Are we going to get hurt badly because of US recession? It’s so easy to worry about that especially that we sell lots of stuff to the US market. But time has changed.
Ten years ago, electronics and semiconductors accounted for only 42 percent of the country’s exports with farm-based products like coconuts, pineapples, bananas, tuna, seaweeds, and baskets having significant percentages. Today, manufactures account for 86 percent of the country’s exports, the bulk of which are electronics and semiconductors. Farm-based products now account for only 4 percent.
Ten years ago, 36 percent of our exports were purchased by the Americans, such that we would always a catch cold, nay influenza, when America sneezed. When combined with our exports to Japan, Netherlands, Hong Kong, Great Britain and Germany, more than 70 percent of our exports were purchased only by seven countries. China and India were not even listed among our markets.
Today, America only accounts for 18 percent of the country’s exports. China is now our third largest market next to Japan. Suddenly we can see our friends in the Asean buying about 17 percent of our products. The rest are accounted for by Europe and the rest of the world.
What we see here is a diversifying export market for Philippine products, a trend that should lessen our vulnerability to external shocks. And yes, the World Bank, it seems, has taken an optimistic note on the Asia Pacific Region, including the Philippines.
I’m trying to be optimistic here, of course. China ultimately sells to the US. Once the American orders for Chinese goods are down, so the Chinese orders from us will probably be. This is still an interconnected world.
But let us see, because even in the US experts don’t agree on the extent of the recession. And here in the local front, the National Statistical Coordination Board has yet to report to us the whole 2007 performance. The numbers would surely be good, considering we had good numbers from the farm sector. But the enthusiasm will surely be dampened by the sobering thoughts about the recession. So let’s wait on January 31, the official announcement of the 2007 growth rate, what the experts will say.
Meantime, you may read the take of Finance Secretary Margarito Teves by clicking here.
Friday, January 25, 2008
Tuesday, January 22, 2008
After the Neocons: America at the Crossroads
ReviewAfter the Neocons: America at the Crossroads
By Francis Fukuyama, 2006
Profile Books Limited, 226 pages
“Neoconservatism” as a way of thinking is a mishmash of contradicting social and foreign policy ideas originated by some New York City intellectuals who used to worship Leon Trotsky, Vladimir Lenin’s buddy who espoused “world proletarian revolution.” How these once communist intellectuals and their thoughts permeated into America’s foreign policy during the administration of George W. Bush and brought the world’s superpower to a disastrous misadventure in Iraq and the Middle East, therefore, is a very compelling story. In his latest book After the Neocons: America at the Crossroads, Francis Fukuyama, political scientist and a former neocon himself, tells us this story with great depth and forceful insights, then proceeded to disavow and castigate the movement that he was once a proud member of.
Fukuyama traces the origins of neoconservative thinking to a group of working class intellectuals studying at the City College of New York in the 30s. They were once Marxists who turned to the right shade of the political spectrum following Trotsky’s exposes of Joseph Stalin’s brutality. Thus from being ardent supporters of socialism, these intellectuals, mostly Jews, became haters of communism and bitter critiques of “social engineering” programs and social planning that they thought tend to create unintended social consequences that make societies even worse off. When America joined the Allies to defeat Germany and Japan during World War II, the neocons started to see American military power as a force for good, something that America’s leaders should use to transform the world in an exercise of “benevolent hegemony.”
Neocons, having taken some pages from Plato and Aristotle, believe that “regime” or the internal character of states matter in foreign relations. “Rogue states” are likely to become a destabilizing force in global affairs, as “regimes that treat their own citizens unjustly are likely to do the same to foreigners.” America and her allies usually deal with these totalitarian and tyrannical states through carrot and stick but said measures are likely to be ineffective, according to the neocons. The best way out therefore is through changing the “underlying nature of that regime,” a phrase that translates into what is known as “regime change” under the Bush administration.
Prior to the collapse of Berlin Wall, foreign policy circles in Washington DC didn’t really take the neocons seriously even if their views fitted well with Ronald Reagan’s Cold War rhetoric about the Soviet Union as “evil empire.” The more credible voice then were the “realists” in the tradition of Henry Kissinger who respect power, downplay human rights as well as the internal character of states. For the realists, all states whether liberal democratic or authoritarian, seek and power and America and other democratic societies have to accommodate them.
After the collapse of the Soviet Union, however, the influence of neocons soared, vindicated as they were with the fact that the communist threat didn’t vanish through containment and détente as proffered by foreign policy “realists” but by the transformation of Eastern Europe and Russia into “democratic states.” It was a profound lesson Fukuyama thinks that Neocons—deeply ensconced into the mainstream foreign policy establishment under George W. Bush—wrongly applied in a world that has drastically changed since 911.
For Fukuyama, the Neocons, in a rapidly globalizing world, have failed to appreciate the growing influence and power of non-state actors (e.g. terrorists groups like Al Qaeda and Hamas) that couldn’t be deterred by conventional military forces. They have overestimated the capacity of the American military that, while unmatched in the conventional and high-tech warfare, was not prepared to deal with insurgency and the task of nation building. Neoconservatism, he argues, has proved contradictory in the real world in that, while neoconservatives loathe social planning and “nation-building,” measures toward these ends are necessary if Bush’s democratization project in Iraq and Middle East has to succeed.
The Neocons assumed that the world will buy the idea of America’s “benevolent hegemony” and confer her actions—clothed with scary rhetoric about preemptive wars against the axis of evil—with legitimacy, unmindful of the fact that anti-Americanism had been brewing all over the world decades prior to the American invasion of Afghanistan and Iraq. Anti-Americanism—Fukuyama contends—came about as a result of several factors, among them the American-led IT revolution and globalization that are perceived by Europeans as threats to the European welfare state system, the uneven result of “Washington consensus” (i.e. structural adjustment loans that tried to foster market-driven policies) in Latin America, and the Asian financial crises precipitated by American pressure to open up financial markets without adequate safeguards.
This book is Fukuyama’s way of explaining why he turn-coated on the neoconservative movement. And yet, he remained a Neocon in essence, warning against the greater dangers of American isolationism following the debacle in Iraq. This time, however, he labels his new advocacy as “realistic Wilsonianism” characterized by the greater reliance on soft power, the promotion of economic and political development worldwide, and the creation of legitimate international institutions that could respond effectively vis-à-vis global threats and issues emerging out in this brave new world of globalization and technological change.
Readers won’t probably agree with all the things that Fukuyama say in this book, but this piece of work once again seems to prove why many think Fukuyama is one of most engaging thinker and analyst of this era. It’s his finest piece since his equally controversial work, The End of History and the Last Man, came almost two decades ago. It’s a must-read for all those who want to understand the nature of America’s foreign policy after 9/11 and figure out where it is heading for.
Friday, January 18, 2008
Will the US recession hurt the Philippine economy?
America is definitely in recession. Lately, US president George Bush has lately called on the US Congress to give tax relief to consumers and business to boost the American economy. Many of us are probably wondering how it will impact the Philippine economy.
When America sneezes, the Philippines catches cold. We used to say that to highlight the Philippine economy’s dependence on the America economy. It’s a relief therefore to learn from experts from the World Bank that emerging economies including that of the Philippines could actually deal with this recession in America quite well. The reason? The continuing rapid growth in the Asia-Pacific region, particularly China, is going to cushion impact of the US recession. Says the World Bank lately:
“Resilience in developing economies is cushioning the current slowdown in the United States, with real GDP growth for developing countries expected to ease to 7.1 percent in 2008, while high-income countries are predicted to grow by a modest 2.2 percent."
