Government and Taxes

Tuesday, April 23, 2024

BWorld 698, Improving state revenue and boosting FDIs

Improving state revenue and boosting FDIs
April 16, 2024 | 12:02 am

My Cup Of Liberty
By Bienvenido S. Oplas, Jr.
https://www.bworldonline.com/opinion/2024/04/16/588160/improving-state-revenue-and-boosting-fdis/

Mid-April of each year is the deadline for the filing of income tax with no penalty and many taxpayers beat the deadline, so government revenues are highest in April each year. I checked the revenues for the first two months of 2024 and compared them with the same period in 2021 to 2023.

Practically all major sources of revenues increased in that period, except for excise tax collections by the Bureau of Internal Revenue (BIR), and fees and charges by other agencies (see Table 1).

Among the related reports in BusinessWorld last week were: “Budget deficit projected to narrow further this year” (April 10), “Tobacco growers: Illegal vapes threatening farmer livelihoods” (April 14), and, “BIR releases implementing rules for Ease of Paying Taxes law” (April 14).

The illicit trade in tobacco products, cigarettes, and e-cigarettes and heated products is the major cause of the decline in excise tax collections. Congressman Joey Salceda made an estimate last October, saying that some P60 billion/year in tax revenues is lost due to tobacco smuggling and illicit trade.

It seems that the key government agencies in charge of controlling smuggling and illicit trade like the Philippine Coast Guard (PCG), the Philippine National Police (PNP), the National Bureau of Investigation (NBI), local government units (LGUs), the Bureau of Customs (BoC), and even the BIR are not doing enough to control this major tax leakage, even if their agencies and LGUs’ yearly budgets rely on more taxes.

Perhaps cabinet-level inter-agency action among the Department of Finance (with the BoC and BIR), the Department of the Interior and Local Government (with the Philippine National Police and the LGUs), the Department of Transportation (with the coast guard), and the Justice department (with the NBI) is needed. The budget deficit at around P1.5 trillion/year and public borrowings have been more than P2 trillion/year since 2020 — this should be enough reason for agencies to control tax leaks.

THE EASE OF DOING BUSINESS

On the ease of paying taxes, Finance Secretary Ralph G. Recto said that “the filing and payment of taxes is now easier than ever. (Taxpayers) have an indispensable role to play in our nation’s progress… These revenues will fuel our economic engine towards Bagong Pilipinas — lower poverty rates; increased infrastructure and human capital investments; more quality jobs for our people.”

You are correct there, Mr. Recto. The ease of paying taxes, ease of doing business, and the quality of public infrastructure are among the concerns of investors, local and foreign.

Last week, a new paper, “How to change a constitution by hand-waving (Or, the unbearable lightness of evidence in support of lifting foreign ownership restrictions)” was released by nine faculty members of UP School of Economics (UPSE) and UP Los Baños (UPLB), including two of my former UPSE teachers Noel de Dios and Orville Solon, my former boss Florian Alburo, and undergrad contemporaries Aleli Kraft and Oggie Arcenas.

The authors argued that “evidence shows that lifting equity restrictions is not a necessary condition for explaining the inward stocks of foreign direct investment (FDI) in the cited countries, including the Philippines. While restrictive equity rules may represent a hindrance to FDI, their potential effects are small and sometimes insignificant in comparison to other explanatory variables such as the ease of doing business, physical infrastructure, and perceived corruption.”

They presented several tables showing, among others, that the FDI Regulatory Restrictiveness Index (RRI) is high in the Philippines compared to Vietnam and other ASEAN countries. They did not show the actual level of FDIs through time, so I checked the numbers.

Countries with high GDP size at purchasing power parity (PPP) values also have high levels of FDI inward stock (inflows minus outflows through time). And speaking of infrastructure, electricity generation is a big factor, with considerations of whether investors can avoid occasional blackouts and pay low electricity prices. Among East Asian nations, the Philippines is below-average in GDP size, in FDI in-stock, and in power generation (see Table 2).

So, the UPSE economists are correct in saying that there are many other factors aside from Constitutional restrictions that limit the entry, if not scare away, potential FDIs. Especially when you consider that the government is trying to attract more public-private partnership (PPP) involvement in many infrastructure projects.

