BWorld 773, Trade non-growth and budget expansion

Trade non-growth and budget expansion

January 28, 2025 | 12:02 am

My Cup Of Liberty

By Bienvenido S. Oplas, Jr.

https://www.bworldonline.com/opinion/2025/01/28/649202/trade-non-growth-and-budget-expansion/

 

Last Friday the Philippine Statistics Authority (PSA) released the December — and hence, full year 2024 — merchandise (or goods) trade data. It showed that exports were flat at $73 billion for both 2023 and 2024, as imports marginally increased by $1 billion.

 

But what significantly changed was the further rise in China’s share of our imports, from 23.3% in 2023 to 25.7% in the 2024 total imports. The total trade (exports plus imports) with China in 2024 at $42 billion is larger than those of Japan plus the US combined at $41 billion, and is slightly lower than trade with our five ASEAN neighbors with a combined total trade of $46 billion (see Table 1).

 

This has a big implication on our foreign policy. If so much of our imports — our clothes, shoes, buses, trucks, gadgets, other consumer and capital goods — comes from China, why is there so much noise against China? It does not make sense. We should focus on trade and commerce, tourism and investment, and economics over war mongering with countries around the world, especially our Asian neighbors.

 

It is a good thing that Donald Trump is back in the White House. Trump has a record of having started no new US wars from 2017-2020. It is likely that this will be repeated in 2025-2028. Now war mongering versus China, the Ukraine war, and the Middle East war has significantly simmered down. I think the deep state operatives that promote the US’ endless wars abroad are scared that Trump will fire them soon, or that their agencies will suffer budget cuts.

 

OPPOSITION TO GAA

The General Appropriations Act (GAA) 2025 is now being implemented but the political opposition against it continues, mainly over the defunding of Philippine Health Insurance Corp. (PHIC or PhilHealth) whose subsidy this year is zero.

 

I will compare the proposed versus the approved budget for 2025. While there is a small decline in the overall budget, there are huge increases in the budgets of the departments of Public Works and Highways (DPWH) and Health (DoH), and Congress. And there are big declines in the budgets of the departments of Education (DepEd) and Social Welfare and Development (DSWD), in Budgetary Support for Government Corporations (BSGC), and, of course, zero for PhilHealth (see Table 2).

 

I believe that the fact that PhilHealth and the DoH are getting funding from smokers, vapers, and drinkers is problematic. The health establishment says that tobacco and alcohol are bad and hence, people should avoid these. Then, ironically, the same health establishment is happy when billions of pesos are collected from taxing more smokers and drinkers of legal products. The political opposition to GAA 2025, health advocates, and activists, are angry that PhilHealth gets zero this year from the taxes paid by smokers and drinkers.

 

To remove the irony of health being funded by unhealthy products, the earmarking of the proceeds from the tobacco tax to health agencies should be removed. The DoH and PhilHealth should get nothing from tobacco tax revenues, which should instead go to the general fund. That way, when revenues further decline due to there being fewer smokers and drinkers because of the high taxes — or due to greater illicit trade and smuggling — they will not be sad because they do not rely on it anyway.

 

With more public-private partnerships (PPP) in roads, airports, seaports and other infrastructure, there is little justification for the DPWH to have so large a budget. The priority should have been reducing the public debt stock, reducing interest rates or the cost of borrowing, and reducing public interest payments, from the projected P848 billion this year to below P500 billion or less. Interest payments from January-November 2024 were P705 billion, or equivalent to P2.1 billion/day. To be clear, that was interest payment alone.

 

And since there is no more virus crisis nor economic crisis, the budgets of the DSWD, state universities, and the Commission on Higher Education should further decline. The focus should be on fiscal responsibility, the aim should be for a balanced budget if not a budget surplus in years where there is no crisis in order to compensate for high budget deficits during years of economic crisis years.

PhilStar 25, On school reunions and celebration of friendship

On school reunions and celebration of friendship

ENERGY, INFRA AND ECONOMICS - Bienvenido Oplas Jr. - The Philippine Star 

January 23, 2025 | 12:00am

https://www.philstar.com/business/2025/01/23/2416124/school-reunions-and-celebration-friendship

 

Last weekend, Jan. 18-19, I attended our high school annual reunion at the former Cadiz City High School in Negros Occidental, Batch 1980. It was our 45th anniversary. When we graduated in 1980, there were 12 sections and a total of over 500 graduates.

 

Last Saturday, nearly 100 came, a good turnout after 45 years.

