, published recently in August 2014 (below) and he argued that we need mining and its various economic potentials not realized by the anti-mining people.

Then the two young researchers from UPSE (MA and PhD Econ candidates). Then Atty. Christian Monsod, hubby of my former teacher in Econ 199 (undergrad thesis) in the 80s, Ma'am Winnie Monsod, a former Comelec Chairman, a former Constitutional Commissioner, among  others.  Photo below, Mandy speaking while Ragos, Monsod and Adriano were listening.

He was delivering well. I don't have his presentation yet but I saw a paper where he was a co-writer and he was saying the same thing as below -- mining is so detrimental to the environment and the people, they are not exactly anti-mining, they can support it BUT... and this can be tantamount to saying "No  to mining".

Source: Esteban Godiano and Christian Monsod, To Mine or Not to Mine, May 31, 2012.

Then the moderator, ASec Tere reminded him that his 15 mins. allowance (applied to the 3 other speakers) was up. He commented while giving his talk, “So you want me to end now?” Tere nodded. Christian stopped talking, got his things in the table on  stage, and walked out of the room. Pikon, hehe. Hindi naman pini-pikon, simple reminder lang.

Most or all other speakers who are reminded by their moderators that their time is up have three options or reactions. (1) “Can I have a minute extra to wrap things up?” (and almost all  moderators would say Yes), (2) Continue talking as if the moderator does not exist, or (3) stop talking and continue the lecture during the open forum.

So Christian has 3 or more choices, but he took the lousy route, walking out. Beehhh, bondying, hehe. No one  in the room knew what irritated him -- maybe Mandy Armas’ bombastic talk earlier, maybe he has a bad day somewhere, maybe … :-)

In the ballroom when he walked out were guys like NEDA Sec. Arsi Balisacan, former NEDA chief Ciel Habito, FNF Regional Director Siggi Herzog (FNF is the biggest sponsor of PES annual conference), UPSE Dean Ramon Clarete, UPSE/PIDS guy Vic Paqueo, etc. Anyway, the open forum that followed remained stimulating even  without Christian Monsod.

Photo below: UA&P Prof. of Econonics and former PES President Peter Lee U, and Mandy Armas.

Thanks again to the PES for a great conference.
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See also: 

Mining 39: Taxes, SDMP and Small Scale Mines, January 11, 2014

Mining 40: MICC and its Proposed 79 Percent Effective Tax Rate, July 21, 2014

Mining 41: Presentation at the UP MINERS Forum, September 21, 2014

Mining 42: Presentation and Debate at UP PALS-NCPAG, November 14, 2014

Mining 6: Large Investments vs. Large Bureaucracies

The mining is perhaps the most regulated, most intervened, and most taxed sector by the government. Coming second would be the pharmaceutical sector, and perhaps the water and other utilities. One important indicator that there is heavy government regulation and taxation of a particular sector is the high presence of the informal or black market for such sector.

In the case of mining, the black market is the high presence of the  so-called "small mining" like in Mt. Diwalwal in Davao. In the pharma sector, it's the existence of so many unregistered "health products" like the "magic coffee" (or tea, juice, etc.) that can treat all types of cancer, TB, diabetes, and two dozens or more of other diseases, or even the fake and substandard medicines.

Last November 27, 2012, I attended the Philippine Economic Society (PES) 50th Annual Conference held at the PICC in Manila. In the afternoon session, I attended the panel on Mining Taxation. There were several speakers, like the IMF Philippines Country Director, one from the Asian Institute of Management (AIM), one from the DENR Mines and Geosciences Bureau (MGB), another one from UNDP I think, and the Chairman of the Chamber of Mines of the Philippines (CMP), Dr. Artemio Disini, also of the UP College of Engineering.

Of the various presentations, the most substantial for me was the paper by Dr. Disini. I got a copy of his powerpoint, posting here some of those slides. I will post the slides on mining taxation in another blog post as it seems to be the most controversial aspect that will require legislation.

From Dr. Disini's presentation, there is indeed huge investment, both actual and planned or potential, in the Philippine mining sector. See these two slides below. Please note again that these data were as of November 2012. There could be some slight changes in the data by now, am not sure.

The biggest is the Tampakan project by Sagittarius Mines, Inc. (SMI). Almost $6 billion, wow. It's a weird case. The company has already started so many infrastructures when suddenly the provincial government of South Cotabato passed a resolution banning open pit mining, so the operation was halted. You pour huge amount of money and human resources and suddenly one branch of the government, the provincial government, says "Stop!" wow.

I read today that Finally, Tampakan mine environmental clearance okayed. But still the company cannot operate because the moratorium on mining is still in effect unless a new law on mining taxation and other matters is enacted.

Below is a good map of where the big copper and gold mining projects are located. In copper mining, only three companies are operational while seven are still waiting for the final go signal from the government. Companies in gold projects are "smaller" compared to copper projects.

For nickel, the four companies still on the pipeline are pouring huge money, average of some $1 billion each. The projected exports revenues of those companies in the 3 metallic products would reach some $12.3 billion by 2018, that's a big amount indeed. But that is still a big IF because industry players, both existing and potential, cannot really predict what the legislators in the Senate and House of Representatives, as well as the Governors and Mayors in the provinces, will do with their existing and proposed investments.

The only saving grace of the Philippines perhaps is its geology. In the "Pacific Rim of Fire" where about 80 percent of all earthquakes and volcanic eruptions in the planet occur, those volcanic and other geological movements would turn ordinary rocks beneath the surface into something precious metallic rocks.

