TRUST AND ANTITRUST

TRUST AND ANTITRUST Published Mindanao Post 30 Dec 1998

An industry is concentrated, according to the U.S. Federal Trade Commission standards, if four or fewer firms control 40% of the market. By 1982 the U.S. photovoltaic industry (solar collectors) was controlled by three firms holding 79% of the market. All are oil companies (enhancing the suspicion that they might threaten the oil business).

In comparison, the Philippine oil industry is under 99% control and dominance of 3 companies. Superconcentration occurred two decades back when a fourth oil firm pulled out of the country. Deregulation has so far not effected the dilution expected. The entry of British Petroleum may break the lull with its plan to build a naphtha cracker plant by 2003.

But in a related development, a proposal to pass an antitrust law to prevent monopoly in telecommunications was made by DOTC undersecretary Lichauco. Should the antitrust move catch on and business become anti-cartel forever, consumers may yet get relief in the rice, sugar, and coconut industries.

Today, Nov 23, 2007, nine years after the foregoing was written, a sudden awakening is spawned by the threat of global oil prices teetering at the brink of $100 per barrel. Rudely awakened and in surly mood were Senators Manuel Roxas and Juan Ponce Enrile who initiated moves for passage of an anti-trust law aimed to discipline companies engaged in anti-competitive behavior such as collusion and other restrictions to free trade, particularly in the oil industry.

Senator Roxas, chairman of the Senate trade and commerce committee, designated Enrile to head a sub-committee to draft an anti-trust law, Enrile having pushed for an anti-trust law and the author of a similar measure filed but not approved in the 13th and 14th Congress. Roxas envisions a stronger anti-trust legislation that, aside from the scrutiny powers on company books, will include provisions to sanction abusers.

The Senate committee on trade and commerce met with trade officials, representatives of oil companies, transport groups and consumer groups to determine why there remains a prevailing rise in the prices of fuel when the peso has appreciated versus the US dollar. Energy Secretary Angelo Reyes raised no objection to proposals to review the Oil Deregulation Law but stressed the need for Congress to appropriate funds entailed by regulation subsidies to be given to the oil companies.

It is not only the Oil Deregulation Law that requires antitrust legislation and amended but also the cement and pharmaceutical industries, and the Electric Power Industry Reform Act (EPIRA). A vital amendment to the EPIRA is the restoration of the ban on cross ownership when a power distribution company also owns, through sister companies, generating plants. Cross ownership gives the linked corporations advantages over their competitors. They can do business with each other at higher rates, to the detriment of consumers.

On medicine, prices are high for lack of competition among the pharmaceutical companies (called Big Pharma). Without an anti-trust law to curtail collusion, the foreign companies have a cartel that fixes prices for maximum profit after public relations expense lobbying and gifting the medical community. The rapacity has spilled over from medical drugs to synthetic foods, the so-called nutraceauticals, targeting babies, but has not diminished Big Pharma’s assault on breast-feeding. The cheaper medicines bill will nibble a bit on the cartel, just a teeny weenie bit.

The cement cartel must also be dismantled. Most cement firms are owned by big foreign companies who can fix prices at will, taking advantage of the heavily taxed cement imports (that also encourages smuggling). The high prices of cement drag down the construction industry and taxpayer-paid infrastructure programs.

On an Oil Deregulation Law, the intent of the deregulation law was to make competition force prices down, but the petite new players merely buy their finished products from the Big Three, presumably at volume discount rate, and sell them at a markedup rate to consumers. An anti-trust proviso must define this practice as collusion.

The United States anti-trust laws work because they are enforced. In the local scene, even if an Enrile-Roxas anti-trust law is passed, it would create another whale of a problem --- where to find honest implementors

Senator Zubiri, one of the several authors of the Renewable Energy Bill, is drumming up support with some hype. The bill encourages the use of agricultural crops like sugarcane, coconut, corn, cassava and “tuba-tuba” [jathropa] for ethanol and cocodiesel. “The $100 per barrel forecast may be breached even before December this year,” he said. “It will push up consumer prices and depress job generation. Households pay bigger power rates, rising prices of food and other basic goods, factories postpone expansion plans or lay off workers and government agencies providing health, education and administrative services are hampered as they are heavily dependent on continuous supply of power.”

