IPR and Innovation 25, Malaysia's IP Monetization strategy

There is a report this week about Malaysia's "IP Monetization" program as articulated by PM Najib Razak.  From that news,  "We need to be competitive in our bid to become a high-income nation that is not dependent on traditional and physical resources but is based on new sources of wealth such as intellectual property.

"To ensure the country's continued momentum in making intellectual property a new source of wealth, we have a responsibility to be more innovative and creative as well as to constantly create value added in order to come up with high-impact products and technologies for the local and global markets," he said at the National Intellectual Property Awards 2015 today.

Najib, who is also finance minister, said the effectiveness of initiatives to strengthen the national intellectual property ecosystem was shown by the 6% average annual rise in applications.

This shows the potential of intellectual property to contribute to national economic growth, he said, adding the government had agreed to consider providing an allocation to encourage intellectual property rights applications as part of efforts to raise the number of registrations. Some 42% of intellectual property rights applications are from within the country. 

Well and good. Kuala Lumpur is just 4 hours away by car from Singapore, the center of IPR protection and the richest economy in the ASEAN. The interdependence between  the two  in  trade and investments, both physical and non-physical/intellectual commodities, is high.

More and more, the world is moving towards high value products and services production and trade. New mobile  phones, flat or curved tv, other appliances and  furnitures with sleek, modern  or exotic designs, etc. are all guided by new ideas that were non-existent  and  unimaginable just a few decades ago. And these ideas are protected by various forms of IP protection -- patent, copyright, trademark, service mark, industrial designs, circuit designs -- to protect the innovators and inventive people and enterprises from copycat ones.

The program or strategy is good, except that PM Razak is still embroiled in a huge corruption scandal that greatly diminishes his credibility and effectivity in initiating new programs.

On a related note, I saw from a World Intellectual Property Organization (WIPO) website the various IP laws and IP-related laws of Malaysia.

They have a law for each type of IP. Being a non-lawyer, I am not sure if this is better than a single, big and long law that covers all types of IP that we have here, the IP Code of the Philippines (RA 8293) enacted in 1997. One advantage of one law for each type of IP perhaps is that if we revise or amend in the future one aspect, say only the patent system or copyright system, it will not affect the whole big law -- and cause some confusion.

Nonetheless, establishing clear property rights for the people, physical or non-physical property, is one of  the most important functions of any government. More important than endless welfarism and  political populism.
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See also:

IPR and Innovation 21: Recent News + IPN Assistance to Asian Think Tanks, February 15, 2015 

IPR and Innovation 22, The USTR 301 Report 2015 and the Philippines, July 10, 2015  

IPR and Innovation 23, Letter to WIPO by 85 think tank leaders from 51 countries,July 21, 2015 

IPR and Innovation 24, The US-China IP cooperation dialogue, August 18, 2015

BWorld 18, Non-tariff barriers in the ASEAN

* This  is my article in BusinessWorld last September 10, 2015.

Trade between and among people is beautiful. What one does not need because he has surplus production, he can sell it and get those things he does not have but he needs, via purchase or via the old system of barter.

Countries and economies that trade more are more advanced, more developed compared to countries that are less friendly to more international trade.

That is why free trade has become a known policy and advocacy in many countries for centuries now. Import tariff rates have been declining significantly, down to zero for some economies like Hong Kong and Singapore.

But protectionist interests have invented many types of non-tariff barriers (NTBs) or non-tariff measures and these limit or restrict trade.

Among the less-visible type of NTBs are the various business bureaucracies and regulations. For instance, while it is possible to require only three documents to allow exporters and importers to ship or receive their products, other Association of Southeast Asian Nations (ASEAN) countries require six to 10 documents.

Here is one result of the World Bank’s Doing Business 2015 Report, section on International Trade. There were 189 countries covered in that report. Global ranks of ASEAN countries are given.

It would take around three weeks for an exporter to finally move his containers out of Cambodia, Laos, Myanmar, and Vietnam, too long compared to less than one week in Singapore and around two weeks for exporters in Malaysia and Thailand. 

