Rule of Law 18: Damaso and Carlos Celdran Conviction

Private property, property rights and their protection are the cornerstone of a free and economically dynamic society. If trust and sanctity of private property is assured, people can conduct businesses easily and peacefully. And the economy can grow rather fast as sources of economic instability are reduced if not eliminated.

 

If, however, other people can say, “his car is also my car; his house is also our house” and comes to use other people’s car by force, or enter other people’s house by force and take away anything that he likes, then society can easily degenerate into chaos and unrest.

Private occasion is an event for selected and invited guests by the host and event organizer. Strangers and uninvited people are not supposed to join that event unless they were given belated explicit permission by the host. Otherwise they can be shooed away or be forcibly dragged outside if they persist on staying.

The conviction of Carlos Celdran by a Manila Court of “offending religious feelings” can be analyzed taking the perspective of protecting private property. A lawyer friend explained that “the central element of guilt or crime is location and occasion.”

The immediate reaction by many "netizens" to the lower court's decision, Celdran camp, was rather OA. The hashtag #freecarlosceldran was quickly used. Celdran was not imprisoned, since the decision was issued last January 27 or 28 until now. So how does one free a freely walking, freely moving person? 

 

In a facebook wall of a friend Jim Libiran, who is also a friend of Carlos Celdran, Jim posted last January 30 about the latter’s case. I saw that Carlos himself joined the exchanges, so I posted this comment:

Hi Carlos, I have a question. Pwede naman gawin yan, hurl posters like DAMASO, Bishop Satanas, Obispo bobo, whatever. It's part of freedom of expression, so it's not being debated. The debate centered on what my lawyer friend called "location or occasion" in establishing guilt or crime. If you did it in Liwasan, Luneta, Plaza Miranda, Edsa, facebook, etc., I think there would be no legal debates. But you chose a specific location and occasion, the cathedral with an on-going religious activity. I assume you already knew you were courting some trouble by choosing such location and occasion, and you exactly got it. Don't you think you just got what you were asking for?

Carlos was kind enough to reply after a few minutes. He said that what he did was not just for fun, but to bring attention to the RH bill then and the CBCP power abuse. When the bill was passed into a law, he said that he exactly got what he wanted.

I followed this up with another comment:

I was referring to the legal case filed against you that was upheld by a Manila court, not the RH law. The issue now is about your conviction by that court, not the RH bill passed by Congress. From your reply, it is clear that you justify, no remorse, of what you did -- entering a private location (it's not a public place like Luneta or Quiapo Plaza) with private occasion (it's not a rally or street demo) uninvited in pursuit of your political advocacy. Some individuals, I think it was not the CBCP itself who filed the case, also thought it is their freedom of expression to haul you to court. The judge is the referee to decide whether the case filed by those individuals should be upheld or thrown away, and the judge ruled in favor of upholding it and hence, your conviction. This is what I meant -- you asked for trouble that day, you got it. Don't you think you deserve it? 

Carlos replied that he and nobody in the Philippines deserves that law nor the hypocritical religion. So I posted another comment:

So you can enter a private location with a private occasion uninvited and make a scene, the people attending that activity in Manila Cathedral deserve it. But when some of the people there think they have the freedom of expression to bring you to court for your action, it is not justified? I see double standard and absence of fairness in that statement. Earlier, I commented also in Jim's wall posting when he said that "If Celdran did the protest OUTSIDE of the Church, say in Plaza Roma, the whole symbolic action will miss the point. It was bringing politics into a church to protest, symbolically, Church meddling in politics." 

Let me restate my reply to him and address this to you now. Is it okey with you if someone will enter your office or your house (both are private properties, not public place), hold a placard denouncing you or your work, because it is their freedom of expression anyway. And you are not supposed to drag that person outside your office or house, and neither you are supposed to sue him. Is that Okey with you?

Asking that question because it is not ok with me, Thanks again.

He did not directly reply to it, only posted an article about him from a local online news. While I also did not support the RH bill then, now a law, I did not use or support the Church arguments as I have my own. My main opposition to the RH bill was that it is another legislation to further expand government, expand public spending, the various bureaucracies and the public debt. More RH services can be done via more private sector and civil society volunteerism, on top of the regular activities and spending of the Department of Health and various local government units.

So my support of the conviction ruling by the Manila Court is not exactly a sympathy with the CBCP and the Catholic Church. It is more of upholding private property and the privacy of individuals in a private occasion.

