Multibillion railway project to fast track Mindanao growth

A multibillion-peso Mindanao railway project is expected to fast-  track development of President Duterte’s home region.

Senate President Aquilino L. Pimentel III proposed on Monday the creation of the Mindanao Railways Corp. (MRC), which he envisions to “hasten the development of the entire island.”

To pursue the railway project, Pimentel filed Senate Bill 112 to  create the MRC, citing the collective experience of Japan, Canada, the United States and most of Europe, where, he noted, railroad networks spurred and sped up their  national development.

Pimentel pointed out that these nations railroads “opened up vast land areas for human settlement and made it possible to transport tremendous number of people and huge volume of goods at the lowest cost.”

He also noted that the “influx of people into areas previously unsettled, the easy mobility of the populace, and the availability of goods and services needed for civilized life means higher productivity of the land and its people.”

According to Pimentel, the proposed railroad network crisscrossing Mindanao would considerably shorten travel time between Zamboanga and his home city in Cagayan de Oro or Davao and Cagayan de Oro.

“That will, in turn, mean a reduction of the travel cost for the people and for the transportation cost of goods whose end destination is the Visayas or Luzon, or beyond our northern shores, or vice versa,” he added. The Senate President asserted the Philippines must benefit from the experience of other countries whose railway systems until today provide people and goods the cheapest and fastest way of mass-transit movement.

Under Pimentel’s proposal, the MRC would have a  corporate existence of 50 years, with  an authorized capital of P100 billion, divided into P500 million common shares with par value of P200, fully subscribed by the national government.

He added the initial paid-up capital of the MRC will be set at P20 billion with the balance provided under a continuing annual appropriation of not less than P2 billion from the national treasury.

“Being a factor for socioeconomic development and growth,” Pimentel said the MRC, which is proposed to be headquartered in Cagayan de Oro, would be “part of the infrastructure program of the government, and would remain under government control during its existence.”

The Senate leader added: “It would be administered with the view of serving public interests at optimum service, and while aiming at its greatest utility by the public, the utmost viability of its operation must also be protected.”

He said this is intended to “ensure that services are rendered at the minimum passenger and freight prices possible.”

Pimentel’s bill provides that the MRC, envisioned as an attached agency of the Department of Transportation, would be exempted from payment of all taxes.

source:  Business Mirror

Why the Philippines’ new war on drug users will fail

RIGHT NOW, just as much of the world moves away from the “war on drugs,” the Philippines has launched headlong into a new and bloody pursuit. President Rodrigo Duterte has unleashed the police and encouraged vigilantism to “kill” drug users, dealers and others falling afoul of his “war” on crime. Hundreds have been killed. Tens of thousands of consumers have surrendered to police despite a complete absence of social or “treatment” infrastructure to absorb them.

Beneath the storm of violence and death lies an ugly historical rhythm -- an ever-present societal tendency towards cleansing unwanted groups, and political leaders enabling and fuelling it. Regardless of the motives, however, lies another historical rhythm, the failures of the so-called “war on drugs.” History and economics from around the globe highlight a policy certainty: the Philippines’ new “war” will fail and society will emerge worse off from it.

The global “war on drugs,” now so widely discredited, had some of its origins in US colonialism in the Philippines. At the end of the Spanish-American war in 1898 the US gained control of the islands. Having, since the late 19^th century, adopted a moralistic and reactionary view to non-medical opium consumption, the new US administration faced a conundrum -- what to do with the legalized sale of smoking opium there? Some argued that swift prohibitions would spark a large illicit market and undermine governance. Others argued that the US had a moral obligation to end the practice and forcibly detox all existing consumers. The latter position won out. The US instituted a policy of strict prohibition, except for “medical and scientific” use.

The nascent US empire, now looking beyond the shores of the Americas, soon saw the existence of legalized opium consumption in Europe’s Asian colonies as both a moral repugnance and a threat to prohibition in the Philippines. Adopting a “supply-centric” view the US argued that all nations needed to suppress the trade in order for one nation to do so. It held the Philippines up as a poster child and began global efforts to international its prohibitionist approach.

