Thursday, May 24, 2018

BWorld 214, Disruption in global economic power

* This is my article in BusinessWorld last Monday, May 21, 2018.

The past three decades showed major disruptions in global politics and economics. These include the fall of European socialism with the collapse of the Berlin Wall in 1989, the creation of many new countries from the former USSR, the move towards freer trade with the creation of the World Trade Organization (WTO) in 1995, and the transition from heavy central planning to the market economy of two big socialist economies in the world, China and Vietnam.

Disruption in macro economy and business is a result of endless innovation by new players both in business and politics. What used to be dirt-poor economies have transformed to middle-income, Internet-savvy ones.

Let us review global economic performance over the past 25 years. We use 1992 as base year because there was no WTO at that time so many economies were still grappling with trade restrictions and by extension, investment constraints. The then top 10 East Asian economies are covered here (see table).

These numbers show the following disruptions over the past quarter of a century.

One, China’s communist central planning until the ’80s has resulted in a very poor economy. Its transition to some principles of the market economy resulted in massive turn-around towards more prosperity: GDP size has expanded 24x in current prices and nearly 16x in PPP values.

Two, India has similar economic policies with China until the ’80s, very nationalistic, socialist, and restrictive. Its transition to some market reforms allowed it to expand its GDP size nearly 9x.

Three, seven to eight ASEAN economies have experienced GDP size expansion of at least 5x in just 25 years, whether in current prices or PPP values. Only Thailand and Brunei failed to expand 5x because they have a relatively high economic base in 1992 or earlier.

Four, traditional rich economies of Europe, Japan, and US were only able to expand three times at most. This is because they already have a high economic base in 1992, and they have become more regulated and more bureaucratic recently owing to very high labor, energy, environment, and other standards.

Going to the micro and enterprise level, many previously domestic and nation-limited companies in East Asia have become regional players and multinationals initially, then became global players.

The Philippines for instance has produced a number of big regional players: San Miguel, SM, Jollibee, Unilab, Zuellig, Max’s, and Pilmico/Aboitiz.

There are many new players that experienced disruptive ascent in just a few years of existence, like Udenna/Phoenix/Chelsea, Voyager, Mobext, AdoboMall. Their CEOs and presidents were among the speakers in the BusinessWorld Economic Forum 2018.

Endless innovation has brought new players to the top and they are the disruptors of the corporate status quo. But their ascent to the top is not guaranteed because new breed of disruptors are being born and created every year.

The market economy has an inherent disruptive, innovative, and subversive nature. Corporate expansion and bankruptcy, boom and bust, are 100% part of its DNA. This uncertainty and several other disruptions may be bad for existing players but they will always be good for consumers. Satisfying consumers is the single biggest challenge to all players, old and new.

The Philippine and Asian governments should ride the wave of disruptions and allow more market reforms, more deregulation, de-bureaucratization and less taxation of the business environment. Governments’ goal of more welfare, less inflation to the people can be better provided by a competitive and dynamic economy. Plenty of private players can create more jobs and produce newer products and services at lesser cost, better quality, and more variety.

See also:

An old correspondence from Libertarian Viewpoint

While looking for an old email from a friend, I rediscovered this email from an American friend though I have not met him.

October 08, 2010


Hi, my name is jim kearney. I hope this finds you and yours well. I ran across your name in a list of people writing sections for the book "Why Liberty". Congratulations on being selected.

Your name on that list caught me by surprise which is why I am writing. I was not aware that a think tank existed in Manila. With the new laws that passed saying people who do not believe in government cannot be citizens of PI, it sort of dashed my hopes to moving there. I of course came to the conclusion that the government was pushing for more government control rather then more freedom.

Suddenly I get an email with your name on it and hope is once again renewed. It has always been my dream to retire in the PI. Each year we go there for vacation I want to just stay there instead of returning to the US. Of course, I cannot do that yet since the kids still need me to help them stand on their own. I love my kids but they do not want to live in PI like I do.

Well, anyway, I am interested in your think tank. I run my own Libertarian blog here in the US and would be delighted to try and get some exposure for you there (on a regular basis if possible). I would also like to find other Libertarian minded indiviuals there who would like to be authors on my blog. The more authors I get from around the world the more successful the blog will be.