The World Bank adds:
"GDP in East Asia and the Pacific is expected to grow about 10 % in 2007, with China expected to grow by more than 11%. Growth for the region should ease to 9.7 % in 2008 and to 9.6 % by 2009. The effects from the turmoil in the world’s financial centers may be small in most economies in the Region. Except for China, direct exposures of financial institutions in the region to mortgage-based securities (or sub-prime crisis) are limited.”
The Bank has a favorable prognosis for the Philippine economy in 2007 and expects it to grow by a decent 6.2 percent in 2008. What explains this trend? Simple: these trends are a part of the economic and social transformation obtaining in the Philippines, a trend I call the “Revolution from Beyond.”
When America sneezes, the Philippines catches cold. We used to say that to highlight the Philippine economy’s dependence on the America economy. It’s a relief therefore to learn from experts from the World Bank that emerging economies including that of the Philippines could actually deal with this recession in America quite well. The reason? The continuing rapid growth in the Asia-Pacific region, particularly China, is going to cushion impact of the US recession. Says the World Bank lately:
“Resilience in developing economies is cushioning the current slowdown in the United States, with real GDP growth for developing countries expected to ease to 7.1 percent in 2008, while high-income countries are predicted to grow by a modest 2.2 percent."
The World Bank adds:
"GDP in East Asia and the Pacific is expected to grow about 10 % in 2007, with China expected to grow by more than 11%. Growth for the region should ease to 9.7 % in 2008 and to 9.6 % by 2009. The effects from the turmoil in the world’s financial centers may be small in most economies in the Region. Except for China, direct exposures of financial institutions in the region to mortgage-based securities (or sub-prime crisis) are limited.”
The Bank has a favorable prognosis for the Philippine economy in 2007 and expects it to grow by a decent 6.2 percent in 2008. What explains this trend? Simple: these trends are a part of the economic and social transformation obtaining in the Philippines, a trend I call the “Revolution from Beyond.”
Sunday, January 13, 2008
Is the Economist pricing itself out of the Philippine market?
I went to the National Bookstore a few hours ago to check on the latest issue of my favorite economic magazine and was shocked to learn it’s now priced P250 pesos a copy (more than 6 US dollars). The last time I bought a copy it was less than two hundred bucks and I was agonizing whether or not to buy. Now, I feel it’s way too expensive for my limited budget. It means I’ll only buy it once in a blue moon when the issues covered are really so compelling.
One thing I like about the Economist is its intellectual courage. It’s the only magazine that takes positions on issues, usually reflecting its free-market orientation. You may like its arguments or not but it’s never afraid to draw the line. And it does prescribe solutions to issues or problems, unlike most publications that only present contending views without stating its own position.
That’s the true mark of intellectual courage. It’s so easy to criticize and analyze issues or problems, but it’s so difficult to propose solutions, essentially because alternatives could be lighting rods for scrutiny from others. And it’s in proposing solutions where we are shown whether or not we really have the discipline to think through what we offer in the market place of ideas.
But I’m digressing here too much. The fact is that I could no longer afford my favorite magazine. Oh my!
One thing I like about the Economist is its intellectual courage. It’s the only magazine that takes positions on issues, usually reflecting its free-market orientation. You may like its arguments or not but it’s never afraid to draw the line. And it does prescribe solutions to issues or problems, unlike most publications that only present contending views without stating its own position.
That’s the true mark of intellectual courage. It’s so easy to criticize and analyze issues or problems, but it’s so difficult to propose solutions, essentially because alternatives could be lighting rods for scrutiny from others. And it’s in proposing solutions where we are shown whether or not we really have the discipline to think through what we offer in the market place of ideas.
But I’m digressing here too much. The fact is that I could no longer afford my favorite magazine. Oh my!
Wednesday, January 09, 2008
Reducing oil tariff: just another misguided policy
The other day, the government announced that it has reduced tariffs for oil products by one percentage point supposedly to cushion the impact of rising crude prices. Sounds good except this policy might end up becoming a subsidy to oil companies without achieving the social objective of “cushioning” the rise of oil products like gasoline, diesel and LPG.
The fact is that the industry is deregulated and movement of prices is determined more by global trends and the nature of local competition than government actions. Lower tariff for oil products simply means that importers are going to enjoy lower import costs or charges. Whether or not they are going to pass the lower import costs to consumers in terms lower prices is another matter. They probably won’t as they always did in the past. Market competition should theoretically force oil companies to go easy on raising prices but that’s only possible in a competitive environment. Right now, the local market is still dominated by the big three (Shell, Caltex, and Petron) and it seems the newcomers, the so-called independent oil producers, are simply taking the cue from actions of the Big Three.
The new policy therefore is another populist measure that may end up achieving nothing. The best thing the government could have done therefore is to maintain the current tariff levels and continue collecting the money to improve government finances. If policy makers suspect that oil companies are colluding, they might as well look for effective ways at bringing greater competition in the oil and energy sector.
The fact is that the industry is deregulated and movement of prices is determined more by global trends and the nature of local competition than government actions. Lower tariff for oil products simply means that importers are going to enjoy lower import costs or charges. Whether or not they are going to pass the lower import costs to consumers in terms lower prices is another matter. They probably won’t as they always did in the past. Market competition should theoretically force oil companies to go easy on raising prices but that’s only possible in a competitive environment. Right now, the local market is still dominated by the big three (Shell, Caltex, and Petron) and it seems the newcomers, the so-called independent oil producers, are simply taking the cue from actions of the Big Three.
The new policy therefore is another populist measure that may end up achieving nothing. The best thing the government could have done therefore is to maintain the current tariff levels and continue collecting the money to improve government finances. If policy makers suspect that oil companies are colluding, they might as well look for effective ways at bringing greater competition in the oil and energy sector.
Sunday, January 06, 2008
Barack Obama is an enemy of outsourcing
What?! Outsourcing is “a form of violence similar to the Virginia Tech killing?” That’s crazy, but Barack Obama, fresh from winning the Iowa caucus, thinks so. I thought all along he has the most realistic view about globalization and outsourcing among the US presidential candidates. Now he is pandering to the mob to fortify his lead over Clinton and Edwards who are both protectionist in their rhetorics. In his speech lately, courtesy of the Texas Rainmaker, Obama said:
“There’s also another kind of violence that we’re going to have to think about. It’s not necessarily the physical violence, but the violence that we perpetrate on each other in other ways,” he said, and goes on to catalogue other forms of “violence.”I don’t have to react to this, for the blogosphere has plenty. Consider this one by Radley Balko of Reason Hit and Run :
There’s the “verbal violence” of Imus.
There’s “the violence of men and women who have worked all their lives and suddenly have the rug pulled out from under them because their job is moved to another country.”
"No one has the "right" to be paid by someone else for their labor. Employment in a free market is peaceful and voluntary, on both sides. So is the decision to stop that agreement, both for the laborer, who may find a better job, or for the employer, who may find someone who can do the job better, or cheaper, or both. There's nothing remotely violent about any of it. To compare a business decision to employ cheaper labor to the senseless slaughter of innocents--even if by way of tortured, nonsensical metaphor--is really reprehensible. It reeks of exploitation."
Ah politicians. They are the same all over the world. Now, surely this statement may have sent shivers down the spine of the American corporate economy that is benefitting immensely from global outsourcing.
Sunday, December 30, 2007
A scam in Boracay?!
Has anybody heard about “Diniwid Beach Resort” in Boracay? I bet nobody does, nor most people in Boracay. But try clicking their websites (here and here) and you will see a very enticing place supposedly just beside the beach. Well, it’s supposedly a “beach resort.” So my architect friend booked and paid here in Manila hoping she could bring joy and warm welcome to a sister who came from Canada. Upon landing in Boracay, they were surprised that nobody knows about the “beach resort” and were shocked to learn it’s not located beside the sea but an interior, almost like a squatter’s area. In her blog, my friend Louise recalls:
"Imagine to our surprise when we arrive yesterday at Diniwid Beach, looking for the Diniwid Beach Resort, and there was no Local who can point to us where's it located... After almost 30 minutes of asking around, she finally found where it was, only after she mentioned the owner's name.