 

I also attended the January 2020 reunion, our 40th anniversary. Since I was the class valedictorian, my classmates and batchmates were looking up to me to possibly give a substantial financial contribution. I approached two friends who are fellow alumni of the UP School of Economics, Ferdie Constantino of San Miguel Corp. and Robina Gokongwei-Pe of Robinsons Retail.

 

Ferdie sent more than 30 cases of various SMC beverages in cans. It was a huge and eye-popping event because we were giving away cases of beer in cans in various games and batch competitions as raffle prizes, giveaways to school faculty, plus our own batch consumption. Robina gave gift checks for Robinsons malls.

 

For this year’s reunion, I again approached Ferdie and Robina, and both sent donations once more. SMC sent many cases of beer in various flavors, which we shared with CCHS Batch 1975, who celebrated their 50th or golden anniversary. My older sister, Lilibeth Oplas, belongs to this batch, and their batch leader or organizer is Ms. Leah Granada-Gaan. Again, it was another eye-popping event as beer in cans was freely enjoyed by various batches. Robina gave several Robinsons gift checks again.

 

Ferdie will retire as SMC chief financial officer and treasurer at the end of this month, after 50 years as an SMC employee and official. But RSA will not let him go, so he will become an advisor to SMC and the SMC board. Congratulations, Ferdie.

 

I am 62 years old now, and a number of my friends have passed away. The most recent was Atty. Kristin Barbra “Ting” Bautista-Bello (1972-2025). She was my friend at the Concerned Doctors and Citizens of the Philippines (CDC PH), a group of doctors, lawyers, entrepreneurs and other professionals who consistently campaigned against the prolonged lockdown of 2020 to early 2022, and against the mandatory vaccination of experimental vaccines; otherwise, people could not enter schools, offices, malls or ride planes or boats.

 

Atty. Ting was a soft-spoken, friendly, and highly principled lawyer who never backed down, never shook her belief that the previous administration, the global elites and UN bodies like the WHO had violated the country’s Constitution and our Bill of Rights – right to mobility, right to economic freedom, free expression and right to our body – in their dictatorial push for a prolonged lockdown unless people were injected with an experimental vaccine. My CDC PH colleagues and I miss her.

 

Another brave friend who passed away more than a year ago was Dr. Benigno “Iggy” Agbayani Jr., who served as the first president of CDC PH when it was formed in September 2020 with an explicit call to end the lockdown, guided by decades-old and proven treatments like Hydroxychloroquine and Ivermectin. He was a brave, principled and UP-trained physician who never wavered in asserting the people’s medical and economic freedom, to work freely without coercion into taking the experimental vaccine.

 

Last December, the father of my good friend Dr. Fidel Nemenzo of the UP Math Department, Dr. Francisco “Dodong” Nemenzo Jr. (1935-2024), passed away. He was a former UP president and, before that, chancellor of UP Visayas and dean of the College of Arts and Sciences in Diliman. Fidel was a former chancellor of UP Diliman.

 

In the mid-80s, after graduating from UP Diliman, I enjoyed hopping between my friends’ houses. I would sleep at Fidel’s house inside the UP campus weekly or twice a month, then at my former best friend Mil Millora’s house in Fairview, also weekly, occasionally at my brother’s house in Pasig, or in a friend’s room in UP Narra dormitory. I was a No Permanent Address person at the time for two years, by choice.

 

Dodong Nemenzo did not find my weekly or twice-monthly intrusion in their house a nuisance, as I enjoyed free dinner and sleep for two years because I was a friend of his eldest son, Fidel. During my eulogy at Dodong’s wake, I narrated this kindness of Dodong and his family, and it is something I will never forget for the rest of my life.

 

Similarly, the father of my best friend, Mil Millora, Atty. Vicente “Vic” Millora (1933-2020), did not find my weekly or twice-monthly free dinner and lodging in their house for two years a nuisance. Mil and I were anti-Marcos activists in UP in the early 80s, while Atty. Vic was a pro-Marcos assemblyman (1978-1984) from Pangasinan. He simply loved and respected his son and extended that love to me.

 

This coming Feb.  7, the 3rd Ruperto P. Alonzo (RPA) annual memorial lecture will be held at the UP School of Economics. The theme is about energy security. It will be followed by the Program in Development Economics (PDE) alumni association homecoming.

 

Prof. Ruping (1947-2017) was a well-loved faculty member at the school. He was my teacher, my wedding godfather and my occasional drinking mate. PDE is a three-semester academic program of applied economics for junior-level government personnel and some private sector young graduate students.