Please tell me more about your think tank.
I see you have some regular posts - can I repost those on my blog as well. your content would be wlecomed to show that Libertarianism is taking hold world wide and not just here in the US.

Looking forward to hearing from you.
May you be filled with the peace of the world and may prosperity find its way to your wallet

yours in liberty


I replied to Jim of course and expressed gratitude for his letter. He was planning to visit the PH that time, his ex-wife was a Filipina and they have a son who lived in the country. 

Today I checked his blog, he still writes there. Among his recent posts that I like is this, reposting below.

You Cannot Legislate The Poor Into Prosperity
By jim kearney, on March 4th, 2018

Adrian_RogersAdrian Rogers was an American Pastor, author and president of the Southern Baptist Convention. Born in West Palm Beach, Florida, he decided to enter the ministries at the age of 19. He dies of pneumonia in November of 2005. I am not the religious type. Though raised as a Catholic I do not follow the church teachings any longer.

None-the-less, I did found info on Adrian to be very informative. He pushed the conservative agenda from the pulpit and believed that Christians had a duty to be involved in government. He had a series titled “God’s Way to Health, Wealth and Wisdom”. In that series he talked about how young people don’t understand the importance or value of “honest” labor. The series produced one of the most famous quotes seen widely across the internet.

I ran across the quote the other day and it started to look into Adrian so I could present it to you here with a little background. Enjoy!

You cannot legislate the poor into prosperity by legislating the wealthy out of prosperity.

What one person receives without working for, another person must work for without receiving.

The government cannot give to anybody anything that the government does not first take from somebody else.

When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that, my dear friend, is the beginning of the end of any nation.

You cannot multiply wealth by dividing it.

Yours in Liberty.

I like these:

You cannot legislate the poor into prosperity by legislating the wealthy out of prosperity.
* What one person receives without working for, another person must work for without receiving.

Good to see that you're still writing, Jim.

Wednesday, May 23, 2018

BWorld 213, Disruption, inflation and taxation

* This is my column in BusinessWorld last May 17, 2018.

Disruptors tend to be successful in three ways: (1) They dramatically lower historic prices through new cost structures…”
— Accenture, “Disruption need not be an enigma,”
February 2018

“Inflation is taxation without legislation.”
— Milton Friedman, 1974

Disruption is good for consumers. It unsettles many incumbent and entrenched players which may have been lording over the market for decades with expensive and substandard products and services.

Disruptors are often the newcomers, or old players using new and modern production methods that drastically change how things are done.

Inflation is immediately tamed by disruption, ceteris paribus or all other things being equal or held constant. Consumers are given new choices and they tend to flock to products and services with lower prices or similar prices but better quality or more add-ons.

The institutionalization of freer trade in 1995 with the creation of the World Trade Organization (WTO) has contributed to lower prices across many countries.

As a result, prices in Asia in 1995-1999 were significantly lower than prices in 1990-1994 except in Thailand and Indonesia which were badly hit by the Asian financial turmoil of 1997-1998. Then prices generally declined in the succeeding decades until 2017 (see Table 1).

Higher taxation and more government regulations however, have the opposite effect of market disruption. When a country imposes drastic tax hikes, that country experiences significant inflationary pressure and reverses the gains of disruption.

This is particularly true in the Philippines when it enacted the Tax Reform for Inclusion and Acceleration (TRAIN) law of 2017.

While personal income tax rates have declined, many products (oil, LPG, coal, sugary food and drinks, etc.) and services were slapped with higher excise tax and/or expanded VAT.

While all countries and economies were hit by rising world oil prices, many incurred even lower prices.

But in this case, the Philippines is an outlier.

Inflation jumped even after the sudden rebasing of the consumer price index (CPI) from 2006 to 2012. The two richest economies of North America and Europe are included to widen the scope of comparison, year to date (Ytd) vs. December 2017 as base year (see Table 2).

Note that the outlier inflation rate in the Philippines this year does not yet include fare hikes by land transportation companies and providers (jeepneys, taxi, UV express, buses). If such fare adjustments are granted — and they should be — then the country’s inflation will rise even higher.

The Bangko Sentral ng Pilipinas (BSP) noted this unexpected level of price increases and it raised local interest rates to encourage people to spend less and save more and hence, help reduce inflationary pressure.