Manila Cathedral is private property of the church, not by the government or by any corporation,  NGO or individual. Although Celdran did not say anything while holding the placard “DAMASO” it was still an intrusion as it was an uninvited or unsolicited action. And when he was forcibly escorted outside so he can stop his drama, he started shouting and hence, created further unnecessary scene and disturbance to the church goers.

There were reports that he already apologized earlier for his action that day. It was not clear to whom he apologized. If he apologized to the judge, then it was the wrong audience as the judge is only hearing the merits or demerits of the case. If he apologized to the CBCP, then the latter should have forgiven him. But then it was not the CBCP that filed the case, it was some private individuals not part of the bishops’ hierarchy.

There are several lessons that we can learn from this case.

One, tolerance means respect for other people's belief, biases and dogma -- Catholic dogma, Islamic dogma, Buddhist dogma, cultural minorities’ dogma, etc. Do not smear their practices in their private places and private events. Bold and daring people may do it but they should face the consequences later.

Two, dragging other issues and complaints against the Church like pedophile priests and corrupt church leaders are immaterial to the current debate. The issue is whether the Court’s conviction of Celdran for his action that day is justified or not.

Three, bold and daring guys like Celdran are supposed to be ready for bold consequences of their actions. They should not argue that only them have the freedom of expression while those who felt offended by their actions have no freedom of expression to bring them to the court.  

Four, freedom comes with responsibility. As the famous Austrian economist and legal philosopher, Friedrich Hayek said, “People who are afraid of responsibility are afraid of freedom itself.”

Five, the rule of law must prevail. If Celdran and his supporters are not happy with the lower court’s decision, they can go to the Supreme Court. He must go to jail once his the bail-out period expires while his supporters wait for fast decision by the Supreme Court.

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See also:
Rule of Law 14: Appointing the New CJ of the Supreme Court, June 17, 2012
Rule of Law 15: RoL and Government Failure, August 16, 2012
Rule of Law 16: On the New SC Chief Justice Ma. Lourdes Sereno, August 25, 2012
Rule of Law 17: Justice Without Discrimination, October 18, 2012

Senior Citizens Discount 4: Distortion in Consumers' Perception of Drug Prices

(Note: The original title of this paper was "Health Transparency, More on Senior Citizens Drug Price Discount".)

There will be another meeting, the 16th meeting of the DOH Advisory Council on the Implementation of RA 9502 (Cheaper Medicines Law of 2008) next week, February 13 at the DOH. I have told the Secretariat that I will join the meeting.

I think the new Department Order regarding the sharing of burden of the mandatory 20 percent discount for medicines of senior citizens will be shown to us members of the Council. Or has it been officially issued already, I don't know.

In my blog post last December on this subject, there were two comments there, one from Leonie Ocampo, the President of the Philippine Pharmacists Association (PPhA) and from an anonymous individual who owns a small drugstore in the province. See below:

(1) ... Drug price regulation or expanding he MDRP list, as had always been my personal and the PPhA POSITION, THIS WILL NOT HELP. The first list did not give the expected result; no increase in the number of users which means only the regular users of the SKUs in the list benefits from the initiative and those who have NOT used said medicines continue not to avail of them even at 50 or 70% price reduction because in the first place, these people do not have the money to buy the medicines. Other ways to improve medicine access must be explored BUT THIS MUST BE DONE WITHOUT JEOPARDIZING THE MEDICINES QUALITY. We are open to help how this will be done.

-Leonie Ocampo

(2)  As a small independent drugstore in the province, I would like to add that the senior citizens law is being EFFECTIVELY USED by the giant chain drugstores as a LOYALTY and PREDATORY pricing program. Since they have the advantage of the “economies of scale”, they can easily “force and coerce” the drug distributors to subsidize this “expense discount” or else they will not buy. Because of this reason, the giant chain drugstores capture more or less 100% of the sales from senior citizens, without spending a penny! Unfortunately (also) for the small independent botikas… this not only means LOST SALES from the seniors, but they also loss the LOYALTY and PATRONAGE of the very influential sector in the local community! A double whammy!

-Anonymous

I developed this new graph below showing what happens when the smaller drugstores in small municipalities in the provinces will stop selling some drugs at a loss, particularly those medicines often demanded by the senior citizens. The mandatory discount under RA 9994 or Expanded Senior Citizens Act is 32 percent (20 percent original discount + 12 percent VAT) and only a small portion will be shouldered by the drug manufacturers, the bulk of the burden will be shouldered by the small drugstores. Government takes little or no burden as such loss is not tax-credited. 