Last week, on April 12, the Investment Coordination Committee-Cabinet Committee (ICC-CC) held a meeting presided by National Economic and Development Authority (NEDA) Secretary and ICC-CC Co-Chair Arsenio M. Balisacan. Participating in the meeting were Department of Budget and Management (DBM) Secretary Amenah F. Pangandaman and Special Assistant to the President for Investment and Economic Affairs Secretary Frederick Go, and Finance undersecretaries who represented Mr. Recto who was still in Washington, DC.

The ICC-CC officials discussed PPP projects for the approval of the NEDA Board, plus guidelines on the approval of national PPP proposals following the PPP Code Implementing Rules and Regulations.

Other officials I saw in the meeting photos were DBM Undersecretary Joselito R. Basilio, PPP Center Executive Director Cynthia C. Hernandez, Finance Undersecretary Joven Z. Balbosa, NEDA Assistant Secretary Erick Planta, and Monetary Board member Romy Bernardo.

Ms. Pangandaman and Mr. Basilio are persistent in their views that public expenditure should be focused on improving the overall productivity of our people via soft and hard infrastructure programs. They are correct. The latest labor force data showed that our unemployment rate in February declined again, to only 3.5% of the 50.75 million Filipinos in the labor force. This is lower than the February 2023 unemployment rate of 4.8%. Public spending should focus on that important goal of more job creation and reducing the unemployment rate in the country.
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Macroecon 26, Trade, FDI and "strong" US$

Reposting my recent posts in Oplas Perspectives viber group. Enjoy.

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Sunday, April 21, 2024

BWorld 697, Philippine Energy Plan won’t ensure security

Philippine Energy Plan won’t ensure security
April 11, 2024 | 12:02 am

My Cup Of Liberty
By Bienvenido S. Oplas, Jr.
https://www.bworldonline.com/opinion/2024/04/11/587197/philippine-energy-plan-wont-ensure-security/

The Philippine Electric Power Industry Forum (PEPIF) 2024 with the theme “Powering a sustainable and secure energy future for the country” held at the Iloilo Convention Center on April 5 was a great success. Audience-packed, information-loaded and networking-rich, it was sponsored by the Independent Electricity Market Operator of the Philippines (IEMOP). Congratulations, IEMOP.

The opening remarks were given by Iloilo City Mayor Jerry Treñas. It was a warm, friendly and challenging message. Warm because he thanked the participants from Metro Manila and other provinces for flying to Iloilo and spending their money there. Challenging because he narrated the huge inconvenience of power blackouts the city and the entire province of Panay and four other provinces suffered in early January and early March, and the need for big power supply given the huge demand from many existing and potential investors and consumers in the province and island.

Energy Secretary Raphael P.M. Lotilla could not come but he gave an inspirational keynote message explaining the need for energy security to help attain economic security. His message was delivered and read by Energy Undersecretary Rowena Guevara. The overall roadmap as contained in the Philippine Energy Plan (PEP) until 2050 and National Renewable Energy Program (NREP) was ably presented by Energy Assistant Secretary Mylene Capongcol.

Other information-packed presentations came from the Energy Regulatory Commission, National Grid Corp. of the Philippines, National Transmission Corp., National Electrification Administration, private players Aboitiz Renewables, Inc. and MORE Power in Iloilo City.

In this column last Tuesday, I made an estimate and forecast of how much new power generation the Philippines should have given the high GDP growth targets set by the economic team — 6-7% for 2024, 6.5-7.5% for 2025 and 6.5-8% for 2026-2028 and avoid blackout.

This piece will attempt to quantify the projected power generation from 2023-2028 given the new committed projects and compare it with the projected needs of the country over the same period.

From a total installed capacity of 28,258 megawatts (MW) in 2022, about 3,193 MW are expected to become operational this year and 2,624 MW next year, for a total of 9,968 MW from 2023-2028 (Table 1).

As mentioned in my previous article, not all megawatts are the same. Conventional thermal power plants have higher energy density, reliability and capacity factor (CF) per MW than conventional renewables such as hydro and geothermal energy, and intermittent renewables such as solar, wind and biomass.

