Humbug

What a cruel gift to our harried commuters. Just as finding rides become more difficult, the minor gods who rule over public transport have cut our options.

Last Sunday, thousands of Angkas riders massed to protest the LTFRB’s decision to cut the number of motorcycle taxis available to commuters. About 17,000 riders will lose their livelihood as a consequence.

At one time, we had 55,000 TNVS available in Mega Manila. But the LTFRB, substituting regulatory impulse for market forces, squeezed the supply of vehicles to only 35,000.

Each day, 800,000 commuters attempt to grab a ride. The reduced number of vehicles can only supply about half of those requests. Worse, commuters are forced to bid against each other as restricted supply forces up fares.

The virus of bureaucratic impunity for market forces extends beyond the transport issues.

In 2009, by means of an executive order, government ordered a 50% mandatory price cut for five commonly prescribed medicines: amlodipine, atorvastatin, azithromycin, cytarabine and doxorubicin. In addition, a voluntary price reduction scheme between government and the pharmaceutical industry (called the Government Mediated Access Price) brought down the prices of 69 products.

As a consequence, the domestic pharmaceutical industry lost P11 billion, adversely affecting both jobs in the sector and government revenues. One large pharmaceutical company shut down its business and brought its manufacturing elsewhere. We began importing more medicines.

Consistent with economic theory regarding price ceilings, formerly lower priced medicines crept up closer to the ceilings, reducing the diversity in pricing. This eventually limited the effectiveness of regulation and denied consumers a wider choice.

A study done in 2010 by the Center for Legislative Development found that while prices have been forced down by bureaucratic fiat, price regulation had no effect on expanding access to medication. Medicines remained unaffordable due to other factors such as low purchasing capacity or the lack of medicines financing. It is easier for bureaucrats to address pricing than to resolve the other issues that affect affordability.

The price controls also adversely affected smaller drugstores, forcing them to close down or sell out to the larger chains. The process culminated in the rise of retail monopolies that cluster in the profitable centers and thus further limiting access to what is called Geographically Isolated and Disadvantaged Areas.  

The same outcome may be expected in the latest crusade of the DOH to force down prices through regulatory controls. Also, since bureaucrats focus price controls on manufacturers (because that it easier to do) and not retailers, they squeeze producers while allowing retailers large margins. This is exactly similar to controlling farm gate prices for rice while allowing distribution cartels to excessively profit downstream.

History teaches us that if we allow bureaucrats to creep into price setting, pushing aside market forces, the end result will be disastrous. Controls block technological advancement. We must decide now whether we go the way of Cuba or Venezuela whose economies wilted because of price controls, or Germany in 1948 that set the stage for the emergence of a powerhouse economy by sweeping away all price controls.

Approved

The approval ratings garnered by our four highest officials as reported in the latest Pulse Asia survey is unprecedented, considering the administration is well past its halfway mark.

President Rodrigo Duterte saw his approval rate balloon to an astounding 87%.  As the rising tide raises all ships, Senate President Vicente Sotto’s approval rate rose to 84% while House Speaker Alan Peter Cayetano rose to 80%. Vice-President Leni Robredo’s rate also increased to 58%.

The survey coincides with our hosting of the Southeast Asian Games and the nation’s sporting “high” might account for our people’s generous estimation of our leaders. That is difficult to scientifically establish, however.

It is easier to link the high approval ratings to the fact that, despite a global slowdown, our economy performed reasonably well. We have met our poverty reduction targets ahead of schedule.

If we are able to correct our sluggish performance in agriculture, we should be on a roll in the coming years. The aggressive infra program will be more visible and palpable the next few years. Our people sense that. There is optimism in the air.

The ratings Alan Cayetano managed to score deserve special mention.

From an already remarkable 64% in the September survey, his approval rate soared 16 percentage points to 80% in December. This is surely unprecedented. Our citizens do not normally hold House speakers in high regard. Former speakers who ran for president after their legislative tenures almost predictably lost.

Cayetano’s impressive ratings pulled up the ratings for the entire House of Representatives. The chamber, normally disdained for being a den of traditional politicians, now boasts of a 66% approval rate.

Be reminded that during the week the surveys were taken, Cayetano was at the receiving end of all sorts of accusations about the use of funds for the SEA Games. The senior opposition senator was trying to reap brownie points by trolling the supposedly overpriced “caldero.”

Maybe it was not the Games that pulled him up to the political stratosphere. With Cayetano at the helm, the House has been a truly hardworking institution, working into the wee hours to pass urgent legislation. That is contrary to the usual caricature of the chamber.

That House was able to pass the budget on time, removing the possibility last year’s horror of a reenacted budget would be repeated. The chamber also acted promptly on the tax reform measures prioritized by the Duterte administration. This will help fund the Universal Health Care program and the Malasakit centers.