EFN Asia panel at Jeju Forum 2017

The Economic Freedom Network (EFN) Asia participated once more at the annual Jeju Forum for Peace and Prosperity, a big international conference held at Jeju Island, S. Korea. I am reposting this report submitted to the organizers within an hour after the panel discussion. Originally posted at the EFN website.

I add two photos here, taken from EFN’s fb page. From left: Wan, John, Razeen, Young-Han.

efn

This is 3,200+ words, 7 pages, enjoy.
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Session Outline

Name of Session: Asia’s Contribution to the Global Open Market
Session Organizer: Friedrich Naumann Foundation for Freedom
Date: 1 June 2017, 14.50-16.20
Moderator: Dr. John Delury, Associate Professor, Graduate School of International Studies, Yonsei University
Welcoming Remarks: Dr. Lars-André Richter, Head Friedrich Naumann Foundation for Freedom Korea Office

Discussant(s)

Dr. Razeen Sally, Associate Professor,
Lee Kuan Yew School of Public Policy, National University of Singapore

Wan Saiful Wan Jan, Chief Executive
Institute for Democracy and Economic Affairs, Malaysia

Dr. Kim Young-Han, Professor, Department of Economics, Sungkyunkwan University

Summary of Presenters & Discussants’ Remarks

Dr. Lars-Andre Richter

Friedrich Naumann Foundation (FNF) is a German non-profit organization, founded in 1958 post-war West Germany. The main goal at the time was to help re-establish democracy in West Germany. Shortly after, FNF opened offices abroad, including in Tunisia, India and Indonesia. The office in Korea was opened in 1987. We promote liberty in Korea through a variety of programs including democracy building, projects with market economy, human rights, rule of law and also the re-unification issue, bringing in the unique German experience of re-unification. In fact, FNF has projects in both Koreas. The North Korea program started in 2004, focusing on economic policy. The session today at the Jeju Forum is hosted by both FNF and Economic Freedom Network Asia (EFN Asia), FNF support’s network of liberal minded think tanks and individuals.

efn2(From left: Wan, John, Razeen, Lars, Young-Han)

Dr. Kim Young-Han

Threat of the Protectionism by the US Trump Presidency

– Why Protectionism by the Billionaire US President?

Trump thinks that the current format of ‘the Global Open Market System’is unbearable and unsustainable for the US blue collar workers. Are US blue collar workers simply irrational? No, they are absolutely rational.

– The US blue collar workers know that there is not and will not be an effective trade adjustment assistance system in the US. Winners get everything with no room for losers in global open market according to the US experiences. (The same with the Brexit case.)

– How much of a threat caused by the Trumpian Protectionism?

Very threatening and disastrous. If Trumpian Protectionism is spilled over to major trading countries, the global trade war is the next stage, just like the experience before the two World War. The current one-sided protective measures of the US are highly likely to provoke retaliatory measures from trading partners.

– Is Trumpian Protectionism Sustainable?

Not really, since it’s self-defeating. Why? The source of gains from free trade: Efficiency Gains via Reallocation of economic resource from inefficient sectors to efficient sectors. In the US, without the effective trade adjustment assistance mechanism, resources in the inefficient sectors became laid-off instead of being reallocated. What Trump tries to do is to keep inefficient sectors protected as inefficient, which is self-defeating and unsustainable. He suspects Trump will realize this after 3-4 years.

– Can other powers fill in the US role?

The Share in the Global Trade: EU takes roughly 40% of the world trade, followed by Asia which takes 33%, and North America (17%). If the US goes back to protective regime, it is bad, while the other players can keep the remaining 83% under free trade regime. The EU might play a more meaningful role in leading the global free trade regime and also Asian powers like China. But he does not think so.

– The requirements for the leadership the global free trade regime: Leader has to prepare itself and operate on a rule-based trade policy and National Treatment for all players (treat all players as domestic players). The EU is more prepared, but not China. Furthermore, Big Players with market power are likely to resort to bilateral arrangements based on one-sided bargaining power. Therefore, relying on a multilateral platform is better than relying on a big guy leading power. Rebuilding the Multilateral Free Trade Regime via WTO is the solution.

