A Kindle for every student?

In a forum on 29 January, Richard Gordon said that if elected as presidenthe will provide a Kindle (an eReader distributed by Amazon) to every public school student in the Philippines. At first glance, this seems like grandstanding on his part – after all, his chances of becoming president are not very high – but on second thought, it seems like a good idea. After all, what is to prevent a future president from implementing good ideas coming from Gordon, or any other presidential candidate.

Phase-in
A Kindle for every public school student. In the Philippines, there are 21 million public school students. If a Kindle is given to them all at once, this would cost (at US$100/unit wholesale) $2.1 billion, or about PhP 84 billion. Compared to the budget for education of PhP 167.9 billion, this seems like a big amount.  However, since it takes time to put the program together, and since we aren’t sure whether we would trust Grade 1 pupils with the device, let us say that the program initially distributes Kindle to first year high school students, which would number about 1.5 million.  If this is so, the cost will be about PhP 6 billion, which is reasonably within the education budget. Later, the program could be widened in steps until it reaches Grade 4.

Negotiate
The program should be put together after extensive negotiations with Amazon and perhaps other suppliers of eReaders. Not only should we get a good wholesale price (Gordon’s estimate was $100/unit), but more importantly, we need to also arrange that Philippine-based publishers get a big share of the download-price (the price for downloading the e-Books, which should be only 10% to 20% of the price of the printed book).  Since practically all elementary and high school books are published in the Philippines, the shift to e-Books should not be a great loss to them.

Wide Use
Then, the Kindle program should aim at all students, eventually. This means that university students, and students in private schools should also benefit from the program. I propose that the government offer this to them at the wholesale price, also in a phased program.  With the university students, this would mean that the books which are published abroad will have to be obtained from Amazon itself, with the provision that the overall cost should not exceed 20% of the print book cost.

Wide use of the Kindle will enable students to download more than just their textbooks – reference books, and even leisure books would then be available, and many people will download these. Even newspapers will come out in Kindle format.

The Kindle program will have various positive effects. First of this will be the cost savings from not having to print (and pay for) so many books. If they are distributed to first year high school students, they will use it for four years; and save a lot on the cost of the books.

Then, there will be the environmental effects of not having to print so many books. This may take time to measure, but eventually, with so many books not being printed, it will count.

Transform banks to be guardians of financial system

President Obama is proposing to force banks to stop “trading for their own account”, pointing out that they were using people’s money for speculative purposes; and that if their investments go sour, the government will bail them out anyway because of the possible fallout on the financial system as a whole. This would mean that “investment banks” will again be separate from ordinary banks. This was to ensure that banks stick to serving the general public.  And that the government would support these activities of banks, but not their own speculative ventures.

An added advantage of this approach is that banks would not need to hire traders for their speculative ventures – and it is these traders’ bonuses which have raised many an eyebrow among the general public. Let the pure investment banks do this kind of thing – and if they go under, too bad for them.

But it is not only the speculative nature of  bank activities which should be stopped; it is also their sheer size. Banks that become so big become “immune” to failure, and this means that risks of all kinds are taken, in the knowledge that if they don’t work out, the government will bail them off. After all, risky mortgages are not “trading for their own account” activities. But big banks will be able to underwrite such mortgages the next time around, because they’re immune to failure.  Thus, banks should be reduced in size, so that they would be open to failure, and thus, their risk-taking behavior will also become more rational.

Banks should be “boring”, as in reliable stewards of people’s money. They should be stable and base their business on the principle of creating value through their loan policy and business-support services.  Banks should not go after the “fast buck”, looking for profits from short-term transactions. Those kinds of activities should be done by investment houses and hedge funds.

What about banks’ investment activities done for other parties? Well, I guess this would still belong with banks. However, more and more, people will prefer to invest using index funds, for stocks and even for bonds.  Also, there is also a growing tendency for investments through internet banks; making this activity more of a service with low margins.

I don’t know if Obama will succeed in breaking up the banks, and restricting their activities.  But I think that banks should indeed be transformed into stable guardians of the financial systems, and no longer be the financial “cowboys” that they’ve been till now.

Hands off Ella and her Blog

Secretary Esperanza Cabral of the DSWD (now secretary of health) has filed a libel suit against blogger “Ella” for posting a blog claiming that the DSWD was hoarding relief supplies for Typhoon Ondoy victims, and that they were “rotting” in DSWD warehouses.  The Secretary went to say that the blog accuses her of corruption, etc. The Secretary has even asked the NBI to file the suit for her.

