July 2011

Will United States’ Past be China’s Future?

The early 19th century saw the rise of the United States of America as an emerging global superpower. America’s economic growth and influence were quickly outpacing that of its European counterparts. The United States saw that in order to sustain its growth and influence it had to forbid Britain, Spain, France, and other European powers to interfere with the affairs of continental America. US President James Monroe enunciated the now famous “Monroe Doctrine”, the US government essentially made it a policy to deny European powers to gain access to Latin America and the Caribbean Sea. The American hemisphere belongs to the United States. With the United States free to flex its muscle in its neighboring territory it contributed in transforming itself into becoming the world’s sole superpower in less than a century. It also led to American colonization and imperialism in the 20th century.

Fast forward to the early part of the 21st century, China has become the second largest economy in the world next only to America in less than three decades. Its apparent political stability, consistent economic development, and immense global influence has led many political economists to predict that China would eclipse America as the world’s premier superpower in several decades. It also led some to speculate that in order for China to sustain its vigor it has to take steps that might be detrimental to its neighboring countries, such as my home country, the Philippines. Pundits are saying that China is preparing itself to become East Asia’s hegemon, following in some fashion what pre-war Japan did.

Will America’s Past be China’s Future? Is China pursuing a Monroe policy (doctrine) over East Asian region and the South China Sea?

One would fail but notice some parallels between early 18th century United States and early 21st century China. China is today’s emerging global superpower challenging existing superpowers, in the same way that United States was two centuries ago. China needed regional influence, another term for regional hegemony, in the same way that United States needed it two hundred years ago. China needs essential resources within their area of interest to sustain its massive and intense economic activity, in the same way that United States needed it on its early stages to global might.

The evidence for a Chinese Monroe Doctrine can be seen from its recent actions in the South China Sea and Southeast Asia and its territorial disputes with Japan, extending its naval deployments into the region, getting into diplomatic word war with Japan and my home country Philippines, building military-civilian complex on the disputed islands in South China Sea, placing new markers on disputed territories, imposing a fishing ban in waters claimed by other countries, generally discouraging oil explorations in disputed territories without the permission of Beijing, and  explicitly forewarning non-claimant countries especially the United States to avoid interfering with the South China Sea disputes.

However, Prof. Amitav Acharya argued that taking a closer look at China’s foreign policy in early 21st century and America’s early 19th century foreign policy makes it clear that there are major differences between the two historical contexts.

First, in the early 19th century, there was no countervailing force, whether another regional power or an offshore balancer, available to block US regional hegemony over its backyard. The rivalry between Britain and France, the two European powers that theoretically might have posed a counterweight, constrained them in the Western Hemisphere. China today not only faces the United States – an offshore, although some say a ‘resident’, balancer – but also regional balancers such as India, Japan and Russia, should it seek regional hegemony of the kind the US wa

s able to achieve in the 19th century.

Second, the Monroe Doctrine came at a time of a historic shift in US economic development. From December 1807 to March 1809, Congress had imposed a near total embargo on US international commerce, a policy that, along with the 1812 US-British war, not only helped the development of US domestic industry, but also lowered overall US international economic interdependence. In this climate of reduced dependence on foreign trade, US policymakers had less to worry about with regard to the damage to its economic interests that European powers, retaliating against their exclusion from the Americas, might have caused the US by cutting off its trade routes. Compare this to China’s dependence on commerce today. According to a recent report in China Daily, over 60 per cent of China’s gross domestic product now depends on foreign trade. Imported oil accounts for 50 per cent of its oil needs. China’s economy operates within a much more interdependent global economic order than was the case for the US in the 19th century. China’s commerce and hence prosperity depends very much on access to sea lanes through the Indian Ocean, the Malacca Strait and other areas over which it has little control, and which are dominated by US naval power. India too has significant naval power in the Indian Ocean.

So if push comes to shove, Prof. Acharya pointed out that an aggressive Chinese denial of South China Sea trade routes to world powers, and the disruption of maritime traffic the resulting conflict might cause, would be immensely self-injurious to China. It would provoke countermeasures that will put in peril China’s own access to the critical sea lanes in the Indian Ocean and elsewhere. Chinese leaders are not oblivious to this fact of life. The truth is that they may not have the option of pursuing an aggressive posture. The costs will simply be too high.