The Role of Asia in Rebuilding the Global Free Trade Regime

– Datawise, Asia takes significant market power, i.e. 33% of the global trade. Historically speaking, all Asian countries’ economies, such as Japan and South Korea, have emerged via the global free trade regime with no regret against the multilateral free trade regime, WTO. A multilateral free trade regime as WTO is welfare dominant to a single country leadership (by whether the US or China). Asia has kept the spirit of multilateral or plurilateral free trade regime via ASEAN and ASEAN+3, and even ASEAN +6. Asian economy with her complexity in terms of diverse stages of economic development and asymmetry of economic size and power works as a miniature of the global economy with gradual and sustainable unit of economic integration.

– Condition for “Sustainable Global Open Market System”

  1. i) Effective Trade Adjustment Assistance Mechanism: Losers (i.e., workers in the importing competing sectors with comparative disadvantages) should be reallocated to Winners’ sectors (jobs in the export sectors with comparative advantages) via Effective Trade Adjustment Assistance Mechanism.
  1. ii) Multilateral Free Trade Regime with strong surveillance and reputation building mechanism with respect to the Big Guys with market power.

Dr. Razeen Sally

He has three main points to make. First, where we are in the global economy, particularly on trade. Second is on protectionist threat. Third is on what can be done in and by Asia to keep the market open.

– Where are we in the global economy?

Economic globalization has not been reversed, since the global financial crisis, but it has stalled. There has been a global growth slowdown. Trade to GDP worldwide has not increased, since about 2006. Foreign direct investment flow has decreased, since the crisis Cross-border flow of finance has Decreased considerably, as expect from the global financial crisis.

– But particularly on trade, something unusual is going on. Since the beginning of 19th century until 2008, world trade grew faster than world output, which is the indication that trade is the engine of growth. But since 2012 until the end of 2016, trade growth barely kept pace with world GDP growth at about 3 percent or less. This is highly unusual and tends not to happen except in war and deep recession. This is particularly worrisome for Asian nations, whom depend on exports. But still too early to tell if this is a new trend.
Continue reading

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Friends in the Asian free market movement

* Originally posted on November 07, 2013.

During the Economic Freedom Network (EFN) Asia 2013 conference in Bangkok last October 21-22, two friends from the Japanese for Tax Reforms (JTR) came, Marc Abela and Hiroshi Yoshida. A third and young participant from JTR joined them.

Hiroshi is a long time friend since 2005, during the Atlas-FNF round table discussion on Hayek’s “The Constitution of Liberty”. Hiroshi came with Mr. You then, the President of JTR. After that one-day event, the EFN Asia 2005 conference started, same hotel in Phuket, Thailand.

1It was my first time to meet Marc, who has been a friend since several years ago in facebook and ARBM Phuket yahoogroups.  I had a debate with him before re anarchy vs monarchy, friendly debate. I didn’t know that he’s a cool, always smiling guy.

Marc is also the convenor of the Mises Study Group in Tokyo. He’s Canadian but has been working in Japan for about two decades now. And good news, he’s planning to help organize a regional or international forum of free marketers in Tokyo soon.

2Our photo, with (from left) Yo Kwong, formerly VP for Institute Relations of Atlas, Mr. You and Hiroshi Yoshida of JTR. During the Atlas Liberty Forum in Atlanta, Georgia, May 2008.

I miss Jo, really cool, warm and friendly lady. Last time I saw her was in November 2009, during the Atlas celebration of 20 years collapse of the Berlin Wall. She raised the funds for my trips during Atlas events in the US. She has resigned from Atlas in 2010.

In China, I have several friends there, from the Unirule Institute of Economics and CIPA in Beijing. Like Feng Xingyuan, Mao Shoulong, Liu Junning, Zhao Xu, others.

In India, many friends there too but the more prominent ones are Barun Mitra and Mohit Satyanand of the Liberty Institute in Delhi. Then Parth Shah of the Center for Civil Society (CCS), Bibek Debroy.

From S. Korea, great and cool friend, Chung-ho Kim, of the newly-formed Freedom Factory Ltd., a new think tank, came. He teaches Economics at Yonsei Univ. in Seoul. He used to be the President of the Center for Free Enterprise (CFE).