In graph A, before the expanded mandatory price discounts to senior citizens is implemented, there are four sellers of a particular drug often demanded by senior citizens. Mercury Drugstore (they control about 60 percent of the total drug retail business in the country) and three small, town-specific drugstores. They may have slightly different prices for the same drug with the smaller ones selling lower than the dominant player Mercury. These are represented by points A, B, C and M.

After the expanded mandatory price discounts, the three local drugstores are still around but they have stopped selling some medicines often demanded by senior citizens to prevent losses. Only price M by Mercury is left, still at the same level as chain stores keep only one price for each product for all their branches nationwide. But the quantity has expanded from Q1 to Q2. 

What the anonymous commenter above argued is that they may prevent losses by not selling certain medicines often demanded by the senior citizens, but they suffer further lower revenues as the senior citizens who may be buying other medicines, say vitamins for their grandchildren, will purchase these in the same store, ie, Mercury or other big chain drugstores (Watsons, Rose, etc.).

The above graph is hypothetical but it shows another negative effect of government price intervention on small businesses. The other negative effect is the inconvenience to senior citizens themselves. If drugstore A selling at price A is just a few blocks away but it has stopped selling the medicine that they need, then they will have to travel to farther, perhaps in the neighboring town or city where there is a Mercury or other big chain drugstores.


I hope that this law will be amended in the next Congress. The main goal of that law is to help the poorer senior citizens purchase their needed medicines, fine. But the law did not make a distinction between the richer senior citizens with their poorer cohorts. Many senior citizens are rich or have ample savings, have PhilHealth and private health insurance, they do not need that discount much. The ones who need a discount are the poorer ones, those who worked at the informal sector. 

There are actually many government programs towards this end. Like the rising budget of the DOH, additional funding for PhilHealth from the new Sin tax law and higher monthly contributions from those working in the formal sector, and higher budget for local healthcare by the local government units. Forcing the private players (drug manufacturers, drugstores, drug importers, hospital pharmacies, etc.) to give that discount otherwise the government will go after them and cancel their license to operate (LTO) or business permit is wrong.

So a new legislation to correct this mistake is needed. I am not sure though how ready the major players and stakeholders can be in deflecting legislators' grandstanding and political harassment. Finding less costly alternative schemes to protect the poorer senior citizens will make this work more palatable to the legislators.

For the meeting next week, we were asked what topics we wish to be included in the agenda. I suggested that requests for price hike for some drug molecules that were put under the mandatory 50 percent price cut through the "voluntary price reduction" or politically twisted as  GMAP, should be be considered and granted. Why? 

So long as cheaper generic products for the same molecule are available for the consumers and patients, meaning they have the option to buy other drugs, let the innovator drugs be priced high if they want.

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See also:
On Senior Citizens Discount, August 10, 2009 
Senior Citizens Discount, Part 2, November 03, 2010 
Drug price control 5: Mandatory discounts and acronym politics, March 21, 2011 
Senior Citizens Discount 3: Sharing of Mandatory Discounts on Medicines of Senior Citizens, December 14, 2012

Fat-Free Econ 37: PH GDP Growth 2012

* This is my article yesterday in TV5's news portal.

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In November 30, 2012, this column made a rather bold statement about the economy for the fourth quarter of that year.

The National Statistical Coordination Board (NSCB) yesterday announced that fourth-quarter growth came in at 6.8 percent, or just 0.2 percent shy of the forecast.

It was not an “ambitious” figure to target for the fourth quarter. For one, the growth momentum for the first three quarters of the year was already there: 6.3 percent in the first quarter, 6 percent in the second, and 7.1 percent in the third (later revised upwards to 7.2 percent). Second, the growth momentum in Asia’s emerging economies is still there. For instance, growth rates in the third-quarter were 7.7 percent in China, 6.2 percent in Indonesia, 5.3 percent in India, 5.2 percent in Malaysia, 4.7 percent in Vietnam and 3.3 percent in Thailand.

This is one advantage of being a neighbor to faster growing economies. Even if political and economic governance in the home country is not that good, overall economic activity will be pulled up by the more dynamic neighbors through regional trade, investments and tourism. In the case of the Philippines and its neighbors in North and Southeast Asia, they seem to be pulling each other up.