It is really possible to cut the time to export to just 11 days or less, as shown by Singapore and Malaysia plus the seven countries above. The eight other governments in the ASEAN need not hold back the exports of their entrepreneurs for two weeks or more.

A similar measurement of bureaucracies and taxes as new variety of NTBs is covered by Fraser Institute’s Economic Freedom of the World (EFW) annual reports. The EFW is composed of five areas, including the freedom to trade internationally. This area is composed of four sub-areas: (A) Tariffs, (B) Regulatory trade barriers, (C) Black market exchange rates, and (D) Controls of movement of capital and people.

The EFW employs a scoring system of zero to 10, where zero is totally unfree and 10 means there is full economic freedom. Thus, high revenues from trade taxes, high tariff, wide variations and deviation of tariff rates mean low score. And more regulatory barriers, more NTBs also mean low score, low degrees of economic freedom for entrepreneurs.

For this piece, sub-areas A and B are shown. Laos was not included in the EFW report. Hong Kong is added here as “benchmark” for being the freest economy in the world. 

The above numbers show that ASEAN countries generally have low tariff rates, with scores of eight to almost 10 (Singapore and Brunei). This is a reflection of the accelerated trade liberalization policy in the region.

But there are problems too, like having wide variations and high standard deviations in tariff rates. Singapore, Malaysia, Thailand, and Vietnam have scores below six.

The member-governments of the ASEAN need to be reminded from time to time that the main purpose of trade liberalization is to empower the consumers and producers of their own countries with more choices. NTBs and complicated bureaucracies defeat or undermine that goal.

Free trade means free individuals, free enterprises. Restrictions to trade is restricting individual and economic freedom, the freedom to choose and compete, where and from whom to buy and to whom to sell.

Some consumers though can lose from free trade and unilateral liberalization if the goods they regularly consume are being exported because prices can go higher. But this loss is temporary because more goods, more choices from abroad will become available in the domestic market.

Multilateral trade negotiations for free trade are too unwieldy and costly, time-consuming and bureaucratic. Regional and bilateral free trade agreements (FTAs) are faster in producing agreements and results but they are selective and become an excuse for protectionism against countries where no FTAs are signed yet.

Unilateral trade liberalization, no need for or minimum of negotiations, just open the borders at zero tariff and minimal bureaucracies, is pro-development. There is little or no justification to restrict trade as it is a voluntary exchange between two or more entities -- individuals, companies, and institutions.

People and companies, not nations and governments, trade with each other. Governments therefore should reduce restrictions on people and goods mobility.

In particular: (a) reduce tariff and non-tariff barriers like quantitative restrictions and customs bureaucracies, and (b) simplify visa requirements and issuance, reduce the cost of migration.

The main function of government in trade is to help enforce contracts and promulgate the rule of law. And the only justifiable considerations for governments to regulate trade are those involving public health and safety. Like bringing in or exporting weapons, ammunitions, dangerous substances, counterfeit or substandard medicines, virus-infected animals, etc.

All other goods should be allowed entry with the minimum or zero restrictions and taxation. This will significantly bring down prices and benefit consumers, especially the poor.

Two groups of people dislike unilateral trade liberalization: (a) the protected local businesses and cronies, political interest groups like militant trade unions and farmer organizations, and (b) trade negotiators and consultants who regularly fly and have endless meetings in some beautiful and expensive hotels and cities abroad.

Smuggling can be beneficial to consumers through lower prices compared to protectionist prices. But this expands corruption in government. To remove the opportunities for corruption and rent-seeking and at the same time give consumers and local producers the freedom to get cheaper goods and services, protectionism should be abandoned and unilateral liberalization should be pursued.

Other institutional constraints like protectionist constitutions that explicitly protect domestic business interests and limit foreign competition should be amended to allow or encourage more foreign investments and trade.

Bienvenido S. Oplas, Jr. heads a free-market think tank, Minimal Government Thinkers, Inc., and is a fellow of the South East Asia Network for Development (SEANET).