 

It was a pet project of Prof./Ninong Ruping. The annual lecture was named after him so that people would always remember him.

 

At Dodong’s wake, three Beatles songs were sung after the eulogy that night.

 

The first song was “In My Life.” A quick flashback of my UP life rushed through my head while listening to the song.

 

“All these places had their moments

With lovers and friends, I still can recall Some are dead, and some are living

In my life, I’ve loved them all.”

BWorld 772, Trump’s energy and climate policies, opportunities for the Philippines

Trump’s energy and climate policies, opportunities for the Philippines

January 23, 2025 | 12:02 am

My Cup Of Liberty

By Bienvenido S. Oplas, Jr.

https://www.bworldonline.com/opinion/2025/01/23/648225/trumps-energy-and-climate-policies-opportunities-for-the-philippines/

 

US President Donald J. Trump issued many executive orders (EO) on the first day of his second term. Below are some of those EOs that are related to energy and climate.

 

1. Putting America First in International Environmental Agreements. Section 3-a provides that the US “shall immediately submit formal written notification of the United States’ withdrawal from the Paris Agreement under the United Nations Framework Convention on Climate Change… The US International Climate Finance Plan is revoked and rescinded immediately.”

 

2. Declaring a National Energy Emergency. It provides for emergency approvals of permits, expediting the delivery of energy infrastructure, coordinated infrastructure assistance, and more.

 

3. Unleashing American Energy. Section 2 provides to “…eliminate the ‘electric vehicle (EV) mandate’ and promote true consumer choice… terminating, where appropriate, state emissions waivers that function to limit sales of gasoline-powered automobiles; and by considering the elimination of unfair subsidies and other ill-conceived government-imposed market distortions…”

 

Sec. 5 provides for “Unleashing Energy Dominance through Efficient Permitting.” Sec. 7. is “Terminating the Green New Deal” and “All agencies shall immediately pause the disbursement of funds appropriated through the Inflation Reduction Act of 2022 (Public Law 117-169) or the Infrastructure Investment and Jobs Act (Public Law 117-58), including but not limited to funds for electric vehicle charging stations.” And Sec. 9 is “Restoring America’s Mineral Dominance.”

 

4. Unleashing Alaska’s Extraordinary Resource Potential. Sec. 2 provides to “expedite the permitting and leasing of energy and natural resource projects in Alaska; and prioritize the development of Alaska’s liquefied natural gas (LNG) potential, including the sale and transportation of Alaskan LNG to other regions of the United States and allied nations.” Sec. 3 provides to “rescind the cancellation of any leases within the Arctic National Wildlife Refuge.”

 

I checked some of the US’ energy numbers and compared them to the G7 nations and the BRICS+ member-countries including Brazil, Russia, India, China, Indonesia, Iran, and the United Arab Emirates (UAE). I chose to compare the years 2016 (the end of the Obama administration), 2019 (before the COVID lockdown under Trump), and 2023 (the latest available data under Biden) for comparison. Two trends or patterns are seen.

 

1. In primary energy consumption expressed in exajoules (EJ), the US was nearly flat, consuming 92.6 EJ in 2016 then barely rising to 94.3 EJ in 2023. All other members of G7 — Canada, Japan, the UK, France, Germany, and Italy — had declining numbers. In contrast, all the BRICS+ countries had rising numbers.

 

2. In total electricity generation from different sources, the US again saw very little expansion — nearly flat — and the six other members of G7 had declining numbers. In contrast, BRICS+ countries’ numbers were rising (see the table).

 

Compared to its ASEAN neighbors, the Philippines’ primary energy consumption and electricity generation were very small, yet we are being bullied by the climate establishment to disallow the building of any new coal plants, which soon might extend to gas plants demonization. We should ignore this unwise lobby. We should focus on building more large conventional thermal power plants to provide us with a bigger supply of electricity at competitive prices.

 

OPPORTUNITIES FOR PHL

In 2023, natural gas contributed 14% of the total power generation of the country, coal contributed 62%, and the rest came mainly from geothermal and big hydro, while intermittent renewable sources like solar and wind contributed below 6%.

 

The US is the world’s largest LNG exporter. In 2016 or Obama’s last year, the US exported only four billion cubic meters (bcm) of LNG. By 2017 or Trump’s first year, it jumped to 17 bcm, and increased to 61.3 bcm by 2020. In 2023, the US’ LNG exports reached 114 bcm, largely due to exports to Europe as many countries there were avoiding getting LNG from Russia.

