Monday, March 21, 2016

Earth Hour 7, Lesson in basic electrical engineering

Another Earth Hour drama the other day. The WWF guys, their buddies, should do it nightly, 365 nights a year, and several hours a night if possible. Better yet, they should have an office in North Korea where EH is a nightly reality for many of its neighbors.

A good satellite photo of Europe and Africa, same time zones. Darkness is cool? Am laughing.



I am reposting a nice intro to basic electrical  engineering, from my engineer-economist friend, Cynthia Hernandez. Cynthia gave me permission to repost this. Thanks Cynths.
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March 20, 2016

Scene in the house last night:
Mother: (looks at clock) Naku! 8:30 na! We have to turn off the lights for Earth Hour.
Me: (launches into my Earth Hour rant*)
End result: Lights and aircon stay ON! Woohoo!

*Earth Hour rant (slightly) condensed: Electricity is not just the Demand side. You turn off the lights, your meter runs slightly less, and you think, "Hurrah, I saved ×× kWh less, yey me, I'm such an Earth Warrior!" Then you pat yourself on the back and not think about the environment for the rest of the year.

However, on the Supply side, the huge generators that have to run to feed the Nation's addiction to OTWOL (or whatever is the current obsession. I don't watch TV so maybe that gives me environmentalist points?) don't stop spinning. Why? If you're running your car at 100 kph, you don't brake to 0 kph in 1 second, right? And these generators are engines that are a million times larger and more complex.

So, when everybody turns off their lights, generators don't spontaneously use less fossil fuel. They are not designed like that. Especially if demand is expected to pick up again after an hour. Most likely scenario is that they are still running in reserve mode and burning fossil fuels as they do so.

Thus, the glowing news articles that appear a day after Earth Hour saying "Hey, you brave Earth-saving person, you saved xxx tons of CO2 from going into the air!" are simplistic. You might not be getting billed for that electricity, but the infrastructure that delivers that electricity to you has only slowed down slightly.

If you really want to make an impact, don't use electricity for an ENTIRE DAY. That means not subjecting the electric grid to the stress of an hourlong demand drop. The system operators, that have to take extraordinary measures so that your appliances don't get fried by a massive voltage surge, will thank you. That is, if you can stand to be without electricity in this heat. Good luck with that.

#‎ThinkBeforeGoingOnABandwagon #‎ILoveElectricity #‎EarthHourIsStupid
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Meanwhile, this quote is from Bjorn Lomborg, he tweeted it. Cool.



Global ecological socialism -- the main goal of climate alarmism and the "man-made" or anthropogenic warming/climate change -- is deceptive and lousy, they wish to see more, bigger governments. The WWF, Greenpeace, the United Nations, other big international campaigners are simply saying, "save the planet... (send more money to us)." 
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See also:
Earth Hour 3: Letter to WWF-EH Campaign Leaders, March 21, 2011
Earth Hour 4: WWF-EH Censoring Critical Comments, March 30, 2011 

Earth Hour 5: Celebrating Darkness is not Wise, March 30, 2012 

Earth Hour 6: The WWF can Change Climate Change?, March 29, 2015

Climate Tricks 51, The CCC, Greenpeace and fossil fuels, February 01, 2016
Wind power, flattened mountain ridges, collapsed towers, March 08, 2016
Energy 60, PH solar companies, PagIBIG loan for solar, March 12, 2016

Saturday, March 19, 2016

ALF 8, Toast to Douglas North

During the Asia Liberty Forum (ALF) last February 18-20, 2016 in Kuala Lumpur, one session at the Freedom Dinner was a toast to the "Lost Heroes of Liberty". These are known free market and freedom leaders who passed away in 2015, and few years ago in the case of Aslam Effendi. Baishali Boomjan of the Center for Civil Society (CCS, India), among the key organizers of the conference, asked me to be one of the presenters, I accepted.

The presenters that night and the lost heroes they briefly discussed (about 3 minutes toast) were:

Kumar Anand: S. V. Raju
Nonoy Oplas: Douglas C. North
Manoj Mathew: Sharad Joshi
Deependra Chaulagaon: Bhola Nath Chalise
Tom Palmer: Whitney Ball
Terry Kibbe: Andrew Coulson
Ali Salman: Aslam Effendi​

Below was my short discussion about

Douglas North’s contribution to free market economics

Douglass North was an American economic historian who shared the 1993 Nobel Prize in economics with Robert Fogel. The Prize was given “for having renewed research in economic history by applying economic theory and quantitative methods in order to explain economic and institutional change.”

He died on November 23, 2015 at age 95.” Fogel died in 2013.

North asked how it is that some countries rich while others remained poor. Thus his contribution was he “Shed new light on the economic development in Europe and the United States before and in connection with the industrial revolution. He emphasized the role of property rights and institutions.”