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See also: 

BWorld 14, OFWs, MERS-CoV and the DFA, August 08, 2015 

BWorld 15, The PH electricity market, August 15, 2015 

BWorld 16, Growth, capitalism and inequality, August 22, 2015 

BWorld 17, More on the Philippine electricity market, August 30, 2015

Free Trade 51, SEANET paper on unilateral trade liberalization in the ASEAN, August 23, 2015 

Free Trade 52, More on the Gravity model, September 08, 2015

Free Trade 52, More on the Gravity model

A presentation by Dr. Ramon Clarete of UPSE during the UPSE-Ayala forum early this year was entitled "Going Regional: Which Mega Trade Deals Should the Philippines Join?"

He used the Gravity model of trade in estimating the level of bilateral exports or imports between two trading partners. So the dependent variable is the flow of trade between and among countries studied, the independent or explanatory variables are the following and their expected signs or relationships:

GDP (+), population (+), distance between two countries (-), commonality of language (+), shared borders (+), landlocked state (-). 

In addition, Trans Pacific Partnership (TPP), Regional Comprehensive Economic Partnership (RCEP) indicators or dummy variables are introduced: 

TB1, 1 if both trading countries are TPP or RCEP members, 0 otherwise,

TB2, 1 if exporting country is a TPP or RCEP member, 0 otherwise,

TB3, 1 if importing country is a TPP or RCEP member, 0 otherwise.

For overlapping memberships, a dummy variable where TPP*RCEP =1 if both trading partners are members of the two trade blocs.

Some 209 trading countries and their annual trade data from 1948 to 2013 was used and analyzed.

A time interaction variable, 1 after 1990s (representing more or less the fact that China has become integrated with the world economy).

Here is the result. All estimated coefficients are statistically significant and bear the expected signs.

In particular, these coefficients mean that...

The implied change of exports of membership are shown below. If the Philippines, already a member of RCEP, and it further becomes a TPP member, its exports are expected to rise by 48%, and real GDP projected to rise by 61%.

Meanwhile, a paper produced February 2015 (39 pages), Trade Theory Network, by Michael Hubler, Four theoretical examples with numerical applications are presented, below:

* increase in trade from Asia to North America affects the world economy,

* an intuitive rule for finding the welfare-optimal tariff is derived,

* three possibilities for vanishing trade effects (fluctuations) are explained: trade diversion, the “river-island effect”, and overlapping business cycles. Fourth, it is shown how adjustment costs delay the propagation of shocks or business cycles.

Among the results are as follows:

A reduction in TPP trade barriers is welfare-improving for North America and Asia. This result corroborates plans for trans-Pacific free trade agreements. The paper has shown that a moderate increase in trans-Pacific trade has significant repercussions on the world economy…. Moreover, the paper has shown that halving the trade barrier between Europe and Asia could create a situation in which the rest of the world, in particular Africa, is to some extent protected from shocks affecting international goods markets.

Less trade barriers, less regulations and permits, mean higher trade flows and economic growth.
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See also:

Free Trade 44: The Gravity Model, March 06, 2015

Free Trade 48, WTO DG Azevedo in Manila, May 22, 2015 

Free Trade 49, the Regional Comprehensive Economic Partnership (RCEP), July 23, 2015 

Free Trade 50, the proposed Trans Pacific Partnership (TPP) agreement, August 09, 2015

Free Trade 51, SEANET paper on unilateral trade liberalization in the ASEAN, August 23, 2015

BWorld 2, Benefits of Trade Liberalization for the Philippines, May 16, 2015

Energy 41, On low global oil prices

Global oil prices have slightly recovered in recent days, West Texas Intermediate (WTI) for instance went down to as low as $38/barrel in late August, then recovered to $48+, and $46 a barrel as of this writing. Still, these are very low compared to prices 5-6 years ago.

My sister's accounting and auditing office, Alas Oplas & Co. CPAs, produced its most recent monthly Economic Update, August 2015 entitled Opportunities for Low Oil Prices. Among the data shown there are the following.

