Strong power industry = strong economy

(First of two parts)

It seems strange that some sectors of the country are trying to make a bogeyman of a well-managed private corporation like Meralco that has proven its capability to help the viability and growth of the economy in the areas it distributes and supplies electricity to, while allowing less capable and oftentimes badly managed power and distribution utilities to operate in their area.

Beware the bogeyman and monopoly, and suffer instead erratic electricity availability and distribution, and consequently lower production and economic growth.

Don’t get me wrong, I am not espousing a monopoly. In fact, I wholeheartedly agree that there should always be robust competition and checks against a full monopoly.

But between having a reliable power supply versus erratic and unreliable power, it seems obvious that the competition must be able to provide the same level of service instead of relying on the bogeyman argument and, as a negative consequence, drag the local economy down.

In a briefing for members of the Monday Circle at the Westin Manila in Ortigas at the start of this week, Meralco’s senior vice president and chief external and government affairs officer Arnel Casanova described the Philippine economy as “a suppressed economy simply because the infrastructure and the power is not there.”

He pointed out though that if reliable and quality power is provided to the countryside, investments – both local  and foreign “will flock inside the country and compete with our neighboring countries. And therefore, from a service economy, we can build a strong foundation for our manufacturing and technology.”

He acknowledged that “There’s also an unfounded fear of privatization. But I think Filipinos should begin to think bigger because, the smaller the scale you have in this industry, the more unreliable and the more difficult it is to serve the consumer. The reason is that power distribution is a natural monopoly ,and therefore, you have to invest the capital investment first before the businesses come in.”

He added that “It’s a chicken and egg situation. Business will not come in if you don’t have reliable power. So kailangan muna, mamuhunan muna bago mo ma-attract yung investment. (You need to invest first to attract investments)  I know this very well, because when I was in BCDA. I was the chairman of the Philippine investment committee with PEZA and all the ecozones in the country. During PNoy’s time, we created these Philippine investment promotion agencies so that we can work as a team, the Philippine team when it comes to foreign investment.”

He continued that “Our major hurdle was actually power. In Clark alone, we had to subsidize Texas Instruments so that we could encourage them to actually continue to be in the Philippines. Otherwise, they’ll be moving away from the country.”

Casanova stressed, “That’s the impact of electricity, particularly reliable power. Once you provide reliable power and when the economy grows, the purchasing power of Filipinos would increase, and therefore, affordability would eventually be resolved as well. Because for a poor person, food is expensive. But if you have jobs, it’s easier to buy. Affordability becomes relative. But for someone who has no job and is poor, food is expensive.

“Everything is expensive. So, that’s what we need to do and that’s what we are trying to do in Meralco. Being the biggest power distribution company in the Philippines, we believe that it’s our moral duty to actually invest in our electric cooperatives so that we could bring everyone up.

“We could use our scale, our bigness, so that we could create a bigger economy for everyone to benefit from...that’s how we look at it and that’s why it’s a difficult job that we’re doing because you know electric cooperatives are very political. Even if they know that they need help, sometimes they would not admit it,” he said.

Casanova elaborated that “The distribution utility is the backbone of the power industry. It’s where we collect all the revenues and the fees that will keep the power sector going. And we connect and serve all the end users and the consumers to power and services, residential, commercial and industrial clients.  We anchor the buyer of the industry and aggregate demand and secure long-term contracts for generation and transmission providers. So, when distribution fails, the economy suffers. And you could see this mostly outside the Meralco franchise.”

According to Casanova, data coming from the World Bank “shows that economic development and good electricity are entwined, inextricably entwined. This is not a causation, but there is a very, very clear correlation between consumption and use of electricity to economic development. And you will see that between the areas where the average electric cooperatives in the Philippines operate and as compared with Meralco, there’s a huge development gap because at the end of the day, the industries are powered by reliable power. Not only industries, but also tourism, health care, agriculture – all of these are drivers of the economy.”

Furthermore, Casanova explained, “within the Meralco franchise, which is the National Capital Region, the GDP per capita of Filipinos is about P503,000 per capita per annum. But the rest of the country lags behind between P150,000 per annum to P200,000 per annum per capita. And you will see that in our national GDP, 60 percent is driven by services. This is simply because our manufacturing and industries are not present in the countryside.”

Casanova pointed out that the reason why there are so many overseas Filipino workers is that they are from the provinces where there are no jobs available.

Even tourist resorts, he said, “struggle to survive, particularly when power outages are very frequent. Kahit maganda yung lugar (even if the place is nice), but the infrastructure, not only the roads, but mostly the power is unavailable... wala talagang hanapbuhay sa kanayunan (there are no jobs in the countryside) and therefore, most of our people and our economy has been a service economy.”

To be continueda