3Photo, LRI Reading Club Salon 2013, October 19, Hong Kong.

After the farewell dinner of the Reading Salon, I have a photo with Andrew Work, the first Exec Director of the  Lion Rock Institute. Andrew and I were friends way back in 2004, first met him at the Mackinac Center in Michigan, leadership conference with Larry Reed. I was sponsored by Atlas then, along with Ellen Cain of FEF. Parth Shah and his wife, Mana Shah was also in that Mackinac conference.

Then we went to Chicago for the Heritage conference, then the Atlas conference.

4First time I met Barun Mitra, April 2004 — in my hotel room. We were roommates then. I did not have any idea who Barun Mitra was, only at the Atlas conference did I realize that he was a giant in the Asian free market movement. He has been in the free market movement for 2+ decades already, while I was in the international movement for only 1 month then.

So Andrew and Barun were among my early friends in the free market movement. I met them again that year in Hong Kong during the EFN Asia 2004 Conference. We are still around until now. The way we manage our life, it seems we are stuck in this passion until we grow old, for the long haul 🙂

4bNow compare our faces, October 2013, at the Hong Kong airport. I told Madhu, Barun’s wife and my friend in facebook, that I saw him 3x in 3 countries this year, she laughed and said all she saw were photos.

Barun and Xingyuan also have their own photo. In Asia, perhaps the oldest or the pioneer in the movement is Barun Mitra. Followed perhaps by Xingyuan, who started working with FNF Beijing under Rainer Adam, for about 7 years in the 90s. So Barun has been around for 3+ decades, Xingyuan for 2+ decades, me and Andrew and Simon Lee, LRI co-founder, for almost 1 decade.

I know that Parth Shah, Bibek Debroy, have been around ahead of us, maybe contemporary with Xingyuan. I miss Mohit Satyanand, a tall guy, frank and no-nonsense speaker and moderator. He was a panel moderator of EFN conferences from 2004-2006. I also saw him in 2005 during the IPN’s “Global Development Network” conference in London.

5I met Feng and Barun 3x this year in 3 countries. First in S. Korea last May, in Seoul then Jeju, for the Jeju Forum for Peace and Prosperity where EFN Asia was a panel sponsor. Then I met them in Hong Kong last Oct 18-19, for the Reading Club Salon 2013 by the Lion Rock Institute. Then met them again in Bangkok, for the 3rd time this year.

Photo, Barun, me, Xingyuan, and Shoulong, inside the taxi from our hotel in HK to the HK Airport, to take our flight to Bangkok.

Wan Saiful Wan Jan is “new” in the Asia free market movement because he just moved in about 3 or 4 years ago from London where he worked for almost 18 years and was involved with the Conservative movement there. But IDEAS is the biggest, most dynamic free market think tank in the whole ASEAN. Or perhaps comparable in size with Freedom Institute in Jakarta, though I think IDEAS is more known globally than Freedom Institute.

I saw Wan 3x this year too. First in Korea along with Barun and Xingyuan, then in Manila two months ago when he attended a conference at De La Salle University (DLSU) and I dragged him to give an evening talk at my rotary club, where 4 other free marketers here in Manila came. Then met him again in Bangkok.

I am glad that Tricia Yeoh has migrated to IDEAS too, from Rakyat Institut. Tricia is a very articulate and intelligent lady, so IDEAS is being packed with more brains. Young and dynamic brains.

Another good friend from Pakistan is Zubair Malik whom I met in Hong Kong during the EFN Asia 2004 Conference. I would see him in all EFN conferences that I have attended. Zubair is also the President of the Pakistan Chamber of Commerce and Industry, elected last year. He travels a lot internationally, also within Pakistan,

6Another good friend from Pakistan is Khalil Ahmad of the Alternate Solutions Institute, a free market think tank based in Lahore. After the EFN 2006 conference in KL, I did not see him in other EFN conferences. Last time I saw him was in 2010 in Sydney, during the 4th Pacific Rim Policy Exchange sponsored by the Americans for Tax Reforms (ATR), PRA, IPA and IPN.