According to the Royal Swedish Academy of Sciences, North "has pointed out that economic, political and social factors must be taken into account if we are to understand the development of those institutions that have played a role for economic growth and how these institutions have been affected by ideological and non-economic factors."

In the 70s, North advanced the notion that institutional structures, especially how property rights are handled within a society, made a considerable difference in that society's economic well-being. Institutions are the basic rules of the road in an economy, including formal systems, such as constitutions, laws, taxation, insurance, and market regulations, as well as informal norms of behavior, such as habits, customs, and ideologies. This field of study came to be called “the new institutional economics.”

North showed that England and the Netherlands industrialized more quickly because the guild system, which imposed restrictions on entry and work practices in various occupations, was weaker in those two countries than in other European countries.

Let me illustrate North’s contribution with this graph.


Property rights are among the key words of D. North's ideas. "Property lefts" is just my invention to highlight the importance of property rights protection.

I don't have any picture in that session. Anyway, the session was followed by a Freedom Speech by Parth Shah, President of CCS. He discussed about individual's political choice in the government budgeting system.

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See also:
ALF 6, Panel discussion on property rights, February 23, 2016

ALF 7, Panel on TPP, RCEP and other RTAs, March 18, 2016

Friday, March 18, 2016

BWorld 49, John Locke and Jovito Salonga

* This is my article in BusinessWorld last March 15, 2016.


When classical liberalism -- more individual freedom and personal responsibility, free trade, minimal government, and rule of law -- was formulated in Europe more than three centuries ago, the philosophy was caught by some Filipino intellectuals two centuries later. Not the entire philosophy but portions of it, like the people’s freedom of expression and assembly and freedom from (Spanish) colonialism.

Politically, portions of the philosophy were adopted by some Filipino politicians when they formed the Liberal Party after World War II, coming from the “liberal faction” of the dominant Nacionalista Party. Nationalism was the natural evolution of Philippine society after experiencing Spanish and American colonialism.


On March 10, 2016, the oldest living great statesman of the Liberal Party, former Senator Jovito “Jovy” R. Salonga (1920-2016) passed away. The man was so respected by many sectors of Philippine society mainly because of his intellectual prowess and excellent academic achievements: a law degree from the University of the Philippines (UP), Bar topnotcher in 1944 (tied with his friend and ally Jose W. Diokno), a Masters in Law from Harvard Law School, a Doctorate in Law from Yale University, and a Doctor of Laws Honoris Causa from UP.

Owing to these achievements plus his integrity, Salonga topped three elections as a senatorial bet despite his lack of huge resources: in pre-Martial Law 1965, in post-Plaza Miranda bombing in 1971, and post-Edsa Revolution in 1987, where he later became a Senate President.

Nearly three centuries before Sen. Salonga was born, the recognized “Father of (classical) Liberalism,” John Locke (1632-1704), an English philosopher and one of the great thinkers of the “social contract theory” was born.


There are some similarities in the ideas and writings of John Locke and Jovy Salonga on some topics. Two topics will be discussed here.

ROLE, PURPOSE OF GOVERNMENT
In a major work, Two Treatises of Government (1680-1690), Book II, Chapter 9, “Of the Ends of Political Society and Government,” John Locke argued that the main purpose of creating a government was to protect private property and have a rule of law. He wrote: “The great and chief end, therefore, of men uniting into commonwealths, and putting themselves under government, is the preservation of their property; to which in the state of Nature there are many things wanting.

“Firstly, there wants an established, settled, known law, received and allowed by common consent to be the standard of right and wrong, and the common measure to decide all controversies between them.

“Secondly, in the state of Nature there wants a known and indifferent judge, with authority to determine all differences according to the established law.

“Thirdly, in the state of Nature there often wants power to back and support the sentence when right, and to give it due execution....

“For in the state of Nature to omit the liberty he has of innocent delights, a man has two powers...

“The first power -- viz., of doing whatsoever he thought fit for the preservation of himself and the rest of mankind, he gives up to be regulated by laws made by the society...

“Secondly, the power of punishing he wholly gives up, and engages his natural force, which he might before employ in the execution of the law of Nature, by his own single authority, as he thought fit, to assist the executive power of the society as the law thereof shall require.

On the rule of law and not rule of men, John Locke continued:

“And so, whoever has the legislative or supreme power of any commonwealth, is bound to govern by established standing laws, promulgated and known to the people, and not by extemporary decrees, by indifferent and upright judges, who are to decide controversies by those laws; and to employ the force of the community at home only in the execution of such laws, or abroad to prevent or redress foreign injuries and secure the community from inroads and invasion. And all this to be directed to no other end but the peace, safety, and public good of the people.”

Sen. Salonga wrote a similar argument.

