Tuesday, November 21, 2017

BWorld 164, PES conference amidst reduced risk and uncertainty

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


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

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

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

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

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

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

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

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

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



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

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

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

To summarize: (a) There are less risks and uncertainties now and the near future compared to recent years; (b) Endless fiscal irresponsibility by governments will create long-term risks with rising public debt; (c) Dutertenomics of tax-tax-tax aside from kill-kill-kill in its drugs war may crack starting next year; and (d) Climate and renewables alarmism will see slow policy reversals in more countries soon.
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See also:
BWorld 161, The sin of smuggling and corruption in the Sin tax law, November 02, 2017 

Trolling by cell phone

Last Saturday, November 18, my cell phone has been getting anonymous calls. I thought they were from some friends but when I answered the call, the caller/s would not speak. I replied by text to some numbers, "Who is this please, thank you", no reply, deadma.

My suspicions where they were coming from:

1. Marketing warriors trying to sell me something.
2. Duterte warriors who love my criticism of the President.
3. Climate warriors who want to "save the planet" and unhappy with those who question their religion.
4. Others, as joked by some friends: (a) BBC trying to interview me (a joke in reference to a Du30 fanatic blogger Sass Sassot who got angry at BBC because they never interviewed her), (b) they are my silent admirers, etc.

#1 is not possible because marketing people quickly speak when their call is picked up.
#s 2 and 3 are possible.

Then the anonymous calls continued until yesterday. Here is a summary of the calls:

a) Last Saturday, 7 calls from 7 different numbers:
0917-5377634
0917-5372684
0917-8163219
0917-8163621
0917-3183613
0917-5375776
0917-3194184

b) Last Sunday, 2 calls from 1 number:
0956-8660941(2x)

c. Yesterday, Monday, 8 calls from 9 different numbers:

0917-5372550 (2x)
0917-8163046
0917-5372684
0917-8163621
0917-3158973
0917-5379213
0917-8163513
0917-5378095

Here are the screen shots, arranged from latest to earliest calls. "Today" refers to yesterday, Monday, I took the shots at 11:42pm.

 

So there, I don't know who these trolls are but I ignore their calls. I will also report this to DICT and Sec. Eli Rio, Jr.

Sunday, November 19, 2017

BWorld 163, US energy policies and implications in Asia and Philippines

* This is my article in BusinessWorld last October 31, 2017.


Energy means development. It is not possible to have fast growth in all sectors — agriculture, manufacturing and services — and sustain it without ample supply of affordable and stable energy and electricity.

The US remains the world’s biggest economy in terms of nominal or current values of gross domestic product (GDP). But in purchasing power parity (PPP) valuation of GDP, China has tied the US economic size in 2013, both with $16.7 trillion, and in 2014, China ($18.2T) overtook the US ($17.4T).

US ENERGY POLICIES UNDER EX-PRESIDENT OBAMA
The energy policies of the previous administration can be summarized as follows: (1) drastic reduction of coal use, (2) steady use and consumption of nuclear and hydroelectricity, (3) relative encouragement of natural gas and oil, and (4) massive support and subsidies for variable renewable energies (VREs) especially wind-solar.

In contrast, other giant economies in the world have the following energy policies:

Germany: (1) mild reduction in coal, oil and nuclear, (2) relative encouragement of natural gas, and (3) massive support and subsidies for VREs.

Japan: (1) increased use of coal and natural gas, (2) decreased use of oil and nuclear, and (3) big support for solar.

China and India: uniform increase in coal, oil, natural gas and VRE. Which is the right thing to do, to improve energy capacity as big and as stable as possible to hasten their economic development (see table).


The US energy transition from coal to VREs like wind-solar has affected its long-term energy stability and competitiveness and punch some holes on the budget and ordinary consumers’ pockets.