Net increase in global oil supply (supply minus demand) has increased from a deficit of 0.2 million barrels per day (mbpd) in 2013 to a surplus of 1.1 mbpd in 2015, and rose to an average of 2.9 mbpd in July this year. That is a huge number. If it is 2.9 million barrels per week, the price should not decline significantly. On the other hand, oil demand by Organization for Economic Cooperation  and  Development  (OECD) countries is declining, from an average of 46 mbpd in 2012-2014 to only 45.4 mbpd in the second quarter of this year. 

Non-OPEC supply keeps rising, led by the US then Canada. These are mostly shale oil. Russia is still the second largest oil producer in the world (third is Saudi Arabia). Four ASEAN countries retain their average annual oil output with a combined supply of 2.2 mbpd. Indonesia has left OPEC several years ago.

source: OPEC

Developing countries like ASEAN members except Singapore can seize this opportunity to further expand and optimize economic growth. For instance, there is low total primary energy supply (TPES), expressed in tons of oil equivalent (toe), and low electricity consumption among developing ASEAN economies. High TPES means higher energy input for agriculture, industry and services sectors.  

The opportunities for them, among others, are the following.

One, higher electricity production at lower prices because oil-based power plants that are used only for peak hours can be made to run more frequently.

Two, the cost of air, land and sea transportation should decline and hence, more people and goods can be transported at lower costs. 

Three, agriculture and fishery sectors can benefit as more farmers and fisher folks can afford to use more hand tractors and motorized boats in their work. 

Governments, often prodded by the World Bank and IMF to raise oil tax rates during periods of low global oil prices, should not heed these institutions. Low oil prices has better welfare impact on the poor compared to high oil prices due to higher oil taxes. 
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See also: 

Energy Econ 37, More on Wind Power in Germany, June 07 2015 

Energy Econ 38, Solar Power in Germany and in Cadiz City, Negros Occidental, June 15, 2015 

Energy Econ 39, the UPSE-Ayala forum on the PH power sector, July 25, 2015 

Energy Econ 40, DOE Circular No. DC2015-06-0008, August 03, 2015

BWorld 15, The PH electricity market, August 15, 2015  

BWorld 17, More on the Philippine electricity market, August 30, 2015

Goodbye Mama. I love you.

My father Bienvenido Sr., mother Consuelo, and my eldest daughter Elle Marie. Taken at our house in Cadiz City, Negros Occidental, April 2010. Our house is not far from sugarcane farms, like most rural houses in the province. My wife was pregnant with our second child then and stayed home in Manila.

Mama is 81 years old. She has been weak in recent years, mostly bed ridden since about four years ago. She was battling a kidney problem and Alzheimer's disease.

A year after, April 2011, also in our house in Cadiz, we visited my folks again. Here, Mama was watching Bien Mary, then six months old.

Lower photo from left: my older sister Lilibeth, wife Ella, Elle Marie, younger brother Bobong, uncle Tioy Angelo, me. Seated were Bong's daughter Lois, Papa, Bien Mary and Mama.

We are five siblings, the eldest, Manong Nestor, died of prostate cancer about nine years ago. My other sister Marycris, is also based in Manila, not in the photo above.

Several weeks after our visit, Mama got sick and very weak. I flew back and visited her again, June 2011. She has recovered days after that.

December 2011, my family visited my folks again. Mama and Elle Marie, then five years old.

May 2012, after Elle Marie's Santa Cruzan parade in Iloilo City, we travelled again to Negros to see my parents. Mama was back being mostly bed-ridden again.

Last week, she was hospitalized. She was in great pain, assisted with various pain relievers.

Today, Mama has rested. Very sad to accept, to lose one's mother. But she has endured pain for so long. Her frail body is too weak to further endure the pains. It is better that she rest, but the pain is on us, the surviving children and our Papa.

Mama and Papa have done their job well as responsible parents. They have brought us up and gave us modest education. During and after graduation from college, it was our call what to do with our lives.

Thank you Ma. I terribly miss you. I love you and Papa. Self-reliance and parental responsibility is a trait that I will pass on to our kids. Thanks again Ma... See you someday when our time comes.

* See also Going back to our roots, April 25, 2011

Asian free market websites, Part 5

Here's an update of the global popularity of Asian free market think tanks and blogs, from alexa.com. Global rank as of today. They are arranged according to their global rank.