There are many other friends from Asia that I did not mention above. I did mention about them in my previous articles on EFN Asia.

FNF has done a great job in spreading freedom in Asia. For many of us in the movement, if we look back a decade or so from now, FNF will appear as the great partner to many of us.  Also the LRI. Thanks again to Peter Wong, Exec. Director of LRI, for inviting me to the two Reading Club Salon of LRI, last year and this year.

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More photos at the Jeju Forum

* Originally posted on June 06, 2013.

Our panel, the EFN Asia and FNF panel, during the recently concluded Jeju Forum for Peace and Prosperity, May 29-31, 2013, was held in the afternoon of Day 2, May 30. While some panels have mostly if not entirely Korean speakers and facilitator, our panel has speakers and moderator from six countries. Two from Malaysia, Wan Saiful Wan Jan (moderator) of IDEAS and Tricia Yeoh of Institute Rakyat, two from China, Feng Xingyuan and Liu Junning, main speaker from Cambodia, Sam Rainsy. Other discussants were from Vietnam, Pham Chi Lan; from India, Barun Mitra of Liberty Institute, and Choi Byung-Il from S. Korea. I was the Rapporteur, that’s seven countries represented.

The audience was big, mostly Korean university students, then other Korean and international participants.

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The Resident Representative of the Friedrich Naumann Foundation for Freedom (FNF) in Korea, Lars Andre Richter, a German, gave a brief opening remarks — that’s eight countries already in our panel, really an international panel. Lars introduced what the FNF and EFN Asia are, their activities to promote freedom and liberty around the world, especially in Asia.

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The group photo after the panel. German Ambassador to Korea, Rolf Mafael, gave the closing remarks. In the photo below, he is 5th from left. He was supposed to give a short closing remarks, perhaps 1 or 2 minutes, but he enjoyed listening to the panel and spoke for about five minutes. The audience like his talk because he gave a European, specifically German, perspective on the subject of economic nationalism. See my Rapporteur’s Report about the panel.

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On our first night at the forum, May 29, we were the last group to leave the dinner table. Before finally leaving the grand ballroom, we had a group photo, below. We were 13 people who travelled from Seoul that afternoon, including two staff of FNF Korea, Sungeun Lim and Ms. Kim, and Pett Jurapaiboon, the Reginal Program Officer of EFN Asia, based in Bangkok. In this photo below, only Sam Rainsy was absent because he went ahead.

On the second night, another dinner at the grand ballroom. The Jeju Forum organizers showed the EFN Asia video on the stage several times, wow. Barun Mitra and Pett Jurapaiboon with me, the EFN video on our background as it was being shown.

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The third and farewell dinner, May 31. This was taken by one of the young staff of the Forum, Ms. Summer Kim.

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The previous day, Ms. Kim and her two other fellow young staff interviewed me. They have read my previous articles about the Forum, weeks before we attended the event and they said they liked it. They asked me how I came to participate in the forum, I said it was EFN Asia and FNF which brought us to the event. They also asked if I have any comment how the event was organized, I said that everything was running smoothly, I have zero complaint, they and the Forum organizers are very efficient. Ms. Kim also sent this photo, minutes before the video interview.

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Once again, thanks to EFN Asia and the FNF for hosting that panel and for bringing me and other panel participants to Seoul and Jeju. It was a great learning experience, as usual.

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Conference 2011, Panels on education, health, transpo and telecom

* Originally posted on October 14, 2011.

On the afternoon session of Day 1 during the recent EFN Asia Conference this week, the topic was “Competition in Public Service Delivery”.

This session was moderated by Wan Saiful Wan Jan, CEO of IDEAS-Malaysia. The speakers and their main messages were as follows:

1. Part Shah, Center for Civil Society-India, Education. Fund students, not schools. Education voucher system will enable students and their parents/guardians choose from many competing schools who can provide better quality education. Diversity and competition can respond to varying needs of students, encourage excellence, whereas centralized government education system offers uniformity and less competitive environment.