 

Trump’s “drill-baby-drill” policy, particularly exporting more LNG to its Asian allies and trade partners would mean stable LNG prices at low levels. The Philippines will benefit from this.

 

Currently there are five existing or under construction LNG power plants in the country, mostly located in Batangas. The biggest operational plant is Ilijan or the South Premier Power Corp. (SPPC), with a dependable capacity of 1,200 MW. Soon to be the biggest power plant in the country is Excellent Energy Resources, Inc. (EERI) with a capacity of 1,760 MW (440 MW for each of its four units).

 

Both Ilijan and EERI are owned by San Miguel Global Power (SMGP) — but with the approved partnership with Meralco Power Gen Corp. (MGen) and Aboitiz Power Corp. (AP) through Chromite Gas Holdings, Inc. (CGHI), these two LNG plants will soon be owned and operated by three of the largest energy conglomerates in the country.

 

So, with competition on LNG exports between the US and some Asia-Pacific nations like Australia, Indonesia, and Malaysia, plus having modern and efficient gas plants would mean cheaper power or electricity for the Philippines. This will help bring down overall consumer prices, and lower the inflation rate for 2025 and beyond.

 

LECTURE AND REUNION

Meanwhile the UP School of Economics Program in Development Economics Alumni Association will hold a homecoming on Feb. 7 at the school. Immediately before the reunion is the Ruperto P. Alonzo (RPA) annual memorial lecture which will be about energy.

Macroecon 33, Updated DBCC fiscal program, 2025-2028

The Development Budget Coordination Committee (DBCC) issued a statement last Thursday, growth target this year was revised downwards to 5.5-6.5%, and 2026-2028 at 6-7%, see https://www.dof.gov.ph/191st-dbcc-joint-statement/.

The budget deficit to remain at P1.5 trillion yearly, expenditures just keep expanding even without  econ. crisis, various agencies cannot control their itch to spend spend spend.

The early PH Devt. Plan (PDP) and DBCC’s deficit-to-GDP target of 3.0% by 2028  no longer attainable.  The target spending in 2026 is P6.6  trillion but submission by agencies to DBM last April or May was already P11 trillion. Tragedy of the commons, agencies national and local want to extract as much money as possible from the taxpayers or from new borrowings. 

I think the bigger problem is the endless crisis narratives. Education crisis, health crisis, stunting crisis, housing crisis, transportation crisis, climate crisis, virus crisis, etc. Most agencies adopt a crisis situation in their sectors to justify endless lobby for higher budget yearly. The UN Socialist Devt Goals (SDGs) is part of this endless crisis narratives, keep governments and multilaterals to expand endlessly.

--------------

See also:

Macroecon 30, PH low unemployment, high GDP growth, August 08, 2024

Macroecon 31, Low oil prices, low inflation, September 05, 2024

Macroeconomic 32, GDP growth in Q1 2025, Germany degrowth, Japan inflation, June 01, 2025

BWorld 771, The Shrink Government trend abroad, opportunities for the Philippines

The Shrink Government trend abroad, opportunities for the Philippines

January 21, 2025 | 12:02 am

My Cup Of Liberty

By Bienvenido S. Oplas, Jr.
https://www.bworldonline.com/opinion/2025/01/21/647772/the-shrink-government-trend-abroad-opportunities-for-the-philippines/

 

Yesterday, Donald J. Trump started his second term as the 47th President of the USA. I have read a number of articles peddling the narrative that the US and global economy, including the Philippines, was worse off during Trump’s first term. To verify if this was true or not, I constructed this table comparing the average growth and inflation rate performance of three presidential administrations — Barak Obama’s last three years (2014-2016), Trump’s first three years (2017-2019), the COVID lockdown years (2020-2021), and Joe Biden’s last three years (2022-2024).

 

ECONOMIC PERFORMANCE UNDER 3 PRESIDENTS

In terms of GDP growth, the US economy performed better under Trump than under Obama or Biden. The same for its northern neighbor Canada. The two largest economies in Europe — Germany and the UK — have shown consistent declines in average growth over those three administrations.

 

The three largest economies of Asia except India, China, and Korea have similar trends as the two European countries but at higher levels. Some ASEAN countries — the Philippines, Vietnam, and Thailand — experienced lower growth under Biden than under Trump.