Rice protectionism and NFA importation monopoly are also slowly being abandoned and the rice import quota will soon be replaced by tariffs and cheaper rice from our ASEAN neighbors will soon become more available to consumers and this will help reduce inflation.

The bad news is that January 2019 is fast approaching and there will be a second round in oil and coal tax hikes. This means another round of inflationary pressure, fare hike pressure, and even larger inflation spikes.

This is a clear case of higher taxation reversing the gains of innovation and disruption in the Philippines. Government as negative disruptor is not good. The TRAIN 2 bill should be an instrument to reverse these disagreeable provisions of TRAIN 1.

Bienvenido S. Oplas, Jr. is President of Minimal Government Thinkers, a member-institute of Economic Freedom Network (EFN) Asia.

See also:

Economic central planners meet ecological central planners

When economic central planners were hoodwinked by, or partner with ecological central planners, one result is lousy economic policy based on crystal-ball predictions. Like this high oil, LPG, coal taxes under TRAIN 1. Dutertenomists believed that world oil prices would never rise high anymore partly because they thought that world demand for oil will flatline or decline soon as more e-cars, e-bikes, e-buses come in. Of course the major reason is they want more transfer of money from private/household pockets to government pockets while they help "save the planet."

Here is an example, economic central planners thought that ecological central planners like UN-Al Gore-CCC, etc would be so right in predicting declining world oil demand and hence, low/stable world oil prices.

Pernia: Gov't did not expect crude price to reach multi-year highs
ABS-CBN News, May 19 2018 12:51 AM

I talked to one DOF Junior staff and that's what he told me, DOF and the rest of Dutertenomics were thinking that supply-demand of gas engine cars will decline as demand for electric cars will rise fast. Eh 1980s ko pa narinig yang e-cars e-cars na yan, after 3-4 decades mostly press release lang and far out from being a really useful stuff. The reality is the opposite of what the ecological central planners say -- demand for oil-propelled vehicles, planes, boats, will keep rising.

Dutertenomists (DOF, DBM, NEDA, DTI, BSP) were so certain then when TRAIN was still a bill, that the inflationary impact of higher oil prices due to high oil taxes would be only 0.7% max. As of April 2018, ytd jump in inflation was 1.2% or nearly double their projected rates. So NEDA issued another prediction last May 04 that look like based on crystal-ball de manghuhula again.

May 4, 2018

I said "crystal-ball prediction" by NEDA of inflation tapering off because govt, via LTFRB and Malacanang, with implicit silence of all Dutertenomists, will not grant any fare hike adjustments. Govt is good in sucking taxes from owners and operators of jeepneys, taxi, UV express, buses but will never grant fare adjustments.

If the Dutertenomists are responsible and honest, they should voice out granting the fare hike adjustments now and find other means to minimize the impact. Wala eh, pasimple lang.

Then January 2019 is near, round 2 of tax hikes for oil and coal, also LPG I think. Inflationary pressure will build up as early as December or Nov. 2018. Then tatahimik naman mga Dutertenomists for any fare hikes?

To say that PH inflation rate is high because of high world oil prices is dishonesty. If that statement is correct, then many if not all oil-importing countries in the world should have experienced high inflation in 2018 compared to December 2017 or full year 2017. This is NOT the case. Many countries even experienced deep decline in domestic prices despite the rise in world oil prices. See table 2 here,

Disruption, inflation, and taxation
May 16, 2018 | 9:22 pm

"Inflation, as we have predicted, will be higher in May, June and July but will eventually go down but still at a high level. It will average close to BSP target band, so that should not lead to suspension," Ang said.

He also cautioned against efforts to suspend the implementation of the tax reform law, saying this would affect the country’s credibility as a now investment grade nation. "TRAIN Law cannot be reversed because the cost to economy and credibility is larger," he said, adding that TRAIN is a package for economic growth. "If you suspend it, where will you get the revenues to fund growth and what will investors and ratings agency think."

Suspension of TRAIN may affect Philippines credit rating — economist
Czeriza Valencia - May 21, 2018 - 12:00am

I agree with Alvin there, I do not support the suspension of TRAIN 1. What I support is that many ugly and inflationary provisions of TRAIN 1 like high energy taxes (oil, LPG, coal), sugar tax, should be reversed and removed via TRAIN 2.

