Private power is the driving force behind the Philippine`s economic miracle

Douglas J. Smith

Managing Editor

When Fidel V. Ramos became president of the Philippines, the country`s economy was in a shambles. Because of electric brownouts and blackouts it was estimated that the economy was losing (US)$3 billion annually in revenues. Although the country had passed legislation in 1987 to allow for infrastructure privatization, including the electric power sector, it was not until the electric power crisis of 1992-1993 that it was fully utilized.

With the country in a financial and economic crisis, President Ramos was forced to move quickly. One of President Ramos` first actions was the revamping of the country`s existing legislation and the launching of a fast-track energy program. The end result was that within 15 months the Philippines added 1,700 MW of new electric capacity.

The Philippine “Infrastructure Privatization Program,” passed in 1987, is reported to be one of the first integrated infrastructure privatization programs in the world. Under this program, the private sector has a smorgasbord of ways it can invest in the Philippines. These include build-own-operate, build-transfer, build-transfer-operate, build-lease-transfer, rehabilitate-operate-transfer, rehabilitate-own-operate, develop-operate-transfer and contract-add-operate.

By streamlining the approval process, the Philippine government has allowed potential power plant developers to reduce the time and costs of bidding for contracts. As a result, many electric power projects are now completed in just over two years. At the 58th anniversary celebration of the country`s National Power Corp., in late 1994, President Ramos said, “Our resounding triumph over the power crisis, to a large extent, paved the way for the breakthrough we have achieved in the economy that makes 1994 the best year we have had in a long while.”

Although President Ramos must be given the credit for improving the Philippine economy, the president has gone to great lengths to praise the private sector. Without the support of the private sector the country would not be the economic success it is today, said President Ramos. The Philippines is a shining example of the benefits of cooperation between government and the private sector. Leading multilateral creditors and the World Bank point to the Philippine model as one of the few successful programs in the privatization of power generation throughout the developing world in recent years.

President Ramos and his government should be congratulated for turning the Philippine economy around in such a short space of time. Today, the Philippines has become a leader in the Asian-Pacific region and is an example of how the private and government sectors can work together to benefit its citizens.

In the Philippines, private investors now operate almost one-third of the country`s available generating capacity. At the beginning of 1995, the Philippines had a total installed capacity of 9,180 MW, with another 2,100 MW under development. Plans call for the private sector to have a 60-percent share by 2005. It is expected that the demand for electricity in the Philippines will increase by 11 percent to 14 percent annually over the next few years. As a result, an additional 15,000 MW of new capacity will have to be added by 2005.

Although President Ramos cannot run for another term, his successor would be well advised to carry through with the country`s privatization program. The cooperation between the private and government sectors is a must if the Philippines is to continue to grow economically.