Since not all new power plants committed for the year will start operating in January — some may not start until the fourth quarter — I adjusted the CF to 95% of the actual CF 2017-2022 as measured by IEMOP. My computation of additional generation in gigawatt-hours (GWh) is derived using this formula: (CF 2023-2028) x (committed projects) x (24 hours/day) x (365 days/year). My results show an additional 12,263 GWh or 12.26 terawatt-hours (TWh) this year and 10 TWh in 2028 (Table 2).

To get the total projected generation per year, I derived with this formula — (actual generation 2022) + (projected generation 2023), and so on. My results show total generation rising from 112.52 TWh in 2022 to 123.54 TWh this year to 154.79 TWh in 2028.

Then I compared this projected generation based on committed projects versus projected generation based on GDP growth targets for 2024-2028. My results show a surplus this year, but power deficits of 8.9 TWh in 2027 and 7.4 TWh in 2028 (Table 3).

Other researchers can replicate this exercise using different assumptions like capacity factor for 2023-2028, possible delays or advance in operation of new power plants, and they may come up with different numbers.

My results imply that adding more intermittent RE with low CF like solar with 3,378 MW and wind with 1,234 MW from 2023-2028 can imperil the country’s growth targets with a power deficit and hence, potential blackouts. Investors and consumers will cringe at the idea of having blackouts again just two to four years from now.

So the Philippine Energy Plan can’t ensure energy security. The proposed PEP will not assure energy security for the Philippines.

As a developing country aspiring to industrialize and raise per capita income and create more jobs, our energy policy should be high growth-targeting, not high renewables-targeting. Junking the anti-coal policy of 2017 and anti-nuclear sentiment will be a good start toward this policy shift.
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Climate 108, Masdan mo ang kapaligiran (1978)

This is one of the famous Filipino songs in the late 70s. About "environmental catastrophe" 1970s into the future. Asin band was famous that time too. Some of the lyrics:

Masdan mo ang kapaligiran
by Asin, 1978
https://www.youtube.com/watch?v=jup5tXpyvOU

...Ngunit masdan mo ang tubig sa dagat
Dati'y kulay asul ngayo'y naging itim...

Ang mga batang ngayon lang isinilang
May hangin pa kayang matitikman?
May mga puno pa kaya silang aakyatin
May mga ilog pa kayang lalanguyan?

Darating ang panahon mga ibong gala
Ay wala nang madadapuan
Masdan mo ang mga punong dati ay kay tatag
Ngayo'y namamatay dahil sa 'ting kalokohan.
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Fast forward today 2024, after 46 years...

-- tubig sa dagat, dati kulay asul, ngayon asul pa rin

-- ang mga batang 40s na ngayon, may hangin pa ring natitikman

-- may mga puno pa rin silang aakyatin (pero ayaw na umakyat, marami na bondying)

-- may mga ilog pa rin silang nalalanguyan (marikina river pwede pa, pasig river di na)

-- mga ibong gala, madami pa rin madadapuan

-- mga puno, iba kalaban ng electrical wires ng Meralco kasi matataas at malapad ang branches, fire and electrical hazards na.
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Some members of Asin band now in the US, enjoying modern environment.

Climate alarmism in the 70s may be justified. But after 5 decades, climate alarmism still persists. They were wrong since the 70s or earlier years.

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BWorld 696, Higher deficit ceilings point to dangerous trend

Higher deficit ceilings point to dangerous trend
April 9, 2024 | 12:02 am

My Cup Of Liberty
By Bienvenido S. Oplas, Jr.
https://www.bworldonline.com/opinion/2024/04/09/586666/higher-deficit-ceilings-point-to-dangerous-trend/

Last week there were several important developments in the macroeconomic and fiscal situation of the Philippines. See these reports in BusinessWorld: “NG debt hits record P15.18 trillion” (April 4), “Philippines lowers growth target for 2024, raises deficit ceilings” (April 4), “PSA lowers economy’s growth to 5.5% in 2023” (April 5), “Inflation accelerates for a second month in a row in March” (April 5).