The phenomenal economic expansion of the planet’s two most populous countries -- China and India, with a combined 2.5 billion population -- is a good example of how they have helped expand demand for goods and services exported by their neighbors in the region. Below are two tables showing the phenomenal economic expansion of many Asian emerging economies in just two decades. Purchasing power parity (PPP) valuation of gross domestic product (GDP) is used instead of the usual nominal GDP to correct for hyper valuation of goods and services in many rich countries.

Source: IMF, World Economic Outlook, October 2012 Database 

In just two decades, China’s economy has expanded 10.3 times from its 1992 level, while India has expanded 5.6 times over the same period. In contrast, the rich European and US economies have expanded only between 2-2.5 times.

The table below shows the expansion of a bigger set of Asian emerging economies:

There are several important implications of the above numbers.

One, many Asian economies increasingly are becoming the “growth anchor” for the rest of the world economy. Expanding wealth and consumer purchasing capacity in Asia creates additional demand for other economies' goods and services exports that may balance between anemic growth and stagnation, if not contraction.

Two, big population is generally an asset as the economy has more consumers, more workers and more entrepreneurs. This is clear in the cases of Japan Indonesia, India and China, countries with populations of 127 million, almost 250 million, 1.2 billion and 1.3 billion, respectively. Among the reasons often cited by investors who put their money here is that the Philippines has a big and young population that can easily be trained with new and changing skills. 

Three, intra-Asian merchandise trade and people mobility greatly help integrate their economies and in the process, pull each other up economically.

So in the absence of really globally or regionally disruptive events like war or huge fiscal collapse of the major European economies, the “default mode” is continued expansion of many Asian emerging economies like the Philippines.

More business-friendly government policies and bureaucracies will help the country sustain and even surpass current economic performance.

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See also:
Fat-Free Econ 33: Institutions and Why Governments Fail, December 09, 2012

Fat-Free Econ 34: Rise in Unemployment Rate Not Exactly Bad, December 20, 2012

Fat-Free Econ 35: World's 25 Largest Economies in 2012, January 02, 2013

Fat-Free Econ 36: Peso Appreciation, Growth and Less Government, January 06, 2013

Business Bureaucracy 7: Penalizing Small Businesses

Last January 10 this year, a friend and a young entrepreneur, Lemuel Goltiao, posted this note in his facebook wall. He gave me permission to blog these things. 

WTF higher business tax assessment for this year! I REALLY FEEL THE GOVERNMENT'S ADDED VALUE TO MY BUSINESS! RAMDAM NA RAMDAM ANG KAUNLARAN! 7% GDP GROWTH!

7% GDP GROWTH AT THE COST OF 20% HIGHER BUSINESS TAX! RAMDAM NA RAMDAM ANG KAUNLARAN!

I commented that LGUs are often worse than the national government in business bureaucracy. That is why I am no fan of decentralization really. It should be degovernmentization.

Lem replied, "I realize that LGUs could be more tyrannical than the national government. They can arbitrarily increase business tax rates year after year without hearing the people most affected: the entrepreneurs. My gross revenue for 2012 is lower than that of 2011 but I have to pay 30% more for the renewal of my business permit. Yes, my business is registered in Quezon City, or the Philippine City of Asia according to its LGU, whatever that means."

Another friend of mine lives in one of the 8- or 10-doors townhouse in Quezon City, and the structure is owned by an official of the QC Hall business permit division. Those who can not afford the ever rising LGU fees will have to negotiate with these guys. And that's how they become rich.

In another posting last December 10, 2013, Lem also wrote this:

A few nights ago my business partner invited me to his birthday celebration and I was able to talk to his pastor who I have already met a couple of times. While waiting for the food, we discussed about our families and then our occupation. When I asked him about his work, he complained that the government has new guidelines for religious leaders who officiate weddings. The government is now asking for more paperwork, credentials, and is somewhat imposing geographical limits on officiating ministers: they can't officiate a wedding far from their church. He also complains that it's becoming harder for couples to get a marriage license (license!) due to stricter enforcement of requirements like the couple's attendance in marriage seminars and counseling. I told him that the government is making life harder for everyone and that started my "libertarian evangelism". It turns out that he's receptive to the ideas of individualism and I related it to the Christian (Protestant) faith. Before we separated that night, he somewhat acknowledged that a lot of "social problems" that we're having right now are mainly caused by government intervention on every aspect of our lives.