2. Dr. Steven Chow, FPMPA-Malaysia, Healthcare. Healthcare has two aspects, business and social. As business, HC is a commodity given to those who need it; as social, to comfort the sick, never to harm. There is high information asymmetry in healthcare, the HC provider knows better than the patient, so free market cannot be relied on. Government must come in to correct market failure. But there are advantages to competition, which is a good business model. Some aspects of HC can be done via competition, others not.

3. Saumura Tioulong, Sam Ramsay Party – Cambodia, Transport. Airline privatization and competition in Europe where she used to be based resulted in better services, planes arrived on time, less strikes. Cambodia to Malaysia, there are two choices, Air Asia or Malaysian Airline. But Cambodia to Vietnam is monopoly, high price. Free competition does not mean being wild, players have to adhere to rules and regulations. State-owned enterprises and monopolies in Cambodia were turned over to private monopolies, not good.

4. Shaifubahrim Mohd Saleh, PIKOM-Malaysia, Telecomm. 17 sectors to be liberalized by 2012 by the Malaysian government. More players to come in, more outsourcing, more competition. Cost of broadband still very high, up to 20x than other countries; local R&D on-going. Telecomm industry needs further liberalization.

I support Parth’s advocacy for school choice. Personally I would like to see all schools should be private, government can provide voucher or fixed amount of money per student per year, at least in the elementary and secondary levels. Parents who want to bring their kids to more expensive schools will have to pay extra. Education is mainly parental/guardian responsibility, not government’s.

Healthcare is another aspect where personal and parental responsibility is more paramount than government’s. While it is true that there is high information asymmetry between patients and doctors/hospitals, patients and individuals are also the ones who manage their own body, not doctors or hospitals or government. People should realize that if they smoke a lot, or drink a lot, or eat a lot, there will be adverse result in their body whether in the short or long-term.

After the Q%A for this panel, there was a “World Cafe” where participants would move from one table to another, one table represents one topic or sector. Four tables to tackle four topics: education, healthcare, transportation and telecommunication, four sectors that are previously known to be bailiwick of “government provision.”

Participants would discuss and answer for themselves, “Should government be the main service provider of _____ sector, or just referee of competition among players?” I was one of the eight table hosts (two hosts and two tables for each sector in order to reduce the participants/moderator ratio). I chose to moderate the discussion on healthcare.

There were four batches of participants then that will come to my table. In order to make my work simpler, I asked them at the onset, “Anyone here who thinks that government should be the main provider of healthcare?”, then “Anyone here who thinks that government should totally step back in healthcare and just be a referee to competition among HC providers?”

The result was rather clear. None of the participants from the four batches said Yes to any of the two questions that I asked. Most if not all of them wanted a combined function for both government and market players in healthcare. In particular, they want competition to be left alone in urban and richer areas where they are plenty of healthcare providers and thus, people will have many choices. But they want the government to provide HC in rural and poor areas where private hospitals, clinics, physicians, other HC providers are either few or zero.

Another proposal was that for infectious and communicable diseases, government should be the main provider of HC, like giving people vaccines and flu shots, getting ride of mosquitoes in wide areas, also for diseases of children. But for non-infectious or non-communicable diseases, competition among HC providers should be encouraged.

Many of the participants shared that in their respective countries — China, India, Malaysia, Thailand, etc. — the poor usually go to government hospitals and health centers, but the lines are long and facilities are often not adequate.

Parth sat on my table and suggested that one option is for the government to give a conditional cash transfer (CCT) type of direct assistance to the poor: X amount as education voucher, Y amount as healthcare voucher, Z amount as transportation subsidy, and so on. Expanding the voucher system to other sectors and services.

We table hosts of the World Cafe then reported to the plenary the summary of the discussions in our tables. After the summary, many of us went to another room to finalize the Conference Resolution. We discussed and debated the draft paper for nearly two hours and we ended up with this brief but straightforward paper.
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RESOLUTION

Economic Freedom Network Conference 2011


Preamble

Competition is an essential engine for prosperity. To prosper, all nations should encourage and nurture competition. Competition encourages innovation and creativity.

It motivates producers to make the best offers to consumers, therefore creating lower prices, higher quality products and better services.

The Role of Government

The primary role of the government is to enforce the rule of law, provide impartial judiciary, protect property rights and individual freedom.

