Govt. & Taxes, Philippines

Sunday, May 18, 2008

Passport and people mobility, Part2

I circulated my article on “Passport, travel tax and people mobility” to some of my yahoogroups, got comments from 7 friends. Below are the summarized comments and my reply to them.

(1) From Prince:

I think the bigger issue with the slow processing of passport is not the number of staff but the equipment for the electronic signature and thumb mark. I assume the equipment is very expensive that is why the government cannot acquire more of it. Another issue there is an unusual increase in demand for passports with the issuance of machine-readable passports (MRP) Several people want a new MRP even if their current ones are not yet expired. Another problem that they need to look at is the number of fixers and unscrupulous people trying to exhort money from passport applicants near the DFA national office.

(2) From May:

This means poverty stricken countries will never be considered free. What’s the meaning of “free”? According to David Schwartz, if you believe you are free, you can be free.

(3) From Eunica:

The problem is in the system. I doubt if the size of the bureaucracy is the problem for I am sure that more than one of the employees there could be considered redundant. So I doubt if a Jollibee-and- Starbucks- type of expansion is the solution.

Subjecting it (DFA) to competition could be given a thought but only up to the point where some steps in the processing could be outsourced. But the nature of information handled by the particular agency could raise some important issues. Given the massive outflow of overseas workers and the rise of budget airlines, business related to this will be viable.

All those expenses and the pressure from predatory Customs officials that OFWs face are just too much and indeed need some drastic measures. Mobility matters to the middle class more than to other people whose major concern is meeting the basic needs that could tide them over a day. Hence, as a barometer of freedom, its application is limited.

(4) From Emir:

Why do we have to pay airport terminal fee anyway? Countries with much more modern terminals don’t even charge any fee. There was a time we used to pay for using those old luggage carts. If they were able t abolish the push cart fee, why not also the terminal fee. If the collection of the fee is for terminal maintenance, the money does not obviously go there. Our terminals are probably the oldest and the worst in Asia. Vietnam or even Cambodia (au naturelle) terminals are even more impressive. The low cost carrier terminal in KL is a lot better that terminal 2.

Whoever is managing the PAL terminal (NAIA 2), has not even heard of an invention called ESCALATORS. When you arrive via NAIA Terminal 2, you need to drag your carry-on luggage down the stairs towards the immigration counters. And you need to pay them P750 for the inconvenience?

(5) From John:

Why can’t the DFA make our passports expire in 10-years, so that we don’t go to them every 4 ½ years since we cannot travel anymore if our passport will expire in 6 months or less?

(6) From Jay:

The lines are long because many people need passports. Passports are needed because the places they want to go to require visas before they let them enter… Even if the government handed out passports for free, that still doesn't result in greater mobility because ultimately it is not the issuance of a passport, but the respective countries who decide whether you can go in or not.

In your conclusion you say that high passport costs "constitute an indirect restriction to some people who maybe poor and desire to be more mobile across the country." There is no connection. No one needs a passport to travel anywhere across the country.

Having traveled very extensively, I agree that there is something that needs to be done about the travel tax, costs of service, and efficiency. Far more efficient systems exist than what is currently in place at DFA, and given the number of people who need passports, it is proper to demand an accounting and better services for the money that is paid. But efficiency takes more than reducing taxes and increasing staff.

(7) From Jim:

For comparison, a U.S. Passport cost about $100 or Php 4,200 (for applicants over 16 years of age) and $85 or Php 3,570 (for applicants 16 years of age and younger). It generally takes about 4 weeks to process, but I know that in case of emergencies one can go directly to a Passport Processing office and get it the same day. So basically Philippines is a bargain compared to the U.S. But with a Philippine passport you'll need a visa to visit most countries, while with a U.S.
passport a lot of countries will allow entry with out a visa. I guess it all boils down to planning, if you know you're going somewhere a months ahead of time kuha ka na ng passport.

My reply to them:

(1) To Prince:

I think it's not with the machines. If it were so, the long queues would be in the passport release section, where people were waiting for 2, 3, or 4 weeks for their passport to be released. The long queues are in the processing, 1 or 2 days before the application forms will reach the machines that produce the MRP. And that is why the number of fixers cannot go down: they know that many people are stressed by the long lines, they want someone who can help them shorten the process, even if they have to pay a big premium.

