Corruption hinders RE investment

As was the experience during the construction of baseload power plants running on coal and other fuels, corruption at the local government level is proving to be a major hindrance in facilitating construction of renewable energy facilities. All the speeches and powerpoint presentations touting the benefits to investors in renewable energy won’t amount to much unless LGU officials, down to the barangay level, behave themselves.

A reader of this column wrote to me to recount her personal experience in helping a foreign investor who was trying to set up a solar farm in a Central Luzon town. This is her account:

“I am a witness to an attempted corruption scam. I worked in marketing and sales for a Belgian company dealing with solar power. They tried for three years, but didn’t make inroads in the local market due to corruption.

“When they went to a Central Luzon town to get a permit from the local government for a solar farm, they were asked a 30 percent ‘lagay’ or kickback for the mayor down to every kagawad! The company said 10 percent was standard and may consider up to 20 percent. But 30 percent was too much. It will destroy the viability of their solar farm. They tried other areas, but got pretty much the same ‘requirement.’ So, in utter frustration they packed up their 7th floor office on Ayala Avenue and left the country in disgust!!!”

Actually, we have been hearing pretty much the same kind of experience from other sources dealing with LGUs, and not only with regards to solar farm investments. My colleague Cito Beltran in the op/ed page once related the experience of small investors in poultry who were being “taxed” by their barangay on the basis of the number of day-old chicks being delivered to their farms.

The greed at the LGU level is throwing a monkey wrench on national government efforts to improve the economic life of the nation. Jobs at the local level are also being lost because investors are appalled by the brazen corruption.

The six-years normally needed to get all the permits to put up power plants includes roadblocks at the LGU level. The Department of Energy gets blamed for the lack of adequate power reserves, but the problem is really at the localities where these projects are being built.

The DOE, under Secretary Popo Lotilla has been busy trying to fix problem areas that discourage investors in energy projects. But they are mostly dealing at the policy level where reforms should theoretically help get investors interested in energy projects.

For instance, DOE has issued a circular that now allows foreign investors to hold 100 percent equity in the exploration, development, and utilization of solar, wind, hydro, and ocean or tidal energy resources. The policy change will help us meet our long-term climate targets. The DOE hopes the new policy will speed up our transition to renewable energy sources.

According to the Philippines’ National Renewable Energy Program (NREP) 2020-2040, the country aims for renewables to comprise 35 percent of power generation by 2030 and 50 percent by 2040. The government also seeks to lower the costs of renewable energy projects and make renewables more accessible to the public.

But our transition to renewable energy sources is seeing a downward trend. In 2008, renewable energy made up 34 percent of power generation, but in 2021 it made up just 21 percent.

To encourage the development and use of renewable energy, the Philippine government has released new incentives for renewable energy companies and other green businesses in its 2022 Strategic Investment Priority Plan. These include corporate income tax holidays, enhanced deductions, and preferential tax rates for industries, such as electric vehicle (EV) assembly, manufacture of EV parts, renewable energy, energy storage, recycling, and other green economy industries.

It is clear investment incentives are not enough. It is easy to suspect that our reputation for corruption is quite widespread so that only the brave of heart are willing to dare come here. Even then, they have a limit which our greedy officials exceed. There are also the anti-corrupt practices laws in their home countries that penalize corrupt acts committed in foreign countries by their citizens.

Our technocrats, many of them with experience in international organizations like the World Bank, are among the best in the world. They are able to craft fantastic plans and programs that are good on paper. But we simply can’t implement any because of, among other things, widespread corruption.

This probably explains why Vietnam overtook us. Their officials were seriously attracting investors for the good of their country. Our officials are more interested in improving their bank accounts. Hence, we are eating their dust as Vietnam is now the darling of investors, including those we would have wanted to attract.

Then, there is the gap between policy pronouncements from the President and what happens in the field. The President said last week during the launch of green lanes for strategic investments, that “If we are to compete on an even basis… we cannot hide behind protectionist laws and protectionist policies.”

Nice to hear, but is it just a PR sound bite? Does it apply if folks close to the top officials are involved? For example, does the President have the guts to strip protectionist policies the sugar cartel uses to keep domestic sugar prices high? Even after importing close to 500,000 MT tons of sugar, the retail price still hovers above P100/kilo. This situation is killing small entrepreneurs using sugar for their products.

And what about the onion cartel? There is a DOJ report on the onion cartel that is several years old? Why isn’t anyone being charged?

According to Trade Secretary Fred Pascual, the first entity to be endorsed for green lanes is SunAsia Energy that plans to build floating solar panels at Laguna Lake to produce 1.3 gigawatts of power. Good luck!

Announcing good policy changes is one thing. To see those implemented is to believe.

Boo Chanco’s email address is [email protected]. Follow him on Twitter @boochanco