 

When considering consumer prices, the US, Canada, Germany, and UK experienced inflations levels that were two to three times higher under Biden than under Trump. A similar trend can be seen for Korea and Japan, the Philippines, and Thailand (see Table 1).

 

So, the idea that the US and global economy including the Philippines was worse off during Trump’s first term is wrong when comparing GDP performance during the Obama and Biden administrations. But the idea is partially true when compared with the Obama administration on inflation.

 

‘SHRINK GOVERNMENT’ TREND: ARGENTINA, US, VIETNAM

When Argentina’s President Javier Milei took office in December 2023, he immediately reduced the number of government ministries from 19 to nine, merging and partially abolishing 10 ministries. A few months later, he further reduced it to only eight ministries. Argentina experienced a budget surplus within two months.

 

When Trump won the US elections last November, he announced the creation of a Department of Government Efficiency (DOGE) to be jointly led by Elon Musk and Vivek Ramaswamy*, two successful entrepreneurs. Musk, Ramaswamy, and Trump were all inspired by Milei’s huge fiscal reforms and DOGE was created with a clear mandate of reducing the bureaucracies, subsidies, regulations, and taxes that curtail business. DOGE will self-evaporate by July 2026 or just after an existence of 1.5 years, as it is not meant to be a forever bureaucracy.

 

Now some leaders of US states are thinking of creating their own DOGE, like the governors or legislative speakers of Iowa, New Hampshire, Louisiana, and Wisconsin, with the same goal of shrinking the bureaucracies, subsidies, and regulations.

 

Meanwhile, the Vietnam Communist Party announced last December that they will cut the number of government bodies from 30 to 21, in a process they labeled as “institutional revolution.” Among the plans is merging the Ministries of Finance, Planning, and Investment to form a new “super ministry” called the Ministry of Finance and National Planning. Then merging the Ministries of Transport and Construction, and Ministries of Labor, Invalids and Social Affairs with Home Affairs.

 

The Philippines has a National Government Rightsizing Program (NGRP) bill in Congress which aims to merge some agencies and bureaus and have a leaner national bureaucracy. Local government bureaucracies are not covered by the bill. The Department of Budget and Management is pushing this bill and its Secretary Amenah F. Pangandaman is confident that this move will help reduce the annual deficit and borrowings.

 

SHRINKING TAXES

President Milei announced last December that they will abolish 90% of all federal or national taxes (not revenues) and have at most only six different taxes on businesses and individuals.

 

US President Trump plans to further cut US corporate income taxes to 15% hopefully this year, to be implemented in 2026.

 

The are no similar plans to cut taxes in the Philippines but Finance Secretary Ralph G. Recto has maintained that there will be no tax hikes, and pushed only old tax measures, like a tax on digital transactions to level the playing field with physical transactions.

 

Recently a bill on a moratorium on sustained increases in the tobacco tax was filed in Congress. I was invited by the House Committee on Ways and Means, chaired by Joey Salceda, and the Senate Committee on Ways and Means chaired by Win Gatchalian. I have attended meetings at both the House and Senate.

 

The Food and Nutrition Research Institute (FNRI), an agency under the Department of Science and Technology, showed one result of their 2023 survey covering some 36,000 households, or about 150,000 individuals, nationwide. Smoking incidence among respondents who were 20 years old and above increased from 18.5% of adults in 2021 to 23.2% in 2023, a big jump of 4.7%, equivalent to 3.45 million more smokers.

 

The continued rise in the tobacco tax is supposed to achieve two outcomes: reduce the number of smokers and increase the value of tax revenues. From 2021 to 2023 neither happened. The reverse happened — there were more smokers, and there was a decline in tobacco tax revenues (see Table 2).

 

The main explanation for this is that many smokers of legal tobacco did not stop smoking or reduce their consumption but instead shifted to illegal tobacco which is dirt cheap. So, the higher tobacco tax rate benefited only smugglers, criminals, terrorist organizers in cahoots with their protectors in government, while tax collections for healthcare declined.

 

I argued in both the House and Senate Committee meetings that the optimal tax rate is P50/pack because it was the rate that gave the DoF P176 billion in 2021. So, if we want to collect more tobacco tax revenues, the tax rate should be rolled back to P50, not increased to P63, and certainly not P70 a pack.

 

*Fox News said yesterday that Ramaswamy is expected to pursue the governorship of Ohio instead of taking up the reins of DOGE.

