Asian Century Journal

An Asian Century Philippines Publication

Mr. President: Reduce Power Rates First Before Pitching for Foreign Investors

Tycoons booze up at Marcos’ victory party with his best friend Sabin Aboitiz uncorking a wine bottle.
 

By Adolfo Quizon Paglinawan, Part 1

 

I am all for foreign investments, especially if they inject productivity into our helpless service economy.

As I write, President Ferdinand Marcos Jr. announced he will sign an executive order (EO) to promote ease of doing business in the country as his administration targets to make the Philippines a “top investment destination.”

This, after the Department of Trade and Industry (DTI) Tuesday presented to Marcos the proposed EO on the Creation of Green Lane for Strategic Investments after identifying the barrier across multiple regulatory agencies that hamper the smooth entry of foreign direct investments (FDIs) in the country.

The proposed EO will cover all national government agencies (NGAs) and their regional and provincial offices, local government units (LGUs) and quasi-judicial bodies involved in issuing permits and licenses necessary for establishing strategic investments in the country, mandating NGAs and LGUs to act on a permit or license application not longer than three working days in the case of a simple transaction, seven working days in the case of complex transactions, and 20 working days for highly technical transactions from the date of receipt.

Bravo! There is however a sine qua non that is being ignored, before any marketing for investments can be effective.

 

The hard fact remains – The Philippines now has the highest power rates in Asia, higher than even Japan, the most developed Asian country, and one of the most expensive in the world.

His new Trade Secretary trying to earn his first few chevrons from the President is even clueless the DTI has long conceded that the high cost of electricity in the country gives foreign investors second thoughts about investing in the Philippines.

Note that all those foreign investments published recently by Malacanang as purportedly earned by Marcos Jr.’s visits abroad, are just pieces of paper prepared in advance by DTI to give color to presidential diplomatic leadership.

Even local firms are relocating to China and Vietnam because the outrageous cost of electricity here make them uncompetitive in the world market.

Indonesia has profited much from low power rates.

Indonesia made it to the top ten manufacturing countries in the world before the Covid-19 pandemic.

This explains why among Asean countries, Indonesia leads in terms of electricity demands, with Vietnam second and Thailand third. Before considering the Philippines, foreign investors first consider these three neighbors of ours, next only to China.

Electricity Demand of Individual Asean Countries

How the country went from energy leadership as recent as 1985 to its despicable state is a classic basket-case is the end-result of thirty years of privatization and deregulation from 1986 to 2016 as an offshoot of the failed EDSA counter-revolution.

 

Flashback on the Old Marcos

Bongbong’s father, Ferdinand Edralin Marcos Sr. embarked on one of the most successful electrification programs of any developing country.

The late Geronimo Velasco, Marcos Sr.’s minister for energy, said: “When I started with PNOC (Philippine National Oil Corporation), the Philippines was 96% dependent on oil while the rest was basically hydro. By 1986, the national program not only succeeded in providing electricity to all provinces, we had reduced oil importation by 46% enabling 50% energy independence.

“Considering that the Bataan Nuclear Power Plant (BNPP) was envisioned to supply 16% of the power requirement of Luzon, the Philippines biggest island, had it been turned on when it was completed in December 1985, the country’s level of energy exceeded the halfway mark and the goal of the Marcos Plan to fuel 11 great industrial projects would have been fully met.”

The BNPP was supposed to be the first commercial nuclear-powered plant

Truth is the nuclear plant was expected to be fired as early as 1983, but US Ambassador Stephen Bosworth ordered non-essential repairs that took another three years of delay.

But President Corazon Aquino mothballed the plant, and eliminated together with it were Marcos and Velasco, the government control of oil-and-energy utilities and the 11 major industrial projects that were to be fueled by these national energy programs.

In his book “Trailblazing: The Quest for Energy and Self-reliance” (2006), said the cost of uranium fuel for BNPP would have been $20 million per year, compared to the $180 million to be saved in oil import costs, that is worth three times at today’s market.

Instead, the inflated costs of imported oil were paid, in addition to the $460 million in debt service.

The total cost of the mothball was $2.3 billion, plus another $1.7 billion in interests and penalties even if were not operating.  

 As we speak, despite not lighting a single light bulb or producing a watt of energy, the Bataan Nuclear Power Plant continues to cost our taxpayers more than a million dollars a year for just maintenance.

Meanwhile, its same models have been in operation in Korea, Brazil and Slovenia for more than 30 years, and are being readied for another 40 years of commissioning.

 

Energy Politics

For the meantime, oligarch Ramon Ang of San Miguel Corp. Global Power (SMCGP) has introduced politics and judicial action.

