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Money for Food March 15, 2008

Posted by Janjan in All, Armchair Economist, Armchair Politics, Seriously now….
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We live in dire times. It is the Ides of March, and the heat of summer brings with it whispers of shortage, famine and economic downturns.

I was reading the column of Alex Magno in the Philippine Star (click on <this link> to read it), and it tells a cautionary tale of how the United States’ impending recession brings with it an adverse effect on the world and our very own Philippines. To quote Mr. Magno:

Analysts are now talking about things that seemed unthinkable only a few weeks ago. Oil, for instance, could reach $120 a barrel very soon.

The reason for that is no longer the dynamics of supply and demand. Oil futures are now under great speculative pressure. As a hedge against the falling dollar, the large institutional funds are putting their money in commodities futures — oil being one major commodity.

Hedging in commodities are pushing prices across the board. It is not only oil that is rising. Grains prices are rising too.

That hits us as well.

Unusual weather the past few months have cut into global grains productions. China, hard hit by extreme cold weather and excessive rains, is prowling all the markets, buying up rice. Vietnam, unsure about its own supply, is not exporting.

We are facing a grains shortage here. Heavy rains in the Visayas and Mindanao drenched the harvest. Imported rice is going to cost significantly more, if we could find enough being exported by other countries.

Rice supply is going to be a problem for us the next few weeks. We are not sure we will be able to procure enough. Even if we do, the commodity is going to cost us more.

The news that the Philippines is hit with a rice shortage is especially frustrating for me. I was just recently in Iloilo, which is one of the country’s major rice producers. During my stay there for the past few days, I’ve been riding the bus going to both Roxas City in Capiz, and Kalibo City in Aklan, and witnessed for myself the endless expanse of ricefields and flatlands, seeing with my own yes how rich our Western Visayas land is. For sure, this is not the only province in the Philippines that has a strong agricultural sector. In Luzon, Visayas and Mindanao, we have been blessed with abundant natural resources that will allow our country to be self-sustaining, if only in terms of food production.

And yet, look at us!

We import rice from Thailand and Vietnam, countries that were back before the 1970’s, lagging so far behind us in terms of economy and food production. In fact, the Philippines had the best scientific research institute for the production of rice, which is the International Rice Research Institute in Los Baños, Manila. The Thai and Vietnamese government sent their own scientists to learn how to grow the best rice yield from our country.

But look at us now! We have to beg for rice from our own neighbors who learned how to optimize rice production from us!

It gets even more infuriating when you think about all the opportunities we have had and lost to improve our agricultural sector. The most major opportunity being the “Comprehensive Land Reform Program”, which supposedly empowers our farmers by breaking them from the bondage of agricultural tendency through granting them land which the government mandatorily purchases from private landowners.

Has the CARP really improved our farmers’ lives in any way?

Look at the sugarfields of Negros Occidental, where you still see to this very day, poor and uneducated laborers being paid so much less than minimum wage for backbreaking work. Look at the farms and haciendas that conveniently side-stepped coverage from CARP by allegedly growing “cattle” and having “agricultural corporations” on their land. Go to the farmlands of Capiz where in this age of tractors and the scientific method of farming you still see farmers tilling the land with the lowly carabao and drying their grain by the roadsides where it may be swept away by strong winds and rain.

You see, the problem is not that our population is too big for our food production to supply to. Our problem is that our current agricultural system for the whole country is still stuck on methodologies and farming techniques used at the turn of the 19th Century, which does not yield enough to feed our starving nation. Hence, we have to import food at a higher premium when we have the capacity to solve our own problems with the right farming science and technology.

One of our problems is our very own Filipino farmers. The CARP Law is one major blunder. While the dream of having our own farmers tend to their own land is a laudable objective, the Philippines never developed a comprehensive program that followed up after the CARP. While it is true that SOME of our farmers now own the land that they till, the reality is that these farmers do not know what to do with that land after acquiring ownership. For sure, to increase the land’s yield, they should buy more fertilizer and learn scientific means for better agriculture. If they lacked capital, they could turn to agricultural loans provided by the government, the Asian Development Bank, and a host of private lending institutes offering various credit arrangements for agriculture. They could have sent their children to UP – Los Baños, or to the Visayan State University in order to specialize in courses like BS Agriculture with a Major in Soil Science, and a multitude of other like courses. They could even have banded together through agricultural cooperatives upon which our government grants numerous tax and fiscal incentives, as well as grants and loans.