To find out more re this, I decided to visit the blog at www.ellaganda.com to find out what the fuss was all about. The blog title was “Aanhin pa ang damo kung patay na ang kabayo? (A special report from a volunteer)”.  What I found was a proper blog by a concerned citizen re the relief goods which apparently were not being distributed promptly to the typhoon victims.  Nowhere in that blog post did she say that relief goods were “rotting” – the word she used was “inaalikabok” (which means “gathering dust”). She was decrying the lack of volunteers to do the repacking work, and even suggested that NGOs or the military could help in this work. She in no way accused the Secretary or the DSWD of corruption.

Of course, since the report went out, other people have embellished it with comments to the effect that this is because of corruption, and that the goods are rotting, but this is NOT in the blog itself!

I think that Secretary Cabral is overstepping her authority and being arrogant, by trying to silence Ella and her blog. Her libel suit is totally without merit. Ella’s blog told the truth, and it was done without any malicious intent. It is not libel, it is free speech.

Blogs can be a powerful instrument to call attention to things going wrong in our society. And things went wrong with the DSWD distribution system around the time of Ondoy. Because of Ella’s blog, the DSWD’s attention to this was called, and perhaps their distribution system was improved in the process. Secretary Cabral should understand that in a democracy (which I assume the Philippines is), criticism from the public should be welcomed, not silenced.

No New Taxes?

Noynoy Aquino promised, during a speech before the Makati Business Club on 21 January 2010 that he will not raise taxes as president.  This is a nice promise, but unfortunately, I don’t think that Aquino, nor any president for that matter, could possibly keep such a promise.

Congress
In the first place, it is Congress that decides to raise taxes, and not the president or the executive branch. When the Congress deliberates on the budget, they also deal with taxes (usually small ones); the budget is such a complicated and involved bill that when they agree on it, it is the result of such a long process of deliberation and compromises. When the budget comes to the president for signing, and it  has a few tax increases, it will be extremely difficult not to sign. Not signing may mean that the budget has to be deliberated on again, and that the first few months of the following year would be without a new budget, etc. Thus, the president may really have to sign such a budget.

Adjustments
Then, there are the adjustments made to taxes on a regular basis. For example, some excise taxes are regularly adjusted to go with inflation. Thus, an excise tax on say alcohol, will have to be updated if the price of alcoholic beverages rise. Or, in the course of negotiations with other countries, it may be necessary to change some taxes from excise to ad valorem (excise is a specific amount in pesos per unit to be taxed, will an ad valorem tax is based on the price of the unit to be taxed) or vice-versa, or to raise some taxes and lower others. When this happens, the overall tax burden may remain the same, but specific individuals may experience an increase in their taxes, while others experience a decrease.

Also, if the national government decides to cut down on subsidies for some services at the local level, this may push the LGUs to raise some of their own taxes to recoup the added expense. In a sense, the national government raised local taxes.

Overall impact
Of course, if the “no new taxes” promise is taken to mean: “I will not increase the overall tax burden.” this become more feasible. This means that increases in some taxes will be offset by decreases in others, so that the overall effect will be the zero. This means that the government will seek other ways to generate money – e.g. through more economic growth – than taxing the people.

The idea behind Aquino’s no-new-taxes policy is that enough money could be raised through efficiency in government and tax-collection. And though this is a good idea; it’s just not an absolute thing. I don’t believe it is a good idea to tie down the president to a “no new taxes” policy, since taxes are inevitably part of the arsenal of instruments open to the president.   If good government requires that some taxes go up, then so be it. Just make sure that it is done fairly and that it really is the last resort.

Philippine Taxes on Alcohol and the WTO complaint

The US has joined the European Union in filing a case against the Philippines with the World Trade Organization (WTO) on the issue of taxes on imported distilled drinks.  They charge that the tax on foreign-made whisky and other distillates could be from 10 to even 40 times that for locally made distillates. And that this is against WTO rules.

The Philippines has held on to its position of having lower taxes on locally made distillates on the basis of protecting indigenous communities that produce these products.  Also, the actual law on this specifies the lower taxes to alcohol products made from “nipa, coconut, cassava, carrots, buri, palm or sugarcane”. In theory, if Cuba wants to sell its rum made from Cuban sugarcane in the Philippines, this rum will be subject to the lower tax.

The US and EU want equal treatment, and charge that the law actually discriminates against foreign-made distillates, and not simply on raw materials. They want the excise taxes on their exports lowered to local levels.

This sounds fair enough, but it is not. The  price of the locally made products is much lower than that of the imported product. Thus, if they are subject to the same excise tax, the local product’s price will be affected much more.

I think that the solution to this problem will be to change the “sin tax” on alcohol products from being an excise tax – which is a specific amount taxed per unit of product – to an ad valorem tax, which is simply a percentage tax based on the wholesale price. This will not only solve the current WTO issue, but it will also solve the problem of adjusting the tax to inflation – since the tax rises with the wholesale price, it will always be adjusted to inflation.