I shook my head when I read this. The government bureaucracies even extend their grubby fingers to how spiritual leaders and ministers would officiate weddings and other religious activities? Horrible.

Meanwhile, before I gave that talk on "Growth Amidst Bureaucracies" last night, see Presentation at Rotary Club of Manila Bay, I also gave a similar talk to my club a week earlier. Below are some slides that I showed in my talk to my club that I did not include in my presentation at the RC Manila Bay. Likewise, there were several slides there that I did not include in my talk to my club.  Just filling some gaps in the presentation here.

 

Thanks to our club leader, Peace President Rose Antonio, for the nice Certificate of Recognition. Some photos below. Many club members were not able to come that night.

See also:
Business Bureaucracy 3: Their Rules and Life,July 15, 2011

Business Bureaucracy 4: How to Reduce It, January 27, 2012

Business Bureaucracy 5: Doing Business 2012 Report, August 28, 2012

Business Bureaucracy 6: Presentation at Rotary Club of Manila Bay, February 01, 2013

Business Bureaucracy 6: Presentation at Rotary Club of Manila Bay

Last night, I was the guest speaker of the Rotary Club of Manila Bay, RI District 3810, held at Astoria Plaza in Ortigas. Thanks to a friend way back in UP, Bobby Galvez, who is the club President-Elect (PE), for inviting me.

Below is my 24-slides presentation.












I introduced the second topic, Bureaucracies, with this note: In a free society, everything is allowed except a few things like killing, stealing, rape, abductions, etc. In an unfree society, it's the reverse: everything is not allowed unless given permits, usually by the government.

So many government units have taken the habit of declaring, "Do not move, do not start anything, unless you get permits from us." And the "us" range from the barangay captain, city health and sanitation office, city building official, city mayor, etc., all the way up to the SSS, BIR, DTI, SEC bureaucracies.

Thank also to Club Pres. Francis "Pankoy" Santaromana for the warm welcome and nice Certificate of Appreciation. Later in the evening, Sen. Koko Pimentel, one of their active club members, came. 

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See also:
Business Bureaucracy 1: Avoiding government: Egyptian experience, March 12, 2007
Business Bureaucracy 2: We don't need a new DICT bureaucracy, July 13, 2010
Business Bureaucracy 3: Their Rules and Life,July 15, 2011

Business Bureaucracy 4: How to Reduce It, January 27, 2012

Business Bureaucracy 5: Doing Business 2012 Report, August 28, 2012

Human Freedom, 2013 Report

* This is my article today in thelobbyist.biz,  

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The freedom from summary execution or abduction, or being imprisoned or physically attacked for expressing one’s view, is often absent in the consideration many global economic freedom or competitiveness annual reports. In these reports, the Philippines never ranked high worldwide. 

This week, an important report was released, Towards a Worldwide Index of Human Freedom,  January 08, 2013. It is a joint project of three big think tanks advocating more individual freedom and limited government – Fraser Institute in Canada, Liberales Institut in Germany, and Cato Institute in the US. It has a big and ambitious goal, to produce the world’s first comprehensive and conceptually consistent index of human freedom, composed of personal freedom and economic freedom.

Freedom is defined in the “negative” – the absence of barriers or coercion that prevent individuals from acting as they might wish. While government is the main source of external coercion, like people can not start any business unless  they get permits from various local and national agencies and pay various taxes and fees, other sources of coercion were also identified. Below are the factors in constructing personal freedom index.

Table 1. Structure of the Personal Freedom Index

 

Source: Ian Vasquez and Tanja Stumberger, Chapter 3, An Index of Freedom in the World, Towards a Worldwide Index of Human Freedom, January 08, 2013

It is amazing how the authors have gathered such kind of data where a global comparison among many countries can be made. Check the link above how those concepts are defined, where the data were lifted, and how scores were made.

There were 123 countries included in this new report. The data used for personal freedom are from 2008 while data for economic freedom are from 2010-11. Here is the result.

Table 2. Freedom Index and Sub-Indexes

Source: same as above.

Generally, countries that have high scores in economic freedom also have high scores in personal freedom, at least for those in the top 10 or top 20. Singapore though is a big exception.  While it is #2 worldwide in economic freedom next to Hong Kong, it ranked very low on personal freedom with a score of only 6.6, should put in the 70+ in global rank. This report will definitely make the Singapore government unhappy.