If there's a long line for customers, fastfood chains open up a dozen more new stores/shops in different locations. The banks, gasoline stations, car repair shops, vulcanizing shops, barber shops, do the same. So why can't the DFA do it too? "Limited funding" cannot be the answer to this question because passports are not free, there's a fee to get it. DFA being a bureaucracy and a monopoly, it need not be too sensitive to the needs and frustrations of the citizens. Unlike private enterprises who are forced by circumstances to be sensitive to their customers; otherwise, the latter will simply go to other firms and suppliers of the same or similar commodities/ services.

Nonetheless, I have respect for the staff of the Passport Director's office. They were really over-worked and they work hard, I could see it. It's the staff of other offices within the DFA who are often idle.

(2) To May

As I defined it earlier, mobility = freedom. Less mobility, less freedom. And according to Friedrich Hayek, freedom = absence of coercion.

Poverty-stricken countries need to simplify and liberalize the issuance of passport for their citizens who want to escape their country and work/move somewhere else. Or their governments need to liberalize the entry of foreigners -- investors, tourists, professionals -- who want to come to their country, and these foreigners can help generate jobs for their people.

If you believe you are free, fine. You have the freedom to go to Kuala Lumpur or Bangkok tomorrow, fine. Assuming you already have the passport, and going to those cities is visa-free for visits of 30 days or less, there are lots of government-imposed costs: (a) travel tax, (b) terminal fee, (c) inspection fee, security fee, embedded in the plane ticket. Which makes your foreign travel more expensive than what it should be if some of those government-imposed costs are reduced or removed.

(3) To Eunica

The DFA is a big bureaucracy in charge with different political and economic diplomacy, trying to save some OFWs from being hanged in the Middle East, attending and organizing different summit (ASEAN, APEC, ASEM, Ministerial meetings, etc.), issuing RP visa to some foreigners coming in, and so on. Issuing passports is only one of its functions. And it is here where the DFA is sometimes getting the public's ire and frustration, instead of support and commendation.

When a government, like the Philippine govt., will impose many taxes and fees on each step, from getting a passport to getting an OFW permit at POEA, OWWA, Bu. of Immigration (if any), etc., including preliminary papers like NBI clearance, PNP clearance, brgy clearance, etc., that government is putting indirect hindrance to people mobility and their freedom to travel.

To correct such hindrance, the burden of proof that a person trying to travel abroad could be an "undesirable" citizen, should be shifted from the people to the government. Thus, instead of the person producing different clearances and permits from different government agencies (NBI, PNP, brgy, POEA, etc.), those agencies should reconcile their data and watch out only for those with some criminal records, all the rest should not be harassed and not be required to secure and pay those unnecessary clearances and fees.

(4) To Emir:

Tama Emir. The terminal fee should either be abolished, or be reduced by 1/2 at most. Airport operators like MIAA earn enough from (a) airlines, (b) rental from shops inside the airport terminals, (c) ads from billboards inside the terminal, (d) airport taxis and rent-a-cars, (e) parking fees, etc.

(5) To John:

I was also thinking that passport validity should be more than 5 years since its effective usefulness is only 4 ½ years. It could be made 6 to 10 years, so there will be less people that go there, which adds to longer lines of passport applicants.

(6) To Jay

Getting a visa is a privilege to be given by foreign governments, and it was not the subject of my paper. Rather, it was about the privilege to travel abroad to be given (or denied) by the Philippine government -- hence, my discussion on RP passport, travel tax, terminal fee, etc. And my beef was that the Philippine government should reduce some unnecessary hindrances to Filipinos desiring to be mobile abroad, like the abolition of travel tax, reduction of long lines for passport application, etc.

"Travel across the country" was a typographical error, my mistake. I meant "travel outside the country".

Increasing staff at DFA passport processing is only one of about 4 options I made. Another option is rechannel some staff in other DFA offices who I saw, were idle, just chatting and laughing in their offices while the passport-related staff were harassed and over-worked.

(7) To Jim:

Not exactly "bargain" the RP passport fee. A $100 can be earned in one day perhaps by a minimum wage earner in the US. A P4,200 can be earned in 2 weeks work by a minimum wage earner in the Philippines. Also, as I mentioned in my paper, you pay not only P750 passport fee, you also pay P150 for those small pictures alone, another P150 to P180 for "notarized" statement that your passport was lost due to theft or fire, or damaged due to water or fire or babies, etc.
Then you also have to take a leave for about 1day from your office to file the application form, processing, etc. If you don’t like long lines, you pay P1,000 to travel agencies to help you, but you still have to go to DFA for e-signature, etc. You also pay sometimes for NBI clearance, PNP clearance, plus birth certificate, marriage certificate, etc. to NSO. DFA gets the original copy, not photocopy. You sum up everything, you could be near P4,000.