But most of our farmers did not do any of this! Sometimes, the reason for sticking to the old ways of agriculture is: “I’m old and too set in my ways. I don’t have the time to learn how to use a tractor or these scientific techniques. I just want to farm the way my father did and his father before him.” These farmers do not even want to send their children to agricultural schools because (1) they need the extra manpower in the fields, (2) they would rather send these children to professional schools where they can become office workers, nurses, lawyers and accountants and earn more.

Clearly, these farmers are too poor and ignorant to know that there is a better way for them to improve their lot in life without abandoning their family’s calling to become farmers. It’s just so sad because all the avenues and opportunities have been made within their reach, if only they were not scared to try a different way of farming.

And while our government has been trying hard to encourage our agricultural sector, still, its efforts are not enough. There is still so much room for improvement that it is not taking advantage of.

The government could ultimately solve the peace-and-order situation in Mindanao so that its farmers can finally till the land in peace, and economic development could finally find its way to the fat and abundant agricultural potential of the southern region of the country. It could provide better teachers and facilities to our far-flung barrios, educating our children and making them see that agriculture can and will lead to financial prosperity with the right application of knowledge and skilled endeavor. It could build better roads, provide superior infrastructure, and set up administrative systems to ensure fast and efficient distribution of food and resources.

But what do we have instead? Anybody remember the fertilizer scandal of last year involving a certain unpopular president and her even more unpopular husband?

Our own private institutions are wanting. Instead of encouraging our children to become farmers, scientists, entrepreneurs and skilled workers, we are instead pushing them to become seamen, nurses and medical professionals so that they can go abroad and bring money back to the family. Instead of upholding the dignity of labor and the beauty of the countryside, we have a culture that sneers at probinsyanos and looks down on municipalities that do not have their own shopping malls and fast food outlets. Where we encourage our young to go out and build businesses of their own, instead, we give them the easy way out by becoming call center agents with ludicrous salaries for unskilled work.

We Filipinos are killing our own Philippines! We used to be the richest country in Asia! Japanese housewives came to our country in the 1950’s looking for work as househelpers. When Vietnam used to be just a poor hovel that travelled on rikshaws and on foot, our country already had its own airline service that flew to international destinations.

Look at those countries now! Japan was thrown nuclear bombs but it built itself from the ashes to emerge as one of the leading technological wonders of the world. Vietnam just recently launched its first satellite to outer space!

We used to be so much better than our neighbors, but we’ve become the country that everybody looks down on. Our women have become commodities sold on the internet for lonely and desperate old white men who just want to marry a glorified housemaid. We’ve become entertainers, and minstrels, exporting our skilled and learned by the droves to other countries. We are so poor that we cannot even afford to grow our own rice and buy it instead from neighbors who learned how to culture rice from our own laboratories.

And yet….

There is still hope. There is always hope. I refuse to believe that things are so bleak that we have no other recourse but to desert our country like rats fleeing from a sinking ship instead of working hand in hand to solve our problems. We are so much better than this. We are so much better than we allow ourselves to give credit for.

We need a PARADIGM SHIFT and we need it NOW!

I am calling upon the Philippine government to stop playing politics and start running the country back to track.

I am calling upon the farmers and private institutions to realize the value of a strong agricultural backbone as a means of making our country self-sufficient and economically feasible.

I am calling upon our youth to realize that there’s no such thing as easy money, and challenging them to work towards going back to the farmlands and reaping the true riches from our Philippine soil.

I am calling upon each and every Filipino, from Luzon, Visayas and Mindanao, to each and every foreign land and clime, this is a wake-up call because it’s no longer a question of will the Philippines become the economic superpower that it once was in Asia.

It has become a question of SURVIVAL and we are soon going to become a dead country unless we get our act together and start making sure that our institutions, systems, values and philosophies are geared towards becoming greater than the morass of pettiness that we have become.

We live in dire times.

It is the Ides of March, and the heat of summer brings with it whispers of shortage, famine and economic downturns.

We need to act NOW!

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The City of Orchids August 4, 2007

Posted by Janjan in All, Armchair Economist, I, Lawyer.
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It’s Monday night in Dipolog as I am writing this entry. I just had dinner with an old law school buddy, Atty. Christoper “Popoy” Mah, who was my fellow swimmer in the Law swimming team, as well as my room mate during my 6-month review for the Bar. Popoy, who is a native of Dipolog, took me out to dinner at a non-Sunburst Fried Chicken restaurant (where we had grilled salmon, yum!), and afterwards he took me to Dapitan city where we hung out at a small tourist attraction called Gloria de Dapitan. (Yes folks, on its inauguration, it was attended by no less than the original La Gloria, whom we know more popularly as Pres. Gloria Macapagal-Arroyo).