Competition is the best regulator; therefore, the government should foster competition rather than restrict it.

Competition in Public Service Delivery

The people will benefit more if the government does not monopolize the delivery of public services.

Competition can be introduced and fostered in the major public services such as education, healthcare, transport, communications, and utilities by diversifying the providers through various form of private participation.

Competition, Economic Freedom and Prosperity

Free market economy is necessary for progress. Empirical evidence shows that open economies are more prosperous.

Competition is a key element in a free market economy.

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KL conference 2011, Dinner at German Ambassador

* Posted on  October 11, 2010.

Here at the Royal Chulan Hotel, Kuala Lumpur, the venue of the 12th Economic Freedom Network (EFN) Asia Conference sponsored by the Friedrich Naumann Foundation for Liberty (FNF), a German liberal political foundation.

Last night, the German Ambassador to Malaysia, Dr. Gunter Guber, hosted a dinner for the participants of the 12th EFN Asia Conference. His residence is not far from our hotel. German time, we were in his place at 6pm sharp, and he personally greeted at the door all arriving participants.

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There were lots of German beer (I like the most that one from Munchen), soda, and wine for the initial cocktails. Then the formal program. A program with no microphone, the host himself, the Ambassador (speaking in the pictures) is also the MC, cool.

Many officials of FNF South and East Asia (India, Pakistan, Indonesia, Malaysia, Philippines, Thailand, etc.) were there.

2My digicam suffered a low bat, and the photos were blurred, agh! Anyway in these photos, top, with Barun Mitra of Liberty Institute, and Fred McMahon of Fraser Institute, Camada, which conducts the Economic Freedom of the World (EFW) Annual Reports.

Below, with Siggi Herzog, former FNF Philippines country director, now regional director for South Asia, and Mr. You of the Japanese for Tax Reforms. I miss his buddy, Hiroshi.

Below, with Asian friends: Fu Weigang from Shanghai, Peter Wong from Lion Rock Institute-HK, Bibek Debroy from India, Wan Saiful Wan Jan from Malaysia, others.

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From top left clockwise: Rainer Adam (center), FNF regional director for south east Asia, Siggi Herzog (center), Wan Saiful (right), and Jules Maaten (left).

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My digicam’s battery finally went kaput later in the night. I shall wait for photos from other friends.

Oopss, my photo with good friends in SEAsia — Luthfi Assyukane of Freedom Institute, Indonesia, Wan Saiful, Muhammad Thamrin of FNF Indonesia.

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Today, the 2-days conference will start. I will be one of the hosts for the discussions both in the morning and afternoon sessions. But at least I’m not going to present a prepared paper :-).
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Meanwhile, I am posting here my article in the lobbyist.biz last June 17 this year as this is related to my posting yesterday. This piece is particularly applicable to the Philippine government. I think many governments did not put the restrictions on foreign investments in their constitution. They usually do it via legislation, which is easier to revise or abrogate, than via Constitutional change.

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 http://www.thelobbyist.biz/perspectives/less-gorvernment/967-when-government-creates-monopolies

When Government Creates Monopolies

FRIDAY, 17 JUNE 2011 02:10

WRITTEN BY NONOY OPLAS

Tags: Less Government

Government is the main creator of monopolies in the economy, via the Constitution, legislative franchising, Executive regulations and local government laws and regulations.

Here are examples of monopolies and oligopolies created by the government.

  1. The Constitution

On profession monopoly, it says, “The practice of all professions in the Philippines shall be limited to Filipino citizens, save in cases prescribed by law.” Filipino nurses, doctors, engineers, accountants, etc. can practice their profession in America, Europe and many other countries, but foreign doctors, nurses, accountants, etc. cannot practice here without some legal machinations.

For many sectors and industries, foreign ownership is limited to a maximum of 40 percent equity. So even if foreign capital and technology are the only viable players to expand competition, they are limited or not allowed to come in. The Constitution is also explicit in declaring, “Congress shall enact measures that will encourage the formation and operation of enterprises whose capital is wholly owned by Filipinos.”