If the Renewable Energy Bill prospers, the Philippines may be the second country after Brazil that will no longer be dependent on imported fuel, being the world’s second largest producer of geothermal energy and producing about 50 percent of our renewable energy from hydropower. We have abundant sunlight for solar power most of the year, locations with strong winds for wind power, tidal currents for marine power, lacking just the funds and technology to harness them. Biofuels technology crude but workable is on hand.

Unfortunately this nation has a crippling handicap --- the leadership is afflicted with myopic vision syndrome.

Back to the escalating price of oil, the Executive has yet to draw up an agenda to address holistically the issue of energy as an urgent priority in the economic program of NEDA. It is not enough to focus on dismantling cartels or on the Renewable Energy Bill that would lessen our dependence on non-renewable fossil fuels like oil and coal. The immediate response to the crisis must be to recognize that the crisis has the potential to lead to disaster with ramifications affecting not just economic stability but also disruptive of social and political stability. The first crucial step is conservation of energy. And this giant step needs public support devoid of politics, and in return officialdom spurns politics (like asking the baby not to cry). This will be the topic of a future blog (energy conservation, not cry babies).

COMPASSION

Rewrites of Jottings: COMPASSION
Published Mindanao Post 12 December 1996


In the Christian world, raised levels of compassion are felt during the Christmas season. Purse strings are loosened, and gift giving is widespread. Most significant of all is the community concern shown for the poor, led by private civic organizations.
But such laudable gestures are transient features of our society. After the season’s greetings and hangovers are over, the generosity fades away, and indifference reigns once again.
A yearlong Christmas season is devoutly to be wished, and the beneficiaries of community graciousness continue to be given to those who are most helpless: the orphans and abandoned children.
For this reason, a poor struggling nation like ours should not be too quick to condemn child labor, for this is a means, however distasteful to the `bleeding hearts’, of survival for the poorest of families and desolate children. And we must seek a solution to the plight of our street children who have been placed on detention in a feeble effort to save them from a drug habit and a future of drug addiction and the crime inevitable to support the habit.
There exists a clear and present danger, and thus a loud warning, that, if not carefully dealt with, the situation is just one step away from the Brazilian solution whereby businesses finance policemen to exterminate street children

Update November 13, 2007
As the Christmas Season is just around the corner, the stark contrast of the haves and have-nots are again haunting the nation with the 11-year old Marianet Amper suicide in poignant emphasis. Despondent and depressed over the poverty of her family, she took her own life. Little did she know that ending her misery would create unintended consequences. Speculations of hazy origins started swirling at the heels of her burial, raising doubts about the real cause of her suicide. The insinuations tended to smear the family reputation, forcing her parents to accede to exhuming her remains and conduct an autopsy.
There is a moral lesson here for poor people: beware of the fake compassion shown by political leaders who take advantage of such tragedies to burnish their image.

Children are usually victims of unethical dishonest adults, and schools are fertile ground for such occasions as the following op-ed shows. It describes a common incident in primary school where pupils are coerced into accepting raffle tickets to a lottery.

Rewrites of Jottings: Diogenes’s search
Mindanao Post 12 March 1997
Raffle, a lottery in which prizes are won by one or more of numerous persons buying chances, is considered an innocent undertaking.
Even the Church dabbles in it -- of course, in the name of charity.
So any group in society may exercise its right to engage in this legal activity, schools included.
Right?
And an educational institution, as part of the learning process and acquisition of knowledge, may ask their pupils to sell raffle tickets, so they can obtain practical experience in marketing, money math and cash management.
Neat and memorable lesson, right?
Now teach the art of peddling a product with a paltry price tag of Peso 0.99 (one centavo less than a peso to avoid the scrutiny of those nosy taxmen) but disposed and sold for a whopping Three Hundred Pesos. That’s the essence of superb marketing and salesmanship.
Right again?
But drat that confounded Diogenes, that crank philosopher whose spirit should have died with him 2,300 years ago. He must bring up a silly query about the semantics and rhetoric of school minions’ use of the phrase “considered sold” when the child clasps the raffle ticket, and makes some irking remarks about ethics on such a simple educational transaction.
So the Diogenes search for an honest man perforce wends on.

