May 17, 2018

Why Federalism?

Philippines current type of government is classified as Unitary State, which means that the President serves as the head of the state (nation); the local government units (LGUs): 

· Provincial/Regional Governor 

· Provincial/Regional Vice-Governor 

· City/Municipal Mayor 

· City/Municipal Vice-Mayor 

· Barangay Captain/Barangay Upuan 

are all reporting to the president or under general supervision of the President. The President is also the head of the armed forces of the Philippines. The President also selects the head (secretaries) of the cabinets (e.g. Department of Tourism, Department of Agriculture, Department of Budget and Management and the likes); the Vise President, is usually (not always), assigned a position in the cabinet. Thus, the power and control of the President (executive power) trickles from top to bottom, starting from cabinets, military, police (under DILG cabinet), and LGUs from governor to barangay captain. The Executive power is checked and balanced by legislative (senate and congress) and judiciary (supreme court). 

In a Unitary State, the power is centralized or concentrated to the national government (the President has the say on everything which can be contradicted by legislative, and judiciary). So, what is the difference between Unitary Government and Federal Government? Exploring Federalism (Elazar 1987), says that “if a political system is established by compact and has at least two levels of government, each endowed with independent legitimacy and constitutionally guaranteed place in the overall system and possessing its own set of institutions, powers and responsibilities, it is deemed to be federal.” To simplify, for a government to be Federal, it must have at least two levels of government, meaning, there can be two or more government bodies in a single country; in our case today, what we have is a single government; local government is connected (not separated) to national government. Also, being Federal means that each government body in a country can have its own set of institutions, power and responsibilities. 

To understand Federalism thoroughly, let us examine concrete example of Federalism. United States (U.S.) is one of the countries who has successfully implemented Federalism. In U.S., the Federal Government is prohibited from exercising any power over the states, which means that states handle most of the government issues within their jurisdiction. If Federalism will be implemented in the Philippines, most likely (depending on the newly drafted constitution) the national government which is headed by the president, will have limited or no control of the regional governments. regional governments will have an independent power to resolve its own government issues. 

In U.S., state governments are not authorized to print currency, they generally must raise revenue through either taxes or bond. If adopted in the Philippines, budget of the regional government will depend on its independent tax collection, unlike in the Unitary Government where budget allocation is done at the national level under the supervision of Department of Budget and Management (DBM). 

Because Federalism fosters independent governance, each regional government will have the ability to change tax rates depending on the needs of the region; in U.S., tax rates differ per state (for example: Sales Tax of Louisiana (10.02%), Tennessee (9.46%), Arkansas (9.41%), Washington (9.18%), and Alabama (9.10%) source: If this is the case, it is possible that under Federal Government, tax rates in Metro Manila would be different in Davao City and Cebu City. 

In U.S., each state has its own written constitution, government and code law. Thus, it is common for states in U.S. to have differences in laws. The implication of this in the Philippines is that, under Federalism, each regional government can create its own constitution and laws. 

Under the Federal Government of U.S., executive, legislative and judiciary remains independent; the President remains the Head of the State. 

This write-up only aims to give an idea of what Federalism is and how it is being implemented in U.S. With regards to Federalism that is being pushed in the Philippines, its application and implementation will depend on the newly drafted Philippine Federal Constitution. 

It is completely evident that the difference between Unitary and Federal Government is in the center of power. Unitary Government centers the power to the national government (the President) while Federal Government decentralizes or distributes the power to the regional (or state) government (the Governors). 

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May 10, 2018

Stopping TRAIN Law will not be Enough to Curve Inflation


Some Philippines government official expressed their concern regarding inflation, suggesting stopping Tax Reform for Acceleration and Inclusion (TRAIN) Law to lessen inflation. TRAIN Law seeks to lower personal income tax, simplify estate and donor’s tax and VAT, increase excise tax for petroleum products, automobiles, sweetened beverages. 

