The developed countries of North America and Europe continue to experience record-high inflation rates and their interest rates follow the upward trend hoping that the measure will help cool down prices. High inflation discourages more household and corporate consumption, which pulls down overall GDP. And this pulls the developed world into a possible situation of stagflation — stagnant growth with high inflation — this year.
INFLATION, INTEREST RATES AND ENERGY COMMODITIES
The US and UK inflation rates of 8.6% and 9.1% respectively in May were their highest levels in 40 years. Germany’s 7.9%, also this May, was the highest since 1973-74. And US 10-year bonds reached 3.48% two weeks ago, the highest since February 2011. European rates this month are the highest since 2014.
Behind these high inflation rates are high energy and electricity prices, high fertilizer and food prices. The TTF-EU (Title Transfer Facility-EU) gas price was only €10 per megawatt-hour (MWH) on June 30, 2019, and reached €180/MWH on Dec. 21, 2021, and peaked at €227/MWH on March 7 this year. Urea ammonium nitrate (UAN) was only €178/ton on June 30, 2019, and peaked at €860/ton in late March 2022, cooling down to €582/ton last week (see Table 1).
This trend towards high prices of energy, fertilizer, and food in Europe and America is not transitory but for the medium to long-term. There was prolonged, decades-old demonization and under-investment in fossil fuels (oil, gas, coal) and crude oil refineries in the West and it will take at least half a decade of re-investment in fossil fuels to expand output and refineries, especially for diesel, fertilizers, and other petrochemical products.
A big challenge for the Philippines and our ASEAN neighbors is how to attract many American and European companies who will get out of their continents and go to Asia where consumers number in the hundreds of millions, and where inflation rates and electricity prices are not as bad as theirs.
The incoming Ferdinand Marcos, Jr. administration can attract many of these migrating companies from the West — provided we do not do what their governments did: over-taxing and over-regulating fossil fuels, imposing high-priced carbon permits, and under-invest in exploration, extraction and refinery.
In short, avoid or slow down climate-related regulations and taxation. Europe is realizing that now. The threat of power blackouts and high food prices today are much scarier than a hypothetical climate catastrophe 50 or 100 years from now.
LAND TRANSPORTATION WOES
A report by News5 TV and Radyo Singko 92.3 News FM on June 10 showed very long lines of commuters in Metro Manila seeking a ride in jeepneys, vans, and buses. Then a friend who owns a van for hire commented that the last time the Department of Transportation (DoTr) and Land Transportation Franchising and Regulatory Board (LTFRB) issued a van franchise was 2013, that instead of expanding the number of van franchises, they prefer the supply of legal vans to remain small so that the supply of non-franchised vans will naturally increase because of high passenger demand, then apprehend these “colorum” vans which gives space for corruption because the fine can go up to P200,000.
The same LTFRB also restricts and puts a cap on the number of technology-based ride sharing cars and motorcycles. Instead of expanding the number of motorcycle taxis (MCT) and transport network companies (TNCs), the agency restricted the industry to a few favored players. Vans, TNC cars, and MCTs can bring their passengers right to their office buildings so there is no need for them to drive their cars, add to traffic congestion and enduring expensive oil and parking.
The latest public data from the DoTr Land Transportation Office (LTO) shows that private vehicle registrations in January-March (J-M) this year were almost half of those in the full year of 2020 and about one-third of full year 2019 registrations, but new buses are few (see Table 2). This implies more traffic congestion by cars, SUVs, AUVs and motorcycles, coupled with more commuter woes as they are unable to get faster and comfortable rides.
While the outgoing DoTr leadership can penalize hapless passengers with no vaccination cards in their recent “no vax card, no ride” policy, they cannot control the leadership of the LTFRB, an agency under the DoTr, when it comes to this ongoing practice of restricting the supply of legal vans, TNCs and MCTs.
Good thing that this political class are all leaving by June 30 after inflicting huge damage to the commuting class. I am hoping that the new leaderships of the DoTr, LTFRB, LTO and other agencies will not follow their policies. Transport competition is good for commuters and the country.
More choices, more options in vehicle types, faster mobility at competitive fares. This is what the public needs and I am hoping that the incoming administration will support this public need.
Good thing that there are many internet companies now in the Philippines that offer fiber optic services. We used to have PLDT DSL internet at home until last year and it could be slow at times. Then we tried Globe broadband pre-paid, and saw that it can be fast but load is easily consumed.
A friend referred me to his friends at Red Fiber, and gave them my mobile number and address. Within an hour I got a call, the lady explained Red Fiber’s internet package and promos to me, then I asked her when they can install our internet. To my surprise, she replied in two days.
We got the 50 Mbps with cable Cignal TV package at P2,399/month. One afternoon all four of us were on streaming. My wife was in a Zoom meeting, I was watching Netflix on the TV, our two girls were watching YouTube/TikTok on their laptops, plus our respective mobile phones were active with Messenger and Viber messages. Streaming was continuous, with no interruption. We are happy. Good service, Red Fiber.
The Duterte administration and its Cabinet Secretaries will be leaving this coming June 30. I want to commend two of the business-friendly secretaries.
First, Energy Secretary Alfonso Cusi. He resisted the mandatory energy mix, like 30-30-30-10 for coal-natgas-renewables-oil that his two predecessors imposed. The ones who should set the right energy mix should be the consumers, not the Department of Energy (DoE) or Malacañang, not Congress or the Energy Regulatory Commission (ERC), not the climate activists or media. He also resisted oil price control and reviving the Oil Price Stabilization Fund (OPSF) scheme.
The second is Trade and Industry Secretary Ramon Lopez. He championed the de-bureaucratization of business registration via the Ease of Doing Business law and related policies. He supported stronger intellectual property rights (IPR) to strengthen consumer awareness of product brands. In 2019, I organized a regional conference in Makati on IPR and health innovation in the ASEAN, then co-organized with the Foundation for Economic Freedom (FEF) the global launching of International Property Rights Index (IPRI) 2019. In both international events, I invited Secretary Mon to be the Keynote Speaker, he agreed and came to grace the two events. Thanks again, Secretary Mon.
Bienvenido S. Oplas, Jr. is the president of Minimal Government Thinkers.