(Footnote: anecdotal tales of honest persons returning lost or forgotten articles to their owner is uncommon news. The write-up of the event rarely attributes the act to innate morality or whether it is prudence, the good sense of avoiding a charge of theft.)

Update November 2007
The odious practice in schools is a no-no but persists. This style of fleecing kids actually starts at every school opening in June.
“When we say free education, we mean it.” This is the stereotyped message the Department of Education emphasizes when it reminds parents to register their children for entry in Grade 1, citing no fees would be collected upon enrollment. But the howls of parents denouncing collection of fees upon registration are the rule not the exception.
With the connivance of Parent-teacher Associations, fees for the Red Cross, Boy Scouts and Girl Scouts though modest are collected during registration.

Additional P1-B fund for hunger

President Arroyo ordered the release of P1 billion more for anti-hunger measures as part of the government’s stepped up fight this year versus poverty. She ordered Budget Secretary Rolando Andaya Jr. to immediately release the amount during the Anti-Hunger Task Force meeting that she convened November 7, 2007 at the Manila Hotel.

The additional appropriation would be distributed to government agencies directly involved in the implementation of the government’s hunger mitigation program which seeks to address the unavailability or insufficiency of food as well as the lack of financial resources to purchase food items.

On the supply side, the measures include increasing food production through productivity programs of livestock, crops, mangrove and coastal fishery development, farm and irrigation, and enhancing the delivery efficiency of food items to consumers through the development of more farm-to-market roads, full utilization of the Roll-On Roll-Off (RoRo) ports and terminals, the construction of more Barangay Food Terminals and Tindahan Natin stores and the strengthening of school feeding programs.

On the demand side, mitigating measures include providing income to the poor through aggressive micro-financing programs, more employment opportunities, livelihood and training seminars and the development of other value-adding products such as coconut coir and virgin coconut oil; promoting good nutrition through social marketing information seminars; and managing the population through responsible parenthood.

Education Secretary Jesli Lapus, Department of Social Welfare and Development, said that under the Food for School Program, one kilo of rice is issued daily for 120 days to families who suffer from severe hunger and whose children are in pre-school and Grades one to six.

Global Call to Action against Poverty-Philippines (GCAP) disputed the economic growth trumpeted by the government does not trickle down but stays put with those who already have plenty. Despite the government’s trite rhetoric that eradicating poverty is its overarching goal, poverty continues to grow amidst the trumpeted economic growth.

“The government’s response to the calamity of poverty and hunger in the country is mere palliative to the root causes of the problem. Billions of pesos are put into these poverty and hunger mitigation programs that are ineffective and a waste of resources as evident in the government’s recently concluded 6-month war on hunger, which by the end of its duration witnessed the record rise in hunger incidence, with one out of four Filipinos experiencing hunger, and now one out of two Filipinos who see themselves as poor,” The Third Quarter 2007 SWS survey showed that “self-rated poverty” rose in all areas, except in the Visayas.

GCAP-Philippines cited the results of the 2003 Family Income and Expenditure Survey, which showed that the income of the richest 10 percent was still 20 times the income of the poorest 10 percent. The group pointed out that the net worth of the nation’s 10 richest individuals and families in 2006 was equivalent to the combined income of the country’s poorest 9.8 million households.

The administration refuses to admit that population growth is a key factor in the trickle-down effect -- economic growth below 7% is not enough to meet the demands of a booming population. The secretary of health admitted that family planning is not a priority of the administration

To be sure, government faces a formidable obstacle in mitigating poverty and hunger. For a start, managing the population through responsible parenthood faces strong opposition from the Catholic Church. For the Catholic Bishops Conference of the Philippines (CBCP), the natural family planning method is the only morally acceptable way to practice responsible parenthood and has called on legislators to spend on projects that would alleviate poverty and provide free education to poor children, instead of spending P1 billion for the purchase of contraceptives, CBCP president and Jaro, Iloilo Archbishop Angel Lagdameo said in a statement.

“We hope it is not true that Congress plans to appropriate P1 billion for the purchase of condoms, birth control pills and other ‘reproductive health’ products to control population growth. It if is true, we categorically object to it and instead strongly recommend that the one billion pesos be directly appropriated for hunger and poverty alleviation projects, as well as for free education of extremely poor children.” He said using abortion and contraceptive pills are against nature and God’s teachings. The Church teaches that using these items is wrong because they destroy the fruitfulness of human reproductive capacities.