It has slapped President Marcos Jr. on the face by saying that the Energy Regulatory Commission should not play favorites in the power sector because “it (ERC) is mandated to uphold the rights of all stakeholders in the power sector. This includes all, and not just a few, power generation companies”.

The ERC is led by Chairman Monalisa C. Dimalanta, one of three former executives of Aboitiz Power (AP), chaired by Presidential Adviser Sabin Aboitiz, another oligarch, running key posts in the government’s energy portfolio.

The other two former AP execs are Energy Secretary Popo Lotilla and Power Sector Assets and Liabilities Management Corp. (PSALM) president Dennis Edward de la Serna.

Worse, SMCGP recently obtained a 60-day temporary restraining order against the ERC which denied its petition to temporarily increase rates in the power supply agreement (PSA) between Manila Electric Co. (Meralco) and South Premiere Power Corp. (SPPC), a unit of SMCGP.

Meralco is owned by yet another oligarch, Manny Pangilinan who sits in its board as Chairman and CEO, in behalf of the Indonesian conglomerate Anthoni Salim.

Ang continued “the ERC Chair and two Commissioners denied the petition, forcing us to continue to absorb losses, and essentially preventing us from exercising our legal options, clearly laid out in the PSAs, to preserve our financial standing. This, despite two other commissioners delivering strong dissenting opinions”.

In a statement on November 27, President Marcos Jr. found it “unfortunate” that the Court of Appeals has issued a 60-day temporary restraining order against the ERC from implementing the power supply agreement (PSA) between Manila Electric Co. (Meralco) and South Premiere Power Corp. (SPPC), a unit of SMCGP.

“We hope that the CA will reconsider. And include in their deliberations the extremely deleterious effect this will have on power prices for ordinary Filipinos,” said Marcos Jr.

But Ramon S. Ang issued another statement a day after, asserting his right to fair treatment in filing a case against the Energy Regulatory Commission (ERC).

“Going to the Court of Appeals is part of our right to due process among the legal remedies provided to us by the Constitution. We recognize and respect the independence of the judiciary as part of our system of check and balance,” said SMCGP.

 

SMC forcing through

San Miguel is actually whaling into the issues with a heavy hand which even with his public relations blast will not alleviate the situation.

Ang should refrain from threats and spare Marcos Jr. from having to step into regulatory and judicial matters that are outside of executive oversight and intervention but exacts a great cost of wasting goodwill with the presidency.

In the first place, when SMCGP entered into the picture, they offered to assume fuel risk and offered supply at fixed rate in 2019. Now, Ang is asking for price increases.

On the other hand, the President must reevaluate his solutions insofar as the energy sector is concerned.

Having Aboitiz people running the sector, such as Lotilla, Dimalanta and De La Serna diminishes his leverage with the people. There is no absolutely no competence among the three to guarantee lowering of the power rates.

It only prolongs the privatization of the energy sector that feeds only on the insatiable greed of the oligarchies for endless profits. During the 2021 financial year, Aboitiz Power Corporation reported a 22 percent increase in revenue compared to the previous year – approximately 134.36 billion Philippine pesos, 24 billion pesos more than the year prior. In 2021, Meralco generated total electricity sales of around 309.24 billion pesos in the Philippines.

Compare this with the suffering of the residential and commercial consumers having to foot exorbitant dues – this is definitely not the dream that you are sharing with the people that your election promise holds.

Instead of putting these hundreds of billions in the pockets of the few the egalitarian formula that your father adopted, minimized profits for the government that operated the power industry by passing much of it to subsidize the consumers’ monthly bills.

Do not fall far from his tree. Marcos Sr. nationalized the power industry, because this is the only way he can place the rich oligarchs on an even footing with the many who are poor.

This is the only way your promotion of foreign investments, which the Philippine News Agency posted at 1 Trillion pesos in your first 100 days, will materialize and bear sustainable fruits.

(To be continued)

 
<strong>Adolfo Quizon Paglinawan</strong>
Adolfo Quizon Paglinawan

is the anchor of Ang Maestro – the Unfinished Revolution at Radyo Pilipinas1, co-host of Opinyon Ngayon at Golden Nation Network Television, a political analyst, and author of books.

His third book, The Poverty of Power will soon be off-the-press. It is a historiography of controversial issues of spanning 36 years leading to the Demise of the Edsa Revolution and the Rise of the Philippine Phoenix.
Paglinawan’s past best sellers have been A Problem for Every Solution (2015), a characterization of factors affecting Philippine-China relations, and No Vaccine for a Virus called Racism (2020) a survey of international news attempting to tracing its origins.

These important achievements earned for him to be named one of the 2021 international laureates for the Awards for the Promotion of Philippine-China Understanding.

Ado, as he called for short, was a former press attaché and spokesman of the Philippine Embassy in Washington DC and the Philippines’ Permanent Mission to the United Nations in New York.

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