Monday, May 21, 2018

BWorld 212, Commodities competition and the mining debate

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


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

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

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

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

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

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

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

What is surprising is the eminence of certain metallic products.

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


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

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

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

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

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

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

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

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

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

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

The government should be an enabler of disruption, not a disruptor, in the clear potentials of metallic mining.
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Sunday, May 20, 2018

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

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

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


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

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


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

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

Energy 108, On mandatory solar roof in California

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

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

California to force new home owners to buy solar panels
Anthony Watts / 9, 2018
https://wattsupwiththat.com/2018/05/09/california-to-force-new-home-owners-to-buy-solar-panels/


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

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

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

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

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

Solar in desert may be understandable. But in this proposed CA new law, solar roof for ALL new houses will be mandatory. All the fakes and hypocrisy of the "greenies" or watermelon (green outside, red inside) and ecological socialist movement.
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BWorld 211, Intellectual property, innovation, and prosperity

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


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

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

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

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

WIPO’s methodology is interesting.

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

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

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

  
These numbers show the following:

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

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

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

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

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

The letter highlighted some important facts, among them:

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

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

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

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

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

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

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

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


Bienvenido S. Oplas, Jr. is President of Minimal Government Thinkers, a member-institute of Economic Freedom Network (EFN) Asia.
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AsPac markets, PH and ID worst performing ytd

As-Pac stockmarkets as of last Friday closing:

(1) Year to date (ytd, January 1 to May 18), worst performing are PH (-10.4%) and ID (-9%); best performing are HK (3.8%) and MY (3.2%).

(2) 52 weeks (May 18, 2017 to May 18, 2018), worst records are Sri Lanka (-3.8%) and PH (-1.2%); best records are HK (23.3%) and DJ CN (19.2%).

(3) Past 3 years (May 2015 to May 2018), worst achievers are Shanghai (-9.3%) and Sri Lanka (-3.6%); best achievers are NZ (14.5%) and India (8%). PH down, -1%. Gains of the previous admin so far have been erased by the current admin.


Source: WSJ.com

Notice that Indonesia wants to overtake the PH as worst performer ytd, why? My Indonesian friend, Dr. Aco Patunru has a quick explanation -- recent bombing, military (and paramilitary) shows of force, anti-import rhetorics etc.

Rising world oil prices and US rate hikes cannot be the reasons because these affect all countries not just PH and ID and yet other countries are not so adversely affected. The main explanations should be internal/domestic. In the PH, it's the continuing Du30 indirect attacks on business -- closure of Boracay for six months, high taxes on energy (oil, lpg, coal, VAT on transmission), other products, continuing uncertainty due to TRAIN 2, recent diplomatic war with Kuwait, etc. 

(See also: AsPac markets after the Korea Summit, April 30, 2018)

Wednesday, May 16, 2018

BWorld 210, Electricity competition, EPIRA, and WESM

* This is my article in BusinessWorld last week, May 09, 2018.


Last Monday, I discussed business competition in general and the role of the Philippine Competition Commission (PCC).

The theme will be continued in this piece and it will discuss electricity competition in particular, especially after I was able to interview PCC Chairman Arsenio Balisacan, the CEO of the Philippine Electricity Market Corp. (PEMC) and Chairman of Transition Committee Oscar Ala and PEMC Spokesperson Atty. Nino Juan.

The Electric Power Industry Reform Act (EPIRA) of 2001 or RA 9136 has drastically liberalized the Philippines electricity sector with at least three important provisions: (1) deregulation and demonopolization of the power generation sector, (2) creation of the Wholesale Electricity Spot Market (WESM), and (3) liberalization and demonopolization of electricity distribution via Retail Competition and Open Access (RCOA).

With these and other provisions of EPIRA, the questions to ask, among others would be:

(1) Were there many private generation companies (gencos) that entered the market competing with each other?

(2) Were there many retail electricity suppliers (RES) that entered the market competing with each other?

(3) Were there many players, gencos and distributors, that use the WESM spot market competition? And more importantly, (4) Have electricity prices for consumers gone down?

The short answer is YES to all four questions.

For gencos for instance, before EPIRA, the National Power Corp. (Napocor) was the state-owned power generation monopoly, which also incurred huge losses and public debts for many years.