In his lecture at UP Diliman on “Good Government,” July 3, 1962, he argued that a responsive government is more than honest and efficient administration, but more importantly, one that promotes and respects social order and individual liberty. He wrote:

“What is a good government? Is it necessarily a government where the mass of public servants are honest and efficient? To my mind, this is not enough for in Italy and Germany during the war years, the great many were honest and efficient. In fact, during the tragic days of Mussolini, the trains in Italy ran on time as never before. The Nazi concentration camp system in Germany was a model of hideous efficiency, It may well be that in Soviet Russia today, the bulk of public servants are honest, dedicated and efficient -- even more so than in many places in the free world.”

And so, when we talk about good government, we should be careful when we discuss it in the context of a free society of free people. In such a society, the law is more than just a set of rules and decrees; it is a system of ordered liberty.

Now, that would involve us, it would seem, in some kind of internal contradiction. Order and liberty are concepts that are apparently inconsistent, when you have nothing but order, you have the makings of a garrison state and may eventually achieve what has been correctly phrased as “the unanimity of the graveyard.” When you have nothing but liberty, so that everyone is free to do what he pleases, you have no more and no less than anarchy and chaos. The eventual result is the rule of the strong over the weak -- which means loss of liberty itself. One is just as bad as the other.

EDUCATION AND GOVERNMENT
In his book, Some Thoughts Concerning Education (1693), Sections 91 -- 100, John Locke suggested that good breeding of grace and politeness of the governor, the tutor and the pupil, wrote,

“To form a young gentleman as he should be, ’tis fit his governor should himself be well-bred, understanding the ways of carriage and measures of civility in all the variety of persons, times, and places; and keep his pupil, as much as his age requires, constantly to the observation of them.... Without good breeding his other accomplishments make him pass but for proud, conceited, vain, or foolish.

“Courage in an ill-bred man has the air and escapes not the opinion of brutality: Learning becomes pedantry; wit, buffoonery; plainness, rusticity; good nature, fawning.

“Wherefore it is necessary that this part should be the governor’s principal care, that an habitual gracefulness, and politeness in all his carriage, may be settled in his charge, as much as may be, before he goes out of his hands.... The tutor therefore ought in the first place to be well-bred: and a young gentleman, who gets this one qualification from his governor, sets out with great advantage.”

In his speech, “The Educated Man,” delivered at Silliman University, Dumaguete City, Aug. 28, 1964, Sen. Salonga argued that the educated man is one who has a well-bred and meaningful life. He wrote,

“The educated man lives this kind of a life, because he has opened the windows of his mind to great thoughts and ennobling ideas; because he is not imprisoned by the printed page, but chooses to make a relentless, rigorous analysis and evaluation of everything he reads; because he is less interested in the accumulation of degrees than in the stimulation of his mind and the cultivation of a generous spirit; because his interest is less in knowing who is right but more importantly, in discerning what is right and defending it with all the resources at his command; because he can express himself clearly and logically, with precision and grace; because he is not awed by authority, but is humble enough to recognize that his best judgment is imperfect and may well be tainted by error or pride; because he has a deep reverence for the inherent worth and dignity of every human being, as a creature of God; because he has a healthy sense of values, a breadth of outlook and the depth of compassion which a purposeful education generates; because whenever he talks about good government he is prepared and willing to sacrifice himself for it; and because he lives a life of relevance to the world in which we live, a sharing in the problems of his time and doing whatever he can with intelligence and fairness and understanding.”

Our public policies, laws, and legislators have long been corrupted by the convenience of populism and welfarism, which is a shortcut to bribe voters’ support and justify high and multiple taxes, fees, fines, mandatory contributions and other forms of government regulations and intervention.

The spirit of more personal and parental/guardian responsibility in raising and educating children has been corrupted by more government responsibility in this aspect of the people’s lives. Thus, a culture of state-dependence instead of self-reliance, a culture of entitlement, and social expectation instead of independent citizenship, have been molded in the minds of both parents and children.

John Locke has lighted the candle of more individual liberty and rule of law as primary function of government more than three centuries ago. Sen. Salonga has also shared the same ideals half a century ago.

Thank you, good Senator. The current generation of thinkers and individuals should take the challenge of being free, self-reliant citizens, not people seeking entitlements and dependent on the state.


Bienvenido S. Oplas, Jr. is the head of Minimal Government Thinkers, a Fellow of the South East Asia Network for Development (SEANET), and a member of the Economic Freedom Network (EFN) Asia. All three entities believe in classical liberalism philosophy. minimalgovernment@gmail.com
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See also:
BWorld 46, China's debt, central planning and central crashes, February 27, 2016

BWorld 47, Renewable energy and the illusion of merit order effect, March 06, 2016

BWorld 48, On unilateral trade liberalization, March 17, 2016

Pol. Ideology 48: Hobbes, Locke, Rousseau and Social Contract Theory, September 09, 2013
Pol. Ideology 63, Alternative Economic System, May 25, 2015

ALF 7, Panel on TPP, RCEP and other RTAs

I am reposting this article from the EFN Asia website, written by a friend, Sethaput. One of those pro-free trade but anti-TPP papers.

