THE Philippine Chamber of Commerce and Industry (PCCI) on Tuesday stressed that the country needs more reliable and affordable energy and such requires a broader ownership of privatized power assets. Supporting the National Economic and Development Authority (Neda), the PCCI also said government should put stricter limits on the cross ownership between power generation and distribution utilities in order to prevent pockets of monopoly in the power sector.
“It is necessary for both industry and consumers to have access to affordable power to lower the cost of business. And for this to be possible, the privatization effort of the National Power Corporation assets must have broader ownership base,” said Donald Dee, PCCI’s president.
One couldn’t agree more. Certainly, this is a principled stand on the part of PCCI, which should be commended for saying so. For so long, the country’s economy has been hobbled by monopolies and oligopolies, one of the major factors why we find it hard to improve the lives of the Filipino people.
Standard economics textbooks tell us about the evils of monopoly: their tendency to produce shoddy but expensive products and services. That is bad enough, but the heavier burden lies with the fact that monopolies are a drag to development, either because they tend to discourage competition or they deprive people of the vital goods and services they need to improve their lives.
Take telecommunications. Before deregulation, anybody who wished to have a landline telephone would have to wait for four years before getting one. Entrepreneurs therefore had to be “entrepreneurial” by buying the telephone lines of those who already had. Others had to share a “party line” and had to quarrel with them all the time for a chance to make or receive calls.
That was then. Now, almost everybody has a cellular phone, to the extent that phone companies must offer all sorts of inducements for landline subscribers, including super-low fees and quick (sometimes, “one-day”) processing. Imagine, from four years to one day. What a difference reform makes.
Still, the issue today is that the country could have progressed a lot more had the entire telecommunications industry been totally open to foreign investments. Today, we are no longer talking about monopoly but oligopoly or an industry dominated largely by two or three players. Had the industry been open just to anybody who wants to come in, Internet penetration could have increased, value-added services like voice-over-internet-protocol would have been common, and the brave new world of information revolution could have unfolded a lot faster to transform our lives for the better.
Indeed, what the country needs right now is a second wave of reforms that were started after the Edsa Revolution.
After the fall of Marcos, we saw the end to monopolies in sugar and coconut trading, telecommunications, and aviation. We had limited reforms in banking and retail. We allowed private participation in infrastructure development and water distribution. We liberalized international trade and reduced tariff and nontariff barriers to force our own industries to grow, mature, and become competitive. Somehow, Filipinos are reaping the benefits of these reforms through relatively lower inflation rates (which preserved much of the people’s purchasing power), greater options for consumers, and greater access to information technology. The privatization of the water distribution has hit a snag with the failure of the Lopez family and its partners to make their water concessions work and had to seek a bailout from the State. Nevertheless, water supply in general has ceased to become a daily gripe of Metro Manila dwellers, thanks to the better performance of Manila Water, and the increasing availability of potable water in general.
Nevertheless, the reforms are not enough because the post Edsa reformers failed to finish the job, either owing to ineptness or the stronger backlash from the country’s oligarchs, or, in some cases, a failure to draw the right kind of foreign investors or partners—meaning, flashy with no real money, technology or expertise and experience. Retail has remained the preserve of a few mall owners, thus discouraging the entry of foreign competitors that could have put greater pressures on local players to reduce prices and offer better or innovative services. The banks continue to behave like cartels, offering low uniform savings rates, while charging high interest rates to borrowers and credit card holders, thus turning off savers. Exporters and integrators continue to complain of high freight rates, saying it’s cheaper to buy corn from
We need to pursue this second wave of reforms to improve the Philippine economy’s competitiveness and efficiency. There’s no other way this country could move forward as the results of the first wave of reforms following the Edsa Revolution seemed to have exhausted its promise. For long, wealth creation by the country’s economic elites has largely been through extra-economic means or political connections and undeserved favors from the state (like state-guaranteed monopoly or oligopoly position through high tariff walls, “fiscal incentives,” restrictions on foreign investments, among others). A second wave of reforms that will force the country’s economic elite to behave based on the dynamics of the market and competition would force them to be innovative, thus raising the entire country from the rut that we are trapped in right now.