Sometimes you cannot just "plan" your trip. You have no money to be a tourist abroad, neither you want to work abroad, you don’t apply for a passport. Suddenly a relative will tour you to HK or Bangkok for free, or you get an all-expenses paid conference, you run to the DFA.

Thursday, May 15, 2008

Passport, travel tax, and people mobility

One indicator of how free a country or society is, is the ease of mobility of its citizens to travel both within the country and abroad. The easier and less costly it is to move around, the more freedom the people have. On the contrary, the more bureaucratic and more costly it is to travel, the less free the people are. In short, mobility = freedom. Less mobility, less freedom.

To travel abroad, a Filipino needs (a) a Philippine passport, (b) a plane ticket, and (c) a valid visa of the destination country whenever it is needed. For many Asian economies like Hong Kong and member-states of the Association of Southeast Asian Nations (ASEAN), visas are not needed for visits of less than 30 days.

For Filipinos traveling abroad to attend a conference, to study, a business trip, or as tourists, they have to pay (a) travel tax of Php1,620 per passenger, and (b) airport terminal fee of Php750. Hence, even before one can board a plane, he has to shell out nearly Php2,400 already and it is not a small amount. Overseas Filipino workers (OFWs) are exempted from paying travel tax and also the terminal fee, I think.

Getting a new passport, whether for the first time or for renewal of the expired or expiring passport, can be costly. The cost of passport, the new machine readable passport (MRP), is Php500 for regular processing (released after 14 working days) and Php750 for fast/overtime processing (released after seven working days).

Other costs are (a) passport pictures, Php150 for six copies, definitely a monopolistic price, service provided by the Department of Foreign Affairs (DFA) multi-purpose cooperative; (b) securing birth and/or marriage certificates, other papers and clearance from other government agencies when necessary, and (c) taking a leave from office, first to get a schedule for application processing, and second, actual processing day, payment, data encoding, etc. Some people apply through their travel agents, and normal processing fee by the travel agencies is Php1,000 per passport, but the applicant still has to go to the DFA for the electronic signature and perhaps interview for first-time passport applicants.

Those long queues are stressful and costly for passport applicants. Long queues mean only one thing: the supplier of the service or a commodity is small or few relative to those who demand the service. In order to reduce, if not remove the long queue, the supplier should either expand the staffers who attend to the long lines of people, or expand the number of offices (or shops) in different places to attend to more people from more places.

Fastfood chains do that. Banks too, and malls and convenience stores, gasoline stations, repair shops, Internet shops, barber shops, and so on. All private enterprises operating in a competitive environment are stretching wide and hard to reach out to more people, to serve and satisfy more customers.

Why can’t the DFA and many government agencies follow that? If the current number of personnel is not enough, then DFA should rechannel some of its staff from other departments or divisions to help in the passport processing work; or hire more staff. If eight hours on 5 ½ days are not enough, then work 12 hours on six days per week. If the DFA building is not enough, then get or rent additional offices in other cities, both in Metro Manila and the provinces. Many DFA regional offices across the country are also experiencing long queues for passport applicants. There are additional costs for this expansion of offices and staff, definitely, but there are additional revenues too that can more than finance the additional expenses.

I suggested the re-channeling of some staff from other DFA offices and divisions because I have noticed that while the staff at the Passport Director’s Office and related offices working on passport issuance are harassed and seem to be overworked, the staff from neighboring rooms and offices at the DFA seem idle.

If the DFA cannot have the flexibility or will to expand its staff and/or offices, then it may consider allowing and accrediting some private travel agencies to process passport applications. Then the DFA main office can attend more to those applicants with special or urgent need for a passport.

Like my case. Last month, I was going to Atlanta, Georgia to attend the Atlas Liberty Forum. The sponsor paid for my hotel and subsidized my plane fare. Less than a week before my flight, my passport accidentally got wet; my travel agent advised me that I need to get a new one as my current passport might be declared “mutilated” and hence, invalid, by the immigration officers of the Philippines and the US.

With the help of some friends who have friends at the DFA, I was entertained at the Passport Director’s Office, where there is a long queue of people who may have the same urgent need for a new passport. Anyway, I had to cancel my original flight, got my new MRP after four working days, flew the following day, and caught up the conference on the day it started.