1. unirule.org.cn, Beijing

2. keri.org, Seoul

3. impencil.org, Beijing

4. freedom-institute.org, Jakarta

5. fef.org.ph, Manila

6. kriengsak.com, Bangkok

7. sifl.org.cn, Shanghai
8. nkradio.org, Seoul

9. funwithgovernment.blogspot.com, Manila
(This blog has a mirror site, http://funwithgovernment.blogspot.in/, with a global rank of 10,565,772 as of today. Mirror sites redirect portions of the traffic from the original sites, resulting in lower global rank of the original.)
10. primeinstitute.org, Islamabad
11. prudentinvestornewsletters.blogspot.in, Manila
(it is not an institute, just a blog owned by a friend; the original site is prudentinvestornewsletters.blogspot.com, with a global rank of 12,786,535 as of today; there are 3 other mirror sites)

12. suarakebebasan.org, Jakarta

13. ideas.org.my, Kuala Lumpur

14. samriddhi.org, Kathmandu

15. indiai.org, Delhi

The biggest gainers above compared to their global ranks in my last update dated July 19, 2015, are the following: 

(a) unirule, from 1.25 M to 0.97 M,

(b) fef.org.ph, from 8.70 M to 1.80 M,

(c) freedom-institute, from 3.45 M to 1.70 M, and 

(d) sifl.org.cn, from 5.29 M to 3.07 M.

The other websites and blogs are:

16. teachnorthkoreanrefugees.org, Seoul.

17. doimoi.org, Hanoi
18. libertyindia.org, Delhi
19. lionrockinstitute.org, HK

20. acenetwork.asia, Delhi

21. indefenceofliberty.org, Delhi

22. ccsindia.org, Delhi

23. jtr.gr.jp, Tokyo

24. asinstitute.org, Lahore
25. efnasia.org, Bangkok
26. freedomfactory.co.kr, Seoul

Other Asian free market sites which have no global rank yet:

* akademimerdeka.org, Jakarta 

* seanetwork.asia, Kuala Lumpur
* cips-indonesia.org,  Jakarta
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See also: 
Asian free market websites, part 2, April 25, 2011 
Asian free market websites, part 3, May 10, 2011 
EFN Asia 31. Friends in the Asian Free Market Movement, November 07, 2013 
Asian free market websites, Part 4, July 19, 2015

Church and State 3, Iglesia ni Cristo is NOT above the law

But the leaders and members of the Iglesia ni Cristo (INC) think they are above the law, that the law against road occupation, especially Edsa, may apply to other groups but not to them.

Rule of law vs. welfarism. Many INC members who went to Edsa were recipients of various welfare programs and now lambast the government. One more proof that when government is lousy in enforcing the rule of law, it can be lousy and wasteful in its populism and welfarism.

I was one of their millions of Edsa traffic victims. Last night, Sunday, my bus from Pangasinan arrived at Cubao terminal around 12 midnight. Immediately I sensed a problem. Very few metro buses going south, the taxis were haggling for higher price, few “ordinary” cars but there were many provincial jeepneys and buses plying Gapan-Cabanatuan, Lubao-Angeles, Dagupan-La Union, etc. And there were many vans too that appeared to be full of people.

I sensed that they were Iglesia members wanting to further choke usually traffic-choke Edsa. After waiting for about 25 minutes, I was able to ride a south-bound bus. There were many people walking in Cubao going south. At Camp Crame, I saw many parked provincial jeepneys, buses and vans. Our bus was crawling. I saw many New Era University buses (Iglesia-owned) carrying many passengers. I think those were among the hakot buses.

There were also many vehicles, provincial jeepneys and buses, parked on the other side, north-bound, of Edsa. At Ortigas flyover, south-bound traffic has finally halted, past 1am already, Our bus went to C5, we managed to evade the Iglesia mob rule at Edsa-Crossing. We exited at Edsa Buendia. Magaling, si Sec. de Lima kaaway nyo, dinamay nyo milyon pa na ibang Pilipino. I arrived home past 2am.

