Industries still plagued with high power rates

Despite fuel-induced reduction in electricity rates in the past two years, industrial end-users are still experiencing financially hurtful pinch of bulky budget on their power consumption.

In a joint forum organized by CitizenWatch and the Albert del Rosario (ADR) Foundation, Federation of Philippine Industries (FPI) Chairman George Chua is vexed at realities that “electricity expense, on the average, accounts for 3.0-percent of the total production cost incurred by manufacturing firms.”

He cited that “electricity expense for light industries is higher for textiles and footwear…and electricity expense for electronics is also higher than the manufacturing average of 3.8-percent.”

Chua also noted that budgets for electricity have always been heftier for relevant industries such as cement, paper products, iron and steel, industrial chemicals, plastic and glass products, petroleum refining and even rubber products.

The FPI chairman laments that “the prohibitive cost of electricity and the emergence of low-wage countries such as China and Vietnam gradually erode the competitiveness of Philippine economy in general and Philippine manufacturing exports in particular.”

Notably though, he emphasized that “textiles, footwear and electronics industries generate a third of the employment in manufacturing sector, mostly unskilled and semi-skilled workers.”

In fact, according to Dr. Raul Fabella, professor emeritus at the University of the Philippines-School of Economics, “it is becoming a tough sell for foreign investors to build industries in the Philippines when the costs of power in our competitors in the neighborhood – Indonesia, Thailand and Malaysia – are just fraction of ours.”

He said “both Filipino and Chinese tycoons and up-and-coming start-ups from Taiwan are either moving out of the country to put up their factories in China, or giving us a miss for Vietnam and Thailand, where electricity rates are nearly a third of ours. Electricity in Thailand costs nearly half that of ours, while that in Indonesia is only a fifth of ours.”

Chua added “the high cost of electricity is a deterrent for new foreign investments, as well as a constant hindrance for businesses that are already invested in the country.”

He stressed “the gradual erosion of the competitiveness of Philippine exports will result in greater displacement of workers in these industries.”

Chua expounded “high power rate has knock-on impact on input prices, and as a result, inflates the final market price of products manufactured locally. Goods produced locally are relatively less competitive than those produced abroad.”