US ENERGY POLICIES UNDER PRESIDENT TRUMP
Recognizing the long-term threat of this trend, President Donald Trump issued a series of policies reversing the Obama policy. Among them are the following:

(1) Appointed an Anthropogenic global warming (AGW) skeptic, Scott Pruitt as head of the Environmental Protection Agency (EPA). EPA in the previous administration has issued lots of regulations that explicitly or implicitly restrict new coal power plants while putting existing coal plants.

(2) Issued America Energy Independence policy in March 2017, targeting to reverse among others, the Clean Power Plan (CPP) projected to cost the US economy up to $39 billion a year and increase electricity prices in 41 States by at least 10%. A follow up Executive Order (EO) “Implementing an America-First Offshore Energy Strategy” was issued in April 2017.

(3) Exit from the Paris Agreement and the multi-trillion dollars possible liabilities in legal and environmental challenges.

These policies will reverberate to Asia and the rest of the world in terms of higher US production of coal, oil and gas. Higher supply means lower or stable prices for these energy sources.

On a related note, an America First Energy Conference (http://americafirstenergy.org/) will be held in Houston, Texas this coming Nov. 9, to be sponsored by the Heartland Institute. Being organized by an NGO, speakers and moderators (41 so far) are all from nongovernment entities except one, from the US Department of Interior.

HUGE COAL POWER IN SOUTHEAST ASIA (SEA)
Last week, the International Energy Agency (IEA) reported that about 100 GW of new coal-fired power generation capacity is expected to come online in SEA alone by 2040, increasing the region’s installed capacity to about 160 GW and more than doubling the region’s current coal power capacity. Global coal-fired generation capacity to grow by nearly 50% over today’s levels.

Coal as fuel is preferred because it is cheaper than natural gas and coal plants are in many cases less costly than the capex needs of gas plants, the IEA admits.

The Philippines will be among the big SEA nations that is investing big amount of resources in expanding its coal capacity. And rightly so. In 2016, coal constituted 34% of PH total installed power capacity but contributed 48% of actual electricity production.

Cheap, stable, and dispatchable electricity upon demand, that is the kind of power sources that people the developing world need. Governments must step back from climate and renewables alarmism and cronyism and go for least-cost, reliable energy.
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See also:
BWorld 160, A high carbon tax is irrational, October 25, 2017 

On the PH's GDP growth of 6.9% in Q3 2017

A friend, Ateneo de Manila's Economics Professor, Ser Pena-Reyes, posted this chart from Rappler in his fb wall yesterday. I like it.


My immediate reaction -- see in the Expenditures side, Q3 2016 vs Q3 2017, Household consumption is declining this year while Government consumption is rising fast. The Du30 government is spending big time this year, funded by lots of borrowings, to be followed by tax-tax-tax in 2018 and beyond. Magaleeeng.

Another economist friend, Jun Neri, BPI's chief economist, posted their chart analysis of the Q3 growth, their version on the spending side. Jun said "It factors in the weight of each sector. Notice how Net Exports (X - M) helped compensate for the slowdown in HFCE (household consumption)." Good chart, Jun/BPI.



Ser made another chart, below, on the demand side of the GDP growth. Ser noted that "HFCE, GFCE, and capital formation appear to be the main drivers of the deceleration—an observation that raises some concern regarding growth sustainability. There is a need to accelerate capital formation in particular, if we are to shift from consumption-led to investment-led growth."



Growthwise, the slow growth in year 1 of PNoy Aquino government was momentum from the lousy Gloria Arroyo economy. Likewise, the fast growth in year 1 of the Du30 administration is momentum from PNoy fast growth era. Besides, while PNoy budget deficit was around P300 B/yr or less, Du30 deficit in year 1, this year, is p600B+. No crisis year yet it borrowed heavily, hence the high jump in Government consumption growth.

Fiscal responsibility means in financial turmoil or crisis years, government borrows big time to help propel an economy then have fiscal surplus in non crisis years to pay some debt. This administration  displays big time fiscal irresponsibility of spend-spend-spend, ramp up the deficit and borrowings in non crisis, already fast growth period.