Other factors underpinned the US strategy. China, in the midst of imperial collapse of the Qing dynasty, blamed opium for much of its internal malaise. The US, at the same time as cracking down on Chinese immigration, saw a way to ingratiate itself to the Chinese state and lessen European influence there. Both nations teamed up to internationalize restrictions on the global opium trade and the Global Opium Commission met in Shanghai in 1909. There began what historian William McAllister calls “a limited enterprise” of global drug control. International conventions, albeit complex and often Swiss cheese-like, were signed over the coming decades. Meanwhile, bilateral diplomatic pressures from the US resulted in the final globalization of the “war on drugs” in the 1970s.

The strategy persisted through the 2000s until states in Latin America, which had paid such a heavy burden for the war, and states within the United States, began to reject the strategy. Europe, which had generally never really subscribed to the vision of the “war on drugs,” was happy to watch it unravel under its own weight. Now, as the UN passes beyond the UN General Assembly Special Session (UNGASS) in 2016, we at LSE IDEAS refer to the emergence of a “postwar on drugs era.” This era is one characterized by the emergence of a wave of more liberal policies throughout the Americas and Europe -- most notably cannabis legalization, but also a tidal shift towards public health approaches and an attempt to drive back from the disaster of mass incarceration in the US.

Others, under this era of “policy pluralism,” seem certain to maintain a “war” on users. Russia rejects anything resembling science or public health and has developed a self-inflicted HIV and Hepatitis epidemic as a result. Many Southeast Asian nations also maintain the war’s efficacy. Some are defecting, however, most notably Thailand, experiencing the pointless ravages of mass incarceration, is looking to decriminalize consumers in a smarter new approach. This highlights the central hope for a new era based on policy pluralism and experimentation: that evidence and rationality will win out over fear and xenophobia. Just as Europe and the US witnesses demagogues pushing for closed borders and a fear of the “other,” so too Asia is witnessing the easy vilification of an internal “other” -- the drug user.

The Philippines will fail in its endeavor for many reasons which are well researched and understood. First, one cannot solve a public health issue through repression and criminalization. It forces consumers into dangerous situations and increases risky practices. Expect higher levels of HIV, Hepatitis C, and other costly and avoidable illness in the aftermath of this war. When forced to hide their usage practices people do irrational things, such as sharing syringes and consuming in dangerous environments.

Second, decades of experience of managing illegal drug markets around the world highlights one simple fact, they cannot be eradicated through repression. They can be displaced. They can be made more or less violent and corrupting. But they cannot be eradicated. Attempts to destroy them through bloodletting, as the recent Mexican case has highlighted, merely causes power vacuums, temporary changes in supply practices, but ultimately a return to market normalcy once the bloodletting ends. In other words, war with the economics of the drugs market is futile. Once a market is established, as it clearly is in the Philippines, demand creates supply.

The most that enforcement can do is tinker at the margins.

In the meantime the country will witness a complete erosion of the basic necessities of a functioning polity and economy -- stability, rule of law, and a minimization of corruption. While each of these may have been in short supply prior to this new war, the latter will certainly exacerbate rather than improve existing problems. Countries emerging from internal conflict take decades to heal. The notion that creating an artificial one will in some way heal internal divisions and problems is a fallacy.

We know from a century of experience what doesn’t work in drug policy. A “war on drugs” is a globally discredited strategy. Although we have strong evidence around what works on the demand side -- public health, harm reduction, and access to treatment services -- we are less certain about proactive strategies for managing the supply side under prohibition. We will surely learn much from experiments with marijuana legalization and new sustainable development oriented approaches to production and transit. However, what we can say with broad certainty from lessons from every corner of the globe is that the Philippines new war will not work and will prove destructive to the legal, political, and socioeconomic fabric of their nation. It should stop.