Many big European economies like Spain, Germany, France and Italy have high scores in personal freedom but low score in economic freedom, reflecting their heavy business bureaucracies and taxes, that consequently pulled down their overall freedom index.

The Philippines is #67 overall. It ranked low in I. Security and Safety with a score of 5.6, and III.Expression, 6.3. But it ranked high in II. Movement with 8.6, and IV. Relationship Freedoms. Reports of extra-judicial killings, torture, political imprisonment and disappearances during the past administration significantly pulled down the country’s score in I.

There are at least two good news for the Philippines in this report. One, its average score in the three indexes is slightly higher than the global average. Meaning we have more personal and economic freedom compared to many people and countries around the world.

Two, compared to other major Asian neighbors, we have high degree of personal freedom, much higher than those in Singapore, Malaysia, Indonesia, India and China. Vietnam, Laos, Cambodia are among the Asian countries that were not included in the report yet.

As mentioned, the information on personal freedom were lifted from 2008 data. Future reports that will reflect 2010 and succeeding years of the current administration would generally produce higher score for the country.

The bad news is that economic freedom remains rather restricted in the country until now. The local and national governments here tend to think that entrepreneurship and job creation is a potentially criminal thing to do, so they imposed plenty of business permits, taxes and fees, that sap significant time and resources of entrepreneurs and investors. This is on top of a very protectionist Constitution that prevents foreign competition to many local business elites and oligarchies.

We hope that the Philippine government, local and national, will heed this type of international comparison. They add to either optimism or pessimism of Filipinos and foreigners alike, seeing where the Philippines ranks compared to other countries around the world. The government should learn to reduce business bureaucracies, reduce the itch for more taxes, permits and fees, and  focus on going after real criminals that bully and victimize the average citizens.

Over the short to medium term, the paranoia against foreign competition in many aspects of the country’s economy should be lifted via constitutional change.

See also:
Rule of Law 13: Freedom Barometer 2011, March 23, 2012
Rule of Law 13: Freedom Barometer 2011, August 16, 2012
Pol. Ideology 38: Central Planning vs. Free Market, October 30, 2012

Business 360 3: Fiscal Cliff and Government Irresponsibility

* This is the article that I submitted to B360 late last month, when the "fiscal cliff" in the US was being discussed worldwide.

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Fiscal Cliff and Government Irresponsibility

The US government’s public debt, currently at $16.3+ trillion, has touched the 100 percent of GDP mark in 2011. This does not include yet debt of local governments – states, cities and counties – which also have their own public debt. This huge debt and the huge interest payment to service the principal that keeps rising each day, is the main cause of its continuing fiscal and economic uncertainties.

Other rich countries which have reached the 100 percent or higher debt/GDP mark are Iceland in 2008, Portugal and Belgium in 2010, France and Ireland in 2011, United Kingdom in 2012. Greece and Italy have reached that mark early of the last decade. Heavy borrowing and fiscal irresponsibility is the main characteristic of these and many other economies. They have been living beyond their means, maintaining extravagant and populist welfare programs, aided by heavy military spending, even if taxes and other revenues are not sufficient to sustain these.

State owned BBC said in its “Q&A: The US fiscal cliff” that "The roots of the current crisis date back to 2001, when President George W Bush's administration was trying to pass a programme of tax cuts worth $1.7bn." 

This statement is wrong on two counts. One, the "roots" of the fiscal crisis date back many decades ago, of heavy government spending and heavy borrowing as if there is no repayment of those debts tomorrow. And two, tax cut is not the villain, it is heavy spending. Tax cut means allowing people to keep more money in their pockets, bank savings or certain investments. It is their money, they worked for it, they should keep more of it. If they spend or invest it, it creates economic activities and jobs elsewhere, so there is little or no need for government spending to keep expanding "to create jobs" for the people.

Entrepreneurs and private businesses, their staff and employees, have been bailing out through various taxes and fees these bloated governments and their numerous bureaucracies for decades. America and Europe prospered on economic freedom, not on heavy welfarism. People before have welfare because they worked hard and kept ample savings for their enjoyment or future investments, and not because the state has fed and housed them for free or at huge subsidies, at money that were borrowed from elsewhere.

Unfortunately, many Asian governments are following the welfarism and fiscal irresponsibility example of the US and European governments. They too are living beyond their means as shown by persistent budget deficit annually (expenditures are larger than revenues).