Sunday, November 05, 2017

BWorld 162, Open pit mines and open economy

* This is my article in BusinessWorld on October 27, 2017.


Open pit mining (OPM) is not as scary and draconian as many activists would paint it to be. Thus the ban on OPM by the CA-rejected ex-DENR secretary Gina Lopez has little or zero technical basis, only emotional outburst.

The Mining Industry Coordinating Council (MICC), the multi-stakeholder body on the sector has finally decided that the ban on OPM should be abandoned and new DENR Secretary Roy Cimatu has said that he will soon issue a new department order for this.

OPM is done and practiced in many countries including developed ones like the US, Australia, Germany, Sweden and Canada. Mining firms and their stockholders get good income, governments get huge tax revenues, many workers get long-term high-paying jobs, and consumers worldwide enjoy continued supply of electricity, gadgets, appliances, cars, steel bars and numerous other products of mining. (See table)


Now that the uncertainty of OPM banning has been removed, existing mines should be able to continue their production without fear of policy reversals. The image of the country as having fickle, atras-abante investment policies should be somehow corrected.

New, big prospective mining projects in the Philippines will hopefully see the green light for their operations. Two of those big potential projects are (1) the $2-billion MVP-led Silangan gold mine in Surigao del Norte, and (2) the $5.9-billion Tampakan gold-copper project in South Cotabato. The latter is actually the Philippines’ single biggest foreign investment project and is expected to bring huge income for the locals and the government, national and local.

Many local anti-mining groups vehemently oppose the Tampakan project citing thousands of hectares of land that will soon be wasted. That is an outright exaggeration. The copper-gold ore extraction in just one area is projected to be about 2.5 kms. wide, 3 kms. long and about 0.8 km deep, after 17 years of operation. This is significantly smaller than the Hibbing and Bingham Canyon in the US, among other big OPMs in the world.

Government should simply set the parameters and criteria for business to follow based on existing laws, like the Mining Act of 1995. Once government has given its permit and approval for a mining project, it should simply monitor the players that they comply with the laws and penalize violators, not change rules midway and in the process, violate the laws that it is bound to follow and implement in the first place.

The rule of law applies not only to businesses and regulated entities but also to the government. The rule of law applies to both governors and governed, both administrators and administered, both regulators and regulated. If governors and regulators want to exempt themselves from the law and make their own instant rules, that is the rule of men with arbitrary powers circumventing the rule of law.
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See also:
BWorld 151, Mining taxes per hectare of land, September 22, 2017
BWorld 159, Electoral reforms and the President, October 19, 2017 

IPR and Innovation 39, Recent IP developments in CN, TW, KR, ID

Reposting these news stories collated by PRA, enjoy.
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China.org.cn, September 19, 2017

The Chinese government has begun a campaign to protect the intellectual property rights (IPR) of foreign companies.

The campaign will focus on malicious trademark registration and imitation of foreign brands, the Ministry of Commerce said Monday, citing a joint action plan by 12 government departments.
From September to December, the campaign will also target infringement of online IPRs, patent rights and plant variety rights, as well as industrial espionage, according to the plan.

Lexology, October 20, 2017

China is in the middle of a rapid shift towards cloud technologies. Execution of the 13th Five Year Plan will deliver substantial investment into cloud computing and the sector is undergoing unprecedented growth. Meanwhile, organisations operating in this digital economy face an increasingly complex intellectual property (IP) environment, as China becomes a global IP center and scales up IP protection, enforcement and penalties for infringement. Indeed, the number of cloud-related IP lawsuits in China grew 158% between 2011 and 2016. Against this backdrop, organisations face an important question: how can they take advantage of the enormous opportunities presented by the cloud in a way that manages this complex IP landscape? In this post, Matt Pollins and Nick Beckett from CMS look at the practical steps organisations can take to protect themselves and succeed in the cloud. 