Public debt keeps rising, not falling. The GDP growth targets made by the Development Budget Coordination Committee (DBCC) were adjusted downwards. And the inflation rate rose to 3.7% in March — although this is just half of the 7.6% inflation in March 2023, the steady decline from October 2023 to January 2024 has halted.

NEW MACROECONOMIC AND FISCAL TARGETS

In Table 1 are the new targets set by the DBCC last week, I arranged them into three sets of parameters: A for macroeconomic assumptions, B for fiscal outlook, and C for GDP growth targets. Then I compared the old targets made in April 2023 with the new ones.

For 2023, the actual growth of 5.5% was lower than the targeted 6-7% but the deficit target was generally achieved.

For 2024, the new deficit target is much higher — P1.48 trillion (5.6% of GDP) vs the P1.36 trillion of the old target. It is the same for 2025, with the new deficit target set much higher at P1.49 trillion compared with the P1.20 trillion in old target (see Table 1).

It is the same trend for 2026 to 2028, the deficit’s new targets are set much higher than the old targets. And this points to a dangerous trend — disbursements and public spending have become more uncontrollable while projected revenues cannot keep up.

Two important medium- to long-term policies should be set.

First, the planned privatization of some government assets — like property of the Ninoy Aquino International Airport or NAIA, the New Bilibid Prison property, the Armed Forces of the Philippines’ golf course, Philippine Amusement and Gaming Corp. (better known as PAGCOR), etc. — should be started earlier.

Second, the planned huge procurement (P2 trillion) of materiel for the Armed Forces of the Philippines (AFP) (submarines, battleships, jetfighters, missiles, ammo) and several hundred billion pesos worth of materiel for the Philippine Coast Guard (PCG) should be junked. Instead, we should focus on high-profile diplomatic negotiations as the cheaper alternative to have a peaceful resolution of the territory disputes in the West Philippine Sea.

If these two measures are not considered, if government will only rely on more taxation while public spending keeps rising fast, the public debt stock will keep rising and interest payments alone would approach P1 trillion/year — it was already P670 billion in 2023.

ELECTRICITY SUPPLY TO SUSTAIN HIGH GROWTH

Last Friday, April 5, I attended the Philippines Electric Power Industry Forum (PEPIF) 2024, which had the theme, “Powering a Sustainable and Secure Energy Future for the Country,” held at the Iloilo Convention Center in Iloilo City. I will write more about it in the next column, but for now I will make my own projection on the amount of electricity in terawatt-hours (TWh) we will need in the medium-term to avoid blackouts because the projected power demand will be high due to high GDP growth targets as discussed above.

First, I computed the average growth in power generation from 2017 to 2022 (it’s 5.1%) to approximate generation in 2023 as data is not yet available from the Department of Energy. Second, I introduced and computed two concepts: 1.) the electricity multiplier in percent expansion (= % growth GDP / % growth power generation), and, 2.) the electricity multiplier in monetary values (= GDP P billion increase / generation TWh increase). All this is done with the assumption of ceteris paribus or all other things/factors being equal or constant.

For the first concept (the electricity multiplier in percent expansion), it shows that a 1% expansion in power generation contributes to a 1.3% expansion in GDP. For the second concept (the electricity multiplier in monetary values), a one TWh increase in power generation contributes to a P236 billion expansion in real GDP size.

But since the country’s per capita kilowatt-hour (kWh) generation remains low and “yellow-red alerts” were still being declared even through 2023, I adjusted the electricity multiplier from 1.3% to 1.2% to help ensure more electricity stability and security in the medium-term.

My results show that the Philippines’ power generation must expand from 5 TWh/year in 2017-2022 (excluding the horrible lockdown year of 2020) to 6.4 TWh/year in 2023-2025, and 8 TWh/year in 2026-2028 (see Table 2).

The electricity multiplier in monetary values from 2023-2028 is at a more realistic level: for every 1 TWh increase in power generation, real GDP size increases by P222 billion.

Since the theme of PEPIF 2024 was focused on renewable energy (RE), lots of the discussions were focused on megawatt (MW) installed capacity expansion by RE, not megawatt-hours (MWh) actual generation expansion. The former can be a deceptive metric because not all MW are the same. A 100-MW solar plant can deliver only about 18 MW of electricity in a day while a 100-MW coal plant and 100-MW gas plant can deliver about 65 MW and 60 MW of electricity in a day, respectively.

