Carlo's Think Pieces

Reflections of a Filipino in the Netherlands

Archive for May, 2010

Euro Crisis?

Posted by butalidnl on 31 May 2010

These days, if you watch CNN (and most other American or British media) you would get the impression that the Euro is about to collapse as a currency; and that European countries will have to reinstate their old currencies. It is truly amazing how the Americans especially have fooled themselves into believing that – and now, they are panicking at the possible effect a fallen Euro will have on their investments.

Well, I think this is quite ridiculous; but don’t take my word for it, look at the facts.

Greece Crisis is Over
In the first place, the crisis with Greece is over. The Greeks have implemented deep cuts in government expenditures, and the rest of the Euro zone (and the IMF) are granting them enough loans to be able to rollover their existing debts for the next three years. After 3 years, Greece will still have a deficit, but this will be more manageable; and there would be enough safety nets in Europe to be able to ensure that Greece could rollover their debts easily by that time.

Structural Problems with Euro are getting addressed
In the meantime, Euro zone countries have put up nearly a billion dollars worth of loans and loan guarantees in a special fund to be able to aid other Euro zone countries who might come into trouble with their deficits and debts. This is a fund which is more than the US’ TARP funds that were used to save the US banking system. I believe that this fund is big enough for any problems Euro zone countries could face.

And then, the European Central Bank (ECB) has been given authority to buy up bonds from individual countries. This means that the ECB will in effect be doing “quantitative easing”, or printing money to be able to rescue member countries, if this is deemed as necessary. Of course, I expect that the ECB will use this new authority rather sparingly. The US Fed and the Bank of England has been using “quantitative easing” quite a lot these last couple of years.

In addition, various southern Euro countries have cut back on their expenses, way before the markets have any chance to attack them, like they did with Greece. In recent days, Italy, Portugal and Spain have announced new budget cutbacks (including cutting the salaries of Cabinet officials) , showing the world that they are taking serious steps to reduce their budget deficits.
And there are continuing discussions among Euro finance officials to set up a mechanism to ensure that countries do not exceed the 3% limit for budget deficits.

Panicky Americans
So, with the concrete causes of the crisis avoided, why are Americans panicking about the Euro? Well, I will attribute it to two things; first, it is to the interest of those who speculated against Greece or Spain to somehow make a profit. Rumours may not cause the bankruptcy of Greece or Spain, but they will maintain the price of their put options or Credit Default Swaps (CDS); the price of these will not go down as long as some people think that there is a chance of default.

And second, is that Americans do not understand the mechanics of European decision making. When Angela Merkel of Germany talks about the possible fall of the Euro, this may be true, but only in the long term. For domestic consumption, though, she would be quite grave about it, so that parliamentarians will be forced to support the various rescue programs etc. However, this is the way Europeans come up with common policy. European politicians are known for their brinkmanship, and their hyperbole especially towards domestic audiences. Then, they sit down together in marathon sessions, and viola – they agree on a solution, at the last minute.

We in Europe are used to this kind of brinkmanship and hyperbole of our leaders. We may be concerned about the Euro, but we know that most of the problems are on the longer term, and that our officials are well on their way to solving them. So, we don’t worry too much about it.  But Americans are a panicky lot – they think that the Euro is about to fall apart, that Spain is about to default, and as a result they withdraw their portfolio investments from Europe. This consequently lets the exchange rate of the Euro fall, and then the Americans panic even further – thinking (correctly) that this will decrease European demand for American products.

Well, Europeans don’t worry about their Euro falling apart any time soon.  True, the devalued Euro may make imports more expensive and make travel outside Europe costlier; but exports are booming, and imported products are low-priced anyway as it is, and they just need to plan their vacations within Europe instead of to more distant destinations.

So, for as long as it lasts, Europeans are going to enjoy the low value of the Euro. Of course, this can’t stay this way forever, especially with the growing surplus trade with the dollar zone. But it will be nice, for as long as it lasts. Actually, if I were an American, I will be well advised to buy European stocks or bonds now, while the Euro is still low; I will be sure to make a big profit in a year or so, when the Euro will be back to more “normal” levels.

Posted in World Affairs | Tagged: , , , , , , | 1 Comment »

Solar Cheaper than Meralco in April

Posted by butalidnl on 29 May 2010

Don’t look now: with the astronomisch prices for electricity in the Philippines,  solar became cheaper than electricity for commercial or industrial applications (in comparison with Meralco rates) in April. This is what is called “grid parity”, when solar costs the same as electricity from the grid. In May, the Meralco prices dipped a bit, making it cheaper again for commercial applications. So far, Meralco prices are still cheaper than solar for residential applications; but the difference there is also closing.

