Capped

Our economic managers are bullish.

They are targeting GDP growth of between 7 and 8 percent this year – the setbacks inflicted by Omicron notwithstanding. At this pace of expansion, we are expected to recover pre-pandemic economic levels by the third quarter of this year. That is a full year ahead of earlier forecasts.

There are several factors, however, that could get in the way of this rosy outlook. The recovery of the global economy last year was snagged by supply chain issues, port congestion and labor shortages in the logistics sector such as the severe shortage of lorry drivers in Europe and the US. Simply put, the existing infrastructure was not ready to support a surge in economic activity.

We know from our recent economic history that growth surges could be effectively capped by weak infrastructure.

In the late eighties, our economy stormed ahead, posting unprecedented growth driven by suppressed demand. The growth surge hit a wall, sadly, when we reached the limits of our energy supply. Not only was our energy costly, it was unavailable. The surge ended in years of rotating brownouts and power rationing.

During the Macapagal-Arroyo years, the economy enjoyed uninterrupted growth for 24 quarters. We even managed to avoid the economic fallout from the 2008 financial crisis. But, alas, the episode of growth hit another wall. Our ports and roads were congested, curtailing what our enterprises could do.

It literally took months for cargo to clear port procedures and days to physically remove containers from Port Area. When the cargo hit the road, they were trapped in infernal traffic jams. Our commuter trains were filled to the brim. Workers took hours to get to work.

This was no way to become a competitive, export-driven economy. The gridlock caused by poor infra dissuaded investors from coming into our economy. This prevented probably millions in new jobs from being created. In turn, this translated into poverty.

The past few days, we have again been hearing dire warnings about our thin power reserves. A spokesman for the NGCP warned that there could be rationed power during elections.

The reason for this is that we have not installed enough new generating capacity the past few years. On top of that, our existing generation capacity is threatened by plant aging, the decision of Indonesia to ban coal exports and the looming depletion of Malampaya’s natural gas deposits.

As the weather warms, we could be looking at another round of yellow and red alerts. That is bad news for our enterprises struggling to recover from the effects of the pandemic.

The next administration will have to put infrastructure modernization at the top of its agenda. There is no other choice.

Impaired

There is at least one area in the country where rotating brownouts are a fact of life for decades – to devastating economic effect.

In Davao del Norte, electric power is not only expensive, it is chronically in short supply. So many of the province’s growth opportunities passed simply because its power supply is unreliable.

This is ironic. While the greater Davao region is a growth driver for the nation’s economy, Davao del Norte is hobbled. Its agro-industry and tourist potentials are curtailed because resorts and commercial establishments rely on portable generators.

For years, residents of the province have written several petitions complaining about the service provided by Northern Davao Electric Cooperative, Inc. (Nordeco). Not only has the poor service impaired the area’s economic development, it imposed high costs the people do not want to bear any longer.

Former House speaker Pantaleon Alvarez said in a recent statement: “The economy of Davao del Norte has also not reached its full potential yet due to inaccessibility and lack of productivity. The constant blackouts and poor service by (Nordeco) is unreasonable, given that we pay P2 more per kilowatt-hour than our neighbors in Davao City.”

Davao del Norte’s governor Edwin Jubahib adds, after the province’s municipalities sought the termination of Nordeco’s franchise: “We hope Nordeco will respect the decision of the people of Davao del Norte. Our people can no longer pay P2 to P3 per kWh (more), while having more brownouts and bad service and having no representation on the board. We have given Daneco (Nordeco’s predecessor) 40 years to improve. My administration even tried to dialogue with them, but they refused to recognize us.”

Last month, the House of Representatives passed on second reading a bill that would terminate the franchise of Nordeco. This is unprecedented. It underscores the terrible inefficiency of the local power distributor and the public outrage this sparked.

Legislation is often a long and tedious process. But for the people of Davao del Norte, it has become the only means to end the misery inflicted by an incompetent power distributor making profits behind the wall of a franchise.

The people of the long-suffering province hope the bill would soon pass on third reading, given the vagaries of Omicron and a looming campaign period. That will end the impairment of Davao del Norte’s progress.

Other areas similarly enduring inefficient power distributors are hoping this act of terminating a franchise by legislative fiat will be a precedent. A franchise ought not to serve as protection for the inefficient and the incompetent. Yet that is precisely what has happened in many areas of the country.

The power distribution business is a natural monopoly. Congress must ensure that the highest standards of service delivery are met before awarding anyone a precious franchise.