And there we saw our place, after being led to an alley. A shack of a house [see picture], absolutely different from what was advertised on the web. Ano to, squatter's area?, my Ate was furious. The steps leading upstairs was only about 18" wide, too steep, my folks would sure slip any time, if they can even manage to climb it at the first place. The other cottage showed to us was more deplorable. Instantly, we decided to transfer to a better location…"
Refund! That’s the only solution when you are misled but the operator, a british national, wouldn’t return the money. Says Louise:
"Negotiating if we can get a refund for the deceit the Owner did to us, we were met by her rough British husband who flatly declared a NO REFUND policy. It seemed that he owns the place and uses only the local as his front."
The gall! Louise said she is going to file complaints at the local tourism office and I hope she gets her money back soon.
"Imagine to our surprise when we arrive yesterday at Diniwid Beach, looking for the Diniwid Beach Resort, and there was no Local who can point to us where's it located... After almost 30 minutes of asking around, she finally found where it was, only after she mentioned the owner's name.
And there we saw our place, after being led to an alley. A shack of a house [see picture], absolutely different from what was advertised on the web. Ano to, squatter's area?, my Ate was furious. The steps leading upstairs was only about 18" wide, too steep, my folks would sure slip any time, if they can even manage to climb it at the first place. The other cottage showed to us was more deplorable. Instantly, we decided to transfer to a better location…"
Refund! That’s the only solution when you are misled but the operator, a british national, wouldn’t return the money. Says Louise:
"Negotiating if we can get a refund for the deceit the Owner did to us, we were met by her rough British husband who flatly declared a NO REFUND policy. It seemed that he owns the place and uses only the local as his front."
The gall! Louise said she is going to file complaints at the local tourism office and I hope she gets her money back soon.
The local tourism office, nay the entire local government should act on scams like this before it destroys the image of Boracay
So let everybody be warned about this “resort” (kuno).
So let everybody be warned about this “resort” (kuno).
Saturday, December 29, 2007
Get the gun, it's Santa!
Get the gun, it’s Santa! That’s Eric’s good natured take on how Americans celebrate Christmas. Imagine yourself seeing a fat man getting into your house through the chimney. What will you do?
And yet this Australian actually tried getting through one’s chimney and got stuck for ten hours until rescuers did their job.
That guy, of course was a thief, but really I’m no fan of Santa, especially the ones they got in New Zealand.
Anyway….
If no one wants to give me any travel bag, a nice “Bush Out of Office Countdown 2008” Calendar will do. Happy New Year to all!
And yet this Australian actually tried getting through one’s chimney and got stuck for ten hours until rescuers did their job.
The man had been stuck inside the chimney for about 10 hours with his knees
jammed tightly into his chest, said local fire station officer Mark James. "He
was like a grub in a cocoon when we found him," James said. "He was really
wedged in there."
That guy, of course was a thief, but really I’m no fan of Santa, especially the ones they got in New Zealand.
WELLINGTON, New Zealand (AP) — A gang of about 50 apparently drunken Santas invaded a New Zealand cinema complex at the weekend — frightening customers, damaging property and swearing, the cinema's manager said Monday. Police believe the Santas were a group of university students dressed in Santa suits who ran amok for 20 seconds through Hoyts Cinema complex in the South Island city of Christchurch on Saturday, manager Derek Rive said.Being a cop is probably one of the noblest professions (assuming one does her/his job seriously) putting order in society, enforcing the law, etc. And society respects them for that. But in America sometimes they are treated as nothing but a nose wipe, as what this woman did:
Cpl. S.E. Elliott said he had arrested the 36-year-old woman last week after
seeing her slap a man, bite him on the elbow and spit in his face. Elliott said
the woman wiped her nose on him as he led her into the police station for
booking on a charge of domestic battery.
Anyway….
If no one wants to give me any travel bag, a nice “Bush Out of Office Countdown 2008” Calendar will do. Happy New Year to all!
Friday, December 28, 2007
Complete domestication in 2008?
I won a flat iron from our Christmas e-raffle. Will I be “domesticated” in 2008?
Lest you think I’m superstitious, consider this. During our 2005 Christmas party, I got a travel bag. Our editor told me: “Maybe you are going to travel beyond the shores in 2006.” A few months after, while enjoying my life in Palawan after leaving Today Newspaper, I got a call from the US embassy.
“Dave, do you want to go to the US,” said a voice from the other line.
“Sure! But why should I go there?” I asked. “And how?”
“We have chosen you as a fellow for the International Visitors Program 2006,” she said. “It’s for leadership training in print journalism. Please come to the US embassy on Monday.”
And indeed I traveled to Washington DC, Virginia, New York, Florida, the mid-West (Nebraska and Colorado), and California (San Diego and Sta. Monica) to interact and learn from media organizations there.
In December 2006, someone gave me another huge travel bag. An officemate joked that I’ll be on a tour once again. True enough, I went to Australia courtesy of the Jaime Ongpin/Australian Ambassador’s Choice Awards. Then came the Jefferson Fellowship where I got to Hawaii, Silicon Valley, China and India.
Last week, I won a Hanabishi flat iron. Does it mean I’ll be completely domesticated in 2008?
Will somebody please give me a travel bag before the year ends?! Haha! Joke. Happy New Year to all!
Lest you think I’m superstitious, consider this. During our 2005 Christmas party, I got a travel bag. Our editor told me: “Maybe you are going to travel beyond the shores in 2006.” A few months after, while enjoying my life in Palawan after leaving Today Newspaper, I got a call from the US embassy.
“Dave, do you want to go to the US,” said a voice from the other line.
“Sure! But why should I go there?” I asked. “And how?”
“We have chosen you as a fellow for the International Visitors Program 2006,” she said. “It’s for leadership training in print journalism. Please come to the US embassy on Monday.”
And indeed I traveled to Washington DC, Virginia, New York, Florida, the mid-West (Nebraska and Colorado), and California (San Diego and Sta. Monica) to interact and learn from media organizations there.
In December 2006, someone gave me another huge travel bag. An officemate joked that I’ll be on a tour once again. True enough, I went to Australia courtesy of the Jaime Ongpin/Australian Ambassador’s Choice Awards. Then came the Jefferson Fellowship where I got to Hawaii, Silicon Valley, China and India.
Last week, I won a Hanabishi flat iron. Does it mean I’ll be completely domesticated in 2008?
Will somebody please give me a travel bag before the year ends?! Haha! Joke. Happy New Year to all!
Monday, December 24, 2007
Christmas sans carbon footprint
You will probably call me Grinch or kill joy, but I really feel there’s a need to reassess the way we celebrate Christmas. No, I’m not complaining about the “crass commercialism” that Christmas has gone down to. The flow of commerce is important if we are to create jobs and all that, but is there a way we could celebrate it in less environmentally harmful ways?
I’m no certified tree hugger (well, I did hug trees when I still enjoyed tree climbing as hobby and that was years ago), but I do think a paradigm shift is in order. But I won’t preach to you guys, but let me share here how I do Christmas with less carbon footprint.
I won’t shoot or light firecrackers, for obvious reasons.
I don’t have Christmas lights to help minimize the burning of fossil for electricity. I don’t have any Christmas tree, either. I find it so artificial.
I don’t wrap the gifts I give. Those wrappers always end up as tons of wastes in the dumps.
I minimize travel to minimize vehicular emissions.
I avoid excessive consumption for my health’s sake. Haha!
To celebrate Christmas, I only pray in silence, and read books to nourish my soul.
Would that make a difference? I don’t know, but if many of us adopt some of these measures, the world will be a better place and Al Gore wouldn’t think he is a failure.
Merry Christmas to all!
I’m no certified tree hugger (well, I did hug trees when I still enjoyed tree climbing as hobby and that was years ago), but I do think a paradigm shift is in order. But I won’t preach to you guys, but let me share here how I do Christmas with less carbon footprint.
I won’t shoot or light firecrackers, for obvious reasons.
I don’t have Christmas lights to help minimize the burning of fossil for electricity. I don’t have any Christmas tree, either. I find it so artificial.
I don’t wrap the gifts I give. Those wrappers always end up as tons of wastes in the dumps.
I minimize travel to minimize vehicular emissions.
I avoid excessive consumption for my health’s sake. Haha!
To celebrate Christmas, I only pray in silence, and read books to nourish my soul.
Would that make a difference? I don’t know, but if many of us adopt some of these measures, the world will be a better place and Al Gore wouldn’t think he is a failure.
Merry Christmas to all!
Friday, December 21, 2007
Is Mar Roxas really a reformist? I dont think so.
I’m puzzled by this story going around that cause-oriented types are now warming up to Mar Roxas hoping he will pursue “policy reforms” once he captures the presidency come 2010. As far as I know, Mar has never been associated with any progressive policy agenda. Mar doesn’t seem to have the knack for speaking for or against anything even when time demanded so. We never heard him talking about agrarian reform or agricultural modernization. He never knew him being passionate about human rights and political killings. He was never truly pro-Erap nor was he really anti-Gloria. He doesn’t seem to have clear stand on anything: environment, globalization, foreign debt, gender, deregulation, Doha round of talks, etc. He never spoke against monopolies and oligopolies. Maybe he behaves this way because he is just consistent being pro-Mar Roxas.
If there’s one thing he is associated with, it’s with Corina Sanchez, and the buzz about them simply faded after he won his Senate seat. Now, that he is angling for the Presidency are we going to see him with Corina again? And why does he have to do that? What is he trying to cover for?
Mar says he is Mr Palengke (markets). But he never had any legislative proposal for expanding or freeing Philippine markets. He is probably even anti-market.
Consider this: In 2001, Roxas caved in to the local cement lobby that was then complaining about “injuries” caused by rising cement imports and was forced to slap additional duties (about P20 per bag) on them, thus significantly raising cement prices in the local market and penalizing the local construction industry. In response, the Tariff Commission conducted an investigation and found out that Roxas’s decision was totally baseless, as local manufacturers maintained an 80-percent share of the domestic market. The report also stated that there was no injury to speak of, nor was there any worker losing his job because of the rise of cement imports. The industry, in fact, improved its productivity as a result of the rising foreign competition. But Mar Roxas simply brushed off the Tariff Commission study in order to shelter the cement industry from foreign competition.
Mar, who are you really? Show us the real stuff you are made of.
If there’s one thing he is associated with, it’s with Corina Sanchez, and the buzz about them simply faded after he won his Senate seat. Now, that he is angling for the Presidency are we going to see him with Corina again? And why does he have to do that? What is he trying to cover for?
Mar says he is Mr Palengke (markets). But he never had any legislative proposal for expanding or freeing Philippine markets. He is probably even anti-market.
Consider this: In 2001, Roxas caved in to the local cement lobby that was then complaining about “injuries” caused by rising cement imports and was forced to slap additional duties (about P20 per bag) on them, thus significantly raising cement prices in the local market and penalizing the local construction industry. In response, the Tariff Commission conducted an investigation and found out that Roxas’s decision was totally baseless, as local manufacturers maintained an 80-percent share of the domestic market. The report also stated that there was no injury to speak of, nor was there any worker losing his job because of the rise of cement imports. The industry, in fact, improved its productivity as a result of the rising foreign competition. But Mar Roxas simply brushed off the Tariff Commission study in order to shelter the cement industry from foreign competition.
Mar, who are you really? Show us the real stuff you are made of.
Wednesday, December 19, 2007
Seems like the 7 percent growth rate has started to trickle down
The recent numbers on jobs based on the October 2007 Labor Force Survey seem to tell us so. The NSO report says the jobless rate has declined a full percentage point from 7.3 percent last year to 6.3 percent this year. Underemployment has declined from 20.4 to 18.1 percent. That’s a two full percentage point down, meaning that a significant number of dissatisfied employees has gone down as well.
The details are quite interesting. The percent share of farm jobs has declined but those of the industry sector has gone up, mainly because of a growing job uptake in construction. There’s also a growing share of jobs in the services sector particularly in the transportation, storage and communications; real estate and renting; education; health and social work; and private households. It means more people are hiring maids and drivers? That says something.
And there’s a significant increase in own account workers, an indication perhaps of greater entrepreneurship activities. Figures on those who get wages and salaries are also encouraging as more private establishments are hiring.
In terms of occupation, the percentage shares of professionals are rising. So are those of trade and related workers; clerks; and laborers and unskilled workers. This trend is not surprising because of robust construction sector. Hey, it quite broad-based.
Is this the trickle down effect of the 7 percent growth rate we have been registering? Seems like it. But expect the doubters to dismiss these numbers. I’m a doubter myself but I don’t denigrate these numbers:I feel these are real gains by real people. And it’s not because of Malacanang but despite Malacanang.
I'll look at the numbers again when I have the time.
The details are quite interesting. The percent share of farm jobs has declined but those of the industry sector has gone up, mainly because of a growing job uptake in construction. There’s also a growing share of jobs in the services sector particularly in the transportation, storage and communications; real estate and renting; education; health and social work; and private households. It means more people are hiring maids and drivers? That says something.
And there’s a significant increase in own account workers, an indication perhaps of greater entrepreneurship activities. Figures on those who get wages and salaries are also encouraging as more private establishments are hiring.
In terms of occupation, the percentage shares of professionals are rising. So are those of trade and related workers; clerks; and laborers and unskilled workers. This trend is not surprising because of robust construction sector. Hey, it quite broad-based.
Is this the trickle down effect of the 7 percent growth rate we have been registering? Seems like it. But expect the doubters to dismiss these numbers. I’m a doubter myself but I don’t denigrate these numbers:I feel these are real gains by real people. And it’s not because of Malacanang but despite Malacanang.
I'll look at the numbers again when I have the time.
Sunday, December 16, 2007
The middle class and the rule of law
I was expecting to see retirees and middle aged guys when the boss told me I should show up for the Entrepreneurs’ “networking night” in Greenhills. That was last Tuesday, the second day in my new job. But I was surprised to see young boys and girls in 20s and 30s, many of them barely out of college. And my goodness, they were all talking about “doing business’ and making money! In my time, we were all about “social engineering,” “social change,” and revolutions as if we knew what we were talking about.
Is a new ethos taking over? I hope so. It’s about time. If we want the country to move faster into the lane of progress (whatever that means), we should have more entrepreneurs in our midst. And its not only because of its positive economic impact, its also because the growth of the middle class is the surest path to political stability. Fareed Zakaria in “The Future of Freedom” said so. Francis Fukuyama (in his “The End of History”) said so. And of course, they are not the original guys to have said so. It was Aristotle who theorized about this long time ago. And I guess, the reason is simple: the middle class, especially the entrepreneurs have a stake in stability and order.
Why? Consider this: if you are really rich, filthy rich, if you are an oligarch, you don’t really need “the rule of law.” In fact, you want the law (or rules) to be opaque so that you could buy it anytime when it suits your end. And the really poor, those who have nothing, don’t care much about the law, the rules, either because they don’t have a stake in the system. Sometimes they have to bend the rules to maintain their existence. Or at least, that’s what some of them think.
But when you are a budding entrepreneur with a little money, you have a stake in the system. Yet you can’t afford to buy the bureaucracy, so you desire for proper societal rules to work for you. You want to be protected from predatory actions of the super rich and the protection from those who will rob your of your wallet. You desire order, stability, transparency, predictability, and fairness. And these are foundations, the values, of a functional liberal democracy that we crave for.
Hmmm, seems like I got an interesting job here.
Is a new ethos taking over? I hope so. It’s about time. If we want the country to move faster into the lane of progress (whatever that means), we should have more entrepreneurs in our midst. And its not only because of its positive economic impact, its also because the growth of the middle class is the surest path to political stability. Fareed Zakaria in “The Future of Freedom” said so. Francis Fukuyama (in his “The End of History”) said so. And of course, they are not the original guys to have said so. It was Aristotle who theorized about this long time ago. And I guess, the reason is simple: the middle class, especially the entrepreneurs have a stake in stability and order.
Why? Consider this: if you are really rich, filthy rich, if you are an oligarch, you don’t really need “the rule of law.” In fact, you want the law (or rules) to be opaque so that you could buy it anytime when it suits your end. And the really poor, those who have nothing, don’t care much about the law, the rules, either because they don’t have a stake in the system. Sometimes they have to bend the rules to maintain their existence. Or at least, that’s what some of them think.
But when you are a budding entrepreneur with a little money, you have a stake in the system. Yet you can’t afford to buy the bureaucracy, so you desire for proper societal rules to work for you. You want to be protected from predatory actions of the super rich and the protection from those who will rob your of your wallet. You desire order, stability, transparency, predictability, and fairness. And these are foundations, the values, of a functional liberal democracy that we crave for.
Hmmm, seems like I got an interesting job here.
Tuesday, December 11, 2007
Congestion in MRT: the pain of "success"?
Call it the pains of “success.” Or at least, the people’s pains for MRT’s success. It seems that these days, Metro Rail Transit is always congested. If one doesn’t start riding at either end of the line (either in Baclaran in the South or North Edsa in the opposite end), one would always have to suffer being packed and squeezed like sardines inside the coaches.
It’s not for love of the trains; it’s because a commuter could save lots of time. What takes one hour or two in the bus just takes about 25 minutes in MRT.
But there’s another reason. It’s so cheap: the 25 kilometer stretch just costs P14 pesos (0.32 US cents), probably about a hundred percent cheaper than the bus. And it’s cheap because its subsidized, meaning that people who live in the rural areas are also paying the maintenance and bank amortization of an infra that is being used solely by the dwellers of Metro Manila, a case of the rural folks subsidizing the “richer” urban dwellers.
Also, part of the value added tax that each one pays to the government whenever one eats in restaurants or pays for the grocery goes to the upkeep of the MRT. Isn’t that unfair? Of course, it is! And it’s not really improving the quality of life of the urban commuters because artificial cheapness suggests that it would be congested most of the time, thus lowering each weary commuter’s “ridership quality.”
Solution? Why not charge the true cost of the facility? That way, we free the rural dwellers, especially residents of Mindanao and Visayas, the burden of paying for such a facility that they don’t use. Those who use it should be the ones to pay for it. And of course, when ticket prices are a little bit expensive, more people would think about riding the buses again thus lessening the congestion inside the trains.
Or maybe, government should think about charging variable prices: charges are higher during the peak hours and lower during the non-peak hours so that people would have the incentive to schedule their travel time accordingly.
People do respond to economic incentives.
It’s not for love of the trains; it’s because a commuter could save lots of time. What takes one hour or two in the bus just takes about 25 minutes in MRT.
But there’s another reason. It’s so cheap: the 25 kilometer stretch just costs P14 pesos (0.32 US cents), probably about a hundred percent cheaper than the bus. And it’s cheap because its subsidized, meaning that people who live in the rural areas are also paying the maintenance and bank amortization of an infra that is being used solely by the dwellers of Metro Manila, a case of the rural folks subsidizing the “richer” urban dwellers.
Also, part of the value added tax that each one pays to the government whenever one eats in restaurants or pays for the grocery goes to the upkeep of the MRT. Isn’t that unfair? Of course, it is! And it’s not really improving the quality of life of the urban commuters because artificial cheapness suggests that it would be congested most of the time, thus lowering each weary commuter’s “ridership quality.”
Solution? Why not charge the true cost of the facility? That way, we free the rural dwellers, especially residents of Mindanao and Visayas, the burden of paying for such a facility that they don’t use. Those who use it should be the ones to pay for it. And of course, when ticket prices are a little bit expensive, more people would think about riding the buses again thus lessening the congestion inside the trains.
Or maybe, government should think about charging variable prices: charges are higher during the peak hours and lower during the non-peak hours so that people would have the incentive to schedule their travel time accordingly.
People do respond to economic incentives.
Thursday, December 06, 2007
Til snow falls on Manila: a chat on globalization and labor migration
Jenny: So how’s Manila now?
I met Jenny in California early this year through a Japanese girl, an accountant working for one of the big global accounting firms operating in Silicon Valley. Over dinner she told me she has several colleagues from the Philippines. She called several numbers and voila and I had an appointment the following day at Starbucks near our hotel in downtown San Jose. Jenny came in a runners’ outfit, clutching a book “The World Is Flat.” We walked around town for hours discussing Philippine politics, economy and globalization. We checked some bars and other things that the Valley of Hearts Desire could offer during the night and promised to keep in touch but we failed to reconnect after the Jefferson Fellowship. Her message through Yahoo Messenger the other day therefore was a pleasant surprise.
Jenny landed in Silicon Valley three years ago after a stint at one of the leading accounting firms in Manila. Her ticket was her accounting expertise and her mastery of the computer, SAP and other enterprise management software. Her parents moved to San Francisco fifteen years earlier but she didn’t follow because she was finishing a post-grad in economics at the University of the Philippines. And she loved the beaches. Until the big offer came.
Dave: Bubbling as ever. Politically, I mean
Jenny: As usual. That’s my frustration there really. I thought GMA was better than Erap so I supported Edsa Dos. It turned out we simply replaced him with someone as corrupt. But oh, I miss the beaches, I love Boracay!
Dave: And then we just had this Trillanes caper…
Jenny: But hey, the Philippines, or at least the GDP figures, have been doing quite good lately!
Dave: You mean you are actually following the trends here?
Jenny: Yup! I’m a frustrated economist, remember? Haha!
Dave: There are new growth drivers: outsourcing, mining, food and beverage, electronics, telecommunications, and financial services. Past reforms seem to have started bearing fruits. Globalization seems to have become a stabilizing force.
Jenny: Been reading about these. And ah, I remember you mentioning about a paper on that at the University of Hawaii. Could you send me an electronic copy?
Dave: Sure, here’s the link:http://davidllorito.blogspot.com/2007/06/globalization-as-stabilizing-force-in.html
Jenny: Thanks. Interesting analysis. Amazes me because our politics there has never been that conducive. I also heard about this “economics delinking from politics theory” from [Congressman] Salceda. Do you think he’s accurate?”
Dave: Honestly, I’m not sure. I’m trying to look at it myself. But the guy has some points.
Jenny: How did those people at the University of Hawaii reacted to your paper?
Dave: Mixed, but some are incredulous.
Jenny: Or even hostile, haha!
Dave: How did you figure that out, hehe?
Jenny: “Haay, Dave!, I’ve met lots of migrant Pinoys here who think that way.
Dave: When I presented that paper, I thought they’d be happy to hear some positive news besides the usual negative ones that they get from media. Many of them were disappointed that I didn’t tell them the usual horror stories. Weird!
Jenny: Probably a psychological thing. Many of those, not all, who left the country decided on the conviction that the country is hopeless, so when they hear that things are improving a bit, it unnerves them, irritates them.
Dave: Really? Why?!
Jenny: They are used to hearing about all the negatives, and there are lots of them in media, and they are happy because those stories tend to support the reasons why they abandoned ship. Now here comes some positive news that to them seems to question the basis of their decision to leave. But yeah, it’s weird.
Dave: In fairness, they are well-meaning people. They do sincerely believe the only way out for the Philippines is for every one to migrate. So they use every opportunity to petition relatives and convince friends to migrate. A friend in New York once told me to take up nursing or become a mortician. Or I could be a plumber in Australia. Be practical, he said. Ha ha ha!
Jenny: Ay totoo yan! [That’s so true!] Ha ha ha!
Dave: After that talk, someone asked if I was telling them to return to the Philippines. ‘Of course not,' I answered. 'Why should you; the Philippines doesn’t have snow yet,’ and all the participants burst into laughter.
Jenny: Ha ha ha ha!
I met Jenny in California early this year through a Japanese girl, an accountant working for one of the big global accounting firms operating in Silicon Valley. Over dinner she told me she has several colleagues from the Philippines. She called several numbers and voila and I had an appointment the following day at Starbucks near our hotel in downtown San Jose. Jenny came in a runners’ outfit, clutching a book “The World Is Flat.” We walked around town for hours discussing Philippine politics, economy and globalization. We checked some bars and other things that the Valley of Hearts Desire could offer during the night and promised to keep in touch but we failed to reconnect after the Jefferson Fellowship. Her message through Yahoo Messenger the other day therefore was a pleasant surprise.
Jenny landed in Silicon Valley three years ago after a stint at one of the leading accounting firms in Manila. Her ticket was her accounting expertise and her mastery of the computer, SAP and other enterprise management software. Her parents moved to San Francisco fifteen years earlier but she didn’t follow because she was finishing a post-grad in economics at the University of the Philippines. And she loved the beaches. Until the big offer came.
Dave: Bubbling as ever. Politically, I mean
Jenny: As usual. That’s my frustration there really. I thought GMA was better than Erap so I supported Edsa Dos. It turned out we simply replaced him with someone as corrupt. But oh, I miss the beaches, I love Boracay!
Dave: And then we just had this Trillanes caper…
Jenny: But hey, the Philippines, or at least the GDP figures, have been doing quite good lately!
Dave: You mean you are actually following the trends here?
Jenny: Yup! I’m a frustrated economist, remember? Haha!
Dave: There are new growth drivers: outsourcing, mining, food and beverage, electronics, telecommunications, and financial services. Past reforms seem to have started bearing fruits. Globalization seems to have become a stabilizing force.
Jenny: Been reading about these. And ah, I remember you mentioning about a paper on that at the University of Hawaii. Could you send me an electronic copy?
Dave: Sure, here’s the link:http://davidllorito.blogspot.com/2007/06/globalization-as-stabilizing-force-in.html
Jenny: Thanks. Interesting analysis. Amazes me because our politics there has never been that conducive. I also heard about this “economics delinking from politics theory” from [Congressman] Salceda. Do you think he’s accurate?”
Dave: Honestly, I’m not sure. I’m trying to look at it myself. But the guy has some points.
Jenny: How did those people at the University of Hawaii reacted to your paper?
Dave: Mixed, but some are incredulous.
Jenny: Or even hostile, haha!
Dave: How did you figure that out, hehe?
Jenny: “Haay, Dave!, I’ve met lots of migrant Pinoys here who think that way.
Dave: When I presented that paper, I thought they’d be happy to hear some positive news besides the usual negative ones that they get from media. Many of them were disappointed that I didn’t tell them the usual horror stories. Weird!
Jenny: Probably a psychological thing. Many of those, not all, who left the country decided on the conviction that the country is hopeless, so when they hear that things are improving a bit, it unnerves them, irritates them.
Dave: Really? Why?!
Jenny: They are used to hearing about all the negatives, and there are lots of them in media, and they are happy because those stories tend to support the reasons why they abandoned ship. Now here comes some positive news that to them seems to question the basis of their decision to leave. But yeah, it’s weird.
Dave: In fairness, they are well-meaning people. They do sincerely believe the only way out for the Philippines is for every one to migrate. So they use every opportunity to petition relatives and convince friends to migrate. A friend in New York once told me to take up nursing or become a mortician. Or I could be a plumber in Australia. Be practical, he said. Ha ha ha!
Jenny: Ay totoo yan! [That’s so true!] Ha ha ha!
Dave: After that talk, someone asked if I was telling them to return to the Philippines. ‘Of course not,' I answered. 'Why should you; the Philippines doesn’t have snow yet,’ and all the participants burst into laughter.
Jenny: Ha ha ha ha!
Wednesday, December 05, 2007
Why the Trillanes caper failed
Why the Trillanes caper failed? Simple: the success factors are not there.
First, Trillanes and company failed to consider the 2010 factor. Politicians these days are now looking at the 2010 election as the reference point for their short-term political decisions. Hence, they would look with discomfort any action or event that deviates from that, especially something that’s being pushed by the likes of Trillanes. A junta that would emerge from a military rebellion is anathema to the presidential ambitions of bigwigs like Senator Villar, Senator Ping Lacson, Mar Roxas, Loren Legarda, to cite a few.
Second is the economic growth factor. The Philippine economy grew by 7.1 percent in the first nine months of the year. Big business engaged in real estate and construction, mining, outsourcing, electronics, finance, telecommunications, etc are now raking in money. So are the technical, professional, and managerial classes supporting these fast-growing sectors. With the increasing globalization of labor markets, even the lower middle classes have options other than becoming pawns in political games. So these people—crucial to the success of previous “people power” cum military revolts—now have a stake in the relative “stability” of the system.
Third, we Filipinos have probably learned some lessons from our previous “people power revolutions.” We probably have realized that we need to develop constitutional liberalism in this country if we want to mature as a nation.
First, Trillanes and company failed to consider the 2010 factor. Politicians these days are now looking at the 2010 election as the reference point for their short-term political decisions. Hence, they would look with discomfort any action or event that deviates from that, especially something that’s being pushed by the likes of Trillanes. A junta that would emerge from a military rebellion is anathema to the presidential ambitions of bigwigs like Senator Villar, Senator Ping Lacson, Mar Roxas, Loren Legarda, to cite a few.
Second is the economic growth factor. The Philippine economy grew by 7.1 percent in the first nine months of the year. Big business engaged in real estate and construction, mining, outsourcing, electronics, finance, telecommunications, etc are now raking in money. So are the technical, professional, and managerial classes supporting these fast-growing sectors. With the increasing globalization of labor markets, even the lower middle classes have options other than becoming pawns in political games. So these people—crucial to the success of previous “people power” cum military revolts—now have a stake in the relative “stability” of the system.
Third, we Filipinos have probably learned some lessons from our previous “people power revolutions.” We probably have realized that we need to develop constitutional liberalism in this country if we want to mature as a nation.
Sunday, December 02, 2007
How to stage a coup like a jackass!
On the same day that Senator and His Most Incompetent Putchist Antonio Trilanes launched his ill-fated “coup” at a five-star hotel, the National Statistical Coordination Board (NSCB) announced that the Philippine economy grew by 6.6 percent. The incident seems to remind us just how the dynamics of the Philippine economy has decoupled from our rambunctious politics. Nice trend, shall I say.
The numbers says it’s actually a pretty broad-based growth, with agriculture, industry, and services contributing altogether. With a 7.3 percent growth in the first quarter, 7.5 percent in the second, and a possible surge in the fourth quarter, we may yet grow close to or higher than 7 percent.
We sneer at these growth numbers, of course. They have yet to translate into lower poverty numbers. True. But we have been at this growth rates quite recently, after hovering at 5-6 percent in the last three years. Experience by the Asian tigers showed they grew 5-7 percent consistently for ten or twenty years before they started licking poverty. This means we have to growth at this rate or higher in the next ten years before we can see substantial reduction in poverty. So it’s a start, and its better late than never.
GMA has nothing to do with this. These improving growth numbers are legacies of the first wave of reforms done following the Edsa Revolution. So the credit goes elsewhere, especially Cory and FVR, and of course, to OFWs, the farmers, business, and entrepreneurs. Had GMA proved to be a better president, we could have achieved higher growth rates, probably at par with Vietnam and India (7-8 percent).
Certainly, she should go, and go to jail (for scandals like NBN, fertilizer scams etc), but can’t we wait two years for the 2010 election? That’s a better option than “taking over” a hotel and making us the laughingstock of the world.
Now that Trillanes is in jail, the latest rumor says he is planning to write a book entitled How to Stage a Coup Like a Jackass!
The numbers says it’s actually a pretty broad-based growth, with agriculture, industry, and services contributing altogether. With a 7.3 percent growth in the first quarter, 7.5 percent in the second, and a possible surge in the fourth quarter, we may yet grow close to or higher than 7 percent.
We sneer at these growth numbers, of course. They have yet to translate into lower poverty numbers. True. But we have been at this growth rates quite recently, after hovering at 5-6 percent in the last three years. Experience by the Asian tigers showed they grew 5-7 percent consistently for ten or twenty years before they started licking poverty. This means we have to growth at this rate or higher in the next ten years before we can see substantial reduction in poverty. So it’s a start, and its better late than never.
GMA has nothing to do with this. These improving growth numbers are legacies of the first wave of reforms done following the Edsa Revolution. So the credit goes elsewhere, especially Cory and FVR, and of course, to OFWs, the farmers, business, and entrepreneurs. Had GMA proved to be a better president, we could have achieved higher growth rates, probably at par with Vietnam and India (7-8 percent).
Certainly, she should go, and go to jail (for scandals like NBN, fertilizer scams etc), but can’t we wait two years for the 2010 election? That’s a better option than “taking over” a hotel and making us the laughingstock of the world.
Now that Trillanes is in jail, the latest rumor says he is planning to write a book entitled How to Stage a Coup Like a Jackass!
Thursday, November 29, 2007
Trillanes and his five-star hotel revolutionaries forgot to read Wikipedia on the basics of coup d'etat
He he he! It seems like our five-star hotel revolutionaries forgot to read the coup manual by Edward Luttwak before going on to launch their luxurious coup. Or if they are really so busy, they should have read Wikipedia on the basics of the coup:
Tactically, a coup usually involves control of some active portion of the military while neutralizing the remainder of a country's armed services. This active group captures or expels leaders, seizes physical control of important government offices, means of communication, and the physical infrastructure, such as streets and power plants. The coup succeeds if its opponents fail to dislodge the plotters, allowing them to consolidate their position, obtain the surrender or acquiescence of the populace and surviving armed forces, and claim legitimacy. Coups typically use the power of the existing government for its own takeover. As Edward Luttwak remarks in his Coup d'État: A Practical Handbook: "A coup consists of the infiltration of a small but critical segment of the state apparatus, which is then used to displace the government from its control of the remainder." In this sense, use of military or other organized force is not the defining feature of a coup d'État.
Since the French coup of 1851, the world has witnessed 99 coups, 17 of them failed. Eleven of these failed coups were in the 80s onwards. This information may indicate the growing difficulties of grabbing power through a coup, probably because of several factors, including the effectiveness of peaceful people-power revolutions as an alternative; and the continuing tide of democratization worldwide. Wikipedia says coups rarely solve the social economic problems of developing countries hence it has become less attractive to military leaders. Currently there are 13 serving leaders who came to power through coup.
One day, I'll buy this book (in the picture), have it xeroxed and give the photocopy to Trillanes and his luxurious five-star hotel commandoes for their own entertainment inside the cells.
One day, I'll buy this book (in the picture), have it xeroxed and give the photocopy to Trillanes and his luxurious five-star hotel commandoes for their own entertainment inside the cells.
Or should I send Harry Potter books instead?
Trillanes surrenders to avoid the "loss of blood"-- his blood
It’s 5:10 pm and Senator Trillanes and General Lim decided to walk out of the hotel and surrender to avoid the loss of lives—their own. With the APCs and the SWAT troops moving in, there’s really no other option for them but to surrender. It was so stupid of them to initiate a “coup” in the first place. You want a coup and you launch it in a hotel?! My goodness! Such incompetent fools!
First, you don’t launch a “revolution” on a rainy day. Edsa I and II were done on a clear sunny day. And you don’t launch it on a five star hotel.
You want a real revolution? Learn from the lessons of Mao Zedong, Fidel Castro, Joseph Broz Tito, Garibaldi, and Michael Collins. These guys launched it in the real battlefield; not in five star hotels. Mao said a revolution is no picnic and he succeeded.
But Trillanes and Lim would rather have their revolution in the comfort of a hotel. And when they started to feel the discomfort of a tear gas, they chickened out. Funny guys!
First, you don’t launch a “revolution” on a rainy day. Edsa I and II were done on a clear sunny day. And you don’t launch it on a five star hotel.
You want a real revolution? Learn from the lessons of Mao Zedong, Fidel Castro, Joseph Broz Tito, Garibaldi, and Michael Collins. These guys launched it in the real battlefield; not in five star hotels. Mao said a revolution is no picnic and he succeeded.
But Trillanes and Lim would rather have their revolution in the comfort of a hotel. And when they started to feel the discomfort of a tear gas, they chickened out. Funny guys!
Wednesday, November 28, 2007
Knee-jerk reaction to rising oil prices (or why bringing back OPSF is counterproductive)
Here we go again! Every time crude prices in the world market moves up, some wise guys out there would call for the return of dreaded Oil Price Stabilization Fund (OPSF), or the institutionalization of its monster cousin, the so-called Oil Exchange. On Monday, it was Party List Representative (Bayan Muna) Teodoro Casiño’s turn to do so. Not only that, he wants the government to “nationalize” the country’s oil industry. He has bills filed in Congress to achieve his desires. The country has tried all these Marcosian measures in the past and it made us all miserable but it seems people simply don’t learn.
We share Casiño’s concern about the price of oil and its impact on the economy and Filipino people. For global crude prices to hover at a hundred dollars per barrel or higher would surely hurt the Philippine economy. But we don’t share his enthusiasm for “nationalization,” the return of the OPSF or its variant, and the Oil Exchange. These proposals are among the most misguided policies any policymaker could ever think of when dealing with prices of oil and oil products. There are better ways; we should avoid knee-jerk reaction that would do more harm than good.
Consider the OPSF established during the years of the Marcos dictatorship. We used to have a free and relatively competitive oil sector prior to the OPSF with wits 6 oil refining companies Shell, Caltex, Esso, Mobil, and Getty competing in the local market. Marcos set the OPSF as reaction to the rapid rise of global oil prices as a result of oil crisis in the 70s triggered by the Yom Kippur war. It worked this way: when prices are low, the government collects money from the industry for the fund (which is necessarily passed on the consumers as higher prices); when crude prices were rising oil companies drew money from the fund supposedly to prevent a surge in oil prices. The Central Bank also allocates dollars to oil companies at an exchange rate on the day the contracts for the shipment of oil were signed.
The government then set the prices and allows firms certain mark-ups based on landed costs, in effect guaranteeing their profits. There was also cross subsidies supposedly to help the poor. It looked fine on paper then but in reality the OPSF ended up draining the Treasury. As prices abruptly rose, the Fund easily got depleted, and the government was always forced to get money from the country’s coffers—from people’s taxes—to replenish it, thus causing massive fiscal deficits. These are not loose change: when the OPSF was depleted in 1990, the government infused P5 billion, and the cycle went on and on. So in reality, OPSF ended up as a massive state subsidy to oil companies, while domestic oil prices remained high despite lower international crude prices and remained even higher when global crude prices were rising. Do we want to get back to this messy policy environment?
The Oil Exchange seems to be an attractive option. The idea is for the government to determine the country’s monthly requirements and ask potential suppliers to bid for the right to supply the requirement. What Casiño has failed to see is that the he is trying to create a monopoly, a monster, this time however, to be controlled by government bureaucrats paid by people’s taxes. Doesn’t he realized that we suffered so much when Marcos had all those monopolies in various commodities (e.g. remember the sugar monopoly) around?
And we know monopolies, much worse a government one. It will surely be managed inefficiently by Malacañang cronies and its humongous cost passed on to consumers via higher prices. They are going to corrupt the bidding process and allocation of oil products. If the Oilex will try to earn money, as it may have to just to finance its operations and the huge layer of bureaucracy its going to create, it will have to charge prices on top of its inefficiency and corruption, thus making us all worse off. And there’s no guarantee that the Oilex officials will not collude with the bidders to rig the allocation of oil products.
An oil exchange either mean that the government will either have to commandeer the storage facilities of the private sector (especially for LPG) so it could bring oil products to every town without delay or it will have to borrow billions of money for the construction of its own depots and related facilities. It’s a prescription for deeper indebtedness.
Why oil prices are rising? It’s because China, India, and the rest of the Asia-Pacific region are growing fast. They need more oil and are buying more oil. Oil experts say the demand and supply of oil are fairly balanced but recently, speculators came into the picture with hedge funds, investment funds, traders, and ordinary investors going after oil futures and oil derivatives. Many of these characters are apparently using oil futures as a hedge against the weak dollar. All these dynamics suggests an OPSF, Oilex and nationalization of the downstream oil industry would simply create more disruptions and uncertainty that are going to manifest in high and unstable retail oil prices.
The solution lies neither in the dismantling the oil deregulation law nor returning to the dark days of Marcos. The solution lies in strengthening oil industry deregulation. These days, the big three oil companies (Shell, Petron and Caltex) still lord it over the industry especially in gasoline and diesel. But certainly some competitors have started to make inroads into their markets, with the new players getting about 15 percent of the market, based on 2005 data. In terms LPG, new players—based on government data—now account for 45 percent of the market. Overall, the downstream oil industry has more than 600 players engaged in different downstream activities from liquid bulk marketing, LPG bulk marketing, bunkering, to terminaling.
In effect, oil deregulation is imperfect but is working. The worry about the continuing dominance of the Big Three is valid but the solution is not another government monopoly but a different set of policy measures like an anti-trust law or a competition policy to promote efficiency and greater competition and discourage the formation of oligopolies and cartels. And we have to do that policy not only for the oil industry but for all other sectors like banking, shipping and port operations, aviation, insurance, among others.
We share Casiño’s concern about the price of oil and its impact on the economy and Filipino people. For global crude prices to hover at a hundred dollars per barrel or higher would surely hurt the Philippine economy. But we don’t share his enthusiasm for “nationalization,” the return of the OPSF or its variant, and the Oil Exchange. These proposals are among the most misguided policies any policymaker could ever think of when dealing with prices of oil and oil products. There are better ways; we should avoid knee-jerk reaction that would do more harm than good.
Consider the OPSF established during the years of the Marcos dictatorship. We used to have a free and relatively competitive oil sector prior to the OPSF with wits 6 oil refining companies Shell, Caltex, Esso, Mobil, and Getty competing in the local market. Marcos set the OPSF as reaction to the rapid rise of global oil prices as a result of oil crisis in the 70s triggered by the Yom Kippur war. It worked this way: when prices are low, the government collects money from the industry for the fund (which is necessarily passed on the consumers as higher prices); when crude prices were rising oil companies drew money from the fund supposedly to prevent a surge in oil prices. The Central Bank also allocates dollars to oil companies at an exchange rate on the day the contracts for the shipment of oil were signed.
The government then set the prices and allows firms certain mark-ups based on landed costs, in effect guaranteeing their profits. There was also cross subsidies supposedly to help the poor. It looked fine on paper then but in reality the OPSF ended up draining the Treasury. As prices abruptly rose, the Fund easily got depleted, and the government was always forced to get money from the country’s coffers—from people’s taxes—to replenish it, thus causing massive fiscal deficits. These are not loose change: when the OPSF was depleted in 1990, the government infused P5 billion, and the cycle went on and on. So in reality, OPSF ended up as a massive state subsidy to oil companies, while domestic oil prices remained high despite lower international crude prices and remained even higher when global crude prices were rising. Do we want to get back to this messy policy environment?
The Oil Exchange seems to be an attractive option. The idea is for the government to determine the country’s monthly requirements and ask potential suppliers to bid for the right to supply the requirement. What Casiño has failed to see is that the he is trying to create a monopoly, a monster, this time however, to be controlled by government bureaucrats paid by people’s taxes. Doesn’t he realized that we suffered so much when Marcos had all those monopolies in various commodities (e.g. remember the sugar monopoly) around?
And we know monopolies, much worse a government one. It will surely be managed inefficiently by Malacañang cronies and its humongous cost passed on to consumers via higher prices. They are going to corrupt the bidding process and allocation of oil products. If the Oilex will try to earn money, as it may have to just to finance its operations and the huge layer of bureaucracy its going to create, it will have to charge prices on top of its inefficiency and corruption, thus making us all worse off. And there’s no guarantee that the Oilex officials will not collude with the bidders to rig the allocation of oil products.
An oil exchange either mean that the government will either have to commandeer the storage facilities of the private sector (especially for LPG) so it could bring oil products to every town without delay or it will have to borrow billions of money for the construction of its own depots and related facilities. It’s a prescription for deeper indebtedness.
Why oil prices are rising? It’s because China, India, and the rest of the Asia-Pacific region are growing fast. They need more oil and are buying more oil. Oil experts say the demand and supply of oil are fairly balanced but recently, speculators came into the picture with hedge funds, investment funds, traders, and ordinary investors going after oil futures and oil derivatives. Many of these characters are apparently using oil futures as a hedge against the weak dollar. All these dynamics suggests an OPSF, Oilex and nationalization of the downstream oil industry would simply create more disruptions and uncertainty that are going to manifest in high and unstable retail oil prices.
The solution lies neither in the dismantling the oil deregulation law nor returning to the dark days of Marcos. The solution lies in strengthening oil industry deregulation. These days, the big three oil companies (Shell, Petron and Caltex) still lord it over the industry especially in gasoline and diesel. But certainly some competitors have started to make inroads into their markets, with the new players getting about 15 percent of the market, based on 2005 data. In terms LPG, new players—based on government data—now account for 45 percent of the market. Overall, the downstream oil industry has more than 600 players engaged in different downstream activities from liquid bulk marketing, LPG bulk marketing, bunkering, to terminaling.
In effect, oil deregulation is imperfect but is working. The worry about the continuing dominance of the Big Three is valid but the solution is not another government monopoly but a different set of policy measures like an anti-trust law or a competition policy to promote efficiency and greater competition and discourage the formation of oligopolies and cartels. And we have to do that policy not only for the oil industry but for all other sectors like banking, shipping and port operations, aviation, insurance, among others.
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