As of April 2018, there were 113 gencos in the Luzon-Visayas grid alone and all of them are WESM participants. Excluded are gencos in the Mindanao grid which is not part of WESM yet. Of these 113 gencos, five players have become more efficient and more moneyed than others, except perhaps the government-owned Power Sector Assets and Liabilities Management Corporation (PSALM), which still owns previous Napocor-owned power plants, mostly hydro facilities in Mindanao and the Malaya plant in Rizal.

For retail competition, the number of contestable customers (CCs) or those with monthly peak demand of 750 KW or higher and have the freedom to pick their own service providers — such as electric cooperatives (ECs) and private distribution utilities (DUs) — have increased. RCOA implementation however, has been issued an indefinite TRO by the Supreme Court in February 2017 and this resulted in a decline in number of CCs.


Here are the numbers for comparative electricity prices that include two types of customers, the captive market (small consumers who must stay with their DUs or ECs) and contestable market (they can leave their DUs or ECs and choose their own RES).


Contestable customers are able to enjoy lower average prices, P6.91/kWh, than captive customers that pay an average price of P7.78/kWh.

So there you see it.

Despite the noise created by certain sectors that EPIRA and WESM are not working, which leads them to call for a return to the old scheme of nationalization, these data show that indeed electricity competition is working.

It is true that Philippine electricity prices in general remain higher than most of our neighbors in the region but that is because of other factors like (a) many taxes especially the high VAT of 12% applied in all parts of the electricity supply chain, from generation to transmission, distribution and supply, even the system loss; (b) many charges in our monthly electricity bill including universal charge, system loss charge, feed-in-tariff (FiT) for favored renewables.

The transition of PEMC, the market operator of WESM, into a real Independent Market Operator (IMO) as explicitly specified in EPIRA may soon become a reality.

As a result, there will be no more government energy agencies and bureaucracies at the PEMC Board. Good work, PEMC Transition Team.
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TRAIN, DOF and AER

The DOF/Dutertenomics and what I think is its front-NGO, Action for Economic Reforms (AER). Very vocal and noisy in tax-tax-tax (oil, lpg, cars, coal, sugar, cigarettes, etc; expanded VAT), saying that TRAIN will not be inflationary and any inflationary impact is just bogeyman (panakot lang) and not real. Now vocal in supporting TRAIN 2 and defending TRAIN 1.

If you guys are noisy at raising oil taxes, you should be equally noisy at making fare hike adjustments because you know that high oil prices will result 100% in the need for higher fares. But you are silent. You know that fare hikes will result in even higher inflation rate. And January 2019 oil and coal tax hike Part 2 is near. Sometimes Govt and "non-govt" like AER can be similar or one and the same?

See this news story:
  
The burden of TRAIN law on Filipino mothers
Eloisa Lopez
Published 11:37 PM, May 13, 2018  Updated 11:38 PM, May 13, 2018

"Sobrang laki ng pinagbago," Nancy said. "Ibang-iba talaga. Halos lahat ng bilihin nagtaas." (It has changed a lot... It's really different. Almost all items became more expensive.)

One crate of 12-ounce Coca Cola products now retails for P132, from P108. A tank of gas is now sold from P600-650, as opposed to the former P450."

I believe that instead of calling for suspension of TRAIN 1, TRAIN 2 should reverse some of the ugly provisions of TRAIN 1 like oil-lpg-coal tax hikes. But AER has none of it, they argue to retain those tax hikes and blame something else like high world oil prices, etc.

Keep the TRAIN on track
May 13, 2018 | 8:26 pm
Yellow Pad By Zak Yuson

Many of the AER officials are anti-Du30 drugs war, anti-China a__licking, good. But they really believe that Du30's additional tax money via TRAIN won't be used to bribe legislators and SC people to remove the CJ, Ombudsman? That TRAIN money won't be used to contract big loans and favors from the China communist dictatorial government?

Anti-Du30 but pro-Du30? Nahihilo siguro.

AER has a weekly column in BWorld, "Yellow Pad." I think 95% of their column is about singing rah-rah-rah, tax-tax-pah.