Dr. John Collins is the Executive Director, LSE IDEAS International Drug Policy Project of The London School of Economics and Political Science (LSE).

source:  Businessworld

If the US becomes protectionist, who loses?

The purpose of free trade is to make cheap things remain cheap and the purpose of protectionism is to make cheap things become expensive. Protectionism imposes high tariff, taxes, fees, charges, and more paper work to complicate things that are otherwise simple and easy to do.

As the US presidential election nears, many issues have become convoluted as expected in any major political exercise.

One issue that gets murky is trade.

Mr. Donald Trump has been vocal about some of his protectionist pronouncements like attacking the US involvement in the Trans-Pacific Partnership (TPP) while Mrs. Clinton is less gung-ho about protectionism.

Last July 26, 2015, Bloomberg produced an article, “If Trump Wins, Asia Loses.” This story was shared by many Filipinos in Facebook and other social media platforms because the Philippines was mentioned.

“An investor survey conducted earlier this month by Nomura Holdings, Inc. flags a long list of worries under a Trump presidency: from a possible rise in trade protectionism…

The Philippines faces risks because of possible immigration restrictions. The US is host to 35 percent of the total number of Filipinos working abroad, and Nomura estimates they account for about 31% of total worker remittances, a key source of foreign inflows for the local economy.

The Philippines has one of the biggest export exposures to the US in Southeast Asia and Trump’s pledge to bring jobs back to the US may threaten the nation’s burgeoning business process outsourcing sector. The industry caters mostly to US companies and attracts revenue that may equal the size of total worker remittances, about 9% of GDP, over the next two years, according to Nomura.”

There are a number of misinformation stated in this report.

One, in trade theory and practice, the big loser in protectionism policy is the protectionist country, not its trade partner/s.

By making otherwise cheap goods from abroad become expensive, that country is penalizing its own consumers and manufacturers. In which case, the title of the piece should be “If Trump (and protectionism) wins, America loses.”

Two, the US’ merchandise trade exposure in Asia is huge, indicating that US households and businesses make substantial income and savings when they export to and import from Asia than Europe or Central and South America. In 2014, 27% or more than one-fourth of its exports went to Asia, its second biggest continental trade partner next to its North American neighbors, and bigger than Europe. And almost 40% of its imports that year came from Asia or slightly lower than its imports from North America and Europe combined at 46.5%.

Three, while the Philippines exported $8.4 billion to the US in 2014, it also imported $10.1 billion from the US, so it makes little sense to antagonize the Philippines with protectionism when the US earns more from the partnership. The US BPOs here means those US companies provide good services and backup support to their customers worldwide by utilizing cheaper and efficient personnel in the Philippines.

The table shows merchandise trade of the United States by origin and destination, 2014, $ million and percentage.

Four, a graphical presentation that the bigger loser of protectionism policy is the protectionist country, not the trade partner/s would look like this: Imagine a supply-demand curve with equilibrium or market-clearing price of P* for all trading countries. Country A becomes protectionist, its supply curve moves to the left so its new equilibrium price goes up to P1, higher than P*, or P1 > P*.

In contrast, countries B, C,... remain free traders, their respective supply curves move to the right, their new equilibrium price moves lower to P2, or P2 < P*. Consumers and manufacturers in these countries will be happy with more supply of various products and result in lower prices owing to trade diversion from protectionist to other free trader economic partners. There will be some short-term business dislocation, true, but firms and people adjust or even anticipate these changes and have plans B and C in place, including bigger trade among non-protectionist economies.

If America -- whether under Mr. Trump or Mrs. Clinton -- will become protectionist, America loses, not Asia. Free trade, more choices, more economic freedom, is the best policy that a government can give to its people.