Last Saturday midnight, around 2:30am, I travelled to Cubao to go to a provincial bus terminal in Cubao. Edsa-Crossing was closed, blocked by MMDA vehicles and officers. I think there were very few Iglesia rallyists at Edsa-crossing. Is MMDA Chairman Francis Tolentino an Iglesia member too? His boys are busy apprehending and penalizing many motorists in Edsa for "obstruction of traffic" and other traffic violations. But these Iglesia militants blocking a big portion of Edsa are allowed and guarded by his boys.

Mob rule can beat rule of law anytime when governments are too busy with so many functions, state-owned businesses and welfarist/populist functions. Penalizing motorists even for minor traffic "violation" (and they created lots of prohibitions and restrictions; more prohibitions, more potential violators, more fines and extortion) that transform traffic officers into tax and fine collectors, good business. When real traffic violators like a mob occupying a very busy road come in, those "public servants" chicken out.

The Iglesia leaders and their followers always think they are above the law. They can demand money from local to national candidates every 3 years election period in exchange for political support via bloc voting of their members. They hate that their leaders can be subjected to DOJ criminal investigation involving illegal detention of their former "kapatid" whom they have later expelled.

The big issue is the inability of the government, both national and local (PNP, MMDA, City governments) to enforce the rule of law -- the law against road occupation by any groups and penalizing violators. If you are a big church group or cult like Iglesia, you can get away with the law with zero penalty.

Some leading Presidential candidates even blatantly and shamelessly support the mob rulers, so long as they can support him/her in the elections next year with their known bloc (and mindless?) voting.

If the government, local and national, allows exemptions to the restrictions of the law (the law applies strictly to some but not to others), then that is rule of men. The rulers make arbitrary exemptions and applications of the law.

Binay and Grace Poe are losers for siding with the Iglesia cultist-we're-abobe-the-law militants. Where is Chiz Escudero, partner of Grace Poe? http://newsinfo.inquirer.net/.../inquirer-net-poll-who...

And Carlos Celdran, why he did not lambast the "Damaso" of Iglesia? Maybe he's scared of this church's mob while he was confident that the Catholic church won't harm him.

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See also: 
Pilipinas Forum 17: The Church and Galileo, November 7, 2011

Church and State, The Iglesia Medical Mission, October 18, 2013 

Church and State 2, Iglesia rally in Edsa, August 29, 2015

BWorld 17, More on the PHILIPPINE ELECTRICITY MARKET

* This is my article in BusinessWorld Weekender on August 27, 2015.
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THIS is a continuation of an earlier discussion, “The Philippine electricity market: Monopoly and competition” (Weekender, August 14).

As noted in that article, Carlos Jericho L. Petilla had issued, before he resigned as energy secretary last June, DoE Circular No. DC2015-06-0008, “Mandating All Distribution Utilities to Undergo Competitive Selection Process (CSP) in Securing Power Supply Agreements (PSA).” That order aims to address, among other things, the suspicion of “sweetheart deals” between some big electric cooperatives (ECs) and distribution utilities (DUs), on the one hand, and the generating companies (gencos), on the other, resulting in expensive electricity prices in the Philippines.

Here is another data, a bit old, from a 2013 commissioned study by the US Agency for International Development (USAID). The first set shows the actual prices including taxes (in Philippines and Singapore) and subsidies (Thailand, Malaysia, and Indonesia), and the second set, adjusted prices if taxes and subsidies were minimized, next to zero.

The USAID report explained why the adjustment was done: “Several factors may explain these wide differences. One is tax: effectively 9% in the Philippines, as opposed to 6% in Malaysia and 7% in Singapore and Thailand, albeit 10% in Indonesia. But the bigger contributor to the price differences is the implicit subsidies to state-owned utilities. The International Energy Agency (IEA) estimated that the electricity subsidies in 2011 in Indonesia, Malaysia, and Thailand were at least 5.56, 0.94, and 5.67 billion US dollars, respectively....”

Thus, most if not all comparative electricity prices are based on artificial pricing. People blame gencos or the big DUs but not governments which intervene a lot in electricity pricing, resulting in either very high or very low prices.