Before anything else, what is the root of inflation in the Philippines today? The root of inflation in Philippines is strong consumption of the public and private sector; and strong consumption is rooted to strong economy (6.8% GDP Growth in 2017). Thus, it is highly probable that what we are experiencing today is a “good inflation”. In layman’s term, people have money to spend from earnings from their jobs, businesses, and retirement money and government has money to spend from tax collection, causing demand for goods and services to increase; with the assumption that supply of goods is not increasing as fast as demand, prices will increase. Eventually, when price increased, some people will shift their consumption - others will lower their consumption while some will shift their preference from superior good to inferior good; the shift will slowly normalize the inflation rate. 

There is what we call in economics “cost-push inflation”, which is fueled by increase in overall price level caused by an increase in cost in an ‘imperfectly competitive’ market (Nafziger). I would define a “good inflation” as something triggered by a ‘perfectly competitive’ market (prices are increasing because demand is pushing the prices up), unlike “cost-push inflation” which is mostly triggered by price controlling cartels and monopolies. “cost-push inflation” should be the one monitored by the government, with todays inflation news hype, big companies and some retailers might use the news as an excuse to increase their prices. My observation is that Philippines inflation is closely triggered by what we call “demand-pull inflation”, which is defined as increase in the overall price level resulting from consumer, business, and government demand for goods and services in excess of an economy’s capacity to produce (Nafziger). On the other hand, prices can also increase when supply of goods is decreasing (shortage), but with current economic whether in the Philippines there is no overall shortage of goods; retailers are expanding businesses in the province and online shopping continues to gain momentum. 

My suggestion is that government should closely monitor the prices of basic goods and services such as water, energy, oil, food and rice, telecom, and transportation; impose the right sanctions to price manipulators. In 1998 when Asian Financial Crisis hit the Philippines, inflation rate rose to 9.33% (2006=100) on average; In 2008 US Financial Crisis, Philippines inflation rate rose to 8.16% (2006=100) on average; From Jan-Mar 2018 average inflation rate is 4.43% (2006=100), 100% lower compared to crisis years, and significantly far from Hyper Inflation (20% monthly inflation). 

As economy grows, inflation will increase, and government revenue will surely follow the trend; it would be a tremendous help to the people if government will use the revenue to create jobs for the bottom 30% of the society.

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April 18, 2018

Philippines Economy Risk of Overheating Containable


World Bank (WB) warned that even though Philippines is one of fastest growing economy in south east Asia, it faces several domestic risks such as overheating, higher inflation and climbing fiscal deficit (source: philstar). 

The question about the comment of WB is that, what do you mean by overheating? The term overheating is not use in economics (when I was a student of economics, I’ve never use this terminology) because it is ambiguous (not specific). WB, being leader in the economics industry, if I may suggest, should be careful in using terminologies, as it may trigger public disturbance. 

With regards to inflation rate, it is very observable that Philippines monthly inflation rate is on upward trend from December 2016 to December 2017 at 1.30% to 3.30% respectively (data source: PSA). It is undeniable that prices of goods and services in the Philippines are increasing under short term perspective. 

Philippines Monthly Inflation Rate (2006=100)

But looking at the long-term side, we would observe that Philippines 2017 inflation rate is not so high compared to previous years (we will see a down trend). This signifies that inflation is still containable, but prices of goods could go up further in the next months (short term) as demand for goods and services increase (due to increasing income of the people). But as supply matches demand (more businesses produce products), prices will go down leading to decline in inflation rate (this is the long-term perspective). Thus, rising inflation in the Philippines could be an opportunity for businesses, as this signifies strong consumer spending (rather than shortage in supply). 

Philippines Yearly Average Inflation Rate (2006=100) 

In terms of government debt, as of Feb 2018, total debt is P6.8 Trillion, 65% is domestic debt while 35% is foreign debt (source: PSA). I would not worry much about government domestic debt in the short term since most of the maturity are long term; of P 4.4 Trillion domestic debt 75% is classified long term (P3.3 Trillion). Foreign debt on the other hand amounted to P2.4 Trillion, 12.6% of Gross National Product. While it’s very clear that government debt is a huge amount, this could be compensated by increasing tax collection. Bureau of Internal Revenue (BIR) reported P1.779 Trillion tax collection in 2017 which is 12.92% higher compared to 2016 (source: businessworld). Assuming that tax collection will continuously increase in the next 5 years, Foreign Debt will significantly decline in less than 5 years. 