President Arroyo ordered the National Anti-Poverty Commission (NAPC) to draw up solid programs to benefit the poor and to keep a tight watch on the implementation of anti-poverty projects at the grassroots, an obvious ploy since the NAPC is supposed to have been doing this all along. The President wants to blunt criticism that the benefits of economic growth are not trickling down to the masses, but even the President’s economic managers concede that amid the glowing growth figures touted by the administration, the absence of the trickle-down effect is glaring.

The other factor blocking the trickle-down effect is corruption and incompetence in all levels of government, depriving basic services and projects that could ease poverty and boost development. So the rich get richer and the poor gets poorer. But wait, Secretary Yap wants to hog the entire 1 Billion for his Department of Agriculture which includes the Black Hole known as the National Foods Authority.

One billion pesos is seemingly a huge sum that can feed many hungry mouths for weeks and alleviate poverty. But given the record of this administration for corruption and incompetence, we can expect a few more children despondent over poverty to end the misery by suicide.

A Call to Reform Agrarian Reform Program

A friend sent an email asking for support to his earnest proposal to alleviate poverty by means of giving free land to the landless. My reply:

I hold you in high esteem and value your friendship, so my comments will be candid. My opinions will be heavily biased along these lines:

1. Cynicism and distrust in the administration of Gloria Arroyo to the extent that all her decisions and programs are designed to protect her incumbency. Any benefits that trickle down to the masses are only incidental.

2. Skepticism in Socialism. Communism is the extreme form of socialism that in essence is classless political system, the political theory or system in which all property and wealth is owned in a classless society by all the members of that society. This system failed in the USSR and failing in China due to the Iron Will of the Oligarchy. In Cuba, the socialistic system is unique but no one bothers to coin a name for it. In its favor, Castroism provides cheap public health care, that’s why the U.S. hates Castro.

The favorite gimmick of Ate Glue is socialism wherein she doles out favors to Congressmen to block impeachment moves and insures her freedom to pander and shower political patronage to lift her despised image.

Charter Change (ChaCha) is required to reform CARP. Allow Ate Glue to tinker with the Constitution and all hell breaks loose. It would be unthinkable to tempt Ate Glue to create a Big Brother Orwellian type of government. That would be superheated Hell.

I agree with Doc Luis that our Education System needs overhauling. The fundamental problem, one that DepEd and parents won’t admit, is that not all students are created equal, some brighter than others, some dumber. In society, the medical truth of inequality is just as true, some are energetic, some lazy. Even the late Pres.Ramon Magsaysay admits that those who have less in life should have more in law (which contradicts the Constitutional mandate of equal protection of the laws). The principle of equality holds true only in political science, where all men are created equal.

The six basic contradictions of socialism: (as seen by believers in democracy and free market system)

1. Under socialism, everyone works, but there is nothing in the stores

2. There is nothing in the stores, but everyone has everything.

3. Everyone has everything, but everyone is dissatisfied.

4. Everyone is dissatisfied, but everyone is for the system.

5. Everyone is for the system, but no one works.

6. No one works, but there is no unemployment.

Sorry, dear friend. I ain’t buying.

Hunger Pangs

The poll group Social Weather Stations (SWS) reported that a new national hunger record was set early October 2007, when 21.5 percent of Philippine households had suffered from hunger, without having anything to eat, at least once in the three months previous to the latest SWS survey of Sept. 2-5, 2007. This new percentage consists of 17.4 percent who said they experienced it only once or a few times, termed Moderate Hunger, and 4.1 percent who said they experienced it often or always, termed Severe Hunger. The survey respondent is the household head, acting as spokesperson for the family.

As expected, the government went into denial mode. Yet, Secretary Duque, who supervises the National Nutrition Council and assigned by the President to monitor the hunger situation, was unaware that the Bureau of Agricultural Statistics (BAS) did a survey in mid-2006, and obtained a national hunger rate of 19 percent validating the SWS account of hunger, reported this to the secretary of agriculture January 2007, but never circulated to the Cabinet.