As a free marketer like Sethaput, for me, the best action is unilateral, one-way trade liberalization. Just give the consumers and producers more choices, more options, more freedom where and whom to buy or sell. This is unpalatable to many sectors of course, similar to advocating significantly shrinking governments and foreign aid institutions, so its chance of being adopted is very small.

So the second-best solution is multilateral, worldwide liberalization. But this is not happening too, look what's happening at the WTO negotiations, 21 years after it was created in 1995. So the third-best solution is regional liberalization via regional trade agreements (RTAs) like the ASEAN FTA (AFTA), ASEAN Economic Community (AEC), Regional Comprehensive Economic Partnership (RCEP), and the Trans Pacific Partnership (TPP).

The no-no option or solution is protectionism, via high tariff or various non-tariff barriers (NTBs) and restrictions.

Photo below, during the panel discussion at the ALF, 19 February 2016.
From left: Julian Morris of Reason Foundation (US) as session chair/moderator, Sethaput (Thailand), Vivek Dehejia, IDFC Institute (India) and Razeen Sally, IDEAS Chair in Political Economy and Prof. at the National University of Singapore (he's Sri Lankan).



Monday, 14 March 2016
Dr Sethaput Suthiwart-Narueput
Thailand Future Foundation (www.thailandff.org)

(Remarks delivered at Asia Liberty Forum (ALF), 18-20 February 2016, Kuala Lumpur. Remarks represent the views of the author and not necessarily those of the Foundation; sethaput@thailandff.org.)
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Let me start with a few general observations on whether regional trading agreements (RTAs) are good for developing countries, before moving specifically to the Trans Pacific Partnership (TPP).

First, RTAs are not as good for developing countries as multilateral liberalization under the WTO.  Although they are often inappropriately called “free trade agreements,” these RTAs are really preferential trading agreements, and subject to the usual problems of trade diversion and complicated rules of origin.  While individual developing countries may benefit from the preferential access offered by RTAs, developing countries collectively as a group would be much better served by greater progress in multilateral liberalization.

Second, recent RTAs like the Trans Pacific Partnership (TPP) are not just (or mainly) about trade, but about a whole lot of other things, many of which are not in the interests of developing countries.  As Jeff Sachs has noted, the TPP is really 4 deals in 1, encompassing a preferential trading agreement; regulatory standards for trade; labor and environmental standards; and regulations covering investor protection, intellectual property (including the expansion of copyright and patent coverage), and service sectors.  As such, the bulk of the 30 or so chapters of the TPP agreement are not really about trade.  With the TPP, we seem to have gone from trade agreements with some standards and other non-trade related baggage thrown in, to an agreement on standards and regulations with some trade thrown in.  As noted by many economists, much of this shift has probably been driven by US corporate interests: “The TPP and TTIP seem to be about corporate capture, not liberalism[1]” (Rodrik, 2015); “[TPP] is largely about Hollywood and pharma rather than conventional exporters[2]” (Krugman, 2015).

Third, by design, developing countries typically have much less bargaining power under RTAs than multilateral agreements.  The TPP is no exception.  As Jagdish Bhagwati has noted, the US managed to obtain better terms by sequentially bargaining with smaller countries first before essentially offering a “take it or leave it” deal with larger countries such as Japan.  The asymmetry in bargaining power is reflected in the very language of the agreements.  In the side agreement on labor standards between the US and Malaysia under the TPP, for example, the words “Malaysia shall” appeared 34 times while the words the “US shall” appeared zero times.  Perhaps in the spirit of partnership, the words “Malaysia and the US shall” did manage to appear together once, in the context of securing funding for some technical assistance.

More worrisome, the lack of bargaining power extends to dispute settlement.  Under the multilateral system, developing countries have recourse to the WTO dispute settlement mechanism.  By contrast, under the TPP, the Investor-State Dispute Settlement System (ISDS) provides international arbitration to “ensure that Americans doing business abroad receive the same kind of protections…that are available to companies and investors doing business in the US under US law.”  The US Trade Representative (USTR) helpfully goes on to note on its website that “the US has never lost an ISDS case.  We have had only 13 cases brought to conclusion against us and the US has prevailed in every case.”  Not surprisingly, the lack of favorable outcomes has deterred others, with only one new case brought against the US in the last five years.

Fourth, nevertheless, individual developing countries can and do gain from RTAs.  Estimates by both the World Bank and the Institute of International Economics (IIE) using computable general equilibrium (CGE) trade models of the net benefits to Vietnam and Malaysia from joining the TPP are on the order of around 8+% of GDP cumulatively through 2030, though these estimates are likely to be on the high side for reasons discussed further below.  At the same time, other countries in the region, notably Korea and Thailand, lose out from not being in the TPP.

