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The Daily Tribune - Marcos: Economy not okay

In The News
24 June 2013

By Angie M. Rosales | The Daily Tribune

The-Daily-Tribune A dearth in infrastructure buildup under President Aquino, primarily the lack of power projects, will be the Achilles’ heel of the country despite President Aquino’s hype of a booming economy, Sen. Ferdinand “Bongbong” Marcos Jr. yesterday said.
Marcos questioned claims of the Aquino administration of an economic boom after the reported unprecedented 7.8 percent first quarter growth rate which supposedly makes the Philippines the fastest growing economy in Asia.

The country is riding high, posting a 7.8 percent gross domestic product (GDP) growth in the first quarter and having its credit rating raised to investment grade by Standard & Poor’s and Fitch Ratings but power supply is seen as the biggest infrastructure challenge for Aquino.

Just one major power plant has been added in the past 10 years in the industrial and commercial heartland of Luzon where many were built during the last electricity crisis 20 years ago.

“Accompanying that (economic growth figure) is the seven percent unemployment (rate). And if you look at the demographic, we have more younger individuals in the labor market for less than five years. It is fast approaching 30 to 35 percent. That’s a huge number,” Marcos said. He expressed concern over the possibility of the country suffering a similar crisis being experienced by Spain.

“Spain is in crisis. We’re almost like there, in their situation. So that is a problem. We cannot just pluck figures and put them out of context,” he said.

Marcos underscored that the high cost of power in the country which is discouraging potential investors should be addressed by the Aquino government.

The senator, however, was quick in pointing out that he’s not pressing for the revival of the operations of the highly-controversial Bataan Nuclear Power Plant (BNPP) project of his late father, former Pres. Ferdinand Marcos.

“It is not (just) worth looking at, it is absolutely necessary for the economy that we fix the problem of power. If you look at the experience of industrialized or industrializing economies anywhere in the world, you cannot move further into industrialization if you don’t have sufficient, cheap and reliable source of power, it’s that simple,” he said.

“We refer to Mindanao as being the promised land (but) we have ten to 12 hours of brownout in Mindanao. Addressing the power (supply issue) is absolutely necessary. But that is what I have been saying for a while. The government has to have more public investment. It is still the same, it’s still schools, it’s still roads, it’s still power, it’s still telecommunications that are needed. It’s even peace and order all of these things basic infrastructure that only the government can invest in, it’s the role of the government to invest in. and we haven’t been doing anything,” he said.

“We are talking about floods and we haven’t done a thing. If you want to talk about the economy, I’m sure these floods cannot be good for anyone, our productivity necessarily decreased because of that,” Marcos added.
“All of these impact one upon the other. Nobody can say that because we have seven and a half growth rate in one quarter, which if you look at it well it’s the campaign spending,” he explained.

Marcos also noted lacking in the Aquino administration’s economic thrusts is pulling in foreign direct investments (FDI).
“We cannot rest on our laurels and depend only on the development of the consumer side of our economy, which is what happening now because we are depending purely on remittances. We have to make public investments so that the economy will grow on its own and we are not dependent upon these very volatile investors that come in. We need foreign direct investment, we need capital investment, that’s the key to development,” he said.

“And you start the discussion on power, that is the key element. And whenever you talk to the chambers of commerce, talk to individual investors, the issue of brownouts and the lack of power and the expensive, the high price of power in the Philippines is always a factor they will raise,” he said.

The reason why the country’s economic growth has not trickled down to the poor is because it’s purely consumer driven, Marcos said.

“Those benefitting are the malls, and some services but there is no new industries being put up, there is no capital investment coming to the Philippines, hardly any new businesses are put up,” he said.

“You have to find a solution (for the power problem). Otherwise nothing happens. We will not get a significant amount of foreign investments which is what we need. We need direct foreign investments and investments in capital investments, starting businesses, in making present businesses global,” he said.

“Investors are reluctant because of the high cost and shortage of power supply. So they usually decide to take their business where electricity supply is reliable. We are the last in that list in terms of preference,” he said.

An electricity outage that blacked out large swathes of Luzon for up to eight hours last month highlighted the worries about a potential power crisis that could undermine the fast-growing economy.

Predictions that electricity demand will outstrip government forecasts have raised fears over the impact on the expansion of industries such as call centers, tourism and gaming.

A raft of private firms has rushed in recent months to put some $9 billion of new plants on the drawing board, but lead times for construction are around three years and environmental opposition to coal-fired plants is already sparking delays.

“Power plants will be put up, the only question is will they be put up fast enough to meet the demand,” John Forbes, a consultant with the American Chamber of Commerce of the Philippines, said.

“We are talking about long-gestation projects. If no new power plants are built, by 2016 we are in for a big problem,” says Sergio Ortiz-Luis, president of the Philippine Exporters Confederation.

The call center industry, which employs 600,000 workers, is aiming to grow at 15 percent a year for revenue of $15 billion by 2016, said the Philippines Contact Centre Association.

“That will be difficult to meet if a power crisis hits us,” cautioned Jojo Uligan, the lobby group’s executive director.

The total generating capacity in the country is projected to reach about 15,300 megawatts MW this year and the country needs additional capacity of 2,500 MW in the four years to 2017, according to the Department of Energy’s latest plans.

Luzon, which accounts for about three-quarters of the country’s total capacity, will require an additional 1,600 MW by 2017, the DOE says, more than its own estimate of up to 1,130 MW due to come on stream from new projects.

However, the Philippine Independent Power Producers Association industry group said Luzon will require some 3,280 MW by 2017 - double the government’s estimate.

The association says the Philippines as a whole will require at least 3,860 MW, as the economy is growing faster than anticipated and demand is rising more quickly.

The country’s biggest conglomerates such as Aboitiz Equity Ventures Inc, Ayala Corp and San Miguel Corp are among those eager to build power plants or increase the capacity of existing facilities over the next five years.

Projects currently on the drawing board or being touted by private companies total around 4,400 MW up to 2018, including some from new entrants to the industry.

But many of these projects are likely to face delays, either from environmental opposition to coal generation - the quickest plants to build and the cheapest to operate - or as proponents wait for power consumers to commit to off-take agreements.

Manila Electric Co. (Meralco), the country’s largest power utility, is leading a consortium that is building a $1.2 billion 600 MW coal-fired power project in Subic Freeport Zone northwest of Manila.

It has delayed by a year its original 2016 target for the plant’s commercial operation because of a legal case relating to environmental concerns.

Another coal-fired project in Luzon, a planned 400-MW capacity increase for a 735-MW plant owned by Aboitiz Power and partner Marubeni Corp of Japan, is also facing resistance. An upgrade announced in 2011 has yet to start.

Companies looking to build new plants are also worried about committing to projects without guaranteed long-term industrial buyers. Users, however, are eyeing the rash of interest in the sector and are wary of signing fixed-price long-term agreements, further delaying any development.

“If you notice, everyone’s planning to move into the power business,” Ramon Ang, president of San Miguel, the country’s biggest power producer, said recently.

Government energy officials say Luzon should have sufficient power supply up to 2016, despite ongoing blackouts in the southern Mindanao region.

“Shortage, I don’t think so. Not in Luzon, not yet,” Energy Department undersecretary Ramon Allan Oca told Reuters, although he declined to comment past 2016.

Power suppliers are not so sure. And they warn reliance on older plants that need more maintenance will simply mean even more outages.

“Businessmen in Mindanao are suffering,” Ortiz-Luis SAID. “In Luzon, although there seems to be enough reserves, soon enough those reserves will be eaten up unless there are alternatives,” he said.