 

Image Credit: Upsideworld.org

How the Global Market is changing Fishing in the Philippines

Fishing in the Philippines

The WWF calls the LRFFT a “boom or bust” business. Yet, their conservation efforts in Taytay are a working model for both the Philippines and neighboring nations. In Biton, a district that is an hour’s boat ride from Taytay, local leaders have primarily fought for food security. “Not long ago, we could catch puffer fish very close to our shores,” said Biton’s district counselor Helen Dandal, “now we haven’t seen any in the waters.” The puffer fish, considered a culinary delicacy in nations such as Japan, is but one of the species caught in Northern Palawan and traded in other parts of the Philippines and abroad. The most prized and heavily fished species in the LRFFT is the coral trout, known as Plectropomus leopardus, which changes names depending on the locality. Locally called suno in Taytay, the fish garners high prices that increase sharply when exported to places such as Manila and Hong Kong. According to Dr. Margarita Lavides in her office at the Environmental Science Department at Ateneo de Manila University, the Philippines is experiencing a rapid decline in fish stocks at the commercial level and at larger undocumented municipal rates.

Read more about “Fishing for Survival: How a Global Market Is Shaping One Island Community”, from the original site.

Excerpt republished here with permission from Ms. Jose.

Photo credit: Coleen Jose

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Coleen Jose is a Student Fellow for Pulitzer Center on Crisis Reporting, Dean Rusk International Studies.

Budget 2012: How it all stacks up

Among the nations in the developed world that follow in the Westminster parliamentary tradition, the most eagerly anticipated policy speech by the government is not the state of the nation address but the budget speech.

The budget tackles not only the spending side, you see, but the tax side as well. On budget night, citizens find out if they are to get some form of tax relief. They also look for any additional spending on things they directly benefit from, like schools, hospitals or infrastructure.

The rich nations that make up the OECD (Organization of Economic Cooperation and Development) have varying levels of taxation. The Scandinavians typically tax more and provide a high degree of social insurance and welfare. The Anglo-American nations of the UK, US and Ireland tend to have lower taxes but provide a smaller safety net for their people.

Australia, the nation I am most familiar with seems to have the best of both worlds, with a tax take much lower compared to the Nordic countries but providing a level of social insurance and welfare comparable to them. That is because its tax and spend policies are some of the most progressive in the world.

Australia spends about 16 per cent of GDP on cash benefits (pensions, unemployment insurance, healthcare and community services) compared to an OECD average of just over 19 per cent. It is able to keep this expenditure down by means-testing benefits enabling it to target spending on those that most need it. Its tax take is about 27 per cent of GDP compared to an OECD average of close to 35 per cent. It is the sixth lowest-taxing country in that group.

Rich country, poor country

It is perhaps in this light that we need to focus on the Philippine tax and spend situation. Most poor countries are able to generate only as much as 20% of GDP from their tax systems. Yet the demand for public service is much higher than in advanced economies. The Philippines is no exception.

In 2012, the government projects it will generate about 1.5 trillion pesos worth of revenue out of a domestic economy that is expected to reach 11 trillion or about 13.6% of GDP. In the current year 2011, the government projects to earn 1.4 trillion out of an economy of 9.9 trillion or 14.2% of GDP. In 2010, the ratio was 13.3% (based on DBM papers).

In 2012, due to its low tax take and with a budget of 1.8 trillion, the government will incur a deficit of 286 Billion (up from the original 260 B) or 2.6% of GDP. That is compared to its projected deficit in 2011 of 300 Billion worth 3% of GDP and 314.5 Billion for 2010 or 3.5% of GDP.

Social services which include education, health, housing and land distribution are programmed to consume 556.2 billion pesos or 30% in 2012. That compares with 529 Billion in the current year equal to 31% of the budget in 2011 and 399.3 billion in 2010 worth 26.2% of that year’s total spend.

Among the social services, education takes the largest share. Next year it will amount to 309 billion or about 2.8% of GDP. This is up slightly from 2011 which was 272 Billion or 2.7% of GDP and from 2010 which was 225 billion or 2.5% of GDP. By contrast, Singapore and Thailand spend anywhere from 3.5-4% of GDP on education. Malaysia spends from 5-6%. If we were to match Thailand’s education to GDP ratio, we would need to spend an additional 70 billion on education.

As for health, next year’s budget includes 59 billion or 0.5% of GDP, up from 48 billion in the current year (0.48%) and 36 billion last year (0.39%). In contrast, Singapore spends about 0.9-1.5% of GDP, while Malaysia spends 1.8%, and Thailand 1.2-3%. If we were to match Singapore’s ratio, we would need to spend about 40 billion more on health.