Let me now turn to the next part of my remarks and try to answer the following question:  In light of the above observations, what position should an old-fashioned, liberal economist from a developing country in Asia take in good conscience towards the TPP?

This is not such an easy call.  Do we tap into our collective or national conscience?  The TPP undermines the multilateral approach and thereby yields an inferior collective outcome for developing countries.  But despite very uneven bargaining power, it can generate benefits for the individual developing countries who decide to join the club.  Do we give greater weight to politics or principles?  Trade agreements have an unfortunate tendency to bring out a wide variety of NGOs and special interest groups in protest, for protectionist or other reasons.  Bedfellows matter.  If we take a position against the TPP, do we want to be seen to be allied with such protectionist interests?  Alternatively, do we want to be seen supporting a RTA like the TPP which has such illiberal parentage and baggage?  The TPP extends copyright and intellectual property (IP) protection far beyond the WTO TRIPS guidelines.  The TPP also seeks to impose higher environmental and labor standards on trading partners in an attempt to promote what it sees as “fair trade.”  But what does it really mean for trade to be “fair”?  The USTR provides some insight into its thinking on this question on its website: “When the rules are fair, Americans can out-compete anyone in the world.”  A corollary must be that if Americans can’t compete, then trade by definition isn’t fair!

On balance, this old-fashioned liberal economist from Asia would tend to say “no” to the TPP, for reasons of both principle and pragmatism.  Why?

First, principles and precedents matter.  We should not abandon the principle that RTAs should be first and foremost about trade and establish a precedent whereby RTAs are commonly and excessively loaded with all manner of other non-trade related baggage.  As Jagdish Bhagwati has written in the context of India and the TPP:

“We are open to trade liberalisation in PTAs but we will not sign on to all the non-trade features built by US lobbies into the TPP under the pretence that these are the marks of a ‘modern’ trade agreement.  Thus, if we want to join a golf club, we must know how to play golf; but we cannot be expected to go to Church and sing madrigals with the other members! – Jagdish Bhagwati[3]

The TPP risks undermining other principles as well.  In a “governance-challenged” region such as Asia, probably the single most important principle to uphold is the rule of law.  However, the TPP provides a means for US corporations and investors to circumvent the rule of law by resorting to arbitration under the ISDS mechanism.  What kind of signal does this send regarding equal treatment under the law?  Excessive corporate recourse to arbitration has already started to raise such concerns even in domestic court cases in the US.  Think of how easy it would be to fan the flames of protectionism here in Asia by claiming that these trade agreements provide one law for locals but another for foreigners.

Second, from a purely pragmatic standpoint, the economic gains and losses from TPP for individual countries are not all that large and are probably less than commonly supposed.  Let’s start with the losses.  Thailand has the unfortunate distinction of being the country that is usually estimated to lose out the most from TPP, but even here the losses are not huge: only around 0.9% of GDP cumulatively through 2030, or a CAGR of less than 6 basis points.  If I were to compromise my liberal economic principles, I would want to do it for more than just 6 basis points.  What about the gains?  The devil is in the details as each country’s circumstances are different, but chances are that the gains to a Thailand or Indonesia would be less than those to Malaysia and Vietnam just because new entrants to the TPP would have to negotiate with all the other signatories.

Of course, for many signatories, geopolitical and other non-economic considerations are likely to be an equally important part of the TPP calculus.  But there are several reasons for believing that the estimated gains to signatories might be less than commonly supposed.  First, not surprisingly, the estimated gains focus solely on the stuff that can be quantified, basically trade and investment flows.  The models and estimates pretty much ignore the much more difficult to quantify effects of the TPP such as the higher labor and environmental standards, much tighter IP protection, and ISDS.  But just because these effects are difficult to quantify doesn’t mean that they have zero cost to developing countries.  Second, the models rely on historical time series data for their calibration, data which may not reflect future prospects.  The World Bank model, for example, relies on data up to 2011.  But trade growth prior to 2011 was much higher than it is today or it is likely to be going forward for some time.  Less trade means less gains from trade which probably means less benefits from TPP.[4]

This brings me to my last point.  Mega-RTAs like TPP, TTIP or RCEP undermine the multilateral trading system.  A dangerous, self-fulfilling dynamic is created.  We decide to participate in RTAs because we can’t conclude Doha and we can’t conclude Doha because we decide to participate in RTAs.  Big trade deals get a large amount of policy and public attention and eat up a lot of political capital.  Do we really want to use what scarce political capital we have for an illiberal trade deal like the TPP?  Even if we were to believe that the multilateral route is dead and that RTAs are the only game in town, we should make sure that we choose the best game for us.  Why not try instead to work on RCEP to make it the best of all possible RTAs, one loaded with much less non-trade baggage and one which makes best use of the best principles and elements of the multilateral system?
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[1] Dani Rodrik, “The Muddled Case for Trade Agreements,” Project Syndicate, 11 June 2015

