Salty

There are two proposals on the policy table. Both of them are unpalatable.

The first proposal involves imposing excise taxes on salty food. This was put forward by the Department of Health (not by the Department of Finance) as a means to reduce consumption of salty food. Excessive consumption of salt contributes to clogged arteries and kidney problems.

The proposal comes on the heels of the highly successful imposition of an excise tax on sugary drinks. This excise tax was praised by the World Health Organization and touted as a model for other countries to follow.

In terms of revenues, the sugary drinks tax contributes only minimally to the national coffers. It is largely the health benefits that make this measure exemplary. The DOH now wants to replicate this achievement by taxing salty food.

You know what they say: When the only tool you have is a hammer, you will tend to see every problem as a nail.

The DOH seems fixated with excise taxation as a tool for health policy. But salty food is an entirely different matter.

In the case of the sugary drinks tax, the excise taxes are collected from the major beverage manufacturers. The items subject to taxation have acutely measurable amounts of sugar per liter. While the tax is borne by all consumers, it is actually collected from a few companies. Therefore this is a manageable revenue measure.

This is not so in the case of salty food. It is difficult to standardize the amount of salt in industrial products such as instant noodles and processed meat. Small backyard enterprises produce much of the deadliest (and most delicious) salty food such as fish sauce, fermented shrimp and others. Many of them are not even covered by the VAT net.

At first blush, this is an unenforceable tax measure. It will hurt the poor mostly. It could hit the big manufacturers of condiments while exempting the backyard producers --- thereby creating an uneven playing field.

It is the big producers that are better regulated for quality and product safety. Taking down the big producers while allowing the unregulated backyard producers flourish does not seem like the best way to protect public health.

If the DOH wants the public to consume less salt, including purine and sodium, the agency will be better off mounting a public education campaign.

As our population becomes more urban, our diet worsens. Urban Filipinos consume more industrial food and less fresh goods. Poorer Filipinos consume less vegetables and more instant noodles. This will soon produce a health disaster.

An annoying television ad just caught my attention: a fetching young mother expressing love for her children by frying meat loaf. That is basically a diet of lard, salt and preservatives.

Distributors

The other bad idea is the proposal to nationalize the water concessions. That will simply bring us back to the miserable days when NAWASA distributed water with utmost inefficiency.

In those days, there was ample water in Angat Dam and a much smaller urban population. But there was no water coming out of our taps. There were leaks everywhere and non-revenue water must have run at 70 percent.

Today, there is little water in Angat Dam and urban demand for water is spiraling. But outside the hours when water is cut off and rationed, there is ample water in our taps. The leaks have largely been fixed and non-revenue water is at about 15%.

The concessions distribute water. The problem we face today is not about distribution but about the available supply of raw water.

Somewhere along the way, our bureaucrats decided it was government’s responsibility to develop new raw water sources. The concessionaries were told to concentrating on upgrading the distribution system.

Since water distribution was privatized, service quality improved. The water delivered is cleaner. The old pipes have been replaced with new ones. Small pipes were replaced with bigger ones.

It is to the interest of the water concessionaires to improve the delivery of water, fix the leaks and bring down non-revenue water. The more water they deliver, the better they earn.

It was never in the interest of bureaucrats, when they operated the water distribution system to fix the leaks, increase the connections, install bigger pipes and bring down the level of non-revenue water. They were paid the same even if the distribution system was run to the ground. The inefficiency was simply covered by public subsidy – just as the utter failure of our rice production systems was covered up for many decades by humungous subsidies to the NFA.

Since the MWSS is merely a regulatory agency, it does not retain an army of civil works engineers capable of maintaining the water distribution system. If we hand over the concessions back to government, there will be no one to run it.

Since they took over, the two water concessionaires borrowed money from commercial sources and invested hundreds of billions in improving the distribution system to its present state. If the distribution system is taken from them on a whim, the money could not be repaid. Our sovereign credit rating will fall through the floor.

If the comprehensive service contracts covering the water concessions are imperiously abrogated, this will send the worst signal to the international investment community. New investments will be withheld or redirected. Unemployment will spiral.

Our water privatization process is emulated globally.  All this talk about re-nationalizing them distracts from the real problem: the shortage of raw water supplies.