Welfare Economics: Philippine Institutional Issues

There were a number of good papers presented during the Philippine Economic Society (PES) Conference last week, see my previous post here, 11-11-11. Among such papers was the closing presentation by Dr. Josef "Jop" Yap, President of the Philippine Institute for Development Studies. Jop is also a friend from the UP School of Economics. He quickly sent me his powerpoint presentation when I requested for it -- thanks a lot, Jop.

Jop's presentation was rather comprehensive, from correcting certain misconceptions about the Philippine economy, to institutional issues that keep it from really developing.

My favorite part was his debunking of two such myths which even reach regional and international conferences : (1) that the Philippine economy was "second to Japan" in development after WW II, and (2) the Philippine economy lost a decade during the Martial Law period of the Marcos administration.

Here, Jop said (1) is not true. In the 50s, Thailand and/or Malaysia were more developed or have higher per capita income than the Philippines.

By 1960, the "tiger economies" of Hong Kong, Singapore, Korea and Taiwan, plus Malaysia were already much ahead of the Philippines. We were only richer than Thailand and Indonesia then.

The second myth that Jop debunked was that we "lost" two decades, not just one, from the early 80s to early 2000s. "Lost decades" here mean the absence of growth -- either a decline or a flat -- in per capita income.

Today is 11-11-11

Wonderful date today, 6 one's. Many groups and individuals marked this day for the launching of some of their big programs and projects.

Me, I will attend the Philippine Economic Society (PES) annual meeting and conference, a whole day activity to be held at the Bangko Sentral ng Pilipinas (BSP). Will meet many friends there in the economics profession. I've been inactive of the PES lately. Well, I did not like the themes and topics of previous conferences before. This year, still another cheesy topic, but the good thing is that there are so many simultaneous panel discussions, something like 6 to 7 panels on-going at the same time, so I can just hop from one panel to another if one panel is boring. This is the main reason that attracted me to attend today's PES big event.

In the morning session, I plan to attend the discussion on "Understanding Institutional Change in the Philippines". I want to see if the speakers will mention topics like rule of law and property rights, two of the most important but often overlooked concepts in many economic and social literatures in the country. Or I can jump to the panel on International Trade.

In the afternoon, I plan to attend the panel on "Labor and Migration", or "Issues on Restraining Firm Market Power". Restrain market power? Why not restrain government power? There will also be cocktails after the conference, yeah, beer or wine, I prefer beer.

November 2011 is quite pivotal for some countries. The government in Greece sank, Berlusconi in Italy is sinking. Thailand manyprovinces are "sinking" literally due to heavy flooding. The floods are still rampaging for weeks now. Some folks will definitely argue that "warming causes cooling", yeah right.

State welfarism is very costly, many countries on both sides of the Atlantic are realizing it slowly. Paying someone for not working, or giving "free" healthcare for many if not all people, early retirement (like 50 years old in Greece?) and long pensions, are slam dunking their public finance with tons and tons of public debt. Public Debt/GDP ratio of 50 percent seems mild these days, as many countries are on the 60 to 100 percent or higher ratio already.

And talks of Israeli strike of Iran's nuke facilities has resurfaced. Here in the Philippines, talks of "all out war" against the communist CPP-NPA and the secessionist MILF rebels is also resurfacing, at least among a few sectors who want to end these 42-43 years old armed conflict. Me too, I'm tired of all these war, even if they are limited to far away municipalities and barrios. I don't want to see, support, finance through endless taxes and fees all those wars and bloated military bureaucracies for the next decades. It's an endless war it seems.
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The PES conference was great, lots of good papers presented, big audience too, should be 200+ participants. I actually came late, past 10am. The morning plenary session has already started, about Public Private Partnership (PPP) on various infrastructure projects. There were four speakers, one from the PPP Office, one from the Department of Finance, and two from the Asian Development Bank (ADB). I forgot the conference kit at home, I don't remember their names, but will write about it further. Peter Wallace was the moderator.

The two ADB guys talked a lot about public goods, like hard infrastructures (roads, energy, ports, etc.) and education. During the open forum, I was one of those who asked questions. I said something like this.

My question and comments are addressed to the two speakers from the ADB. You talked a lot about public goods, state responsibility, but I think one important public good now that government can provide is how to reduce the public debt, reduce the interest payment burden. The ongoing debt problems in Greece, Italy, the US and other developed countries clearly show that high public debt leading to economic turmoil is one clear proof of government failure, of government as creator or instigator of economic instability. So why not push for private sector investments even with no public sector participation? When government comes in, they bring lots of bureaucracies, as earlier mentioned by Mr. Vic Valdepenas where the PPP Office is duplicating the functions of the ICC (Investment Coordinating Council), the BOI (Board of Investments) and other agencies. Government also contract more debt, and get more taxes to finance those debts. So it is possible to have more private sector investments with no additional public debt.

Interest payment alone of the Philippine government is around P330 billion per year, average for 2010 to 2012, principal amortization not included yet, clearly a huge public finance burden. If private investors come in, government can only ask them, "Will you be involved in drug pushing, human trafficking, related activities?" If their answer is No, then government should tell them, "Ok, start your business tomorrow" and that's how we proceed with investment-led growth.

Perhaps it was somehow a shocker for the two ADB guys to be told that government -- and ADB-pushed new debts -- should step back. My gift for them on 11-11-11. In fairness to the two guys, they admitted that bigger private sector involvement is possible and desirable, that high public debt is a big issue for many economies.

More stories later in this blog.