The DOE Circular was the subject of discussion in a forum organized by the Energy Policy Development Program (EPDP) early this month. There were six speakers, led by OIC-Secretary Zenaida Y. Monsada of the Department of Energy (DoE), Director Mylene Capongcol also of the DoE, UP School of Economics professors Raul Fabella and Ruperto Alonzo, UP College of Engineering professor Rowaldo del Mundo, and Romeo Bernardo of LBT Consulting.

Mr. del Mundo is the lead technical adviser to the Central Luzon Electric Cooperatives Association-First Luzon Aggregation Group (CLECAFLAG) under the USAID COMPETE project. Twelve ECs in Central Luzon aggregated their total power demand of 300 MW, auctioned it off, and contracted for 20 years the winning supplier, won by GN Power (with expanded capacity of 1,200 MW in Bataan). In his presentation, Mr. del Mundo showed this table of comparative electricity prices in the ASEAN.

  

By pounding on the need for demand aggregation by DUs as shown in the CLECAFLAG experience, Mr. del Mundo concluded, “The mandatory CSP is the only antidote to [the] EPIRA’s [Electric Power Industry Reform Act] cross-ownership that will avoid temptation to parties with conflict of objectives.”

There is a problem in this conclusion of supporting mandatory or obligatory, instead of voluntary, CSP, based on specific circumstances among DUs and gencos. For the following reasons:

One, as shown in Table 1, we have high electricity prices because the government imposes many taxes on energy while other ASEAN countries subsidize their energy consumption.

Two, Mr. Bernardo noted in his presentation that “Growing pains from regulatory uncertainty, and contracting, approval, and construction bottlenecks have delayed new plants. The average time it takes to build a baseload power plant in the Philippines is probably double elsewhere. Just getting approvals, coupled with overcoming NIMBY opponents, is an ordeal.” And he showed this list of some 200 signatures and permits needed to put up one baseload plant.

 Three, Mr. Fabella suggested market testing of PSA contracts instead of mandatory CSP. Market testing is easier to enforce because the Energy Regulatory Commission (ERC) only verifies and approves the market test (say, auction) employed, and is easier to defend in public. There are many modalities for market testing like the cases in Chile, Brazil, New England.

Four, there’s the big question of who are the “third parties” that will be recognized by the DoE, the ERC, and the National Electrification Administration (NEA) which will approve or disapprove the PSA between the DUs and gencos. Will they work for free? Very unlikely. Rather, the DOE and ERC will be forced to make extra budgetary requests to pay for these “third parties” including allowances for their meetings and public consultations.

It is also possible that NGOs, the media, and other sectors actively or silently supporting the “Repeal/Abrogate EPIRA” movement may position themselves as “third party” referees. The DoE circular is not about repealing or tinkering with the EPIRA.

In short, the DoE circular is barking at the wrong tree: By making the competitive bidding mandatory rather than voluntary, it will invite or create more problems than what it intends to solve. The circular should therefore be withdrawn. Or amended to make CSP voluntary, not mandatory. The DoE and other government agencies should instead address other problems and contributors to expensive electricity in the country. Like multiple taxes, numerous permits by the Philippine government, from the barangay to city/municipal, provincial, and national government offices and agencies. Requiring a firm to present up to 200 different permits would expose it to 200 different opportunities of corruption and extortion.

Government should simply learn to step back from too much intervention, regulation, and taxation.

Bienvenido S. Oplas, Jr. is president of the free-market think tank Minimal Government Thinkers, Inc., and a fellow of the South East Asia Network for Development (SEANET).

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See also: 

BWorld 13, SONA's liberalism, five years after, July 28, 2015 

BWorld 14, OFWs, MERS-CoV and the DFA, August 08, 2015 

BWorld 15, The PH electricity market, August 15, 2015 

BWorld 16, Growth, capitalism and inequality, August 22, 2015

Energy Econ 39, the UPSE-Ayala forum on the PH power sector, July 25, 2015 

Energy Econ 40, DOE Circular No. DC2015-06-0008, August 03, 2015