Hunger means lack of adequate nutrition, the foundation of good health and wellbeing. Poverty is the root cause of hunger. How can public policy be reformed to alleviate poverty? An obvious first step is to ensure the availability of cheaper rice, our staple food.

To do this requires a politically painful decision, the abolition of the National Food Authority (NFA) with its monopoly of the on international trade in rice and corn The NFA gets in the way of the free market.

Who are required to secure a license from NFA? All persons that engage in the rice and/or corn business whether commercial or NFA rice/corn.

What activities in the rice/corn industry are required to have a license from NFA? All businessmen engaged in the following activities are required to have a license: retailing, wholesaling, milling, warehousing, corn shelling, processing/manufacturing, threshing, exporting, importing, indenting, packaging, mechanical driving

Former Finance Secretary Cesar V. Purisima had a plan for major restructuring of the NFA to ease the weight of its impact on the government’s consolidated public sector deficit. He said NFA contributed P27 billion to the 2004 consolidated debt and the government loses an average of P2 billion a year in subsidies. Former Budget Secretary Emilia Boncodin, chimed in and said the NFA had long been a concern among budget planners but the executive decision had yet to be made on how to rationalize the functions of the NFA.

NFA primarily operates as a trading company that implements the government’s rice support program by buying palay from the farmgate and selling rice in strategic areas to smoothen the volatility in the prices. "It’s really intended to support the price of palay and rice but we have not been able to afford the amount necessary to actually accomplish this.I personally recognize that some form of subsidy is necessary but it can no longer be the kind of subsidy being implemented now," Boncodin said. "At the very least, the process has to be totally transparent, it can not just go through credit lines the way it is done now." Several legislative measures filed in Congress all designed to ensure that NFA would no longer be a burden on the national budget were not passed.

Earlier, the International Monetary Fund (IMF) said the NFA and other GOCCs should be prevented from shifting the burden of fiscal adjustment to the National Government.
The IMF said the National Government should avoid taking on more fiscal burden from other government corporations.
Abolish the NFA and consumers could benefit from the entry of lower prices of imported rice and corn. Besides, the NFA is a huge financial burden incurring huge losses in the order of P2 billion per year. These funds could be used instead as subsidy for those rice and corn farmers unable to compete with imports.

Lack of resources makes it difficult for the country to achieve its goal of being self-sufficient in rice and do away with costly importations by 2010.
Aside from feeding a population that grows 2.3 percent annually, the bid for rice self-sufficiency is also intended to eliminate expensive rice imports that cost government about P28 billion annually.

Agriculture Secretary Domingo F. Panganiban announced early 2006 that self-sufficiency in rice is achievable by 2009. "There is a clear roadmap on how to boost rice production and even achieve a surplus by 2009 or 2010, but all that is hinged on the injection of all necessary inputs required to make the plan work," said an official of the Ginintuang Masaganang Ani (GMA) rice program.
The ambitious dream hinged on several iffy conditions: if funds were made available to rehabilitate the dysfunctional 50% irrigation facilities and add new systems. The other major obstacle is the plan demands the use of the so-called golden rice hybrid which costs six times the price of inbred seeds A former DA official also pointed out that the "age-old" problem of lack of support infrastructures has yet to be faced squarely by policymakers.

What we don’t know is that talk of food self-sufficiency, mainly rice, is turning into a myth. And it is hurting us.

The Philippines, a net importer of rice for decades (sporadically before that), importing 191,000 MT in 1984. We bought 934,000 MT in 2003 of which 646,000 MT were purchased by the NFA and 229,000 MT purchased by farmers, allowed for the first time under the Farmers As Importers (FAI) program to import rice. The importation of 600,000 MT of rice in 2004 was planned, 984,000 actually imported. In 2005 imports doubled to 1,805,000 MT and in 2006 dropped slightly to 1,622,000 MT. Vietnam was the source of most rice imports starting in Year 2000.

A former Department of Agriculture Secretary announced "the government was considering a ‘free-for-all’ policy on rice importation by allowing the private sector – mainly farmers and traders – to bring in rice in unlimited volumes. The President wants as much as possible to lift the limits imposed on rice imports such as volume restrictions”. But, this could be another bureaucratic ruse that will allow politicians to oblige their favorite patrons who have cartelized the rice trade, depending on the implementing rules. The FAI program raises fears that this will backfire as farmers discover importing is more profitable than farming and convert their CARP-acquired lands to non-farming use.