Bienvenido S. Oplas, Jr. is a SEANET Fellow, head of Minimal Government Thinkers, and both institutes are members of the Economic Freedom Network (EFN) Asia.

minimalgovernment@gmail.com 

source:  Businessworld

Traffic-solving Pinoy innovation adopted in 136 cities, except Phl

First of three parts

IT is ironic but true: There are now over 136 cities in 39 major countries worldwide that have adopted a traffic-solving transport innovation started by a Filipino inventor, which caught the World Bank’s attention and got adopted by the US and the world over, but treated with disdain, lamentably, in the Philippines.

Not wrong to copy, but don’t copy wrongly? Innovator Francis R. Yuseco Jr., a onetime investment banker, registered his intellectual-property rights (IPR) 27 years ago in 1989, or 10 years before the popular bus rapid transit (BRT) was adopted abroad.

For Yuseco, getting copied is okay, provided it redounds to the common good, but what matters most is being ignored locally. In the free market of ideas, one can’t demand consideration for originality, as any modification in design, or even change in name, is considered, at times, an innovation and, thus, tolerated.

Lamentably, if they have copied, they should have, at least, done
it grammatically. His system PhilTrak rapid transit (PRT), a proposal of his company PhilTrak, was renamed BRT “Rapid,” describing the bus transit, thus, it should have read “rapid bus transit” to be grammatically correct. But because the Americans called it so, everyone swallowed it without question.

With improvements, Yuseco now calls it Intel-Track, for Philippines Integrated Intelligent Trackways. Perhaps, it’s best to correct its nomenclature to its generic descriptive acronym as RBT, for rapid bus transit.

Faster, cheaper and bigger impact

WHATEVER the name, Yuseco said his is much cheaper by a fraction of the costs of railway, which requires massive construction of pillars, railroad tracks, costly train coaches and power systems, which entail huge investment costs, and five years to build.

But Yuseco’s Intel-Track “can be completed in six months to eight months, or one year, at most to allow delays, because all it takes are designated road tracks. “

Unlike railways, which are subsidized and imported, Intel-Track is subsidy-free. In fact, this is why many countries have shifted to RBT from Metro Rail Transit (MRT)/Light Rail Transit (LRT).

While railways are dependent on foreign technology, foreign imports, foreign loans, foreign consultants and everything foreign, Yuseco’s RBT involves local innovation, local design, local engineers, local investors and local funding. Except for engines of buses, road tracks can be built by local contractors using local materials, thus, generating local employment.

The “ticketing system” and bodies of the buses can also be done locally. With high local content and huge dollar savings, expect higher economic multiplier effects.

Studies, experts validate Yuseco’s idea

AS early as August 1989, the National Center for Transport Studies (NCTS) at the University of the Philippines declared Yuseco’s RBT of only 92 articulated (elongated) buses, carrying 200 passengers each, mostly standing, except for the elderly, pregnant, etc., similar to LRT/MRT, can match the volume of passengers carried by LRT, or the volume of 6,000 regular buses.

They can transport about 1,054,000 passengers daily. The study by the NCTS, then called the UP Transport Training Center (UPTTC), was corroborated by the Department of Transportation and Communications (DOTC), the Department of Public Works and Highways (DPWH) and the Metropolitan Manila Development Authority (MMDA), with all agreeing RBT has the same operating efficiency and capacity of railways, and has an “amazing decongestion factor of 96.8 percent.”

These buses are 18-meters long and 2.7-meters wide, and if necessary design, even much longer buses. If Singapore has buses with passengers standing, except for the elderly, pregnant and the disabled, these buses must also allow mostly standing.

Rejected by all, except then-President Fidel V. Ramos (FVR). Except for Ramos, all past administrations rejected Yuseco’s proposal. Even former President Benigno S. Aquino III’s administration wanted railways, but could neither fix MRT. It even told Yuseco his proposal is allegedly “merely theoretical, unproven and has limited systems capacity.”

Under FVR and eight months of study, it was recommended that pilot tests be done along Commonwealth Avenue and C-5. By October 15, 1997, the Ramos administration made a historic move to award the first RBT project of its kind in the world. Signatories were the late Transportation Secretary Arturo T. Enrile, Public Works Secretary Gregorio Vigilar and MMDA Chairman Prospero Oreta.