This trip is probably my fourth or fifth to Dipolog, as I’ve explained in a previous entry, to litigate a certain hearing. Over time, I have walked and toured around the city, observing its people, sampling its cuisine (alright, alright… sampling its Sunburst Fried Chicken), and generally losing myself among its populace.

If anything, Dipolog reminds me of Cebu in the mid-1980’s, a sleepy town poised for an economic boom. The feel and the vibe is definitely there, as well as all the key ingredients which was necessary for the “Ceboom” phenomenon.

For one, Dipolog has a visionary administrator in the person of Zamboanga del Norte Governor, the Hon. Rolando Yebez, who has implemented good programs for tourism, industry and agriculture. His leadership is so prized by the people of Zamboanga del Norte that he won the last elections by a landslide over his opponent.

Another important feature is Dipolog’s beautiful beaches, which I daresay looks better than the ones over at Mactan, Cebu. But other than being a nice tourist attraction, Dipolog also protects certain areas by setting up marine sanctuaries strongly enforced by anti dynamite fishing regulations and controls. Since its ecosystem is well-protected, they have strong potential for an eco-tourism industry. My friend Popoy particularly recommends Dipolog and Dapitan’s beautiful dive spots. A few years from now, I wouldn’t be surprised if Dipolog and Dapitan become Mindanao’s answer to Boracay.

A third feature is Dipolog’s strong agricultural industry in the form of marine resources, and lush agricultural lands. Being located beside open seas, Dipolog has rich fishing grounds. In fact, this has spawned the growth of its well-reknowned bottled sardines, which are exported both domestically and internationally. I brought home some bottles myself, as pasalubong for family and friends.

Expounding on the agricultural industry, Dipolog’s vast and long shoreline is likewise dotted with coconut plantations, which has supplemented the local income with the exportation of nata de coco and copra.

Another factor that could lead to its success are its beautiful roads. The roads leading from Dipolog to Dapitan and onwards is even better than the roads we have in Cebu. Much much better. It is better maintained, with nary a crack or a pothole to ruin one’s driving experience. That’s why I enjoy riding on a habal-habal on my trips there. It’s a joy to drive past the localities and savor the rustic charm, which at night, is well-lit by street lamps for safe night-time driving.

In the matter of infrastructure, both Dapitan and Dipolog each have their respective wharves for boats and ships. Although I am no civil engineer, I doubt however whether the waters of both cities are deep enough to support the large vessels which ply international maritime routes (which Cebu and Manila has), but nevertheless, both cities have good access to open seas.

Dipolog already has its own existing airport, although I’ve heard that it hasn’t been used for some time due to the unavailability of flights supported by our local airlines, but given an appreciable number of tourists and human traffic, I believe that over time, the local airlines will soon be chartering flights to Dipolog City.

The people? I feel like I never left Cebu. Historically, the Dipolog/Dapitan area used to be populated with its own native-born culture, called the Subanos, back in pre-Spanish times. These people were said to have their own language, but I guess that language died out during the Spanish Colonial era because the only language I’ve ever encountered during my trips there is Bisaya, in particular the staccatic and clipped Cebuano variant (as opposed to the softer and more lyrical Bisaya spoken by Leyteños, Boholanos and Cagayanons). This is because, over the years, people from Bohol, Cebu and Negros have moved to Dipolog and populated it, notably during Spanish times when masons and carpenters from the Visayas were employed by the Spaniards to build the infrastructures of Dipolog/Dapitan. (Dipolog used to be part of Dapitan until it broke away as an independent town somewhere in 1912 during American occupation).

However, more and more Visayans (especially Cebuanos and Boholanos) moved to the Dapitan/Dipolog area in the 1950’s, a fact mentioned to me by my dad, who said that when Pres. Ramon Magsaysay caused the enactment of the Homestead Patent Act, there was a great diaspora of entrepreneurs, farmers and thrill-seekers from the Visayas into the various provinces of Mindanao, which, back then, was hailed as “the Land of Promise.” Vast tracks of agricultural land was being offered by the Philippine government at a really cheap price, hoping to lure people from the Visayas who had dreams of becoming their own hacienderos into populating the underdeveloped lands of Mindanao. I guess a lot of Cebuanos and Boholanos found their way to Dipolog and Dapitan, judging from the language and traits I’ve observed during my stay there. In fact, I daresay that a lot of it is Cebuano stock, judging from the family names that I’ve encountered, which are also old families in Cebu, such as my very own Perez namesakes.

In my opinion, the only things needed to put Dipolog more prominently in the economic map are:

(1) A strong academic institution with modern-day facilities. A University would be nice… U.P. or U.S.C., perhaps? Dipolog needs a good college to develop the existing skill-set of its well-populated youth, to supplement the skill and knowledge level of the community’s workforce, hence, removing the need to send its children off to Cebu, Cagayan de Oro and Davao in order to get good quality education, because chances are, when these youths hie off to the more modernized cities, they will not likely be coming back to live in Dipolog.