It’s good to remind a country about the basics of monetary and fiscal policy, and I must agree that for Philippines to be one of the Tigers of Asia, it should be able to manage the economy very well; but right terminologies must be use.

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April 17, 2018

Facebook Fake News in PH: Who Should Screen?


Thursday April 12, Facebook announced its partnership with Vera Files and Rappler as third-party fact checkers in the Philippines (source: Rappler). The announcement came, after reports of Facebook’s data breach by Cambridge Analytica; were estimated 87 million users’ personal data were collected (source: CNN); with estimated 1.2 Million of those data are Filipinos (source: Inquirer).

The Philippines government expressed agreement regarding Facebook’s initiative to strengthen its fact checking effort thru third party organization, but it disagree with Rappler and Vera Files being appointed as fact checkers in the Philippines. Roque (Presidential Spokes Person) pointed out that the two groups are accused of partisanship (bias opinion in favor of a particular cause) (source: Inquirer).

This topic is challenging because you don’t want other people to tell you that your stories are fake, just because they have the power to say that they are fake. Moreover, you don’t want a fake news in your timeline. The question here is a balance between freedom of speech (in words) and the truth. There is also a challenge between identifying a difference between opinion and fake stories. This problem is not new in those people who have been in the internet in the past 10 years, others just know how to tell what is fake and what is not. You must be intelligent in order screen the incorrect information.

Facebook should be careful on this, yes there are studies that shows that fake news can curve democracy; but, controlling the stories that promotes democracy and openness (which can be perceived as fake based on judgement) is a sign of autocracy.

I think the best way to prevent fake news from spreading is by educating the users about fake information. Fake information does not only exist in the Facebook, it exists in the whole internet, and in the real world. False information also exists in institutions you would not imagine telling lies – news organizations, books, journals, marketing ads, and many more. The only defense to false information is to have a questioning mind – and not to be ignorant.

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April 13, 2018

ICC Should Not Intervene with PH Government

Law from

The International Criminal Court (ICC) continues to conduct preliminary investigation against President Duterte’s war on drugs; Duterte retaliates by saying that it will have the members of ICC arrested in the Philippines if it continues to investigate government’s anti-illegal drug campaign (source: ABS-CBN News). As of March 20, 2018, 4,075 individuals have died out 91,704 anti-illegal drug campaign operations in the Philippines (source: PDEA).

I would say that ICC should not intervene with Philippines government, first, Philippines is a sovereign country, we have our own government; we have a judicial system to investigate matters that violates the law. On my opinion, ICC should focus on countries which has no stable judicial system (less developed countries). If the President of the Philippines has committed a crime, it should not be the ICC to decide if the president is guilty or not; the people of the Philippines should decide through the intervention of local justice system, since the crime was committed against the Filipinos.

Philippines judicial system is perfectly functioning, we have cases more than drug killings that our judicial system has resolved. Our judiciary has jailed powerful people: presidents; senators; congressman.

The people of the Philippines will surely appreciate ICC’s thoughtfulness with regards to human rights of the Filipinos, but if the thoughts threatens the sovereignty of the country, by being controlling rather suggestive, and makes the country incompetent in the eyes of other nation; then ICC should start thinking if what they are doing is helpful to world.

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April 12, 2018

Why is Stock Price is Swinging Up and Down?

Pendulum from

There was a chapter in the book “Thinking, Fast and Slow” written by Daniel Kahneman (published 2011), that talks about a phenomenal event that is very observable in stock market, the “Anchoring Effect”. According the Kahneman, anchoring “occurs when people consider a particular value for an unknown quantity before estimating that quantity”. 

Anchoring happens in stock market when we accept the price of a stock based on the momentary price that we see on the screen without further validation if the price of a stock is reasonable. That is, the present price that we are seeing is serving as the anchor. For example, some stock players buy stocks without comparing prices or looking at financials of the company. It might happen that you have bought a stock at higher price with lower value (the rational choice is to buy a high value company at a bargain price). If you bought company A at higher price compared to company B; and company B’s asset and income is higher compared to company A, that means that you have made a wrong choice.