[2] Paul Krugman, “TPP at the NABE,” NY Times Blog, 11 March 2015

[3] Jagdish Bhagwati, “India should not toe the US line on the Trans-Pacific Partnership,” Hindustan Times, 28 Sep 2015

[4] A third and more subtle reason has to do with the specification of the baseline or counterfactual scenario.  As is typical, most of the modeling effort and attention is focused on analyzing the policy scenario at hand, i.e., TPP.  But the baseline is equally important in determining the size of the estimated gains since the gains are just calculated as the difference between the TPP and baseline scenarios.  But what if the right baseline scenario to use is a world where multilateral liberalization is more successful?  Or if RCEP is quickly implemented?  The corresponding gains from TPP would probably be reduced.
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See also:
ALF 6, Panel discussion on property rights, February 23, 2016


BWorld 44, Why the Philippines should join the TPP, February 19, 2016
BWorld 45, Asia Liberty Forum and property rights, February 20, 2016

Thursday, March 17, 2016

Business 360-34, Hydropower in Asia

* This  is my article in Business 360, a magazine published monthly in Kathmandu, Nepal, February 2016 issue.
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Hydropower in Asia

Asia being mostly tropical, the potentials of hydro power is big, in mainland Asia in general, and in mountainous countries in particular. Dams of hydro power plants not only serve as storage for electricity production, they also impound huge amount of flash flood that can inundate low-lying areas of a country near the rivers.

The biggest producers of hydro power in Asia in terms of high percentage of hydro dependence are Nepal, Bhutan, Myanmar and Vietnam.


I was lucky to visit Nepal and Bhutan in winter months of 2015.  January in Nepal and November in Bhutan. Electricity supply in both countries are very different. While parts of Kathmandu can experience 14 hours or more of black outs or power outages daily in January, the situation is very different in Bhutan as they do not experience black outs during winter.

One reason why this is so is that  Bhutan has only 0.7 million people while Nepal has nearly 28 million people and hence, demand for  electricity is much larger in Nepal than  in Bhutan.

In terms of actual hydro power production, the biggest producers are China, India, and S. Korea. Bhutan and Nepal are not included in this list below.


To help address the severe lack of electricity in Nepal during the winter season  and hence,  reduce the need for generator sets, other factors, the following are suggested.

One, expand the capacities of existing hydro power plants by dredging heavily-silted dams, by improving and  modernizing the turbines.

Two, allow private players to build dams and produce hydro electricity. Government resources will always be insufficient to build such huge structures, but government can facilitate the acquisition of right of  way (ROW) like houses and other  structures that stand on the roads or water reservoir. These must be relocated elsewhere.

Three, encourage multiple use of water in  dams to generate additional revenues. Like fishing and water sports.

Having cheaper and huge, stable energy supply has become more common among many Asian countries now. It is a good development and it should continue.

Governments must give more leeway to market players to flourish and expand, to introduce more innovation. This means reducing the number of bureaucracies, taxes  and  permits. Which will attract more traders and businessmen to do business in the country.
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See also:

BWorld 48, On unilateral trade liberalization

* This is my article in BusinessWorld last March11, 2016.


Free trade and voluntary exchange of goods and services by people across villages, cities, islands, countries and continents is the hallmark of modernization and improvement of human condition. Goods and services of certain quality and quantity that are not available locally are made available by liberalizing their entry from many parts of the world.

Protectionism and economic nationalism in various shades however, has limited the march of faster global economic integration. Thus, multilateral negotiations towards global free trade was invented via Uruguay round and its predecessors, and later via the World Trade Organization (WTO) since 1995.

This has proven to be a disappointment than a success in realizing global free trade as various types of non-tariff barriers (NTBs) were invented by many countries. So regional and bilateral free-trade agreements (FTAs) were invented to hasten the process.

So far, economies that have progressed and expanded faster than the average are those that embarked on unilateral trade liberalization. Yes, one-way liberalization without waiting for other countries and trade partners to liberalize and reduce tariff by the same amount. It may be a reduction from 20% to 10% or 4% in a span of few years, or down to zero.

There are many economies that embarked on unilateral liberalization, including the 10 ASEAN countries like the Philippines. The pace of tariff reduction in the past 2 decades were fast, much faster than tariff reduction in other regions of the world.

This paper will briefly review the experience of five economies: Hong Kong, Singapore, New Zealand, United Arab Emirates (UAE), and Chile. These countries have a small population of 7 million or less except Chile and UAE, thanks to expats and foreign workers that constitute about 85% of UAE current population (see Table 1).