For our economic security, we should have energy security, and such can only come from reliable sources like thermal plants (coal, gas, oil peaking plants) and nuclear power. I liked the assessment and speech by Jimmy Villaroman, President of Aboitiz Renewables, Inc. (ARI). He said at the forum:

“We advocate a balanced approach, growing renewable energy and investing in traditional sources… our transition in the Philippines, as in the rest of Asia and the Pacific, must be gradual and intelligent. It has to be well-planned; uniquely suited to each country… We believe LNG is a great complement to RE due to the latter’s inherent intermittency…. We’re also studying the feasibility of small modular reactors… as other long-term solutions.”

Yes, we cannot and should not abandon conventional sources. Sustained high economic growth, more job creation, are goals that are more noble and more practical than high RE share to total energy mix.
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MidEast Africa 13, Notes from Mike Alunan

This is a good post by a friend Mike, a former BusinessMirror columnist, in our viber group Oplas Perspectives. Reposting with his permission, thanks Mike.
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Middle East Notes
by Michael "Mike" Alunan
April 20, 2024

America must learn a lot from numerous lessons in history, otherwise it is bound to repeat past mistakes, to paraphrase a famous quote from George Santayana. As early as the time of the Greeks, the collapse of its civilization was a result of the internecine destructive 28-year war among the Greek city states mainly because of hubris or arrogance and envy among each other. The US is in the same situation, so we are seeing increasingly Pax Americana (US Empire) on the decline. And may implode in the long-run with the financial bubble building up again that could burst and result in crisis worst than 2008.

Between 1947 and 1989, or the cold war alone, the US thru its CIA tried regime change 72 times (See
https://www.washingtonpost.com/news/monkey-cage/wp/2016/12/23/the-cia-says-russia-hacked-the-u-s-election-here-are-6-things-to-learn-from-cold-war-attempts-to-change-regimes/).
This excludes the dozens of involvement in post-cold war military activities like Serbian -Croatia war from1991-95, Iraq war from 2003 to 2011, Afghanistan war from 2001 to 2021 fall of Khadafy in 2011, Maidan coup on Ukraine in 2014, and many more. In fact, ever since the fall of the Soviet Union in 1991, or after the so-called "Cold War" the CIA has been involved in many covert operations, supporting mass movements and opposition groups and color revolutions, and in Eastern Europe were partly responsible for the 5 waves of conversions of most Eastern European states to NATO. Once joining NATO, the US sets up military bases and ballistic missiles, This is fully documented in a book in 2021 by M. E. Sarotte entitled "NOT ONE INCH: America, Russia, and the Making of Post-Cold War Stalemate" – Cold War.

Let's not forget the CIA has been behind the "terrorsist groups," ethnic groups and freedom fighters like Mujahideen which evolved into what is now Al Qaeda, and other terrorist groups like ISIS, Al Nustra, Kurds etc, all involved now in the continuous campaign towards regime change in Syria. I am not in favor of Iran and its Islamic theocracy, but let's face it, It is Iran that has been fighting these terrorists like ISIS and Al Qaeda, backed indirectly by the CIA.

A great source too of updated geo-political analyses are the You Tube interviews of prolific book author intellectual and deep ex-CIA intelligence officer Scott Ritter, who has about 10 published books to his name, and is fairly objective in making his updated analyses on the recent Ukraine and Iran-Israel conflicts.

On the recent Iran-Israel conflict, which could potentially and dangerously trigger a global economic crisis or possibly escalate into a nuclear war, we hope not, Scott Ritter, who has a full grasp of facts and privileged intel information, says Iran is not after a war with Israel, for many reasons, and has thus kept its cool and strategic patience the past few years and decades, and avoided DIRECT confrontation, despite getting hit the past years and decades by a series of Mossad assassinations of its top officers, nuclear scientists, its top general Sulahmeini, et al. Of course, just like the US and Israel, Iran also funds proxy wars like the Houthis of Yemen, Hezbollah and Hamas. Recently, it is Israel and US, which now appear like rogue states, compared to Iran, owing to their actual actions.