If Dutertenomics simply cut the personal income tax, they simply corrected the historical injustice of CTRP of 1997, they would have won the hearts and minds of many people including the anti-Du30 groups, me included. But they were tax-hungry with all sorts of bleeding heart arguments why they want more transfer of money from private pockets to government pockets.

In the earlier debate bet IBON/Bayaan Mo Na ("TRAIN is pro-rich, anti-poor") and AER ("TRAIN is pro-poor, anti-rich"), both are wrong. TRAIN is anti-rich, anti-poor, only pro-government.

TRAIN is also pro-China communist government. Big integrated PPP projects were reversed by Duterte to become hybrid PPP so that the construction phase can be given to China contractors, O&M to be given to Filipino contractors. TRAIN money will make sure that new big loans with China will be paid in the future.

Even my haircut cost in a public market barber shop, the P40 (non-aircon, open air with electric fan) has become P50. The air-con haircut rose from P50 to P70. People raise their own prices because their cost of living has increased anywhere.

From IEA and WHO data, as of 2015 estimates showed that some 61 M Filipinos or 60% of total households were still using firewood/charcoal for cooking, lighting, ironing, other energy needs. Cheaper oil and LPG allowed many poor households to use LPG for cooking, this saved perhaps millions of trees from being butchered, the price of charcoal or uling declined. With recent world oil price hikes + tax-tax-tax of TRAIN, LPG prices rose, many poor people are going back to using charcoal and firewood, indicated by the rising prices of charcoal -- about P100-120/sack in 2017, now P130-150/sack. This means millions of trees will be stolen and butchered in the public forest lands.

And the "raise oil taxes to save the planet" bleeding hearts now implicitly argue for killing many trees "to save the planet"? Lousy hypo___s.

Source: IEA, SE Asia Energy Outlook 2017, p. 41.

Inquirer business reporter and a friend Ben de Vera twitted his story,

DOF: No collateral for China loans
By: Ben O. de Vera - Reporter / @bendeveraINQ Philippine Daily Inquirer / 05:10 AM May 15, 2018

Ben posted it on twitter, I replied:

@Noysky  Replying to @bendeveraINQ @DOF_PH @SecSonnySays

Come on DOF, #TRAIN tax-tax-tax is the collateral. Our oil, lpg, cars, coal power, electricity transmission, sugary drinks, etc are rising bec of current spending and future spending to pay more China loans. Why is the #DOF evasive about this?

From the above Inquirer report,

"We borrowed $200 million, there was no collateral,” Dominguez said, referring to the Philippines’ first-ever panda bond issuance.

In March, 1.46 billion renminbi or about P12 billion in three-year panda bonds were issued by the government in China at a “tight” yield of 5 percent."

At 5% interest rates -- DOF will need more tax-tax-tax so that present and future generations of Filipino taxpayers will be able to pay those expensive China loans. Because Du30 told the DOF and Dutertenomists to get more loans from China? And some NGOs like AER would justify all tax-tax-tax by Duterte? Magaleeeng.

Tuesday, May 15, 2018

BWorld 209, Is the PCC a facilitator or a hindrance to business competition?

* This is my column in BusinessWorld last May 07, 2018.


Even before the various competition bills in Congress ultimately became the Philippine Competition Act (PCA) of 2015 or RA 10667, I have been asking myself this question.

After all, I have observed that the main creator of monopolies and oligopolies is the government itself through constitutional restrictions on public utilities and creation of “natural monopolies” like electricity transmission and distribution, water distribution, which, in turn, require congressional franchises.

Other monopolies or oligopolies are created by various agencies, like airline routes (CAB franchise), shipping routes (MARINA franchise), telecommunications (NTC franchise or permit), jeepney and bus line route (LTFRB franchise), tricycle route (LGU franchise).

So the basic question would be: What can the Philippine Competition Commission (PCC) do to limit or curtail the granting of such state-created monopolies and oligopolies?

Last week, I interviewed PCC Chairman Arsenio Balisacan in his office. Sir Arsi is a friend and was my former teacher in the ’90s at the graduate program of UP School of Economics on the subject of Development Economics. [The discussion between Mssrs. Oplas and Balisacan, which covered several topics, will be uploaded on BusinessWorld’s YouTube channel soon. — Ed.]