1. Hong Kong. A small free port economy which thrives on free trade -- no barriers on trade, no tariff on imports or exports of goods. Its early open door policy made it one of the world’s largest trading economies, an international financial and commercial center in the Asia-Pacific region, at a time when many countries and economies have turned nationalist, protectionist and even socialist, years after World War II.

Import and export licensing are kept to the minimum, imposed only when there is real need like obligations to trading partners, or meet public health, safety or internal security concerns.

Literally, HK imports in thousands of container ships, and exports in hundreds of millions of shopping bags. Free trade attracts lots of visitors from other countries who think certain goods are not available in their countries or available but at higher prices. Any “losses” in import tax revenues are more than compensated by local tax revenues when millions of visitors and investors come to Hong Kong to spend. Major winners are the airlines, hotels, restaurants, theme parks, malls and shops, other players in the hospitality and tourism industry.

2. Singapore. Created only in 1965 after separation from Malaysia, the people embarked on an open, free, competitive economy, opening up lots of opportunities for the entrepreneurs. With a few exceptions, tariff is zero. Total merchandise trade is almost four times of GDP, FDI inflows are big. Import restrictions, if any, are based mainly on environmental, health, and public security concerns. Rice is subject to import licensing to ensure food security and price stability. Otherwise, international trade is highly encouraged.

But while Singapore has unilateral liberalization in goods, it practices protectionism of its services sector. Thus, many countries have arranged for bilateral and regional FTAs with Singapore, focusing on services liberalization. These include mutual recognition of standards, enhanced investment protection disciplines, protection of intellectual property rights (IPR), and elimination of anti-competitive practices, establishment of a competition policy.

3. New Zealand. Being so geographically detached from the rest of the world because of its location -- it is closer to Antarctica than mainland China -- the country has no choice but to engage in stronger global trade to enable it to procure many things and services that are not available locally.

In its mid-80s liberalization, tariffs were removed (zero rate) in a wide range of goods without domestic competitors, while reduced in others. Overall tariff has decreased from 27% to 7% in 1997. Import licensing was also gradually removed and other forms of export assistance were also greatly reduced (Grafton et al., 1997).

An editorial from the NZ International Business Forum (NZIBF) about two years ago summarized it this way: “History of trade in New Zealand is that our quality of life plummets when we are shut off to the global market. We do not get rich by selling to ourselves.”

4. Chile. The economy before the military take over in 1973 was characterized by high and dispersed import tariffs, import prohibitions, quantitative restrictions, and distortionary multiple exchange rate system. The fall of democracy in the country ironically paved the way for economic reforms which liberalized the country. First was reduction and simplification of trade barriers with more than 60% of tariffs removed and import restrictions eliminated.

In 1985, liberalization continued with the uniform tariff decreased to 20% and further to 15%. Reforms continued despite transitioning back to democracy. An independent central bank was established and the uniform tariff was again reduced. Currently, the country is pursuing several trade agreements (Edwards & Lederman, 1998).

A WTO annual report 2009 described it well, “Chile’s trade and investment regime continues to be characterized by openness, transparency, and predictability... Since the last review in 2003... modernize customs and facilitate trade, maintained a single MFN [Most Favored Nation] tariff rate of 6% with a few exceptions, abolished some import taxes and export subsidies...”

5. United Arab Emirates. Founded only in 1971, its seven emirates include world-famous cities like Abu Dhabi and Dubai. It is the second largest economy in the Gulf after Saudi Arabia. Its free-trade zones allow (a) 100% foreign ownership of enterprises, (b) 100% repatriation of capital and profits, (c) zero import and export tax, (d) zero corporate tax for up to 50 years, and (e) zero personal income tax.

Generally, it is heaven for global businesses that locate there. This change in policy, the rapid liberalization in goods and services allowed or necessited the entry of millions of expats and foreign workers, which now comprise around 85% of UAE’s total population.

Here is one summary of the performance of the five economies that embraced unilateral trade liberalization (see Table 2).


As a result of liberalization, these economies have expanded: 22 times for Singapore, eight to 12 times for UAE, Chile, and Hong Kong in just a span of 35 years. That is almost a miracle. New Zealand is a bit different because of its geography. Even if tariffs for all imports are zero, its distance from major economies in North America, Europe, and Japan necessarily makes shipment costs high. Which largely explains for its slower economic expansion.

The Philippines should pursue a policy of unilateral trade liberalization, in goods but more so in services and the practice of different profession. By opening up those professions to foreign competition, Filipino customers will have more choices, the Filipino professionals themselves will learn from their foreign allies and competitors, and the policy will earn benefits will that will open up opportunities for Filipino professionals to practice in more countries around the world.