Iran is more serious at building peace and development and has made peace with its arch rival Saudi Arabia after fighting for 7-8 years in a proxy war over Yemen, following a peace settlement brokered by China. Both Iran and Saudi have also joined BRICS, along with Egypt, Ethiopia, and United Arab Emirates. About 31 or 41 more countries have signified their interest of joining BRICS, many because of fears they can also be victims of US sanctions like what US did in freezing Russia's $300 Billion assets or Afghanistan's $9 Billion, and other forms of pressures and sanctions, triggering jitters and the current shift to de-dollarization, the increasing interest in BRICS, etc. Jeffrey Sachs, a world-known economist, is also a good source of updates on economic and geo-political trends. Iran and Russia are also developing an alternative. Iran is also building together with Russia alternative multi-modal transport alternatives to the Suez Canal, only as a result of the sanctions, etc.

Iran only struck directly at Israel last April 14, in retaliation of Israel's April 1 fighter jet attacks on Iran's consular office in Damascus, Syria, killing 2 generals and other top level officials. This obviously violated Article 51 of the UN Charter and Geneva and Vienna conventions, which make the Damascus consulate a sovereign territory and justifying an appropriate retaliation vs. Israel. Iran was not serious with harming Israel, or killing Israelis, as it even sought UN Security Council response on Israel's violations of international law, but got no positive response over its complaint over Israel's violation of international law and even Western world's self-imposed "Rules-Based Order." It also gave Israel and the US 72 hours prior warning on its plan to attack Israel, giving the latter ample time to prepare and move valuable assets. On top of this 72 hours, Iran gave another 5 hours warning before its actual attack sending initially its drones, which took 4 hours to travel, giving time for Israel, US and other allies to prepare and shoot down the drones. The missiles followed and hitting two Israeli bases, but not causing major damages. Except a girl as collateral damage. Iran had no intentions of killing people, otherwise it should not have given series of prior warnings.

With his apparent failure at his Gaza genocide project, Netanyahu believes his only way to cling to power is to widen the war in the Middle East and forcibly bring US to its rescue. Otherwise, Netanyahu will be toppled from power, along with his zealot Zionist Knesset cabinet. We do not condone Hamasy Before the Oct. 7 attack of Hamas.

We do not condone Hamas' Oct. 7 attack on Israel, but we grossly detest Israel's disproportionate response towards a genocide on Gaza. Before this event, there were hundreds of thousands protesting against Netanyahu over charges of corruption and other crimes. So it seems Netanyahu;s defense is to go offense, and drag everyone down, including the US, as he capitalizes on the strong Zionist lobby, which actually also includes some 70 Million Christian Zionist. Many Jews are distancing themselves from the Zionist, which is a racist oligarchic and militarist ideology, making use of twisted biblical tales.
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See also:
Unrest in MidEast-Africa 9: Gaddafi falldown, August 24, 2011
Unrest in MidEast Africa 10: Israel-Hamas War 2012, November 26, 2012
MidEast Africa 11: Egypt, Arab Spring and Capitalism, July 05, 2013
MidEast Africa 12: US-Iran conflict, June 21, 2019

Tuesday, April 09, 2024

BWorld 695, On the power reserves market and the cost of different energy sources

On the power reserves market and the cost of different energy sources
April 4, 2024 | 12:02 am

My Cup Of Liberty
By Bienvenido S. Oplas, Jr.
https://www.bworldonline.com/opinion/2024/04/04/585509/on-the-power-reserves-market-and-the-cost-of-different-energy-sources/

The Independent Electricity Market Operator of the Philippines (IEMOP) held a media briefing last week on March 28. Among the topics discussed was the Philippines reserves market that began operation on Jan. 26, 2024.

RISE IN RESERVES AND STABLE ELECTRICITY

The IEMOP showed data that the reserves of the National Grid Corp. of the Philippines (NGCP) have improved significantly starting February. In the Luzon grid for instance, the contingency reserves have increased from 31% in February 2023 to 100% in February 2024. IEMOP added that “For increased reliability in power grid operations, total scheduled capacity should meet the required level of reserves (i.e., 100%).”