Source: computed from ADB’s Key Indicators for Asia and the Pacific 2012, Table 7.1

http://www.adb.org/publications/key-indicators-asia-and-pacific-2012

Nepal government seems to be less extravagant compared to its four neighbors in the region. But this is no consolation as growth can be sustained at deficit of below 2 percent of GDP as shown by the governments of Thailand, Vietnam and Indonesia. The governments of Hong Kong, S. Korea and Singapore even run on fiscal surpluses.

Fiscal responsibility and economic sustainability can be done on a few simple principles.

One, live within one’s means. Do not persistently spend beyond one’s income. Set aside savings for the rainy days and in times of emergencies.

Two, there is big role for personal and parental responsibility in many social and economic services, and not everything is government responsibility.

And three, there is big potential for tax cuts, or at least not creating new taxes, and allow the people to keep more of their income and savings. They know their priorities better than government officials and politicians. 

Let the new year usher in new thinking, away from the old thinking of more social engineering and economic central planning by the state, politicians and foreign aid bureaucracies. Modern technology has allowed people to learn new and more skills outside the formal school system, and opened up more economic opportunities beyond their country’s borders. Overall productivity should be rising and not stagnating. This is a good ingredient to create more jobs, fight poverty and have sustained inclusive growth.

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See also:
Busiiness 360 1: Nepal and the Philippines, November 26, 2012
Business 360 2: Free market means free individuals, December 28, 2012

Fierce Competition is Fair Competition

"Fair competition" is a nice and neutral term that many sectors in society can identify with. People love competition, the way they like Manny Pacquiao competes with some of the world's great boxers on the ring, or the country's Azkals soccer team competes with great soccer players in Asia. 

But people normally do not like to hear "fierce competition" even if that's the reality in sports and the same reality in many products that are internationally traded like mobile phones, laptops, flat tv and cars. For me,  fierce competition is fair competition, the same way that free trade is fair trade. Government-managed or protected competition is not fair competition.

This Thursday, I will attend this forum organized by the Friedrich Naumann Foundation for Freedom (FNF). I believe in the formulation that competition is key to economic growth. This is similar to the Economic Freedom Network (EFN) Asia conference theme in Kuala Lumpur in October 2011, "Competition: Engine for Growth".

The line up of speakers and panelists for the forum on Thursday is impressive, below.

My thoughts on this subject is that no matter what kind of "Competition Law" that the Philippines will enact, there will be no fair or fierce competition in many important sectors of the economy like power generation, electricity distribution, airlines, shipping lines, bus lines, real estate, malls, water, media, agri-business, universities, hospitals, various professions, and so on.

Why? Because of the Philippine Constitution. Foreign business competitors are simply limited if not outrightly prohibited from competing with local businessmen and professionals in these sectors and sub-sectors. So we Filipinos and Philippine-based foreigners simply have to endure and be contented with whatever the local players can provide us. Where there is relative complacency due to limited competition, service provision by some if not many local players can be poor and mediocre.

Like internet speed. While we can buy modern cell phones, laptops and desktops from abroad as these are  freely-traded commodities from many big global players and manufacturers (Samsung, Apple, HTC, HP, Toshiba, etc.), internet speed is slow if not unstable in many areas as there are only few ISPs and telecom carriers domestically.

The more crucial reform that is needed therefore, is to change the current Constitution created in 1987 and do away with the protectionist, anti-foreign competition provisions. Now this is easier said than done. A change in the Constitution can lead to either less protectionism or more protectionism, although the likelihood of less competition, less protectionism seems higher than the protectionist camp and scenario.

While such change in the Constitution is not yet here, I agree that we will have to tinker with some existing laws in order to remove rigid rules that tend to protect one group of players over the others.

But wait, this will also mean the creation of another bureaucracy, the Fair Trade Commission FTC or an Anti-Trust Commission or Competition Regulation Authority or other names.

I dislike the creation of more bureaucracies on top of existing bureaucracies. It would be more palatable if for every new bureaucracy that the legislators create, they also abolish one or two existing bureaucracies.

Will try to write another blog post after the conference on Thursday.
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See also:
Competition and Prosperity, EFN Asia 8: KL Conference, October 12, 2011
Free Trade 22: Freedom to Trade, February 10, 2012
Free Trade 23: FNF on Free Trade Agreements, February 10, 2012
Free Trade 27: Proposed EU-PH FTA and TRIPS Plus, September 24, 2012