But when Enrile died, his successor, Josefina Lichauco, had it reviewed, but approved it anyway. To waive a public bidding, what were invoked was a constitutional provision favoring local inventors; Republic Act (RA) 7459, providing incentives to Filipino investors, and RA 8293, respecting intellectural- property rights.

Gains WB, world attention

YUSECO shows “two vital documents proving indisputably that it gained more attention abroad and that it is Filipinos—the inventor, engineers and academe—who are the originators of the global phenomenon [BRT].”

One is the World Bank Internal Memorandum dated April10, 1990, written by World Bank transport expert Gerhard Menckhoff, who met and praised Yuseco for “the vision, features and operating characteristics of the Filipino invention” and recommended it as “the appropriate mass-transit system for developing and developed economies.” He disseminated it to all World Bank officials worldwide.

The other is a letter from American Bus Association (ABA) President Georg Wynn on August 31, 1999, citing US Federal Transit Administrator Gordon Linton declaration to “reinvent bus service in the US, with the features and characteristics identical” to Yuseco’s PRT, but baptizing it with the catchy but grammatically wrong BRT.

When interests interfered? After getting reviewed and approved twice, Yuseco’s project suddenly screeched to a halt, after the Development Bank of the Philippines (DBP), under the next administration, suddenly demanded P1 billion in hard real-estate collaterals.

One can only surmise or hazard a guess of interests interfering. And yet, DBP took bigger risks bankrolling a lease financing for shopping lines, by purchasing the ships and leasing them to industry.

It is ironic why a project with great impact is not funded, even by phases, and yet, four foreign investors even get power subsidies of P5.86 billion for 2016 alone as provided under Executive Order 666, a number which sounds unholy to Christians.

Public transport’s interests must also be managed well and told they will not be threatened much because when motorists leave their cars, traffic will ease up, and create a huge demand for public transport along arterial roads feeding into the Intel-Tracks. This is crucial because many good plans are blocked when marginalized transport groups oppose, although the government must carry the higher interests of the bigger riding public.

Offtrack maybe, but on-track to the end. Yuseco’s project may have gone offtrack temporarily for almost 30 years, but he hasn’t given up his advocacy, a passion he has developed as early as his first job when he worked with Pantranco North Express. Although he later became an investment banker with companies like Bancom Development Bank, and much later as a partner and executive director of the Philippine Investments Systems Organization, he continued to pursue his passion in transportation.

And to quote Les Miserables French writer Victor Hugo, “Nothing can stop an idea whose time has come.” Yuseco should also realize that the government, in the end, can be reasonable, if he is able to reason.

To be continued

source:  Business Mirror

The partnership in PPP

The rather ambitious infrastructure rollout goals of the Duterte administration will hardly be possible without investments from the private sector. Even the very bullish Budget Secretary Ben Diokno realizes his dream of a Golden Age of Infrastructure requires a very vigorous implementation of the PPP program.

Officials of the past administration couldn’t make up their minds what it wanted to do with PPP. They launched the PPP program in a very grand manner during the first month of the Aquino watch. But the roll out of projects quickly slowed down. Press release lang pala!

The first PPP Center head resigned a few months after the big launch, frustrated with the response he was getting from senior bureaucrats, including cabinet members. His successor, Cosette Canilao, an experienced investment banker, bravely fought her battles but also ended up frustrated enough to quit a few months before the end of the Aquino watch.

Many in the private sector who took official pronouncements at face value soon found the going very rough in their effort to bag PPP projects. In a conference of the construction industry the other week, they commonly complained government bureaucrats forgot the “partnership” in the public-private partnership concept.