PhilStar 24, Lower unemployment, inflation and electricity prices

Lower unemployment, inflation and electricity prices

 

ENERGY, INFRA AND ECONOMICS - Bienvenido Oplas Jr. - The Philippine Star 

January 16, 2025 | 12:00am

https://www.philstar.com/business/2025/01/16/2414452/lower-unemployment-inflation-and-electricity-prices

 

Last week, the Philippine Statistics Authority (PSA) released the labor data for November 2024, with the unemployment rate at 3.2 percent – an all-time low except in June 2024 and December 2023 with 3.1 percent. So this is good news.

 

Finance Secretary Ralph Recto expressed optimism in their press release that “We are working non-stop to ensure that we open more economic opportunities to Filipinos, so we can provide more and quality jobs to our people and boost our economy.”

 

Also last week, the PSA released the inflation data for December 2024, it was 2.9 percent, good. The highest inflation last year was 4.4 percent in July and the lowest was 1.9 percent in September.

 

Our full-year inflation has declined from 5.8 percent in 2022 and six percent in 2023 to 3.2 percent in 2024. This is lower than the 2024 inflation of India at 4.9 percent and Vietnam at 3.6 percent, but higher than Indonesia and Korea’s 2.3 percent. Note that Vietnam, India and Philippines have the fastest GDP growth in 2024 (Q1-Q3) among the world’s top 50 largest economies. Somehow an illustration of the “Phillips’ Curve” – more growth and lower unemployment leads to higher inflation.

 

Of the 3.2 percent inflation last year, the biggest pull-ups came from alcoholic beverages and tobacco with 4.6 percent inflation, and food and non-alcoholic beverages with 4.4 percent. The largest pull-down were from transport with 0.9 percent, and housing, water, electricity, gas and other fuels with 1.7 percent.

 

During the Monthly Economic Managers Meeting (MEMM) last Monday, Jan. 13, Budget Secretary Amenah Pangandaman, NEDA Secretary Arsenio Balisacan, Special Assistant to the President for Investment and Economic Affairs Frederick Go, Secretary Recto, other officials from Bangko Sentral and Bureau of the Treasury discussed the declining inflation and unemployment rates, and budget for 2025.

 

Also last Monday, Manila Electric Co. (Meralco) announced a decrease of P0.219 per kilowatt-hour in the electricity rate in January 2025 billing due to lower generation and transmission charges. Good news to start the year.

 

I checked the generation charges being passed on by Meralco from different power plants to the consumers, here are the numbers I got. Rates are in pesos per Kwh, percentages in parenthesis are their share to total generation.

 

In November 2024, generation charge was P6.793, of which from Wholesale Electricity Spot Market (WESM) has P4.297 (28.7 percent). Coal plants have lower cost, like Limay P5.381 (8.8 percent), San Buenaventura P6.353 (9.1 percent), Sual P5.52 (3.0 percent). Gas plants generally have higher prices, contracted solar has lower prices but their percent share is very small, below one percent of total.

 

In December 2024, generation charge increased to P6.972 of which WESM has P4.550 (31.4 percent), coal plants again have lower prices: Limay P5.168 (8.9 percent), San Buenaventura P6.073 (6.3 percent), Sual P5.407 (3.3 percent) .

 

And this January 2025, generation charge decreased to P6.834 of which WESM has P3.666 (33.7 percent), coal plants Limay P5.405 (9.0 percent), San Buenaventura P5.689 (7.0 percent), Sual P5.478 (3.2 percent).

 

So if we want cheaper electricity, brighter streets and colder offices, malls and houses, we should have more big coal plants, not less.

 

Last week, the Independent Electricity Market Operator of the Philippines (IEMOP) released the prices nationwide in WESM. For January 2025 billing, WESM average price nationwide was P3.45/kwh or 22 percent lower than December 2024 price of P4.42/kwh. The main reason was the increase in power supply to 20,150 MW from 19,492 MW in December 2024 or 3.4 percent increase. While demand has decreased to 13,275 MW from 13,659 MW in December 2024, or 2.8 percent decline.

 

Higher supply while demand is flat or declining results in higher reserve margins, and hence lower prices. If we want to have stable electricity supply at lower prices, we should have high reserve margins always. Redundancy of reserves can increase cost but because they reduce the chance of blackout, they have a pull-down effect on overall prices.

 

More big coal plants, big LNG plants and soon nuclear plants will always be beneficial for the Philippine economy in terms of lower power prices, lower chance of blackout, and hence higher attractiveness for business and investments.