Let us go into this a bit more.

We’ll use a measure for Solar Energy Prices in the US to come up with the cost of solar power in $cents/KwH. The index is based on a monthly survey of US solar energy installation companies, with an assumption of 5.5 hours of average sunlight, a US location, and 5% interest over 20 years. The price for solar for Residential includes batteries; but the price for solar for Commercial and Industrial do not include batteries (and are thus grid connected).
The index is a good indicator for solar installation prices in the Philippines. The cost of the solar equipment may be a bit higher in the Philippines, but at the same time we have more sunlight than the US and the cost of labor is lower. So all in all, US prices would either be the same or a bit higher than that of the Philippines.

Using the index, and computing for a Php 45: $1 exchange rate, the figures for April are:

  • Residential: Php15.68/KwH
  • Commercial: Php 11.16/KwH (for 50+ KWs)
  • Industrial: Php 8.70/KwH (for 500 + KWs)

Let us compare to this with the prices for electricity from Meralco:

  • February: Php 10.20/KwH
  • April: Php 13.28/KwH

Meralco says that their prices for May will go down to the level of February.
From this, we could see that Solar for Industrial uses is cheaper than Meralco power even in February. And, that Solar for Commercial use is cheaper than Meralco power in April, but not in February. But since these prices are for grid connected electricity (thus, no batteries), the companies that decide to install solar will continue to receive electricity from the grid.

The trend is clear, though. The cost of solar installations keep falling, from month to month; while Meralco prices keep rising, though not in a continuous straight line. The difference between the two, even for Residential consumers, will surely close as the months go on.

So there is good news that comes out of the bad news over the high cost of electricity in Manila. The electricity price is so high that it has reached grid parity for solar. But what does this mean? Well, not much immediately. Companies will not go out immediately on the basis of this, and buy solar panels. Why not? First of all, they are not sure if the high prices of April will be repeated. Perhaps the government will do something to lower prices. Or something like that. Then, there is also that installing solar panels cost so much money up front. It is as if you buy 20 years worth of telephone load all at once – not too many people will do that. And the third reason is that most companies will not have enough roof space for all the solar panels that they would need to cover their needs. So, most companies will opt to wait. But for companies who are more daring, solar energy will not really cost them more than grid electricity, so they could actually shift without suffering increased costs.
But the prices are getting more and more in favor of those who will install solar panels. If the government would like to help things along, it does not need to implement feed-in tariffs like other countries. What it  would need to do would be to : first, offer a partial rebate on the cost of installing solar panels. The partial rebate could be as low as 20% of the cost of installing solar panels – and with this, even Commercial applications will be cheaper than grid electricity.
And, the government can also help to provide loans for alternative energy projects. One way of doing this will be by requiring banks to have a minimum portion of their loan portfolio (say, 5%) for alternative energy projects.

These steps will surely encourage some companies to install solar panels, and perhaps help the country go through its “shortages” of electricity, especially during the dry season.

Posted in electricity, environment, Philippine economics, Philippines, solar, solar energy | Tagged: , , , , | 5 Comments »

Mining: Not good for Philippine development

Posted by butalidnl on 25 May 2010

Mining is not good for the Philippines. It actually retards development, and should not have any part in a Philippine development plan. Here’s why:

Short-term benefit
In the first place, the Philippines is full.  Practically all the land in the country has been claimed, or lived on, and there is absolutely no way that you can decide to dig up somewhere without anyone being displaced. On an economic level, you have to weigh the advantages of keeping the present occupants where they are – and they continue their activities (e.g. farming, fishing, preserving the forest as watershed etc) – and compare this with the advantages of having a mine there. For many government officials, they would choose the mine, since they can easily extract revenues from a mine (through taxes), while not so readily from farms. But from the view of the overall economy, the mine is a short-term advantage compared to the longer term advantage of having farms etc. on the same piece of land.

Add to that the fact that it really is an either/or choice these days between agriculture and mining; since mining is most preferably done by the strip mining method, where they simply strip the topsoil and get at the minerals underneath. They don’t really build tunnels these days.

Mines are also often located near the sources of rivers. The forests there are watershed areas for areas downstream. True, there is no immediate tax benefit from watersheds – but if these are polluted, downstream areas will have a problem getting enough water for crops and for drinking, etc.