An economist from the International Rice Research Institute (IRRI) said that maybe self-sufficiency requires more investment than it is worth. "Despite playing a key role in Asia’s Green Revolution," David Dawe said, "the Philippines may never attain rice sufficiency and could be better off importing cereals." He added, “self sufficiency has a cost if you want to do it and that cost is borne by the poor. Dawe said arable land is in short supply in the Philippines where only 30 percent is planted to rice. The soil itself is "more suited to growing coconuts and maize" and lacking the major river systems and rainfall patterns available for the heavily water-dependent crop in such areas as Bangladesh, Thailand and Vietnam. "God made that land for growing rice," Dawe said.

Dr. Rolly Dy of the University of Asia and the Pacific agrees with Mr. David Dawe
Dr. Dy points out that small farmers prefer planting rice no matter how uneconomical. For one, it is not perishable, it can be stored and it can be eaten if unsold. The politics of rice has, Dr. Dy believes, contributed in part to the neglect of other sectors and industries such as corn, coconut, sugarcane, fruit trees, aquaculture, oil palm, etc.

Still, while it is important for us to make sure we always have enough rice to feed our people, it is also equally important to make sure that it is affordable. The high cost of rice is a burden to the budgets of poor families. For those consuming at least one and a half 50-kg bags of rice a month, rice purchases can be as much as a third of take home income. It also has a strategic implication to the economy. "High food prices will drive wage demands. High wages will make labor-intensive industries uncompetitive. As a result, investors prefer to locate in low wage countries, assuming all other factors constant.

According to noted economist Dr. Bruce Tolentino, retail rice price in Vietnam is only half that of Philippine rice because of the higher yield and lower logistics cost. NFA imports of cheap rice are sold to match the higher-priced locally produced rice to prevent killing the local rice industry. For this reason, consumers have paid a higher price — double that of neighboring countries for over a decade. In effect, consumers subsidize the high cost of rice. A hidden tax, if you will. Our politicians have never thought of this problem in this light. This is why we always hear platitudes about the need for rice self sufficiency.

In yet another staple, NFA stats show yearly corn imports since 1980, except for 6 years of no importation.

Alleviation in 2008

In October 15, 2007 PGMA bares P10-billion allocation for poverty alleviation in the 2008 budget. Highlighting the close interconnection between poverty and human rights, President Gloria Macapagal-Arroyo said her administration will mobilize P10 billion in the government’s 2008 national budget to eradicate extreme poverty.

The poverty alleviation agenda is presently limited to the school feeding program that provides a kilogram of rice to each school child as an inducement to attend school. An urban poor spokesman wailed that the war on hunger declared by Gloria Macapagal-Arroyo last March allocated one billion pesos spent with no accomplishments to show. Last September, without subjecting the previous allotment to accounting and assessment, there was the announcement that another P3.3 billion will be set aside to fund the "Food for School Program."

Helping improve the needy's nutrition

Lack of fresh fruits and vegetables can cause serious health problems, especially for the poor. We often hear about how lack of access to recommended cancer screening can delay diagnosis and treatment of cancer among the nation’s poor, worsening likely outcomes. However, studies also suggest that the environment in which the poor live may promote lifestyles that increase risk of developing cancer rather than protecting against it.
A diet high in fruits, vegetables and whole grains and low in fatty meats and empty nutrient snacks is a vital step to lower cancer risk. Yet foods most available to those who live in poverty may be just the opposite.

Lack of refrigeration
Low-income residents are also more likely to have no or limited refrigeration and cooking equipment. When access to fresh produce is limited, and facilities for storing and preparing it are also limited, people are more likely to eat high-calorie, low-nutrient snack foods. One study among urban poor concluded that education programs were needed, not so much to kindle desire for healthful foods, but to help people deal with lack of refrigerated storage and cooking equipment.

Families with limited income are also more likely to choose fatty cuts of meat and poultry, which are usually cheaper than leaner cuts, salt-preserved food that risks problems in kidneys, blood and heart, and smaller amounts of fruits and vegetables. Children’s dietary staples are often nonperishables, such as salty snacks, candy and soft drinks. Simply increasing the availability of healthy food may increase its consumption.