World Trademark Review, September 26, 2017

A major amendment in Taiwan to the regulations governing customs border measures will play a key part in protecting trademarks. The measures allow the owner of a trademark registered in Taiwan to file an application with Customs to have the trademark recorded on its database enabling Customs to seize counterfeits when it inspects imported or exported goods ex officio. The legal basis for this mechanism is rooted in the Regulations Governing Customs Measures in Protecting the Rights and Interests of Trademark, which is enacted pursuant to Paragraph 2 of Article 78 of the Trademark Act.

XinhuaNet, October 10, 2017

South Korea's unification ministry on Tuesday urged the Democratic People's Republic of Korea (DPRK) not to violate property rights owned by South Korean companies which had operated factories in the currently closed inter-Korean industrial complex.

The Economic Times, October 27, 2017

Seeking to achieve a "more balanced" trade relationship, the Trump administration has pressed India on key issues like market access, lifting of trade barriers and intellectual property protection. During the first US-India bilateral Trade Policy Forum (TPF) under the Trump administration which was attended by US Trade Representative Robert Lighthizer and Union Minister of Commerce and Industry Suresh Prabhu, India strongly differed with the American position on many of the contentious issues.


PRA

During a meeting in New Delhi last week, Indian Commerce & Industry Minister Suresh Prabhu announced how "extremely important" it is for India to protect intellectual property rights. Minister Prabhu noted that the Indian economy has undergone robust changes during recent decades and is now a leader in innovation and developing technologies.
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See also:

Thursday, November 02, 2017

BWorld 161, The sin of smuggling and corruption in the Sin tax law

* This is my article in BusinessWorld last October 23, 2017.


The intent or purpose of higher taxation is to further penalize an act, work, or consumption, hoping to discourage them by making their prices higher while giving government and lobbyists more freebies and more money.

The unintended result of higher taxation is to encourage illicit trade, production of cheaper but lower quality goods and services while giving the corrupt and extortionists in government more money.

Such may be the experience of the Sin Tax law of 2012 or RA 10351. It has raised lots of money for government, benefitted the universal health care program of DoH-PhilHealth while enriching the smugglers, illicit traders and their government protectors.

Revenues from sin tax has significantly increased in 2013, the first year of implementation of the law. Tobacco tax in particular has more than doubled from P32B in 2012 to P70B in 2013. Meanwhile, estimates of cigarettes smuggling have also increased from 35 million packs in 2012 to 40 million packs in 2013 (see table).


The CRC estimates are partly derived from the Oxford Economics report in 2016, “Asia: Illicit Tobacco Indicators 2015.”

The rise in smuggling and illicit trade of cigarettes is also shown by the haul of the BoC and BIR in raids in November 2016 in Bulacan, Pampanga and Pangasinan where more than P1 billion worth of illegally produced cigarettes and counterfeits were discovered. In Pangasinan alone, an illegal factory was raided, which led to the discovery of fake stamps and cigarette making/packing machines that can produce up to 3.6B cigarettes a year.

So claims by the government and advocates of RA 10351 that “8 million Filipinos have stopped smoking since the passage of the law” or “at least 70,000 smoking-related deaths have been averted since 2013” and similar pronouncements may not be true after all? Or are these numbers exaggerated?

The numbers in the table and the huge number of discovered smuggled cigarettes by government raids mean one thing — demand and consumption for tobacco products remained high despite the tax hike. Consumers simply shifted from higher-price to lower-price products, and from legal to illegal or informal sources of tobacco and alcohol products. Like lambanog and tuba.

I made an informal, verbal survey of some small sari-sari stores in a rice farming village in Bugallon, Pangasinan when I went there last month, accompanied by a local. I asked the store owners, “Has smoking and drinking incidence by the people declined, stayed about the same, or increased?”

They replied that they do not have the numbers but they observe that smoking and drinking incidence did not drop or decline. Poor people simply shifted to cheaper brands as new brands with cheap products like Mighty sprouted. The well-off continued patronizing the established higher-price brands despite the rise in prices, they simply reduced their smoking by several sticks a day.