Finally in housing, the 2012 budget contains 14.5 billion worth of spending or 0.13% of GDP compared to the current year’s 21 billion (0.2%) and 12 billion (0.13%) from 2010. Singapore by contrast spends about 1.8-2.5% on housing. Malaysia spends 0.3-0.6%, and Thailand spends 0.5-1%. If we were to simply match Malaysia, we would need to double our current spend by another 14 billion.

Living within our means

Judging from the magnitudes and ratios alone, we can plainly see that the country will continue to lag behind its neighbors in the region when it comes to providing basic social services for its citizens. As a result, it has much higher levels of poverty and inequality and lower levels of human development among the ASEAN-5.

If you take out the possibility of tax reform, “living within our means” confines the budget department to look for savings and improve the structure or mix of spending to improve the quality of the spend rather than the quantity. Past studies have shown that our education spending is already quite progressive, while that of our health sector tends to be regressive with its focus on the tertiary hospitals in urban centers rather than on primary healthcare in the community.

Certainly, there are opportunities to improve the progressivity of our spending program in health. One problem is that our health system follows the model in the US, Europe and Japan which relies of specific contributions. Those who earn more tend to receive higher reimbursements. While in Australia, health expenditures are financed from income taxes, but then are spent in a more egalitarian way by means-testing recipients so that those who earn more tend to pay more out of pockets than those who earn less.

Can afford more

The orthodoxy of constraining the budget because we have to live within our means can of course be challenged by simply asking the question, can society afford to pay more?

From his State of the Nation Address, the president hinted that we probably could afford to pay more when he cited to his own disbelief the close to two million self-employed entrepreneurs and professionals who declare incomes beneath the minimum wage. The BIR has said subsequently that it believes that the current 10 billion raised from these individuals should actually be about 100 billion.

Aside from professionals and self-employed individuals, the corporate sector might also afford to pay more. That is according to a five year old study by Dr. Renato Reside. His work showed that a very low correlation between investments approved by the BOI and PEZA with actual capital formation in all regions except Regions 4 and 7. He concluded that since investments did not materialize companies were simply using their fiscal incentive privileges to engage in tax avoidance. The recipients of such incentives read like a who’s who of Philippine business elite according to Dr Ben Diokno.

Because companies under this scheme are also allowed to sell as much as 50% of the goods they produce to the domestic market, Dr Reside also believes that much revenue is lost. According to him, back in 2004, we were losing as much as 59 billion pesos from revenues on imported capital goods, 135 billion on imported raw materials, 10.5 billion on the use of domestic capital goods, and 44 billion on income tax holidays provided to these so called exporters. If even half of these were recoverd, it would be an additional 125 billion in revenues.

Another form of tax incentive is provided to sin products because of the non-indexation of taxes imposed on them. It is an incentive because every year the prices of these products go up, but the taxes imposed on them don’t. Government revenues are eroded over time. By gradually increasing the taxes along with the rise of prices in general, the additional revenues from sin products estimated to be as much as 70 billion annually could help beef up our infrastructure which in 2012 will be 270 billion a mere 2.5% of expected GDP.

Indeed, from the combined tax breaks given to entrepreneurs, professionals and corporations, our society could afford to bridge the gap in social as well as economic infrastructure. We could become a more inclusive society. With a combination of better policies and stricter enforcement in revenue and incentive granting agencies, by renovating our economic bureaucracy, we could produce a more progressive tax and spend system.

Ampaw: The Flawed NTC Memorandum Order on Minimum Speed of Broadband Connections

NTC MO 07-07-2011 is a paper tiger

Author’s Note: The full text of the National Telecommunications Commission Memorandum Order No. 07-07-2011 (Minimum Speed of Broadband Connections) was provided via email as an Adobe PDF file, in response to a request for the document.

To the best of the author’s knowledge, NTC MO 07-07-2011 has not yet been published in any newspaper of national circulation.

A sop to Filipino consumers, conceived with no regard to objective realities, and written in a lazy fashion — that, very politely, describes the NTC MO No. 07-07-2011. Not quite unlike a speech given by a traditional politician, it is prefaced by a long-winded introduction and followed by a weak policy.

To be fair, let’s begin our analysis by parsing the strengths of NTC MO 07-07-2011.

First, NTC MO 07-07-2011 requires internet service providers to be transparent in the billing of their subscribers, via Rules 1 and 2 of the order. Transparency is good for us consumers; we’ll know exactly what it is we are paying for.