Easy illustrated than practiced in the real world, preventing one’s self to be anchored on the stock price is difficult. That is the reason why some people lose their money on stock market. They were anchored by soaring prices believing that it will still go up. To combat this phenomenal anchoring effect, we should ask our selves if the price of stock is right. And if you find your self in doubt, don’t invest – make sure first that the price is right by doing research. If you still doubt your research – don’t invest. Remember that worthwhile investment should be based on sound research.

Daniel Kahneman is a well known for his work in behavioral economics in which he was awarded a Nobel Memorial Prize in Economic Sciences.

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April 2, 2018

Philippines Economy in 2018 – Pushing the Limitations

The Residences at Greenbelt Makati by Judgefloro (Own work) [CC0], via Wikimedia Commons

Last year was an exceptional year for Philippines, the economy is still in the high point, registering an economic growth of 6.8% (GDP 2017p). Yet, the growth is seen to be centered on the middle and upper class of the society. The question arises, how do we include the bottom in the economic development? This is crucial question because the bottom can be the cause of problems of society (crime, cyclical poverty, over population and the likes).

Create Jobs for the Poorest of the Poor

We all know that the start of the problem in an economy is unemployment. Unemployment (if you don’t have a business) means you don’t have money to spend to buy food & beverages, to pay for house rental, water & electricity, to pay for transportation, and to use other services. That is, when basic needs are not met, a person could possibly shift to survival mindset and could possibly commit a crime. This coincide with Adam Smith statement that, no society could truly be happy with a portion of its population down to poverty.

What we want to prevent is the poverty cycle; that is when the poorest of the past are still the poorest of today. The solution is to give them jobs, jobs that are easy to do, jobs that doesn’t require special skills – such as construction work, road works, community works and the likes. Work in agriculture sector doesn’t also require high skill, if we teach poor people to plant they would probably earn money. The crucial investment for agriculture employment is land, seed, and irrigation.

Improve Security

We have learned last year 2017, that even though there is a massive effort to curve crime and illegal drug use, the bad guys are still there and doing their usual routine. There is much more to do when it comes to ensuring the safety of people on the street. On the other side, Philippines government is trying to boost the morale of police officers by increasing their salary.

Market Philippines Tourism Around the World

There is no doubt that Philippines has the best beaches around the world backed by a tropical climate. Surely, if all foreign travelers, looking for white sands, knows that it’s cheaper to have fun in our country then tourists arrival will hit its peak. Tourism needs to be one of the priorities of the government since it creates income to small businesses.

Improve Mass Transportation

As more people flocked to cities of Metro Manila, more and more will demand for transportation. The daily traffic on the streets of Manila is a normal scenery, while one of the solution is to add and expand roads and bridges, this would probably take long years before being implemented. Improving mass transportation like trains (MRT, LRT, PNR) would surely benefit the public, this should not take too long since we have the train rails in place.

Improve Exports and Manufacturing Sector

Manufacturing sector not only create jobs, but it also increases our foreign reserve (Dollars) if it engages in exporting of goods and lessens our imports if it engages in domestic selling. As we demand more goods from abroad (cars, cell phones, laptop and, etc.) we would also need to have enough reserves of foreign money. This is very important since this affect the value of our money (foreign exchange). If more countries demand for Philippines goods (thru manufacturing) and services (thru BPO and OFW) then we will observe that our currency will be much stronger compare to other foreign currency (e.g. USD vs. PHP); we will be able to convert Peso in higher amount of foreign currency. If we don’t have enough supply of foreign currency, that means that there is no much demand for our goods and services from abroad, that would mean that we will have difficulty of accessing foreign goods and services in the long run.

Philippines 2018 GDP Forecast

Philippines economy is projected to hit 7% GDP growth this 2018. The numbers is set to high point since the country has many rooms for growth. Private sector businesses are increasingly expanding their business locally and government is set to disburse a budget of PHP 3.767 Trillion (USD 74.79 Billion) this year.

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November 28, 2017

Philippines: Education or Learning?