One complaint aired: “there is a mindset to control the private sector’s actions, which actually assumes bad faith, in spite of the fact the private sector is putting up all the money and so far, the winning bidders for PPP projects have been the most reputable firms in the country. The government is not treating the private sector as a partner and, in the process, it is unnecessarily complicating the concession agreements.”

Thus, there is this tendency of bureaucrats to enumerate in the concession agreement all the activities that the private sector is obligated to do, the procedures that should be followed and impose corresponding penal provisions. This results “in tedious and convoluted agreements that, at times, border on the ridiculous.”

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Example cited: “enumeration of 35 events of default for the concessionaire, including when certain reports are delayed. There is also a list of 25 performance standards for operations and maintenance, with penal provisions of up to tens of thousands of pesos, including when there are more than four accidents in a week.”

A reactor in the conference observed “the problem is, the government is treating PPP projects as ordinary government-funded projects and is applying the same tedious rules, even if it is the private sector that is providing the funds. PPP concessionaires are treated as if they are contractors, but they are actually partners with whom government shares many common objectives.”

Bureaucrats, it was suggested, should draft contracts based on fairness and balance. It will result in simpler negotiations. Government should maintain complete transparency in dealing with all bidders rather than wasting time on protracted one-on-one meetings with bidders simply because bureaucrats do not want the bidders to know the objections raised by other bidders.

It is also not fair, a contractor pointed out, to ask the private sector to bid for a project, to win the bid and then be required to still seek some form of operational permit or franchise from regulators. The regulator should be involved in the bidding process so that when the winning bidder signs the agreement, the regulatory permit is also granted as part of the agreement or as a separate document signed at the same time.

The point was raised that the average time from publication of bid notice to award is 29 months and there is a target to reduce this to 20 months, which is still too long. It was recalled the privatization of MWSS was one of the biggest and most complicated in the entire world, but took only 10 months from bid notice to award. It was also hailed as one of the most transparent.

The proposed amendments to the PPP Law should make the program more responsive to problems we now know through actual experience. Some suggested revisions I heard in my conversations with the industry include:

If a project is considered of national significance to qualify for PPP, there should be automatic approval of national and local permits conditioned on submission of relevant documents. This will supposedly cut three to four steps from things proponents have to do after award. Cutting red tape will facilitate executing and delivering the projects.

If already approved by the NEDA Board, the boards of attached agencies should have no more power to pose any opposition in the bidding and implementation of projects. Right now, it was observed that the boards of MWSS, LRTA and PPA among others are opposing biddings of already approved projects.

What’s not in the current PPP Law, but could be a game changer in the execution and delivery of projects, is to provide for only one government agency to do procurements for PPP projects and will only hand over the project to implementing agencies once construction and commissioning are done.

The Procurement Bids and Awards Committee for the projects will be composed of the involved agencies and chaired by the PPP Center and co-chaired by the implementing agency. This should help respond to the problems often blamed on the Procurement Act.

Bureaucrats often forget that the private sector is spending millions of dollars just in the preparation of the bid offers. Indeed, government should be more careful in the choice of technical and engineering consultants.

Experience showed the quality of consultants hired by government has been subpar. They often make serious technical errors that have material financial implications. When this happens, the whole process is delayed because each bidder has to conduct a duplicate technical due diligence instead of having the government consultant do it once.  

Congress is considering a revision to the PPP Law. Sen. Win Gatchalian is proposing a super PPP Center and it looks like the senator is right on track. Of course, the entrenched bureaucrats in NEDA and the various implementing agencies do not like losing turf.

But giving the PPP Center more power is unavoidable if we want to drum up more interest in PPP and realize that Golden Age of Infrastructure the Duterte administration is dreaming of. Bureaucrats who benefit from ODA and direct budget funded infra projects must be made to see the light in the interest of the nation.

The key thing to remember is the word PARTNERSHIP in the PPP concept.

Boo Chanco’s e-mail address is bchanco@gmail.com. Follow him on Twitter @boochanco

DEMAND AND SUPPLY By Boo Chanco (The Philippine Star)