The high cost of getting a new passport plus travel tax and terminal fee constitute an indirect restriction to some people who maybe poor and desire to be more mobile across the country. The world is globalizing fast, and there are not too many opportunities in the country given the bad state of governance. Those unnecessary but indirect restrictions to people’s mobility should be reduced. The travel tax, for instance, looks like extortion since there are no corresponding services to the public who paid the tax. It should be abolished.

* Thia article posted in

Tuesday, May 13, 2008

RP's GDP structure, 2007

RP's GDP structure

A. by industrial origin, current prices, 2007, in P Billion except %

Services sector, 3,631.2 (54.6%)
Industry sector, 2,082.7 (31.3%)
Agriculture, fish. & forestr, 937.3 (14.1%)
Total GDP, 6,651.3 (100%)

B. by expenditure share, current prices, 2007, in P Billion except %

Personal consumption, 4,615.3 (69.4%)
Capital formation, 980.0 (14.7%)
Government consumption, 654.1 (9.8%)
Net Exports (X-M), -48.8 (-0.7%)
Statistical discrepancy, 450.2 (6.8%)

High oil prices and govt parades

As world oil prices hit the $126 a barrel mark, the Makati City government closed off a big part of Ayala avenue and a few surrounding streets for the big "Makati Day" parade in the afternoon. These parades are participated mostly by the barangays in the city and some agencies under the Mayor's Office.

The 1st batch of the parade started walking at 2pm, the bulk at 3pm, but the bright boys of Makati traffic police closed off Ayala as early as 12 or 1pm. Even after all the parade participants have left the assembly area, front of Makati central fire station, much of Ayala on both sides was clear and almost empty of vehicles.

I went down to buy some food at People Support building, then I saw a corporate-dressed man pleading with the police on the intersection of Buendia-Ayala, he's going to People Support building, just around 20 meters away, but the Makati policeman would not allow him, even if the entire road was clear because the event was held in front of Tower 1, about half a kilometer away! The policeman's other traffic officers buddies just looked at them carelessly.

For this type of bureaucrats, private citizens don't matter to them, unless the latter have close political connections perhaps. If the citizens have an important meeting, bureaucrats don't care, the private citizens are not the "boss" of the bureaucrats. It's the city mayor, the councilors, the city and national police chiefs.

Exasperated, the man has to go around more than 1 km perhaps in heavy traffic streets, where all vehicles were rerouted, waste several drops of gasoline, spew more gas emissions elsewhere, be late for his appointment or meeting, perhaps lose a business deal.

Friday, May 02, 2008

Bringing down local oil prices

An email urging people to boycott Shell and Caltex, to force these 2 oil giants to bring down their prices, then forcing other oil players to also bring down their prices, has been moving around for several weeks now. I personally have received it at least 7 times from several friends, and I have one reply to them: NO, it will not work.

That should be a cheap trick by Petron (#1 in sales), Total (#4), and/or other small oil players. If people want gas prices to go down to P30/liter, even lower, then they should boycott not only 1 or 2 gas stations, but ALL gas stations. Then they buy good walking/rubber shoes, also a good bicycle, and use less vehicles -- public or private -- that consume gasoline.

Now if they can't walk and bike to work or school often, then people may better pressure the state to bring down if not abolish, petroleum taxes. Diesel has 2 taxes -- import tax (1%) and VAT (12%). Gasoline (unleaded, premium, etc.) has 3 taxes -- import tax, excise tax (about P5.60/liter) and VAT. The application of VAT here is wrong: it slaps the VAT on the price that includes import tax and excise tax, or a tax on a tax.

Speaking of oil taxes, I emailed Sen. Mar Roxas 2 weeks ago, I asked him that since he was very vocal on the reduction if not abolition of oil taxes to make "cheaper oil", why is he silent on the reduction if not abolition of drug taxes to make "cheaper medicines"? Sa awa ng dyos, he did not reply.

I think his posturing on oil taxes is just for political gimmick, pa-cute. He knows that the DOF will not agree to it, just his political positioning for 2010 Presidential elections. Also the "Cheaper medicines" bill, I think he knows it won't bring down the price of good quality medicines. Cheap medicines are already here -- they're currently sold in public markets, variety or sari-sari stores, etc. But whether these are effective and safe medicines, that's another story.