Expensive power threatening to subdue Philippines growth momentum

Expensive power threatening to subdue Philippines growth momentum

The ability of the Philippines to sustain a high average economic growth
rate over the next quarter of a century will depend, to a large degree, on
whether policymakers can reduce the cost of power and make its supply more
reliable to encourage more local and foreign investments.

And while the country has exhibited an impressive pace of development in
recent years, sustaining this hinges on improving energy supply and cost
which are "central to an improved investment climate that, in turn,
generates a higher productivity growth."

Thus said an Energy Policy and Development Program working paper authored by
Majah-Leah Ravago, Raul Fabella, Ruperto Alonzo, Rolando Danao and Dennis
Mapa of the University of the Philippines School of Economics, and presented
to the public during a forum last Friday, organized by the Institute for
Climate and Sustainable Cities.

"The sustainability of the recent growth remains tenuous," the authors of
the energy policy paper said. "One constraint is the perennially high cost
of power, as well as an inadequate power supply that cannot support the
country's potential growth."

The paper lamented that Philippine power costs remain high by regional
standards, even ranking second to highly industrialized and affluent
Singapore within the Asean region. Because of this, the country "struggles
to attract mobile capital," and the growth of the local manufacturing sector
has lagged those of its peers in recent decades, the authors pointed out.

To remedy this, the paper laid down proposed key reforms and alternative
policies to help improve the energy sector, including the imposition of
better coordination among stakeholders in the power generation, transmission
and distribution sectors.

"A well-conceived master plan that accounts for the current assessment of
the industry and provides incentive-compatible arrangements will attract
investors to bet on the country for the long term," the paper read.
"Coordination has never been the Philippines' strong suit, and we have to do
much better in this regard in the next 25 years."

The paper called for the government to invest in the expansion of the
transmission highway currently held under franchise by the National Grid
Corporation of the Philippines - a proposal that was opposed during the
forum by the representative of the National Economic and Development
Authority, who noted that this sector was best left to the more efficient
private sector.

The paper also encouraged greater regulatory oversight coordination to
support a more competitive energy market; reconciling the contradicting
policies laid down in the Electric Power Industry Reform Act and the
Renewable Energy Law; reforming inefficient electric cooperatives; and
investing in research and development.

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Link to Original Article:
http://business.inquirer.net/226458/expensive-power-threatening-subdue-ph-gr
owth-momentum

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John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com