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 Canva.com

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 Canva.com

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, https://commons.wikimedia.org/w/index.php?curid=39962360

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 (https://creativecommons.org/licenses/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 (https://creativecommons.org/licenses/by-sa/3.0) or GFDL (http://www.gnu.org/copyleft/fdl.html)], via Wikimedia Commons
And this is Amsterdam:

Cyclists in Amsterdam, The Netherlands by Steven Lek - Own work, Public Domain, https://commons.wikimedia.org/w/index.php?curid=10554436

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 https://www.flickr.com/photos/analogica/8661000014 [CC BY-SA 2.0 (http://creativecommons.org/licenses/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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August 3, 2017

Free Tuition Fee in SUCs?

Photo by Aerous (Own work) [CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons

Budget Secretary Benjamin Diokno expressed his opposition for granting of full subsidy to tuition fees in state universities and colleges (SUCs). According to Diokno "... it will cost us something around PHP100 billion, hindi po kaya ng gobyerno yan". He added, "it was not in the 2018 budget of the president, in the absence of any law we cannot appropriate money for free tuition".

Ernesto Pernia, National Economic Development Authority (NEDA) Chief, pointed out that  most of the beneficiaries of free tuition will come from able families; those who have the capacity to pay tuition fee (source: GMA News - We can't afford free tuition SUCs - Duterte economic Manager).

There is no doubt that free tuition fee will be a big help to lower and middle class family.  For lower class it will help them send their children to college; for middle class it will lower  their expense and increase their disposable income (income you can use in your daily expense like food and etc). It is understandable that there will always be a challenge in allocation of government resources; Diokno highlighted that PHP100 Billion is too big for the government and that it is not included in the budget. This challenge I guest requires more tactical rather analytical solution. As a proposal, we can tap private institution and raise funds if we want to provide free tuition fee to the public.

While we have the guts to asked for free tuition, it should be noted that the priority of this project should be the poorest of the poor. What is evident today is that the student selection process of SUCs is based on intelligence (IQ) rather than family income. Thus, if the government really wants to provide college to the poorest of the poor, it should offer student sits of the SUCs directly to the poorest of the society. The government should identify those poorest family and give them directly the scholarship regardless of their intelligence level. Most of poor kids lack nutrition, good environment, and access to information; it would be false to assume that most of these student are intelligent, thus if intelligence will be the main basis to enter to SUCs, most of the poorest of the poor will fail to qualify.

Overall, free education will be beneficial to the economy, but it should be provided to the poorest of the poor to help them improve their economic status.

If you teach an intelligent student to become intelligent, he becomes more intelligent; if you help an ignorant kid to become a student; he becomes intelligent. Who should you teach?

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July 24, 2017

Thoughts: Second State of the Nation of President Duterte

Photo by Presidential Communications Operations Office [Public domain], via Wikimedia Commons

I have watched the second state of nation of President Rodrigo Duterte and I must say that it went well specially when it comes to highlighting the national sovereignty and political & economic challenges in the country. I subscribe to the idea that there are lot of things to be done and that the patience of the public is now being challenge. When it comes to Martial Law, I still believe that “you cannot impose martial law forever in Mindanao”, thus it should be time bound, and should not violate the democratic rights of the public. Yet, I think that the public sees that there is a legitimate reason why Martial Law is being implemented in Mindanao right-now.

In this present age, radicalism will not be the solution to clustered problems being faced by the country. We need to open our eyes that the problems we are seeing now is the result of the past and the only solution is to be part of the solution. We have to accept that the past government has failed create an inclusive development (even though each administration has its own economic projects and contributions) and the only thing we can do right now is to strive hard to find solution to our own economic problems.

Filipinos are patient (resilient) this is the main trait that has made our society survive. We need to be part of the solution instead of being part of the problem; today is the day (or maybe in the future) that each every Filipino will realize that he or she has a role in solving the problems of the country. The society should have realize by now that the government cannot do everything (but the government can help). The only way to a true development lies on our hands, the role of the government is to support the society in all its power.

What I said is idealism and opinion, but I believe that we have to act now rather that wait for the government solve our problems – this is the reality. But I understand as well that each every Filipino has the right to demand from the government what is due for them.

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