Du30 needs more TRAIN money so that the huge and many China loans that his administration will contract will be paid someday. I doubt if any of the Dutertenomists will admit the hidden agenda of build-build-build via loans-loans-loans from the China communist government.

"Government may have been too busy or too excited to collect the revenues from TRAIN that it forgot how important it is to prepare for its implementation. How a tax is implemented is equally important, if not more important, than the tax policy itself. Bad administration means bad policies. All the excel formula on the results of the TRAIN on prices and income distribution will come to naught when producers and taxpayers are left on their own to adjust to changes in tax rules." 
-- Nini Guevarra, former DOF USec.

How not to do a tax reform
Published May 15, 2018, 10:00 PM  By Milwida M. Guevara

Meanwhile, Du30 already reversed financing of Kaliwa Dam, other big projects from integrated PPP to hybrid PPP so that more China loans, China contractors will be committed/involved by his admin. Now even building coal power plants to be given to CN communist govt and its crony firms? #TRAIN money will pay for these new big loans,

Monday, May 21, 2018

BWorld 212, Commodities competition and the mining debate

* This is my article in BusinessWorld on May 15, 2018. The chart is added here as it was not accommodated in the column due to space constraints that day.

Commodities competition as defined in this piece refers to companies that are producing certain commodities and are competing for investors. Thus, energy companies are those that plan to attract more investors and expand operations when world energy prices are high as compared to those companies producing agricultural, industrial, and other commodities.

This is a continuation of a series of pieces about competition.

Last week we discussed overall competition and the role of the Philippine Competition Commission (PCC), electricity competition and the role of Philippine Electricity Market Corp. (PEMC), innovation and the role of IPR protection.

Endless competition also leads to endless innovation and this results in disruption in global economic balance or imbalance, which, among others, would be discussed in BusinessWorld’s Economic Forum 2018 that carries the theme: “Disruptor or Disrupted? The Philippines at the Crossroads.”

Currently, energy prices especially oil are rising again as the supply from OPEC-Russia remains constricted and US shale oil production expands but insufficient to cope with high world demand. But this rise in energy prices do not represent disruption in the global energy balance yet.

I visited the Commodities section of Trading Economics,, and checked which of the many commodities have “disrupting”prices over the last five years.

The commodities are divided into five groups: (1) Energy (crude oil, natural gas, naptha, propane, uranium, etc.), (2) Metals (gold, silver, manganese, palladium, rhodium, etc.), (3) Agricultural (rice, corn, coffee, cheese, lumber, sugar, soybeans, wheat, etc.), (4) Livestock (poultry, cattle, hogs, beef), and (5) Industrial (coal, copper, cobalt, steel, nickel, lead, aluminum, etc.). There are about 50 commodities in total.

What is surprising is the eminence of certain metallic products.

Four commodities have incurred disruptive price hikes — cobalt, rhodium, palladium, and lumber. Zinc and lithium also have rising price trends but not as steep as these four. The rest of the commodities have up-down-up cycles, or declining prices like uranium.

Cobalt is mainly used to produce high performance alloys and rechargeable batteries. Thus, companies producing batteries for mobile phones, electric cars, motorcycles and buses would be scrambling for limited cobalt supply in the world as Congo is the dominant supplier but politically unstable. Cobalt is found in copper and nickel ores and the Philippines is a major nickel producer in the world and an average copper producer.

Rhodium is a silver-white metallic element that is highly resistant to corrosion. Thus, it is mainly used in automobiles as a catalytic converter, changing harmful unburned hydrocarbons, carbon monoxide, and nitrogen oxide exhaust emissions into less noxious gases. It is found in platinum or nickel ores and other metals, and again, the Philippines is a major player in global nickel production and exports.

Palladium is used in catalytic converters, also in jewelry, dentistry and surgical instruments, watch making, aircraft spark plugs, ceramic capacitors, among others.

High lumber demand is experienced as there is a new trend in building construction using treated wood instead of cement and steel. Innovations in wood treatment allow them to be fire-resistant. Demand for “eco-friendly” packing materials and related products also experience rising demand.

And this brings us to the endless mining debate in the Philippines.

The trend is there — rising if not disruptive price hikes in many metallic products — so why make mining production highly politicized and bureaucratic? Why is that DENR circular that suspended or closed several mining companies issued by a former secretary who believes she can fly still not lifted until now?