For alcohol products, San Miguel beer is literally wiped out in poorer villages because of its higher price but the consumption of Ginebra, Emperador, Red Horse, and other products has remained the same if not increased. Drinkers usually start with the high alcohol drinks and before going home or elsewhere, they wind down to Red Horse.

Sen. Manny Pacquiao introduced Senate Bill 1599 that aims to increase the unitary excise tax on tobacco products from P30 to P60 per pack, and the annual increase be raised from 4% to 9%. His goal is to parrot the goals of the Sin tax law of 2012 — more money for government, less smoking incidence by the people.

Given the above numbers and facts on the ground, what the boxer-Senator would achieve if his bill becomes a law would be more illicit trade and more corruption in government while gaining more political pogi points for his political plans in 2022.

Instead of introducing another round of higher sin tax, legislators and executive agencies should focus on strictly implementing the existing law and plug loopholes. The proliferation of counterfeit products and stamps mean there is proliferation of corruption in government that allowed such things to happen for several years.

There is a limit to state nannyism and government intervention on how people should run their own lives. Government should limit its unlimited itch to tax-tax-tax, regulate-regulate-regulate, spend-spend-spend.
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See also:
BWorld 158, Why a carbon tax is wrong, October 16, 2017 

Tuesday, October 31, 2017

Energy 102, Germany's CDU/CSU and FDP rejecting the Greens' anti-coal agenda

I like the development in the new German government. #1 CDU getting closer with #4 FDP (Free Democratic Party) in climate and energy policies while potential partner #5 Greens go more idiotic and watermelon-ic (green outside, red inside) in demanding zero coal power. The Greens have more commonality with #2 SDP and #6 Linke (commies). CDU is correct -- if they follow the Greens for the sake of coalition-majority, #3 AfD will greatly benefit and further expand as AfD is explicitly anti-renewables alarmism and cronyism. Germany having 3rd highest electricity prices in the world might move to 2nd or 1st if the Greens-SDP agenda will prevail.

https://www.thegwpf.com/climate-policy-threatens-to-crash-german-coalition-negotiations/


“If coal plants are closed down in Eastern Germany and thousands of workers are made redundant, very soon 30% of voters will support the Alternative für Deutschland (AfD),” Laschet warned. ... Prime Minister Laschet announced that he would not make substantial concessions: “If push comes to shove we will have to crash the talks.” He said that environmental policy was a bigger hurdle for the negotiations than immigration policy: “The latter is easier to settle than the closure of power stations.”
(translated to English by The GWPF)

"Kellner reiterated the Greens’ position that Germany should quickly close coal-fired power stations to help fight climate change, a position resisted by the other parties." 
October 26, 2017.
https://www.reuters.com/article/us-germany-politics/german-coalition-talks-stumble-on-migration-climate-idUSKBN1CV1FZ

"While all parties agreed in principle this week that they want to uphold the Paris climate accord, the FDP is pressing for a commitment to curb government measures to promote renewable energy, which help make German power prices the second-highest in the European Union after Denmark’s.

“We certainly have to reduce carbon dioxide,” the FDP’s Suding said. “In Germany, this is much more expensive than in other countries and we have to find a way to reduce CO2 emissions more cheaply. Of course, there won’t be a complete phase-out of coal by 2030.”
October 27, 2017.


"According to Lindner (FDP):
The project of the century Energiewende [transition to green energies] has failed. None of the agreed targets will be reached. Climate protection is stalled, energy prices are rising and they are burdening us as electricity consumers, just as they are the industry and middle class. And not least of all it is becoming increasingly difficult to guarantee a secure power supply during the winter months.” 
http://notrickszone.com/2017/09/29/germanys-green-energy-project-close-to-death-eeg-feed-in-act-has-failed-has-to-go/#sthash.ZAheNnnr.RsV59Dyz.dpbs

It is good that both CDU/CSU and FDP are jointly resisting the deindustrialization goal of the Greens. One reason why AfD rocketed high to nearly 13% of the votes despite being created only 4 years ago is on the energy mini-suicide of the watermelon groups.
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See also: