PPP vs ODA, Part 2

* This is my article in BusinessWorld last week.

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“The first lesson of economics is scarcity: there is never enough of anything to fully satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics.”
— Thomas Sowell (US economist and political philosopher)

This paper is a continuation of the same topic in this column last June 8. To summarize previous arguments:

  1. User-pay principle via public-private partnership (PPP) means only those whose the service or facility will pay for its construction and maintenance. As a result, the rest of the population in other parts of the country will be spared of such cost.
  1. All-taxpayers-pay principle means projects are paid by current taxpayers through the annual general appropriations act (GAA) or by future taxpayers through official development assistance (ODA). Taxpayers from Visayas and Mindanao will also pay for toll roads, dams, airports even if they hardly use these since these are located in Luzon.
  1. It is not true that infrastructure projects funded by official development assistance (ODA) and/or taxpayers through the GAA are more beneficial to the public than PPP-funded projects. Iloilo Airport — which was funded by ODA — took longer to build and incurred cost overruns compared to the PPP-funded Mactan-Cebu Airport, which remains on schedule despite initial delays.
  1. There are inherent problems and risks to the public under GAA- and ODA-funded projects since ODA funding normally has strings attached. Thus, a project funded by China ODA may require the government to hire Chinese contractors, suppliers, managers, and even workers.

We now add more reasons why the Dutertenomics’ shift from PPP to ODA (mainly from China) funding of its build-build-build plan is unwise and risky.

  1. In a Management Association of the Philippines (MAP) forum two weeks ago, finance expert Vaughn Montes cited the big contrast between ODA-funded Subic-Clark-Tarlac Expressway (SCTEx) and the PPP-funded Tarlac-Pangasinan-La Union Expressway (TPLEx). SCTEx took seven years from government approval to completion, two years delayed, and cost nearly twice at $32.8 billion vs. the approved budget of $18.7 billion or P341 million per kilometer. TPLEx cost only P61 million per kilometer.
  1. Investor confidence in the Philippine economy has gained momentum compared to some of our neighbors in the region and it is not wise to constrain such confidence by ditching many PPP projects and shift to ODA and GAA funding.

The expansion of FDI in the Philippines from 2000 to 2009 (last year of the Gloria Arroyo administration) was not significant (less than twice). However, during the same period, FDI expanded almost five times in Singapore, about four times in Indonesia and Vietnam, about three times in Thailand, Cambodia, South Korea, and Taiwan.

But from 2009-2015 or just six years, FDI in the Philippines expanded two and a half times while there was only two times expansion in Singapore, Indonesia, Vietnam, and Myanmar; and less than two times expansion in Thailand, Malaysia, Hong Kong, South Korea, and Taiwan. It is this kind of investor confidence and momentum that can greatly propel the Philippines into more investments and job creation, faster growth and infrastructure buildup.

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  1. The government’s PPP Center noted that “most PPP bids received in recent years have come at lower than the approved government costs. If in the instance that actual project costs turned out higher than approved government costs, the private sector partner assumes or shoulders cost overrun risk.”
  1. 201706146745fThe China government is the least trustworthy source of ODA funding considering that it is acting belligerently and aggressively in bullying the Philippines and other ASEAN neighbors that have claims over the many islands and islets in the South China Sea or West Philippine Sea (WPS). Note also that recent China-funded projects in the country were notoriously scandal-ridden — North Rail and National Broadband Network (NBN)-ZTE projects.

The insistence of the Duterte administration to compromise the income and savings of Filipino taxpayers — even if there are many big private investors, local and foreign, that are willing to shoulder the costs and risks of infrastructure projects — may result in shenanigans and large-scale corruption.

And its consistent pronouncement of relying more on the money and contractors of the bully state across the WPS would further weaken the Philippines’ territorial claims to those islands and exclusive economic zone and weaken the rule of law.

Honest minds in the Duterte Cabinet should remind the President of the economic and political dangers that it is treading on.

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US and China stockmarkets, huge divergence

One year until yesterday, US vs China stocks, below.

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What does this mean: that global investors have rising trust of the US economy but flat or rising distrust of the China economy? More trust in Trump policies but less trust in Xi policies?

I checked CNN and BBC’s business sections, seems they did not make any report of this. NYT has one. https://www.nytimes.com/…/19reuters-usa-stocks.html

CNN, BBC, NYT, others are among the top anti-Trump media outlets.

The report says it’s the tech and health companies that were the main attractors,  http://www.foxbusiness.com/…/wall-st-hits-record-highs

Then there’s this news, “Oil falls to seven-month low on more signs of growing crude glut.” This could mean that US shale producers are gaining the upperhand over OPEC countries, so back to low world oil prices. I’m waiting for sustained below $40/barrel in the coming few weeks or months. http://www.foxbusiness.com/…/oil-falls-to-seven-month

I checked Hong Kong’s Hang Seng index, while the China stocks are declining, HK’s are rising, faster than the growth in US stocks actually.

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I am a non-finance guy so I asked several friends about this development, including my friend in HK, Andrew S. if this means that there is a growing divergence in investor trust between the economies of the mainland and the HK SAR.

Andrew offered a different perspective. He said that “Of the 10 biggest companies that make up the hang Seng index.  Probably less than 5% of their combined revenue/profit comes from Hong Kong.  The Hang Seng Index is of zero value as a reflection of HK’s economy.”

I’m inclined to believe that the HK stock market has a positive, non-zero value to the overall HK economy because there is more rule of law, more policy stability in HK market than say, the PH or TH or ID or MY markets.

Mr. Trump has been making plenty of economic, fiscal, energy policies that almost reverse the 8-yrs policies of Mr. Obama. I am curious if Trump’s policies were factored in positively by investors in the US stock market. Like the recent decline in world oil prices as reflection that Trump’s energy policies are doing positively for the US. Shale oil frackers, coal producers, they are improving. And manufacturing, transport firms that are energy-intensive like airlines.

From a WSJ oped last week, June 15:

“Remember the “energy independence” preoccupation of not so long ago? The U.S. is now emerging as the world’s energy superpower and U.S. oil and gas exports are rebalancing global markets. More remarkable still, this dominance was achieved by private U.S. investment, innovation and trade—not Washington central planning.

Thanks largely to the domestic hydraulic fracturing revolution, the U.S. has been the world’s top natural gas producer since 2009, passing Russia, and the top producer of oil and petroleum hydrocarbons since 2014, passing Saudi Arabia.

Trump’s reversal of Obama energy policies is a big contributor to this. More shale gas and oil, more coal, production and exports. To surpass Russia in gas production and surpass Saudi Arabia in oil production is one big achievement.

From the reports, biggest gainers yesterday were some pharma firms since Trump is trying to get rid of Obamacare. Like United Health Group, up 14.5% since Nov 6 2016.

Meanwhile, China’s market is “very very expensive for a long while” according to another friend, Peter A. This means the bubble is slowly crashing already? Hard to predict because China’s communist government will never allow Freedom of information, will hide the real data.

More globalization means more mobility of capital, labor and technology to markets worldwide that have more rule of law.

ASEAN trade expansion and RCEP

* This is my article in BusinessWorld last June 09, 2017.

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Despite various protectionist rhetoric by many world leaders against free trade, deep inside they know that there are “net gains” from trade and there are “net losses” under protectionism and restricted trade. Thus, while the multilateral trading agreement under the World Trade Organization (WTO) is not moving significantly, bilateral and regional free trade agreements (FTAs) are everywhere.

Trade within the Association of Southeast Asian Nations (ASEAN) is among the most dynamic in the world because of their consensus on faster unilateral trade liberalization policy and near zero tariff for all 10 member-countries since 2016. The region of some 630 million consumers would naturally attract the attention of its neighbors that want to source many of their needs and imports and want to export many of their products and services.

Thus, the ASEAN + 6 (Japan, China, South Korea, India, Australia, New Zealand) evolved and later these 16 countries moved towards creating the world’s biggest FTA covering half of the planet’s total population + the Regional Comprehensive Economic Partnership (RCEP).

Plenty of negotiations still ongoing but member-countries are hoping that RCEP will be formalized within the next two years. The main thorn in the agreement is not on tariffs but on non-tariff barriers (NTBs) or non-tariff measures (NTMs).

Last May 8, Stratbase-Albert del Rosario Institute (ADRi) organized a small group economists’ roundtable discussion on the “Global Geopolitical Situation: its Impact on Australian and Philippine Economies” at the Manila Peninsula Hotel. The main speaker was Mark Thirlwell, chief economist of Australia Trade and Investment Commission (Austrade).

It was a good forum with lots of useful data and insights. Among Mark’s points were the following: (a) Global tariffs are still low but have stopped falling, (b) Free Trade Agreement (FTA) coverage has grown but may have plateaued, (c) Non-tariff barriers are rising, including temporary barriers like anti-dumping, countervailing duties and safeguards, (d) trade liberalizing measures are surpassed or outnumbered by discriminatory/protectionist measures, and (e) ASEAN countries fit this global pattern as shown in these two very clear charts.

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During the ASEAN Summit in Manila, Malaysian PM Najib Razak reemphasized the need to reduce the NTBs or non-tariff measures (NTMs) in the region, which have surged from 1,634 in 2000 to 5,975 in 2015.

Mark also said that e-commerce is also enabling trade citing the role of eBay, Amazon, and he asked if the world has already attained “peak trade” as global trade/GDP ratio has somehow plateaued at around 63% over the past few years. I argued during the open forum that like “peak food” (formulated by Thomas Malthus and later by Paul Ehrlich, others) and “peak oil” (formulated in the ’70s, reformulated in the ’90s), “peak trade” will not happen.

The average merchandise exports/GDP ratio from 2010-2015 of these Asian economies are as follows: Hong Kong 352.2%, Singapore 260.7%; Vietnam 152.7%; Malaysia 134.7%; Taiwan 114.6%; Thailand 113.6%. Yearly data I got from the ADB’s Key Indicators, November 2016 report. These are exports of goods alone. If exports of services are included, the ratio will grow much higher.

20170608bc46cASEAN countries should proceed with further trade liberalization and reduce the number of NTBs/NTMs at least among themselves. There is economic prosperity in trade expansion and misery in protectionism.

Income tax and the politics of envy

* This is my article in BusinessWorld yesterday.

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“The income tax created more criminals than any other single act of government.”
— Barry Goldwater (US businessman and five-term senator)

“The difference between death and taxes is death doesn’t get worse every time Congress meets.” 
— Will Rogers (US actor, humorist, columnist)

The tax reform plan of Dutertenomics known as Tax Reform for Acceleration and Inclusion (TRAIN) is composed of (a) overall personal income tax (PIT) cut, (b) hike in excise tax for cars and oil products, (c) hike tax for sugar-sweetened beverages, and (d) hike in number of sectors covered by the value-added tax (VAT).

This paper will focus on the income tax reform: Minimum-wage earners and those earning P250,000/year and below will pay zero income tax. The 13th month pay and other bonuses not exceeding P100,000 are also exempted from income tax. The number of tax brackets has been reduced from seven to six. And the top PIT rate of 32% for taxable income of P500,000/year or higher has been increased to 35% for taxable income of P5 million/year or higher.

To better appreciate the current PIT and proposed changes in the policy in the Philippines, let us compare the rates with our neighbors in the ASEAN.

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The proposed PHL-TRAIN indeed deserves compliment because current PIT policy is highly confiscatory and makes Barry Goldwater’s statement so accurate. Imagine earning an annual income (net of some deductions) of only $10,000 and the Philippine government automatically confiscates one-third of that.

But what the Department of Finance (DoF) and Congress did is to adopt the “increase tax rates elsewhere to compensate for lower PIT rate” philosophy. This is wrong and there are four reasons why.

First, it is possible to abolish income tax, zero, and yet government will still survive and prosper via other revenue sources. Currently there are 10 countries in the world which have zero income tax policy: Bahamas, Bahrain, Bermuda, Brunei, Cayman Islands, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab Emirates. Their governments rely and thrive on selling petroleum, natural gas, lands, and/or earning from consumption-based taxes and financial transaction taxes.

Second, lower PIT rate can expand the tax base and can potentially increase overall tax revenues. More entrepreneurs and professionals from abroad as well as Filipinos working abroad will be encouraged to do business here to take advantage of lower income tax rate and hence, bigger take home pay.

Stated in a simple equation: Tax revenue (T) is a product of tax rate (t) multiplied by the number of taxpayers (N). Or (T = t x N). A decline in t can encourage the increase in N so that overall T can potentially increase, not decrease.

The DoF and Congress leaders have taken the linear and simplistic argument that lower tax rate means automatic lower revenues. They did not consider potential increase in N and T when income tax rate is significantly reduced.

Currently, Asian economies with low, flat income tax rates are Mongolia with only 10%, Macau with 12%, and Hong Kong with 15%.

Third, lower PIT even for high-income people means more take home pay, more domestic consumption which are captured by other consumption-based taxes like VAT, excise tax, property tax, motor vehicle tax, entertainment tax, travel tax and so on.

And fourth, the politics of envy is wrong. The philosophy of “demonize and overtax the rich, subsidize the poor forever” creates moral hazards problem. The implicit message is: Be careful when you become rich because the government will silently demonize you and explicitly overtax you. Aspire to remain poor, poor forever if possible because (a) your minimum wage income plus bonuses will be tax-free, (b) you get lots of freebies and subsidies, and (c) these are no timetable, forever subsidies and transfers.

When there are plenty of poor people, the government is silently saying two things: “Congratulations” and “Thank you.” Here’s how:

  1. “Congratulations — you are entitled to many subsidies and freebies: free cash transfer, free health care, free education until university, free or highly subsidized housing, free or highly subsidized e-tricycle, tractor, etc. No timetable, for life, can extend to your children and grandchildren, so long as they continue to be poor.”
  2. “Thank you — we have more justifications and alibi to harass and confiscate more from the income, wealth, properties and inheritance of the rich and super-rich (especially if they are not friends of the administration).”

Therefore, instead of raising the top PIT rate to 35%, Congress should bring it down to 25% to be more comparable with Malaysia; better if it is only 20% to be more comparable with Singapore rate.

2017060866507Society should reward people who become rich and wealthy via entrepreneurship and efficient professional work, not demonize and overtax them. We should have more millionaires and billionaires, not less; we should have more super rich people, not less.

Bienvenido S. Oplas, Jr. is the head of Minimal Government Thinkers and a Fellow of SEANET and Stratbase-ADRi.

PPP vs. ODA

* This is my article in BusinessWorld last week.

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Among the important characteristics of the user-pay principle is that only those who use the service or facility will pay for its construction and maintenance while the rest of the population — who won’t use them — will be spared of such cost. This characteristic is embedded in the public-private partnership (PPP) mode of construction, procurement, and maintenance of big infrastructure projects.

In contrast, projects that are funded through the annual general appropriations act (GAA) and official development assistance (ODA) are under all-taxpayers-pay principle. More specifically, GAA are paid by current taxpayers while ODA are to be paid by future taxpayers.

Last month, the government through the Department of Transportation (DoTr) and Civil Aviation Authority of the Philippines (CAAP) has terminated the PPP mode of Development, Operations and Maintenance for five regional airport projects — New Bohol [Panglao], Davao, Iloilo, Laguindingan and Bacolod-Silay. These five projects are projected to have a total cost of P108 billion.

There are other projects that suffered from policy reversals from PPP to ODA-funding, like the Kaliwa Dam project in Quezon, and the PNR South Railway project.

Since late 2016, the Duterte administration has announced that it will avoid PPP modes whenever possible and shift to government funding via GAA or ODA or a mixture of both. The reason given is that it will be faster and cheaper to build via government funding. This will cover mostly the P8-trillion infrastructure programs then auction off the operation and maintenance (O&M) contracts to the private sector.

Recall that in my previous piece, the DOTr said during the BusinessWorld Economic Forum last May 19 that these four big projects will all be ODA-funded:

  1. PNR North Railway (Manila-Clark), Q4 2017 — Q4 2021, P255B.
  2. PNR South Railway (Manila-Bicol), Q3 2018 — 2021, P270B.
  3. Mega-Manila subway (Phase 1, QC-Taguig), Q4 2019 — 2024, P225B.
  4. Edsa-Central Corridor Bus Rapid Transit BRT, Q1 2019 — Q1 2021, P38B.

Now the basic question — is it true that GAA or ODA-funded are more efficient, faster, and cheaper to build, than PPP-funded projects?

In the same BusinessWorld Economic Forum last May 19, one of the speakers was Oliver Tan, Chief Financial Officer of Megawide Construction Corp. He showed two tables comparing the construction of two airports in the Visayas, the New Iloilo and expanded Mactan-Cebu airports (see table).

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Mactan Cebu airport terminal — whose awarding was delayed for 18 months but will still be completed on time — is almost five times the size of the New Iloilo airport and yet construction time is almost half that of the latter. The Cebu airport serves 17 international destinations, 27 domestic destinations, by 20 partner airlines. When this new terminal is finished middle of 2018, passengers are projected to enjoy these benefits: check in time will be reduced from 10.5 minutes to 6.85 minutes; getting luggage from 11 to 6.5 minutes; while retail outlets will rise from 17 to 28 and dining options from 17 to 31.

From this example alone, it is NOT true that burdening all taxpayers with government-implemented infra projects is more beneficial to the public.

There are inherent problems and risks to the public if GAA- and ODA-funding become the dominant mode in building important infrastructure projects.

One, a government administration is short term, limited to only six years term and thus, it has little political or corporate brand to build and protect, it can worry less of what the people would say after its term has ended especially if the project is later discovered to be of inferior quality and tainted with corruption. In contrast, a corporation has a brand to protect and it would not risk this brand that has been built for decades to be tainted with corruption and wastes.

Two, ODA funding normally have tight strings attached, like a China-ODA would mean only Chinese contractors, suppliers, managers, and even workers would do the work. Local firms would be relegated to O&M and their purchase of equipment and supplies might be constrained by the project specifications so that they will be forced to source these from China again.

Three, there are recently finished and ongoing PPP projects that are yielding positive results, like the Mactan-Cebu Airport terminal building, NAIA Expressway, Tarlac-Pangasinan-La Union Expressway (TPLEx), school buildings, and automated fare collection system for the trains. These gains cannot simply be dismissed as inferior to government-promised better infra, especially under the environment of bad governance culture in the country.

Four, the user-pay principle means that a tollway or an airport in northern Luzon will be paid only by those who frequently use those facilities. So the people and taxpayers in southern Luzon, Visayas, and Mindanao who seldom or do not use these facilities will be spared of servicing the cost of construction and O&M.

201706014008dThe shift from PPP to GAA and ODA funding of the build-build-build plan of Dutertenomics does not bode well for Filipinos.

Bienvenido S. Oplas, Jr. is the head of Minimal Government Thinkers and a Fellow of SEANET, both members of Economic Freedom Network (EFN) Asia.

Dissecting Dutertenomics’ overspending plan

* This is my article in BusinessWorld last Tuesday.

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During the BusinessWorld Economic Forum held last May 19, Budget Secretary Benjamin E. Diokno showed two interesting charts: (1) sustained overspending and borrowings, budget deficit/GDP ratio from -0.9% in 2015 to -2.7% in 2016 then -3.0% from 2017-2022. And yet (2) debt/GDP ratio was expected to decline from 44.8% in 2015 to 40.2% in 2017 and further down to 36.7% in 2022.

Is this possible? That one overspends and over-borrows and yet the debt/GDP ratio will keep falling?

DBM, NEDA, and Malacañang say yes because the projected taxes/GDP ratio will increase via the proposed Tax Reform bill of 2017. Sec. Diokno said in the same forum that “We will continue to guard against underspending, the Waterloo of the previous administration.”

“Underspending” for me should mean that expenditures are lesser than revenues, resulting in a fiscal surplus. When expenditures are larger than revenues but the deficit is only at -1% or below -3% of GDP, that is still overspending, not underspending. So the previous administration did not really underspend, just that it did not go into an uncontrolled spending spree.

Here are relevant numbers about the Philippines’ fiscal position and levels of outstanding public debt, and comparative debt/GDP ratio of seven ASEAN countries (see table).

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The numbers above show three important facts:

One, the average deficit in the previous administration, 2010-2015 was only P185 B/year or -1.8% of GDP, benign and considered as “underspending” by many fiscal hawks, especially when compared with deficit in 2009 (last year of the Gloria Macapagal-Arroyo administration) and 2016 (first year of Duterte administration).

Two, low annual budget deficit and borrowings in the same period means the country’s outstanding debt stock has risen only mildly, with the average of P260 B/year.

Three, partly a result of this, the Philippines’ debt/GDP ratio over the same period showed significant decline, similar to the experience of Myanmar while other neighbors posted deficits, owing to increased borrowing.

Fewer borrowing means less debt service payments for both principal and interest. It was during the same six-year period that Philippines’ GDP growth was 6.2% per year, much higher than Thailand’s 3.7%, Indonesia and Malaysia’s 5.7%, Vietnam’s 6.0%.

In the same BW Economic Forum, the DoTr showed that these projects will be ODA (government loans) funded, not PPP.

  1. PNR North Railway (Manila-Clark), construction Q4 2017 — Q4 2021, P255 B.
  2. PNR South Railway (Manila-Bicol), construction Q3 2018 — 2021, P270 B (originally a PPP).
  3. Mega-Manila subway (Phase 1, QC-Taguig), construction Q4 2019 — 2024, P225 B.
  4. Edsa-Central Corridor Bus Rapid Transit BRT (Edsa, Ayala, Ortigas, BGC, NAIA), construction Q1 2019 — Q1 2021, P38 B.

Other big projects were identified but it wasn’t specified whether these would be funded by official development assistance (ODA) or via Public-Private Partnership (PPP). In December 2016, DoF Secretary Sonny Dominguez already indicated that infrastructure projects under the Duterte administration will avoid PPP whenever possible. And the massive China and Japan ODAs came into the picture.

Then there are tweaks in some major projects, from PPP to ODA. Like the PNR South Railway and the Kaliwa Dam project in Quezon province of Maynilad Water. What would pre-qualified players like San Miguel do with this policy reversal?

The Dutertenomics’ spending plan is detrimental to taxpayers in general and the investment environment in particular, for the following reasons.

  1. Bigger annual budget deficit would mean more government loans, higher public debt stock, and will lead to higher taxes now and the future to service those huge loans to be contracted. Soon the P6/liter increase in oil excise tax will not be enough, it will further rise.
  2. Massive shift from PPP (private investment) to ODA of major infrastructure projects will result in more loans which mean more public debt, more taxes, and fees in the future.

Global commodity prices, trade and growth

* This is my article in BusinessWorld yesterday.

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One of the beauties of free trade and global economic integration is that countries can benefit from low commodity prices as improvement in technology and processes in other countries result in bigger output for the same land area and other inputs. The downside of course is that when commodity prices go up, economies that are more dependent on imported products would tend to wobble.

The period from 2008 to 2014 was characterized by generally high food and commodity prices.

For instance, price of corn was only $98/ton in 2005 but it shot up to $223 in 2008. I think it was the momentum of the biofuels law in the US in 2005, spurring huge demand in the US, Brazil, other countries. The price mellowed in 2009-2010 during the global financial turmoil that started in the US, but shot up again to nearly $300 in 2011-2012.

The global spike in rice prices (aka as “rice crisis of 2008”) from $288/MT in 2005 to $700 in 2008 was caused by several factors, among which are (a) price hikes in major energy sources oil, natural gas, and coal in 2008, and (b) rice export restrictions by India, Vietnam, Brazil, other countries.

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Maize (corn) — US No.2 Yellow, FOB Gulf of Mexico, US price
Rice — 5% broken milled white rice, Thailand nominal price quote
Swine (pork) — 51%-52% lean Hogs, US price
Poultry (chicken) — Whole bird spot price, Georgia docks
Sugar — Free Market, Coffee Sugar and Cocoa Exchange (CSCE) contract no. 11 nearest future position
Coffee — Other Mild Arabicas, International Coffee Org. New York cash price, ex-dock New York

Crude Oil (petroleum) — West Texas Intermediate 40 API, Midland Texas

Natural Gas — Indonesian Liquefied Natural Gas in Japan, $/million metric British thermal units of liquid

Coal — Australian thermal coal, 1200 btu/pound, less than 1% sulfur, 14% ash, FOB Newcastle/Port Kembla

Among the reasons why world oil prices rose to record levels in 2008 was the high energy demand in the two biggest countries in the world in population, China and India. Prior to 2008, from 2003-2007, China’s GDP growth was always double-digit, averaging 11.7% per year. India’s growth during that period was also high, averaging 8.8% per year.

Implications for the Philippines

Among the things that the Philippines should optimize given these price fluctuations in world commodity prices are the following:

  1. Rice trade liberalization should have been started in 2010 when the Aquino administration took power. After short price spikes in 2011-2012, rice prices went downhill. The Duterte administration should proceed with full rice liberalization this year because of high medium term outlook for rice output and exports by our neighbors, Thailand and Vietnam especially.
  2. Sugar liberalization should be pursued too as world sugar prices have declined from their peak prices in 2010-2012 average of around 22 US cents per pound.
  3. Trade of corn and swine, even poultry should also be liberalized. Prices of rice, corn, swine, poultry and other food products are among the major contributors of the overall consumer price index (CPI) which are used to compute the inflation rate.
  4. Energy-intensive industries like manufacturing, hotels, construction, and transportation (on air, land, water) can expand their production and fleet to take advantage of lower prices of oil, natural gas, and coal.
  5. Two hindrances here: (a) the planned hike in excise tax for oil products by P6/liter across the board, and (b) continued onslaught by feed-in-tariff (FiT) and soon, renewable portfolio standards (RPS) that will result in expensive electricity. The purpose of trade and energy revolution is to make global energy prices become cheaper. The purpose of government in this case to make cheaper energy more expensive. These two measures should be abandoned and reversed someday.
  6. Among the ASEAN-6 big economies (Indonesia, Malaysia, Thailand, Singapore, Vietnam and Philippines), the Philippines registered the highest average GDP growth per year from 2010-2015: Thailand 3.7%, Indonesia and Malaysia 5.7%, Singapore and Vietnam 6.0%, and Philippines 6.2%. There was something good that the previous Aquino administration was doing that the new Duterte administration should somehow continue.

Bienvenido S. Oplas, Jr. is the head of Minimal Government Thinkers and a Fellow of SEANET. Both institutes are members of Economic Freedom Network (EFN) Asia.