Not content with bureaucratic licensing and monitoring of mining companies, mining excise tax has been doubled in the TRAIN 1 law of 2017 and there are moves to further raise this tax in TRAIN 2 bill now in Congress.

A better alternative for Congress would be to ban “small-scale” mining as almost all such mining actually use heavy equipment such as backhoes, bulldozers, and huge trucks. They should then be encouraged to pool their resources to become medium- to large mining corporations registered with SEC and subject to mandatory community projects as provided in the Mining Act of 1995.

Australia and Canada, among the biggest mining powerhouses in the world despite having major environmental NGOs, do not have “small-scale” mines that are harder and more time-consuming to monitor.

The Philippine government should be a partner and not a hindrance to more modern and responsible mining and allow us to take advantage of this upward trend in global metal prices.

The government should be an enabler of disruption, not a disruptor, in the clear potentials of metallic mining.

Sunday, May 20, 2018

8 years of "Hope and change" vs 1 year of Trump

I see many people still glamorize the 8 years of "hope and change" in the US when it did not have a single year of GDP growth of 3%. Many policies were simply anti-business. From 2009-2016 of "hope and change," these countries achieved growth of 3% or higher: Canada and Germany 2x, UK and Japan once, USA zero. China, it kept humming at 6-10% growth.

Last year, the US was estimated to grow at 2.2%.

Joblessness, four years before "hope and change", the US has a low unemployment rate of 5% average. Things drastically change in the first term of "hope and change", US unemployment rates almost doubled and were higher than perennially high unemployment Germany and Canada.

By the 2nd term of "hope and change", US rates have declined but still higher than Germany, Japan.

Posting this because some people still think that it should be the candidate of "hope and change", Hillary! Hillary! Hillary! who should be US President so she can continue the high taxes, high bureaucracies, high energy prices to 'save the planet' and related policies. They cannot accept that many US voters were just dissatisfied with 8 years of "hope and change" and do not want its candidate to continue the lousy policies. So they blame Russia and Putin, agh.

Obama is a good orator but many US economic numbers do not match his glorified speeches. Many of his policies are anti-business, anti-job creation and divisive.

Energy 108, On mandatory solar roof in California

I saw this news from LA Times two weeks ago, discussed by WUWT.

California heads toward requiring solar panels on all new houses
By ANDREW KHOURI  MAY 08, 2018 | 4:55 PM 

California to force new home owners to buy solar panels
Anthony Watts / 9, 2018

What political socialism cannot achieve in America in terms of more command and control, ecological socialism can. Bonker, a proposal that ALL new houses in California must have solar roof, that means all new houses must cut and kill all nearby tall trees. Because solar hates shades -- from clouds, rains and tall trees. Shades automatically reduce the efficiency of solar.

Most environmentalists say, "Plant trees to save the planet." Solar developers and advocates say, "Remove/kill all nearby trees to save the planet."

Green, trees -- people can see birds, butterflies, squirrels, etc hopping/flying from branch to branch, or tree to tree. Solar has little or zero tolerance for tall trees with tall, wide shades. Solar is fake "green."

A solid anti-fossil fuel believer Filipino friend living in California, Joe Real, commented in my fb wall that "You have a twisted sense of logic my friend! Ha ha ha ha. Solar panels are twenty times more efficient than trees at capturing the energy of the sun! Basic Scientific Fact!"

It's good he confirmed it, that solar is fake green. That to get energy efficient solar, one must cut if not kill all nearby tall trees. Since he hates fossil fuels, from California to Manila or other far away cities in the planet, he and his fellow anti-oil campaigners and lobbyists should be riding solar planes or planes using water, or uber-kites, uber-brooms, any flying object that does not use fossil fuel.

Solar in desert may be understandable. But in this proposed CA new law, solar roof for ALL new houses will be mandatory. All the fakes and hypocrisy of the "greenies" or watermelon (green outside, red inside) and ecological socialist movement.

See also:

BWorld 211, Intellectual property, innovation, and prosperity

* This is my column in BusinessWorld last May 10, 2018.

The BusinessWorld Economic Forum 2018 is fast approaching this coming May 18 and it has a timely theme, “Disruptor or Disrupted? The Philippines at the Crossroads.” Focus is on the challenges, risks and potentials of artificial intelligence (AI) and other technological advances.