BWorld 770, Why PDIC, PhilHealth remittances and spending control are good

Why PDIC, PhilHealth remittances and spending control are good

January 14, 2025 | 12:02 am

My Cup Of Liberty

By Bienvenido S. Oplas, Jr.
https://www.bworldonline.com/opinion/2025/01/14/646302/why-pdic-philhealth-remittances-and-spending-control-are-good/

 

Among the recent fiscal issues that have come up after the sustained attack against the newly enacted budget or General Appropriations Act (GAA) 2025 is the clamor against the remittance of the Philippine Deposit Insurance Corp. (PDIC) to the Bureau of the Treasury (BTr) of P107.2 billion to help finance some unprogrammed appropriations.

 

I checked some numbers of government-owned and -controlled corporations (GOCCs) at the Budget of Expenditures and Sources of Financing (BESF). Sources of funds of GOCCs are equity and subsidy from the National Government, corporate borrowings, and corporate funds. Uses of funds are general administration and support (GAS), support to operations, operations, and projects.

 

Those under the Department of Finance (DoF) with high available balances (sources minus uses) are the Development Bank of the Philippines (DBP), the Land Bank of the Philippines (LANDBANK), and the PDIC. Earlier, DBP and LANDBANK resources had been remitted for the initial funding of the Maharlika Investment Fund.

 

The Power Sector Assets and Liabilities Management Corp. (PSALM) under the Energy department also has a large available balance yearly, but only about half of PDIC’s. The Philippine Health Insurance Corp. (PhilHealth) had no available balance in 2024 (see Table 1).

 

Tapping PDIC’s excess funds for some government expenditures is a good move, for four reasons. One, the P107 billion is equivalent to its available balance for 2022 and 2023 alone. Two, it is less than the Deposit Insurance Fund (DIF) requirement in 2023 of P187 billion, derived as the DIF ratio 5.5% multiplied by total insured deposits of P3.4 trillion. Three, the assurance from PDIC President Roberto Tan that the DIF “remains adequate to cover risks in the banking system in case of insurance calls.” And, four, tapping excess funds of financially stable GOCCs is a lot better, far superior, to raising taxes or raising additional borrowing.

 

So, I support the DoF and the Department of Budget and Management (DBM) in tapping the PDIC excess funds. The same way that I supported their move to tap excess funds of PhilHealth (funds that came from taxes paid by smokers, vapers and drinkers of alcohol and sugary beverages, not from direct contribution of members).

 

If there is one thing that I wish the DoF and DBM would do, or that President Ferdinand Marcos, Jr. would push, is to have an across-the-board spending cut, targeting a budget balance, and significantly reducing the public debt stock, reducing interest payments.

 

I want to see spending cut from infrastructure, foreign aid-funded projects, and social services like the budgets of state universities and colleges (SUCs) including UP. The SUCs budget has been jumping up, from P67 billion in 2019 to P81 billion in 2021, P107 billion in 2023, and P133 billion in 2024 — which is double its budget just five years earlier.

 

Much of the infrastructure — roads, airports, seaports, power plants, etc. — are now financed and constructed by private corporations via public-private partnership (PPP). The user-pay principle is a lot superior to the all taxpayers-pay principle.

 

Education, healthcare, and household welfare should first and foremost be personal and parental responsibilities, not the government’s responsibility. Government should still help, but be limited to primary and secondary education, limited to infectious diseases and not compromised with non-infectious diseases because these result in bottomless health spending. Plus, local governments units (LGUs) are putting up their own hospitals, their own universities, their own social welfare programs, and they always have a budget surplus while the National Government (NG) always has a budget deficit.

  

There was some good news in public finance in 2024: revenues in January-November were higher than in the full-year 2023 while expenditures were controlled. This led to a lower deficit, although it was still above P1 trillion, and borrowings are below P2 trillion (see Table 2).

 

We should sustain this momentum. A lot of the criticism made by various NGOs and pressure groups about the GAA 2025 is that their favored sectors — like healthcare and education — did not get more money than they wished. They wanted more health and education socialism and are not interested in fiscal balance, nor in asserting personal and parental responsibility in how people run their lives. They hate the legislators and want the endless dependence of the people on the government, which is run and fund-appropriated by the politicians they hate. There is irony and hypocrisy there.

 

To remove the irony, people should demand less public spending and borrowing, less taxation and regulations, and more money in their pockets to finance their household needs, to do more philanthropy for needy people.