Second, NTC MO 07-07-2011 requires internet service providers to be provide a minimum service reliability for their subscribers, via Rule 1. Instead of not being certain of getting what we’re paying for, the minimum service reliability ensures that we’re going to get it. In fairness to the ISPs and the NTC, a minimum service reliability of 80% is not too bad, considering the state of telecommunications infrastructure in the Philippines.

Third, NTC MO 07-07-2011 provides internet service providers good flexibility towards developing competition strategies, via Rule 1. By allowing internet service providers to offer the public various packages and prices, the ISP with the most aggressive, the most reliable, and the best-priced packages wins the market.

All that said, and despite the best of intentions, NTC MO 07-07-2011 is useless to us consumers and does nothing concrete to require good service from ISPs. Why?

First, NTC MO 07-07-2011 does not provide effectively for short-term prepaid internet connectivity. With service reliability measured on a monthly basis, prepaid internet subscriptions lasting one day, three days, or a week can easily meet 80% service reliability on paper, with the customer not enjoying the connectivity he has paid for. For instance, should a customer use a 3-day prepaid card and not be connected, his complaint will be easily dismissed once the ISP shows that he could have been connected on the other 27 days of the month, with the ISP meeting a service reliability of 90%.

Considering how much of the broadband market floats on prepaid services, that segment of the consuming public is going to continue to get screwed.

Second, NTC MO 07-07-2011 does not specify where service reliability is to be measured, instead of protecting the consumer by requiring service reliability to be measured at the subscriber end. As such, the internet service provider can very well claim to be meeting 80% service reliability or even higher, by measuring reliability at their end of the transmission medium.

This, despite at his end the consumer keeps on getting “Unable to connect to the Internet” error messages on his browser.

Third, NTC MO 07-07-2011 is silent on data volume capping. Thus, the MO allows for unreasonable data volume capping.

Therefore, a consumer with consistent 1 Mbps connection speeds can have his connection cut off every three days by virtue of a 1 GB data volume cap, and the ISP will still be completely compliant with the memorandum order, for as long as the ISP has a provision on data volume capping in fine print somewhere in the service offer/ contract/ prepaid SIM wrapper.

Fourth, NTC MO 07-07-2011 does not require ISPs to provide clear, timely, and customer-centric rebate mechanisms for customers if service reliability minimums are not met. ISPs can very well still get paid for the services they do not provide, and getting rebates will still be as easy as pulling teeth from a rabid dog using longnose pliers.

Subscribers, therefore, can continue to get screwed under the guise of “ma’am, network maintenance po kasi, di po yan covered ng rebate”, “sir, kelangan complete po ang documents and proof of downtime, tapos wait po kayo ng thirty days tapos i-claim ninyo personally dito sa office namin yung tseke”, and whatnot.

To summarize bluntly the impact of NTC MO 07-07-2011 to internet service providers, compliance to NTC MO 07-07-2011 is as simple as ISPs rewording their boilerplate contracts and marketing collaterals and ensuring that 80% reliability or higher is measured at their end. NTC MO 07-07-2011 will merely require cosmetic changes and tweaks in marketing, rather than significant improvements in service.

To summarize bluntly the impact of NTC MO 07-07-2011 to us consumers, NTC MO 07-07-2011 provides us with absolutely nothing but a wad of used toilet paper.

It’s brilliant, really. This MO will be hailed as a victory for the consuming public, with the perception of the NTC being the white knight riding to the defense against the greedy invading ISPs. The reality, however, is that the NTC MO 07-07-2011 is no more an actual strike for Filipino empowerment than the sham that was the Battle of Manila and the surrender of the Spanish troops to the Americans.

Read the full text of NTC MO 07-07-2011 here. If you want to read a proposed draft of a better memorandum order, one that serves all parties fairly, read this one instead.

And to think we were led to believe that the NTC really does have our interests at heart and does its best to serve us. Bleh.

Image from The Pulse Review (www.pulsereview.com).