Endless trial and error, research and development, intangible and intellectual creations, are at the heart of innovation and economic disruptions. The role of property rights protection in general and intellectual property rights (IPR) in particular cannot be overlooked.

Here are some numbers showing the degree of competition among countries and economies in encouraging and protecting innovation and IPR as shown by three data sources. These are the

(1) World Intellectual Property Organization (WIPO), INSEAD, and Cornel SC Johnson College of Business, “The Global Innovation Index 2017” (GII); (2) Property Rights Alliance (PRA) — International Property Rights Index 2017 (IPRI); and the (3) US Chamber of Commerce (USCC) — Global Innovation Policy Center (GIPC), International IP Index (IIPI) 2018.

WIPO’s methodology is interesting.

The overall GII score is computed by getting the simple average of the Input and Output Sub-Index scores. The Innovation Input Sub-Index is comprised of five pillars: (1) Institutions, (2) Human capital and research, (3) Infrastructure, (4) Market sophistication, and (5) Business sophistication. The Innovation Output Sub-Index is composed of two pillars: (6) Knowledge and technology outputs and (7) Creative outputs.

Each pillar is divided into three sub-pillars and each sub-pillar is composed of individual indicators, for a total of 81 indicators. Cool.

Data on GDP per capita income at purchasing power parity (PPP) $ values are from the International Monetary Fund (IMF), World Economic Outlook database, April 2018. The numbers in parenthesis of each report (WIPO-GII, IPRI, IIPI) represent the total number of countries included in their respective reports (see table).

These numbers show the following:

One, countries with high global rank and scores in innovation and IPR index are also those with high per capita income. Conversely, countries with low global rank in innovation also have low per capita income.

Two, the Philippines in particular exhibits this low ranking. Placing only 73rd out of 127 countries in WIPO-GII 2017 report, 64th out of 127 countries in PRA-IPRI 2017 report, and 38th out of 50 countries in the GIPC-IIPI 2018 report. Our GDP per capita income of only $8,300 at PPP values is low, and even lower if nominal GDP prices are used, less than $3,000.

Three, many East Asian economies are rising in ranking, landing in the top 25% in global ranks.

To further reiterate the importance of intellectual property (IP) and innovation, 70 independent and free market-oriented think tanks and institutes worldwide sent an open letter to WIPO Director General Dr. Francis Gurry, during the 2018 World IP Day last week, April 26.

The letter was spearheaded by the PRA in the US and Minimal Government Thinkers is among the 70 co-signatories. The letter was also sent to UN Secretary-General Antonio Guterres, and Director-General of the World Health Organization (WHO) Tedros Adhanom Ghebreyesus.

The letter highlighted some important facts, among them:

* In 2016, a record 3.1 million new patents were filed worldwide. These patents protected groundbreaking technological processes, helped cure devastating diseases, and modernized everyday conveniences.

* Copying is not the same as inventing and enforcement of IP rights helps prevent counterfeits that undermine innovation and help finance criminal organizations. This shadow economy of counterfeits is responsible for nearly 2.5% of global imports, amounting to nearly $461 billion.

* 10% of global pharmaceutical trade is thought to be counterfeit. These “medicines” have serious health consequences, including death. New medicines require research, trials, $2.8 billion, and up to 12 years. IP Rights incentivize commitment and collaboration.

* Removing trademarks through plain packaging has costly economic, health, and security consequences. $300 billion is the implied loss to the beverage industry if such packaging is applied to alcohol and sugary drinks.

Another global group, the Biotechnology Innovation Organization (BIO) is also promoting innovation in biotechnology of innovative health care, agricultural, industrial, and environmental products.

Governments, national and multilaterals like the UN and WHO, should help encourage and respect IPR and innovation. Some cases however show that they do otherwise.

For instance, the 2016 UN High-Level Panel on Access to Medicines, their report has portrayed patents and IP as harmful to global development and human rights. Backward thinking.

The enemy of public health and human rights are counterfeits and substandards — medicine, food, and drinks — and the criminal organizations that manufacture and sell these products.

Bienvenido S. Oplas, Jr. is President of Minimal Government Thinkers, a member-institute of Economic Freedom Network (EFN) Asia.

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