PhilStar 23, Toward more gas power development in the Phl

Toward more gas power development in the Phl

 

ENERGY, INFRA AND ECONOMICS - Bienvenido Oplas Jr. - The Philippine Star 

January 9, 2025 | 12:00am

https://www.philstar.com/business/2025/01/09/2412785/toward-more-gas-power-development-phl

 

The fastest-growing major economies in the world – those in the top 50 largest GDP size – are mostly Asians. For instance, the average GDP growth from 2015-2023 were as follows: Vietnam, six percent; China and India, 5.8 percent; Turkey, five percent; Philippines, 4.7 percent; Egypt, 4.6 percent; Indonesia, 4.1 percent; Malaysia, 3.9 percent and Poland, 3.7 percent.

 

One thing I notice about these countries is that they are mostly small users of natural gas. Their gas/total generation ratio in 2023 were as follows: Vietnam, 9.5 percent; China, 3.1 percent; India, 2.7 percent; Indonesia, 17.4 percent; Philippines, 14.4 percent; Turkey, 21.2 percent and Poland, 9.8 percent. They are high coal users.

 

Compare that with these countries which have high gas/total generation ratio and low average growth over the same period. The respective numbers are as follows: Mexico, 57.7 percent and 1.4 percent; Argentina, 51.8 percent and 0.3 percent; Italy, 44.3 percent and 1.2 percent; Russia, 44.8 percent and 1.2 percent; US, 43.1 percent and 2.5 percent; Netherlands, 37.5 percent and 2.2 percent; UK, 34.3 percent and 1.5 percent and Japan, 31.7 percent and 0.6 percent.

 

Some Asians have a balanced energy mix and modest growth. The gas/total generation ratio and average GDP growth respectively over the same period are as follows: Taiwan, 39.6 percent and three percent; Malaysia, 37 percent and 3.9 percent, and South Korea, 27 percent and 2.6 percent.

 

Middle East countries with big gas reserves naturally have high gas/total generation ratio, like Iran with 84.5 percent, United Arab Emirates with 72 percent and Saudi Arabia with 62.7 percent.

 

So it seems that natural gas is not cheap enough to power high growth. There are many factors for a country’s fast or slow growth and energy input is one of them but it is among the major contributors.

 

The Philippines has a coal/total generation ratio of 62 percent in 2023. The moratorium on new or “greenfield” coal projects declared in 2020 paved the way for more gas plants and recently, entertaining nuclear energy in the power generation mix.

 

Two good developments in Philippines gas power sub-sector. One is the approval by the Philippine Competition Commission last December for the liquified natural gas (LNG) partnership of three big power companies – San Miguel Global Power (SMGP), Aboitiz Power (AP) and Meralco Power Gen Corp. (MGen) sealed in March 2024. They will jointly own two LNG plants, the Ilijan plant of South Premier Power Corp. (SPPC) and Excellent Energy Resources Inc. (EERI) with combined capacity of nearly 2,000 MW, and an LNG import and re-gasification terminal, all in Batangas.

 

Two, expansion of MGen’s subsidiary in Singapore, the Pacific Light Power (PLP) in Jurong Island. Currently PLP  operates an 830-MW LNG plant since 2014, plus a 100-MW fast-start LNG peaking plant under construction and be operational in second quarter of 2025. Singapore’s Energy Market Authority (EMA) this week awarded PLP the right to build, own and operate a hydrogen-ready 600-MW combined cycle gas turbine (CCGT), to be operational by 2029.

 

I say this is good development for the Philippines because MGen will generate more lessons and experience in running big LNG plants that can supplement its knowledge running SPPC and EERI, along with its partners AP and SMGP.

 

If the Philippines will sustain an average GDP growth of six to 6.5 percent yearly, we will need about 7,000 to 8,000 gigawatt-hours (GWH) yearly increase in power generation until 2026, then 9,000 to 10,000 GWH yearly by 2028 onwards. Currently the average increase is only 5,000 to 6,000 GWH yearly, that largely explains why we still have frequent yellow-red alerts until middle of 2024.

 

A 1,000-MW LNG plant with average capacity factor of 85 percent should be able to generate about 7,446 GWH/year of electricity. Thus, we should have at least one big gas plant with 1,000 MW capacity or higher, commissioned single year non-stop.

 

With the moratorium in “greenfield” coal projects plus unavailable legal framework for nuclear development, we have little choice in the short-term but entertain more big LNG plants. Plus push for committed coal projects approved prior to the moratorium order, like the planned 1,200-MW Atimonan coal plant in Quezon province.