Bienvenido S. Oplas, Jr. is the head of Minimal Government Thinkers, a Fellow of the South East Asia Network for Development (SEANET), and a member of the Economic Freedom Network (EFN) Asia. All the 3 entities advocate free trade. minimalgovernment@gmail.com
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See also:
BWorld 44, Why the Philippines should join the TPP, February 19, 2016 
BWorld 45, Asia Liberty Forum and property rights, February 20, 2016 
BWorld 46, China's debt, central planning and central crashes, February 27, 2016

BWorld 47, Renewable energy and the illusion of merit order effect, March 06, 2016

Sunday, March 13, 2016

Weekend fun 61, Math jokes

A lazy Sunday, back to some math humor :-)


For non-Filipino readers, the last equation, right hand side means sob.
An engineer-economist friend commented that "pilit ang humor" because of the x = gina.
hehe, true, it was "coerced" to produce some funny conclusion. Just for fun.

Below, scattered memes and equations I  got  from  the  web. Witty and funny, like the infinity vs. 5, drink and derive.


And the obtuse triangle, the  square of 3 and cube of 3. A pi has an endless decimal, so very witty to say to get its last 4 digits.


More.


Election is coming, there should be part 2 of Political jokes soon.
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See also:
Weekend fun 17: Political jokes, May 15, 2011
Weekend fun 22: Functions and Equations, September 17, 2011
Weekend fun 23: Economist Jokes, September 24, 2011
Weekend Fun 27: Physics Jokes, January 21, 2012
Weekend Fun 58: Mugabe Falls, February 08, 2015 

Saturday, March 12, 2016

Energy 60, PH solar companies, PagIBIG loan for solar

There are many solar companies in the Philippines now. Pasting some of these as reported in interaksyon.com, reports from late 2014 to early 2016 only. Many of these companies were set up or started serious solar construction only when the handsome feed in tariff (FIT) rates were announced by the DOE.



First Gen/EDC's renewables are largely in the wind power business, also in geothermal.
Ayala Corp. (AC) Energy is also into wind power business + hydro. Below is one report from interaksyon,

Ayala posts P17.7B 9-month earnings, up 26% year-on-year
By: InterAksyon.com
November 12, 2015 2:54 PM

AC Energy continues to expand its renewable energy portfolio. It recently entered into a partnership agreement with Bronzeoak Clean Energy Inc. for the development, construction and operation of a P1.3-billion solar power farm in Bais City, Negros Oriental with a capacity of approximately 18 megawatts in the first phase, and targeted completion in March 2016. The second phase involves the expansion to 50 megawatts.

First Gen, Ayalas, Aboitiz, other big energy firms, you are big and rich companies or conglomerates already, you may wish to beg off from collecting your FIT rates entitlement and payment someday, sooner than the 20 years FIT entitlement.

A clear chart from The Economist, October 12, 2013 report, How to lose half a trillion euros.


The installation cost keeps going down but actual cost of subsidies, to be paid  by all energy consumers, the public keeps going up. How come? Because of  FIT and related subsidies. And this means rising electricity bills for households.

Meanwhile, there was a news report in 2014 which resurfaced in facebook a few days ago. PagIBIG says "borrow more  (housing, start up business, and now solar) from us.


Loan up to P130,000 per 1kW power? Wow. Include the interest payment and the cost further goes up while the efficiency declines through time.

Then a news about the DBP loan for net metering. The government corporations are joining the  "save the  planet" movement via more expensive electricity.


Demonopolization

A friend commented that despite the expensive set up  of retail  solar, "more than anything else, this is more about dealing with a power monopoly by giving us a real alternative power that allows us to unplug off the grid and create our own electricity. that's power to the people!"

The retail competition and open access (RCOA) provision of EPIRA is breaking the monopolies by Meralco and about 120 other distribution utilities (DUs) and electric cooperatives (ECs). If you have a 1,000 kW or 1 MW mini hydro power plant, say in Montalban, you can supply direct to one small subdivision, or a small mall. You break out of the DUs and ECs' monopoly, also the NGCP's transmission monopoly. You just have to pay a wheeling charge for the use of the DU's electrical network down to household level.

RCOA will soon move lower to 0.75 MW. Can you believe that, if you have a 750 kW biomass plant, or carpark solar, or perhaps 2 wind turbines, etc., you can do commercial sale of electricity, small scale of course. But the bottomline is that you are contributing to de-monopolization of the power generation sector. It's called the "contestable market", those that can join the RCOA. The ordinary houses, offices or buildings that are not linked to the RCOA system are called "captive market" by the DUs.

Demonopolization of the power sector is already in the law as early as 2001, but implementation was delayed.

Meanwhile, I saw this today from Solar PH's website.


This is disinformation. A 1,200 watts or 1.2 MW solar plant -- with maximum solar output of only 700-800 kW at noontime, around 12-1 pm, cloudless sky, and zero  output for 11-12 hours night time -- can power SM North Edsa with total energy needs of perhaps 5 MW?
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See also:
Energy 51, More on solar power and supply instability, December 29, 2015