Unfavorable Factors
The Philippines is a particularly bad place to mine because of two things: the mines are in mountainous places, and the monsoon and typhoons that hit the country. This is because when a mine operates, it extracts huge amounts of rock and crushes them, then the mineral is extracted, and the rest of the crushed rock is dumped somewhere. This crushed rock can’t stay still, because of the steep gradient and the heavy rains. It then leaks out unto the nearest river and pollutes everything downstream. This crushed rock has a lot of heavy metals in them, which causes all kinds of problems with livestock and people. The 1996 disaster in Marinduque is a good example of what could happen: when 3 million tons of “tailings” (the crushed rock leftovers) escaped into the river and sea, resulting in heavy metal poisoning of many people in the area, and ruining large tracks of coral and seagrass.

Will it be Noticed?
The Philippines’ mining output is small. It will not affect the world supply of essential minerals. We could simply cut off production from mines in the Philippines without any shortage or even price hike resulting from it. So, in this sense, it should be easy to simply stop mining altogether in the Philippines.

How about mining in other third world countries? Well, I guess this depends on the conditions in those countries. Chile’s copper mines are in uninhabited dry regions – so the tailings problem is rather non-existent. And there are mines in developed countries, of which many would be alright. But the thing is, the world is awash with minerals of all types, and it will not do too much harm to have lesser supplies of many of them. The price for these minerals may go up in the process; but this should be good in that it will encourage more recycling and more efficient use of these minerals.

Posted in environment, Philippine economics, Philippines | Tagged: , , , | 1 Comment »

Can “Bangkok” Also Happen in Manila?

Posted by butalidnl on 20 May 2010

With the Thai army dispersing the “red-shirts” from their positions in Bangkok, some people ask whether or not Manila is also ripe for a Bangkok-like class struggle. After all, they say, there is also a big gap between rich and poor in the Philippines. And Thailand and the Philippines are sort of comparable in terms of size, stage of development, etc.

Safety Valves
Well, I don’t think so. The main reason for saying so, is that the Philippines has various “safety valves” that the Thais do not have. In the first place, come the OFWs. People who are not able to find jobs in the country have the option of going abroad. Filipinos are very much able to go abroad to work, compared to the Thai (who don’t speak English, and thus aren’t able to work abroad en masse). Thus, we can say that the option of working abroad is one of the safety valves in Philippine society.

The second safety valve, ironically, is our home-grown communist insurgency. Why would that be?  People who are particularly mad about the present system have the option of joining the NPA in the countryside. Despite various efforts, the NPA remains restricted to countryside operations, where they face local challenges e.g. armed right-wing groups etc. The NPA does not retain that much left-over energy to fight in the cities. And the CPP-NPA is actually already coopted into the political status-quo and will not do anything to really threaten it.(see: CPP-NPA Helps Maintain Status Quo in the Philippines)

And then comes elections, which are particularly popular for Filipinos. Our elections “work”, in the sense it brings about a relatively peaceful transfer of power (though still within the ruling elite). Despite everything, elections are part of a system of patronage, even of (temporary) dissent, and it does let off so much of the pressure in the system.  The circus atmosphere of elections also distract people from their pressing problems.

And the people still believe in elections. They still think that change is possible through the electoral process. If only good leaders get chosen, the country will improve. They believe a lot more in elections than revolution or other extra-constitutional means to change things. Military coups don’t really make it in the Philippines – the only successful coup (if you could even call it that) was the 1986 “People Power” revolution.

It is only when the result of elections are not respected, that Filipinos opt for more violent means. This happened in 1986, when Marcos attempted to thwart the election result in his favor. And, sad to say, again in 2001 when a middle class “People Power” revolt overthrew Erap Estrada; effectively negating his landslide victory in elections. This gave rise to”EDSA 3″ where many poor people demanded the return of Estrada to power, and ended up in rioting that reached Malacanang. We can compare EDSA 3 to “Bangkok”, because it was a revolt of the poorest segments of the population; however, EDSA 3 failed miserably, and one factor in this was the lack of leaders.

Can EDSA 3 Happen Again?
Perhaps. But it will not be successful, especially because many of the people who could be their leaders are now involved in elections, or in NGOs, in the countryside (as NPAs) or abroad. The main mass of people tend more to the pro-election, gradual reform of society – revolution or urban uprising are just not attractive.  There is no way that they will be able to sustain an uprising in the city for weeks, even months.