(2) A large manufacturing and/or industrial facility. One the likes of Atlas Mining Co. or the Shemberg Manufacturing Plant, or even an equivalent of the Balamban shipyard, in order to spur development, investment and employment in the community.

The one thing that keeps these from happening, I believe, is Dipolog’s proximity to the more unpopular regions of Mindanao, which, I think, is an unfair case of guilt by association. In my numerous trips to Dipolog, I can personally vouch for the peace-and-order situation of the locality. I actually feel safer walking in the streets of Dipolog than I am in either Cebu or Manila.

I do believe Dipolog and Dapitan have so much potential for economic prosperity, but hopefully, not at the price of losing its beautiful provincial charm and its wonderfully protected ecosystem. Given a good break, over time, I wouldn’t be surprised that this area will become one of the true urban metropolises of the Philippines.

Links:

Official Website of the City of Dipolog

Official Website of the City of Dapitan

The Entire Cebu as an Ecozone June 25, 2007

Posted by Janjan in All, Armchair Economist, Legally Opinionated and Jurisprudent.
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I’ve read about an interesting project that the Cebu Chamber of Commerce and the Cebu Business Club are jointly collaborating on, namely, to have the entire Cebu, both province and city, declared by the National Government as an Ecozone. If both organizations can pull it off, I’m sure it will spur even more business investments into Cebu, to the end that some of these investments will be thrown to the rural areas of Cebu, thus lessening the diaspora of urban migration to Cebu City itself.

 It sounds nice, a win/win situation for both businesses and the employment force, but I’m questioning whether or not local government units would support this move.  A brief backgrounder:

 An economic zone, or ecozone for short, is defined by law as “selected areas with highly developed or which have the potential to be developed into agro-industrial, industrial, tourist/recreational, commercial, banking, investment and financial centers.”  Or, to put simply, it’s a special zone set aside by the national government for highly developed industries and given certain fiscal benefits like a special tax rate, special visas for business executives, and the like.  A good example of an ecozone would be the Clark export processing zone, our own Mactan export processing zone, and the Cebu I.T. Park in Apas, Lahug.  Each ecozone is run by the PEZA, or the Philippine Ecozone Authority.  To avail of the benefits of this law, a business must (1) be registered with the PEZA and (2) be located within an ecozone.

The nice thing about having a PEZA-registered company is their tax break benefit, which is preferential rate of 5% of the company’s gross income, in lieu of the regular 35% corporate income tax.  But that’s not all:  this 5% tax rate exempts the company from paying ALL national and local taxes, such as income tax, real property tax, VAT, customs duties, and the like.  Now, if you pair this with a registration with the Board of Investments (BOI), which grants registered companies with an income tax holiday of around 4 to 6 years, you have a killer tax break combo that spares companies from the burden of taxes which take up around 40% of their income.  (If you are interested in availing of this benefit for your company, contact this law firm, and look for me.)

So, the implication for having the whole of Cebu as an ecozone would be to encourage companies to set up businesses all around Cebu, not just in Cebu City.  Tourism-oriented industries will be sprouting up all around municipalities that are adjunct to the sea, like Bantayan Island, Argao, and San Remigio.  Manufacturing-oriented industries, like the Tsunishi ship-building facility in Balamban, can erect production facilities in far-away areas like Toledo and Dalaguete.  Agriculture-oriented industries can make vast corporate farms in Bogo, and Barili.  So, we will have a whole region-wide development that is not hinged on Cebu City alone.

However, I think that there would be some resistance to this move from the local governments, since the companies are EXEMPT from paying local taxes, thus depriving the local governments from a source of income.  They won’t be deprived of real property taxes though since the ecozone locator, or the organization that will set up the whole area as an ecozone, will still be liable to pay real property tax.

Personally, I am for this move because in the long run, encouraging businesses to grow and flourish in a rural community will have a spill-over effect of inviting more development into the municipality, such as the building of roads, the flourishing of the underground economy, and the retention of local employable talent in the community.  And think about it… why would the young men and women of these municipalities flock to Cebu City when in their very own community, they can find jobs?  I mean look at the Tsunishi facility in Toledo… it’s employs I think around 3,000 workers.  That gives the local people more money to spend on businesses in the community.  Just look at the numerous carinderias and eateries springing up around the factory and the hordes of trisikad drivers shuttling workers to and fro.