Photo by BigBrotherMouse - Own work, CC BY-SA 4.0,

Much of the past economic policies of the world have focused on education, yet, there is a bigger word that needs to be focused now - learning. The question arises if education in the Philippines (and other developing countries) really provides learning or to put it in other question, does a student know how to apply his/her studies after graduation? After years of studying, can a student apply what he/she learned from college? Can a college graduate create or build something after graduation? Did the student learned what he/she studied?

The question above by-passes the ability of a college graduate to get a clerical low paying job - it focuses on the ability of a college graduate to work on high skilled profession and get a high paying salary or be able to create business and help on generating employment. Many students finished college not knowing how to use what they learned; this is considered unfair and unethical, it feels like you have spent many years of reading and writing and knowing nothing at all. Universities and colleges should take full responsibility of ensuring that all graduating students are knowledgeable and skillful.

Easy imagined than implemented, putting rationality on education should be the top priority of every educational institution in the Philippines (and other developing countries). This means, educating and equipping students with knowledge and skills that is usable in the real world; allowing students of every school of thought to create something while they are still under the incubation of universities and colleges. Thus, a college or university should never let go of a student who is assessed to be ill equipped of knowledge and skills (but there are exception to this, students who wish to leave the university or college has the right to do so).

This brings us to the end that there should be a comprehensive assessment tool to test the knowledge and skills of a graduating college student. The tool or program should be able to tell if the student can apply his knowledge and skills in solving real world problems. The tool should be able to unleashed the creativity of the student in solving real world problem. The student should be able to solve, build, and create.

Imagine if we are not only highly educated but also highly knowledgeable and skilled.

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October 11, 2017

Do you want to be like Amsterdam? Why we should promote cycling in Philippines

Cycling Amsterdam by Alfredo Borba (Own work) [CC BY-SA 4.0 (], via Wikimedia Commons
Amsterdam is home for 1.1 million population with over 1 million of it's population using bicycle as means of transportation. Amsterdam is the cycling capital of the world classified as developed city (capital of Netherlands). This significe that one country can be developed and used bicycle as major source of transportation (take Japan also as major example).

This is how road in Edsa Manila Philippines look like:

Heavy traffic on the EDSA in Makati City by Scandi (Own work) [CC BY-SA 3.0 ( or GFDL (], via Wikimedia Commons
And this is Amsterdam:

Cyclists in Amsterdam, The Netherlands by Steven Lek - Own work, Public Domain,

The benefits of cycling in the community is enormous.

1. Bicycle is an exercise tool, it helps you burn calories, keeps you fit while bringing you to your near destination.

2. Using bicycle reduces carbon foot prints; when you are using bicycle it means that you are not using a car. We cannot remove cars on the roads, but when you want to buy something in the grocery store, does it make sense to use bicycle instead of car? It would be really amazing to see cities filed smooth moving bicycle instead of traffic congested cars.

3. Owning a bicycle is cheaper compared to car - it reduces the pressure of owning a car which is expensive. This means that by owning a bicycle you can be mobile just like cars (well cars a very comfortable for long rides, while bicycles are good for short distances).

To rip the benefits of cycling, the government and private sector should start to invest in cycling friendly roads; and who knows we might be the next cycling capital of the world.

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August 8, 2017

Tactical Approach to Funding Free Education Law in the Philippines

Photo by [CC BY-SA 2.0 (], via Wikimedia Commons

Now that the free education law is now approved, the next question arises, how do we fund it? I think the first thing to do first is to have a specific computation (is it really PHP100B?), afterwards tap the budget of other government agencies that does not perform, then turn to private sector. The government can issue bonds related to this project, development banks can help as well since this is a legitimate project. Next is to improve tax collection system, this law now serve as pressure that government should collect every cent of the tax. Other ways is the improve the expense and income efficiency of every government agencies; since the government needs additional budget, expense should be accounted properly and raise the standard of government service to generate more income. In general we have government fund, the bank fund, and the crowd fund – combined it all and we can raise money. And one more thing – lessen the corruption.

To do the math, we are 100,000,000+ population, 100B/100M = 1,000; which means each and every Filipino can contribute P1,000 per year or P83 per month or P2.77 per day to raise 100B – which is feasible.

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