Posted in Philippine politics, Philippines, politics, World Affairs | Tagged: , , , , , , , , , , | Leave a Comment »

Before talking peace with the NDF

Posted by butalidnl on 14 May 2010

President-elect Noynoy Aquino has declared that he aims to reopen peace talks with the NDF and the MILF during his first 100 days of office.  For its part, the NDF is  also indicating their willingness to reopen peace talks. Provided, however, that the Philippine government tell the EU and the US to drop the terrorist tag on them. Well, the government should present its own peace proposal. I would like to point out some things that the government needs to consider in formulating its proposal.

Terrorist Tag
This seems to be a staple in the NDF’s list of conditions for peace talks.  [see:NDF wants new admin to remove terror tag on NPA, GMA News, May 12 ] Unfortunately, there is nothing that the Philippine government can do about this. Contrary to the propaganda, the Philippine government was not responsible for putting the tag on the NDF in the first place. The responsibility for this rests with the Dutch government, which put the CPP and Joma Sison on the list. The Dutch did this because of “personal links between Joma (and the CPP) with known terrorists”. And this is not only the position of the Dutch Justice Ministry, it was also upheld by the Raad van State, the highest court in the Netherlands; which goes to show that the Dutch government must have physical proof (probably including pictures provided by Interpol) of CPP representatives talking to terrorists. And by terrorists, they mean “groups that undertake armed struggle in Europe”, such as the Basque ETA (I personally believe that the ETA is one of these groups). It’s the CPP-NDF’s own fault – they shouldn’t be relating to the ETA and other terrorists in the first place; but to make things worse, they got caught while doing so. So, that’s why the Dutch put Joma and the CPP on the terrorist list.

And when the EU ministers of Justice met to approve a black-list of terrorist organizations in Europe, the Dutch proposed to include Joma et al, and of course all the other ministers agreed.  It’s true that the Philippine government sent an emissary to Europe to “lobby” for the inclusion of Joma/CPP in the list before the meeting; but it was academic by then, the Dutch had already proposed it, it was only a formality to be accepted by the other countries.

There is nothing that the Philippine government can do to remove the “terrorist”  tag from the CPP/NDF/NPA.

If we take from previous rounds of talks between the NDF and the Philippine government, we know that they will propose forming “peace panels” for both sides, even before a ceasefire is declared. This is rather irregular, if you really look at it. Both sides will be free to attack each other (as in ambushes), even while they are talking. Wouldn’t it be much better to agree to a ceasefire, however temporary, before talks start. This way, we will know that the NDF is sincere in wanting peace. And we will know that the Philippine government is restrained from arresting or attacking the NPA while the talks are going on.

The Philippine government declared a ceasefire with the MILF when they held their talks, why is the NDF any different?

The NDF has a sneaky practice of declaring arrested NPA commanders as “consultants” for the peace talks, freeing them from jail in the process. And these “consultants” leave the country to join the negotiating team based abroad. In the meantime, there is no real progress in the talks, which drag on forever, while the NDF’s “consultants” are free to roam the country, or go abroad, and they are immune from arrest. And the war simply goes on…

The peace talks should lead towards peace. A ceasefire should be declared before real talks begin.

It is alright for peace talks to be held abroad (after all the MILF talks are held abroad) but it is strange that the “negotiating panel” is headed by people permanently based abroad.  Isn’t the NDF supposed to be a home-grown insurgency? Isn’t it that its real leaders are based inside the Philippines? Why then are the talks with people permanently based abroad? Joma Sison has been outside the country since 1986 (24 years) and Louis Jalandoni since 1980 (30 years). They have been away for so long, and have been so detached from the day-to-day leadership of the movement in the Philippines for all this time.

We can only conclude that the Philippine-based leadership is not really serious about peace talks; that these talks are nothing but a scheme to get NPA leaders released, and to let Joma Sison have his day in the spotlight. The Philippine-based leaders don’t even think highly enough of the talks to honor it with a ceasefire; in other words, “they can go on talking all they like, but we will continue with our armed struggle”.

Perhaps the Philippine-based real leaders of the CPP/NDF want to continue the myth that Joma Sison is the chairman of the CPP, so as to confuse the enemy. But the Philippine government should know better – they should talk with the real leaders, for they are the ones who can really talk peace with them. Talking with Joma Sison et al will just be a public relations exercise that will end nowhere.

The government should talk to the real, Philippine-based, leadership of the CPP-NDF in its peace talks. Talking with foreign-based “spokespersons” will get them nowhere.

Posted in Philippine politics, Philippines, politics | Tagged: , , , , , , | 1 Comment »