Also, think about all the corporate lawyers that will benefit from the need of registering so many companies…. 8)

It Pays to be Clean June 22, 2007

Posted by Janjan in All, Armchair Economist, Legally Opinionated and Jurisprudent.
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A few nights ago, I was talking with Ken, a key member of the Thursday Group and one of my co-founders in a future project we are calling “Section Six.” The topic was about Japan’s recent investment towards biofuel production in Leyte, where they are reportedly putting up $100M and $50M in a bioethanol and biodiesel production facility, respectively. I was thinking along ostensible reasons for the investment, namely so that Japan could directly import its biofuel from the Philippines and have its own captured supply.

However, Ken put up an interesting viewpoint in the matter, namely that Japan has a higher stake other than biodiesel supply. He propounds that Japan is in it to cash in on the Philippines’ considerably high carbon credits. To quote Wikipedia:

“Carbon credits are a tradable permit scheme. They provide a way to reduce greenhouse gas emissions by giving them a monetary value. A credit gives the owner the right to emit one tonne of carbon dioxide.

International treaties such as the Kyoto Protocol set quotas on the amount of greenhouse gases countries can produce. Countries, in turn, set quotas on the emissions of businesses. Businesses that are over their quotas must buy carbon credits for their excess emissions, while businesses that are below their quotas can sell their remaining credits. By allowing credits to be bought and sold, a business for which reducing its emissions would be expensive or prohibitive can pay another business to make the reduction for it. This minimizes the quota’s impact on the business, while still reaching the quota.

Credits can be exchanged between businesses or bought and sold in international markets at the prevailing market price. There are currently two exchanges for carbon credits: the Chicago Climate Exchange and the European Climate Exchange.”

In other words, it’s now profitable to be ecologically-sound. The genius behind this scheme recognizes a fundamental principle in economics, which is that scarcity creates demand, and demand, in turn, creates market economies. Clean air has become a product that you can buy and sell over the global market. In other words:

Carbon credits create a market for reducing greenhouse emissions by giving a monetary value to the cost of polluting the air. This means that carbon becomes a cost of business and is seen like other inputs such as raw materials or labor.

By way of example, assume a factory produces 100,000 tonnes of greenhouse emissions in a year. The government then enacts a law that limits the maximum emissions a business can have. So the factory is given a quota of say 80,000 tonnes. The factory either reduces its emissions to 80,000 tonnes or is required to purchase carbon credits to offset the excess.

A business would buy the carbon credits on an open market from organizations that have been approved as being able to sell legitimate carbon credits. One seller might be a company that will plant so many trees for every carbon credit you buy from them. So, for this factory it might pollute a tonne, but is essentially now paying another group to go out and plant trees which will, say, draw a tonne of carbon dioxide from the atmosphere.

As emission levels are predicted to keep rising over time, it is envisioned that the number of companies wanting/needing to buy more credits will increase, which will push the market price up and encourage more groups to undertake environmentally friendly activities that create for them carbon credits to sell. Another model is that companies that use below their quota can sell their excess as ‘carbon credits.’ The possibilities are endless hence making it an open market.

Japan is a highly industrial country with manufacturing as one of its driving industries. So, if Japan were to comply with the Kyoto Protocol, it would have two choices: reengineer its own manufacturing facilities to have them produce less greenhouse gases, and/or buy carbon credits from other countries.

Ken propounds further that perhaps, by setting up the biofuel facility in the Philippines, Japan found a way to claim some of our carbon credits as theirs.

The way I see it, the whole of the Philippines IS a big carbon credit manufacturing facility, due to the vast track of rainforests covering some parts of our country. (Rainforests, which, we are sad to note, are rapidly dwindling because of illegal logging and mining activities in the country.) Heck, if carbon credits were a tradable resource, the whole of Mindanao should be considered as an export processing zone.

Considering however that our country’s stance is now towards biofuel production, if we were to cash in on our carbon credits, we’d have to rethink our economic strategies. Biofuel produces less greenhouse gas emissions but it does release chloroflourocarbons (CFC’s) nonetheless.

Maybe our country should also make moves towards other forms of renewable energy like wind, geothermal, and solar power generation. In fact, this is the contention that environmental advocacy group World Wildlife Fund Philippine chapter has urged, by pushing for the passage of the long stagnating Renewable Energy Bill.

The bottomline is that the Philippines’ clean air has now become a valuable resource, one that we could trade in the global market in the form of carbon credits. It now makes economic sense for us to be ecologically-sound and environmentally friendly. (Not to mention that with or without economic reasons, we really should be protecting and conserving our natural resources). Therefore, both our government and our private sectors should work towards harnessing this valuable resource. Wouldn’t you agree?