These high contingency reserves mean the likelihood of a blackout is almost zero as any big power plant having an unscheduled shutdown or prolonged maintenance shutdown can be covered by the high level of ancillary services (AS). In my previous article, “10 lessons from the PHL Nuclear Trade Mission to Canada” (March 21), I lambasted the huge increase in the AS rate, meaning the higher transmission charge in our monthly electricity bill which can contribute to higher overall inflation. Now I understand that the pain of a higher transmission charge is less than the gain of a low chance of any blackout. After all, the most expensive electricity is no electricity.

Also covered in the IEMOP media briefing was the power generation mix nationwide. Coal, the most publicly demonized energy source, remains the main savior, the reason why the Philippines does not suffer from daily “Earth Hours” (the celebrate darkness campaign). Meanwhile, the publicly beloved wind/solar power can contribute a measly 3-5% of the total power generation in the country. This is technically insignificant and if relied on, will ensure that “Earth Hours” are guaranteed to happen every single day in the country (see Table 1).

Thank you, NGCP, for finally doing what you should have done many years ago — ensuring adequate reserves and sparing the country from horrible frequent yellow-red alerts yearly. Thank you too, coal generated power plants, for enduring the irrational attacks of the climate activists and giving us lights and air conditioning every day and night.

But there is a question mark on the action of the Energy Regulatory Commission (ERC) which suspended the price determination methodology of the reserves market. No price stability means no supply stability for reserves and hence we might go back to the ugly situation of frequent yellow-red alerts.

That is a topic for another column.

PEPIF 2024 IN ILOILO CITY

The Philippine Electric Power Industry Forum (PEPIF) 2024, organized by IEMOP, will be held tomorrow, April 5, at the Iloilo Convention Center (ICON) in Iloilo City. The conference theme is “Powering a Sustainable and Secure Energy Future for the Country.”

Among the speakers will be Iloilo City Mayor Jerry P. Trenas, top officials of the Department of Energy led by Secretary Raphael Perpetuo M. Lotilla, ERC Chairperson and CEO Monalisa C. Dimalanta, National Electrification Administration Administrator Antonio Almeda, National Transmission Corp. President and CEO Fortunato Leynes, NGCP Head of Transmission Planning Redi Remoroza, Aboitiz Renewables, Inc. President and COO James Villaroman, MORE Electric President and CEO Roel Castro, Napocor President and CEO Fernando Roxas, ACEN Corp. COO Miguel de Jesus, and IEMOP President and CEO Richard Nethercroft.

They will discuss the Philippines’ energy transition plan via more renewables. Not in the program is a discussion on nuclear power development as part of energy security for the Philippines. Luckily, I saw a new paper on nuclear energy price competitiveness.

PAPER ON LCOE PHILIPPINES ENERGY

The paper, “Comparative Analysis of the Levelized Cost of Electricity of Selected Power Generation Technologies in the 2020-2040 Philippine Energy Plan” (March 2024, 49 pages) was written by Dr. Arturo E. Romero, Jr., a geophysicist and new Department of Science and Technology Balik Scientist who will be based at the Philippines Nuclear Research Institute (PNRI).

The focus of his study is the computation of the levelized cost of electricity (LCOE) of various energy sources. LCOE is defined by the author as “the sum of all discounted cost of the facility normalized by the total power produced over its technical life. It focuses on plant level financials without considering system-wide interplay of power supply and demand, dispatchability and crowding of the grid systems and the effects on electricity pricing.”

The author produced several charts and figures on the computed LCOE of Philippines’ existing and potential energy sources. From the math model and data he gathered, the results show that the cheapest LCOE is to rehabilitate and refurbish the Bataan Nuclear Power Plant (BNPP) which will have an average LCOE of only $44/megawatt hour (MWh), the second lowest to nuclear long-term operation (LTO) life extension at only $34/MWh.

The next cheapest LCOE comes from a liquefied natural gas (LNG) combined cycle (CC) gas turbine and from solar photovoltaic (PV) at $52/MWh. LNG open cycle (OC) has a high LCOE of $94/MWh if there is no carbon tax included. The most expensive LCOE would be from concentrated solar power (CSP) at $123/MWh (see Table 2).