  1. Legislative franchising

Many public utilities have to get a legislative franchise, a law granting a franchise or sole provider of certain services for certain areas. Electricity providers, telecom companies, etc. have to get a legislative franchise. Given the horse trading culture in Congress, it is not far out that the bigger the franchise and monopoly power given to a private corporation, the bigger the risk that corruption and/extortion can take place.

  1. Executive regulations

The Department of Transportation and Communications (DoTC) is among the biggest agencies to have huge power to approve or disapprove new players. In airlines through the Civil Aeronautics Board (CAB), in shipping lines through the Maritime Industry Authority (MARINA), and in bus and taxi lines through the Land Transportation Franchising Regulatory Board (LTFRB).
While there may be five local airlines (PAL, PAL Express, Cebu Pacific, Zest Air, SEA Air), not all of them compete on all routes. Thus, for some destinations, there may be only one or two airline/s covering the area. In inter-island shipping like RORO (roll on, roll off), there are certain areas that are monopolized by a particular shipping company. The same with buses. There are dozens of provincial bus companies from Luzon to Mindanao, but in certain destinations, there is/are only one or two bus companies that cover the route.
Jeepney monopoly of certain routes is another example. Take the Ayala route. Bus passengers coming from the south (Parañaque, Las Piñas, Laguna, etc.) and going to Ayala have only one cheap transportation option, the jeepneys plying the Ayala-Washington route. Some of the ugliest and dilapidated jeepneys in the country are in Ayala Avenue, the premier financial center of the country.
The jeepney operators have no incentive to improve their units since ordinary passengers have no choice anyway.

  1. Local governments

Granting of franchise for tricycles belong to the city or municipal governments, not the LTFRB. Once tricycles dominate the route, the drivers and operators do not want the jeepneys or air-con vans to enter their turf. Ordinary passengers have to endure the discomfort and congestion inside a small tricycle as there are no alternatives except to take the taxi.

There are other legislative and executive agencies’ regulations that tend to limit competition in the economy.
Now, the President has issued a new Executive Order (EO) to control anti-competition and break monopolies and cartels. See this news report in Business Mirror, Aquino issues antimonopoly, anticartel EO. The report states:
President Aquino has designated the Department of Justice (DOJ) as the “Competition Authority” in charge of cases involving competition issues to help deter and break up monopolies and cartels in the country to ensure a level playing field.
In issuing Executive Order (EO) 45, dated June 9, 2011, the President said, “There is a need to promote competition and level the playing field in the market.”
The DOJ as the Competition Authority will investigate cases involving violations of competition laws and the prosecution of violators “to prevent, restrain and punish monopolization, cartels and combinations in restraint of trade.”
If the barrier to the entry of more competition is the Constitution or the Legislative franchising, what can the DoJ do? Lobby for early charter change?
A good example of an industry duopoly is the telecommunications sector. Before it was an oligopoly (Smart, Globe and Sun) but after the Smart takeover of Sun Cellular early this year, it has become a duopoly, and it is not good for the Filipinos.
The main barrier to foreign entry in the local telecom industry is the Constitution. Since foreign equity in public utilities like telecom is limited to 40 percent, interested foreign players will have a hard time looking for that local business group that can provide the 60 percent equity ownership, considering the huge capitalization required.
Another disadvantage of this set up is that the DOJ is given additional work which is far from its original mandate of protecting the citizens’ right to life, right to private property. By expecting the DoJ to do more business regulations function, its time and resources to promote property rights and promulgate the rule of law will be reduced and limited.
The only positive effect of this proposal perhaps is that the creation of another bureaucracy, the Fair Trade Commission (FTC), will become less likely.
Observing and asserting “anti-competitive, anti-cartel” behavior of a firm is tricky and subject to arbitrary political intervention and harassment.
When your price is lower than that of your competitors, you can be accused of predatory pricing. When your price is the same as your competitors, you can be accused of  price cartelization. And when your price is higher than your competitors, you can be accused of price gouging.
Whichever pricing you take, the government can invoke “anti-competition practice” if it wants to.

The President should not proceed with its new EO, nor should it push through the creation of an FTC. Government should reduce and simplify the rules and requirements for business, reduce the taxes too. This way, more companies will come in resulting in more competition in more sectors and sub-sectors of the economy.

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