My opening question to him was a light one, “Do many people mistake the PCC with a racing or sports commission?” He smiled and answered that it seems to be a common misconception for many people especially in non-urban areas, they ask what sports competition the PCC is promoting.

The confusion may be understandable as there are 16 Commissions under the Office of the President alone. These are the Commissions on: Climate Change (CCC), Filipinos Overseas (CFO), Filipino Language (CFL), Higher Education (CHED), Anti-Poverty (NAPC), Culture (NCCP), History (NHCP), Indigenous Peoples (NCIP), Muslim Filipinos (NCMF), Pasig River (PRRC), Women (PCM), Racing (PRC), Sports (PSC), Urban Poor (PCUP), Youth (NYC), and the PCC.

I checked the latest report of the World Economic Forum (WEF), the Global Competitiveness Report (GCR) 2017-2018, to see how competitive the Philippine economy is and by extension, the domestic private businesses, compared to its neighbors in East Asia.

Out of 137 countries and economies covered, the Philippines ranked 56th overall. And of the 12 pillars of the GCR, the Philippines scored high in pillar #2 Macroeconomic environment (22nd) and pillar #10 Market size (27th).

But the country scored very low in three pillars: #1 Institutions (Irregular payments and bribes, Favoritism in decisions of government officials, Burden of government regulations, Reliability of police services…); #2 Infrastructure (roads, railroads, ports, air transport,…) and #6 Goods Market Efficiency (Extent of market dominance, Effectiveness of anti-monopoly policy, Number of procedures to start a business, Time to start a business, Burden of customs procedures), (see table).


There is a direct relationship between a competitive economy and its prosperity, and given the relative smallness of the Philippine economy, what seems to be “big” corporations domestically can be small or medium-size compared to the corporations in our East Asian neighbors.

The PCC checks and prohibits three major acts and behavior: (1) Anti-competitive agreements like price fixing/collusion, bid rigging, output limitations, and market sharing; (2) Abuse of dominant position and market power like predatory pricing, discriminatory pricing, exploitative behavior towards consumers and competitors, and limiting production, markets or technological development; and (3) Mergers and acquisitions (M&A) that restrict or lessen competition in the market.

These point to two important issues.

One, the PCC is concerned only with behaviors of existing competing players but does not cover behaviors of state-created monopolies.

And two, many of those behaviors rendered “anti-competitive” are generally short-term and never long-term, so the imposition of penalties may be a question mark.

Take price discrimination or “price differentiation” and “market segmentation” in economics. This is perfectly normal in market competition as the supplier is optimizing revenues from customers with different needs and different budget or resources. Thus, higher prices are set for those deemed wealthy and lower prices for those financially struggling.

In price fixing/collusion, players here may be digging their own graves as they antagonize customers and invite new players that can quickly provide the goods and services at lower prices. If this happens, the collusion can quickly break up and the old players would try to secure their previous market share eaten by the new player/s.

Competition requires innovation, lots of it in terms of product and service quality, variety, marketing and pricing. Player X’s prices compared to its competitors would look “predatory” yesterday, “collusive” today, and “excessive” tomorrow and these are all fine. Those prices can roller coaster at temporary and short-term durations. New players would tend to give low introductory prices to attract many new customers while innovators would tend to give high prices to recoup their high investments in product R&D, consumers survey, and marketing/promotions.

According to the WEF Executive Opinion Survey 2017, the “Most problematic factors for doing business” in the Philippines are: (1) Inefficient government bureaucracy, (2) Inadequate supply of infrastructure, (3) Corruption, (4) Tax regulations, (5) Tax rates, and (6) Policy instability.

So, is the PCC a facilitator or hindrance to overall business competition in the Philippines?

For me, it’s a tie.

The PCC can be a potential hindrance because its long list of prohibitive acts can be additional deterrent to potential players that are already wary of the corrupt bureaucracy, government-created monopolies, poor infrastructure, high tax rates, and policy instabilities.

But it also has two important functions that can facilitate competition.

One, it gives information to potential and incoming players on how they will be treated in case existing players, foreign and local, will charge and accuse them of “anti-competitive” behavior. And two, it can coordinate with other sectoral regulatory agencies and temper their itchiness to regulate, restrict and prohibit as PCC has the overall view of the degree of competition in the country.
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