Thank you, Dr. Romero for producing the numbers. And thank you, PNRI and its Director Dr. Caloy Arcilla, for getting this brilliant mind back to the Philippines.

As an economics researcher and writer, my main concern is how the Philippines can attain high economic growth and sustain this for many years in order to create more jobs and entrepreneurs for Filipinos and Philippines-based businesses. Having expensive electricity and intermittent, unstable and blackout-friendly energy sources are inconsistent with the goal of sustained high growth.

I like this observation made by Lino Bernardo, Head of Energy Transition Projects of Aboitiz Power, among my co-participants at the Philippines Nuclear Trade Mission to Canada last month in Toronto. He said:

“While the first nuclear power plants are expected in the 2030s, other baseload technologies must continue to provide the much-needed power this decade and into the next. Beyond the generation of stable electricity, the country should also look to harness the potential of nuclear energy in the academe, industry, and medicine, through atomic particle research, radioisotopes as industrial tracers, and radiation for diagnosis and therapy procedures, respectively. We need to prepare in terms of policy, regulation, and education to ensure safety and proper waste management in nuclear power generation and further.”

Energy security will help attain overall economic security. People can work productively even when the sun is not shining, and the wind is not blowing. They can walk the streets safely at night under bright lights, travel long distance via trains that run on electricity, and so on.

Bienvenido S. Oplas, Jr. is the president of Bienvenido S. Oplas, Jr. Research Consultancy Services, and Minimal Government Thinkers. He is an international fellow of the Tholos Foundation.
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See also:
BWorld 692, 10 lessons from the PHL Nuclear Trade Mission to Canada
BWorld 693, On Earth Hour, Lenten travel, and Pinoys in Toronto
BWorld 694, High growth imperative and fiscal consolidation

Fiscal Irresponsibility 35, The AFP and PCG lobby for trillions pesos procurement

On the lobby by the Armed Forces of the Philippines (AFP) for P2 trillion, reported here,

Marcos OKs military’s P2-trillion wish list for weapons, equipment
January 29, 2024
https://newsinfo.inquirer.net/1895629/marcos-oks-militarys-p2-trillion-wish-list-for-weapons-equipment

Let's do some math.

AFP lobby is P2 trillion for procurement alone. Training may be included here but not spare parts and services, ammo replacement, etc. not included yet. Over 10 years would be another P0.5 trillion.

The Phil. Coast Guard (PCG) would likely be asking for their own huge boats, many big boats with materials, hire xx thousand new personnel, training, spare parts, etc. Maybe will cost another P1 trillion over 10 years or so.

So AFP + PCG lobby = P2.5 trillion + P 1 trillion = P3.5 trillion. On top of existing spending for these two big agencies. PNP lobby not included yet.

So PH will borrow P3.5 trillion -- taxes and fees won't be able to cover it, cannot even cover regular spending, only borrowings. If borrowed over 25 years to pay, that's P140 B/year, principal amortization alone.

Interest payment, currently the 10-yr PH govt bond is 6.53%. Assume an average 6%, for an optimistic view perspective.

So P3.5 trillion x 0.06 = P195.9 B/year, interest alone. Round off to P196 B.

Principal + interest = P140 B + P196 B = P236 B/year.

AFP and PCG lobby alone annual payment, on top of what they regularly receive. And on top of current interest payment (P670 B in 2023, possibly P750 B in 2024,...) and principal amortization for regular spending and borrowings by the government.

Where to get that big fund yearly? From the pockets of AFP and PCG generals and colonels? Will not be enough because they don't even want to pay for their own pension, don't want to contribute to it, don't want taxation of their monthly pension, etc.

True that all administrations, past and present, have their practices of wastefulness in public spending. But we cannot solve wastefulness with another wastefulness.

Gung ho of going over the brink, "gyera na total hindi obra diplomasya" -- Ukraine did it. And Ukraine got what they wish for -- large scale destruction of many parts of their country, lots of deaths and wounded.

People who wish for military confrontation with China over those far away islets, set aside high profile diplomacy and negotiations -- maybe they can start with your children and grandchildren, sell their properties to pay for more taxes to finance a huge war.

The benefits of this policy -- how many billions or trillions, from where?
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