Full Text: NTC Memorandum Order No. 07-07-2011 (Minimum Speed of Broadband Connections)

REPUBLIC OF THE PHILIPPINES
COMMISSION ON INFORMATION AND COMMUNICATIONS TECHNOLOGY
NATIONAL TELECOMMUNICATIONS COMMISSION

MEMORANDUM ORDER
No. 07-07-2011

SUBJECT: MINIMUM SPEED OF BROADBAND CONNECTIONS

WHEREAS, the 1987 Constitution fully recognizes the vital role of communications in nation building and provides for the emergence of communications structures suitable to the needs and aspirations of the nation;

WHEREAS, the promotion of competition in the telecommunications market is a key objective of Republic Act No. 7925 (RA7925, for brevity), otherwise known as The Public Telecommunications Policy Act of the Philippines, which mandates that “a healthy competitive environment shall be fostered, one in which telecommunications carriers are free to make business decisions and interact with one another in providing telecommunications services, with the end in view of encouraging their financial viability while maintaining affordable rates;

WHEREAS, RA7925 further defines the role of the government to “promote a fair, efficient and responsive market to stimulate growth and development of the telecommunications facilities and services”;

WHEREAS, RA7925 mandates the National Telecommunications Commission (Commission) to promote and protect the consumers of public telecommunications services;

WHEREAS, it has been observed that the service providers are offering broadband/ internet connections specifying only the maximum speed;

WHEREAS, customers/ subscribers/ users have the right to be informed of the quality of the broadband/ internet connection service being provided;

WHEREAS, fixed, fixed wireless and mobile broadband/ internet access differ in transmission characteristics;

WHEREAS, mobile broadband/ internet access suffer from signal fading more than fixed and fixed wireless broadband/ internet access;

NOW, THEREFORE, pursuant to RA7925, Executive Order (EO) No. 546 series of 1979, and in order to maintain and foster fair competition in the telecommunications industry, and promote and protect the rights of broadband service customers/ subscribers/ users, the National Telecommunications Commission (the Commission/ NTC, for brevity) hereby promulgates the following rules:

1. Broadband service providers shall specify the minimum broadband/ internet connection speed and service reliability and the service rates in their offers to consumers/ subscribers/ users in their advertisements, flyers, brochures and service agreements and service level agreements. The minimum service reliability shall be 80%.

Service Reliability is measured over a period of one (1) month and calculated as

[(Hours in a day x Days in a month) – (Time internet connection speed is below minimum)(Hours in a day x Days in a month)

The service offers shall specify the service rates for a minimum broadband/ internet connection speed and the service reliability. For example: a broadband service provider can offer PhP 900.00/month for 512 kbps minimum connection speed and 80% service reliability, or PhP 1,000.00/month for 512 kbps minimum connection speed and 85% service reliability, or PhP 1,000/month for 1 Mbps minimum connection speed and 80% reliability, etc.

2. The subscribers/ consumers shall be properly informed of the broadband/ internet connection service being offered to them.

3. Service providers offering committed information rate (CIR) shall comply with NTC MC No. 12-19-2004.

4. Failure on the part of a broadband service provider to comply with this Order, the Commission shall file appropriate administrative case against said broadband service provider.

5. Any circular, order, memoranda or parts thereof inconsistent herewith are deemed repealed or amended accordingly.

6. This Order shall take effect fifteen (15) days after publication in a newspaper of general circulation and three (3) certified true copies are furnished the UP Law Center.

Quezon City, Philippines, 15 July 2011

(signed)
Gamaliel A. Cordoba
Commissioner

(signed)
Carlos Jose A. Martinez
Deputy Commissioner

(signed)
Delilah F. Deles
Deputy Commissioner

Health tip

MEANWHILE BACK IN ALI BABA’S CAVE…

Raul Lambino, Gloria’s lawyer and spokesman, responds to the statements of another set of witnesses to the cheating in the 2004 election:

    “Those same allegations were already investigated thoroughly before and even exposed in media. Now, personalities with their own political agenda to advance are like hyenas savoring to devour their fallen prey by capitalizing on matters that in their minds will help them earn some points from the unsuspecting public”

Raul Gonzales, Gloria’s justice secretary, asking why these allegations were not investigated before, adds:

    “Palagay ko gawa-gawa lang iyan eh..just either for publicity or they are being paid…whatever reason self-motivated yan”

And Ali Baba wraps it up

    “Our persecution continues. We are continuously being vilified and maligned based on hearsay evidence. I don’t know these people who are spreading these lies about me. After more than a year in office, it’s still all politics. For a non-performing administration, we are being used as scapegoats. We are being used as a media fodder to mask this administration’s lack of solid and long-term economic program.”

Parang sumasakit din ang leeg ko, sa may batok. Na high-blood yata ako sa mga pinagsasabi ng mga gunggong na yan.