Saturday night fever
Try to blank out the visions of John Travolta dancing under the disco lights in ill-fitting trousers. A colleague from Malaysian utility TNB was drawing attention to what they call “Saturday night fever,” the regular demonstrations that take place in Kuala Lumpur every Saturday. While Asia has been under its own spotlight since the beginning of the financial turmoil, recent events have seen that spotlight become more focussed on a couple of countries in the region.
Malaysia`s organised protests have apparently been a feature of the country`s capital since the arrest of deputy prime minister Anwar Ibrahim in September but ultimately they are the knock-on effects of the crisis which has become more deep-rooted over the last year.
The turmoil has reduced electricity demand bringing TNB its own set of problems. The utility reported a RM3.09 billion ($813m) loss in the year to August 31, 1998. To help tackle its financial problems, TNB had been seeking to cut rates paid to IPPs in exchange for extended power purchase agreements. It has now reached an agreement to make payments monthly instead of weekly which should ease its cash flow problems. The company also believes that the pegging of the ringgit at 3.8 to the dollar will see it return to profit next year.
As a country, Malaysia`s problems seem to pale next to Indonesia. While Indonesia`s state utility PLN has similar problems to TNB, the state of civil unrest is far worse. It has seen the worst riots in its history in opposition to Mr Habibie`s government. Meanwhile, tens of millions of the population are said to be on the poverty line.
Some believe it will take three to five years for Southeast Asia to recover from the current economic crisis. But for investors, political instability of the kind seen in Malaysia and Indonesia is as much of a problem as economic concerns.
The more politically stable countries will recover the quickest and, for what it`s worth, the Asian Development Bank recently forecast that the worst of the crisis may be over. Overall economic growth of the 23 Asian developing countries, excluding Japan, surveyed was expected to rise to 3.4 per cent in 1999 after a 1.9 per cent decline in 1998.
In Southeast Asia, only Indonesia, Malaysia, South Korea and Hong Kong were forecast to remain negative next year, although their rate of contraction was expected to slow.
While this is positive news, a report by Hagler Bailly Consulting still does not paint a rosy picture for IPP development. It took a detailed look at the seven most severely affected countries – Indonesia, South Korea, Thailand, The Philippines, Malaysia, Pakistan and Taiwan. These countries make up 35 per cent of Asia`s pre-crisis capacity needs and constitute more than 50 per cent of Asia`s backlog.
Hagler Bailly concluded that out of 140 “solid” Asia projects, no more than 14 000 MW, or 41 projects, will come on line in the next four years. This compares to 26 000 MW forecast 14 months ago.
Despite the doom and gloom, some are still putting on a brave face. India, China and even Pakistan are still seen as encouraging markets if you have stamina and patience. Taiwan`s GDP remains at around the five per cent mark while Thailand is predicted to turn around from a seven per cent negative growth in 1998 to 0.5 per cent growth in 1999.
The 12th CEPSI (Conference on the Electric Power Supply Industry) in Thailand was an interesting event to hear positive spins put on worrying situations. At the keynote address Anand Panyarachun (former prime minister of Thailand and now, among other things, Chairman of the Council of Trustees of the Thailand Environment Institute) spoke of “the three E`s: electricity, energy and environment.”
Although electricity demand was down 0.5 per cent in 1998 and EGAT was to reduce capacity by 4800 MW in 2001; Thailand would still “strive towards a more sustainable future.”
He spoke at length of the country`s efforts to reduce emissions from the use of fuel oil and lignite, as well as the increased use of natural gas from its neighbouring countries.
The general message was green, green, green – but I think the gentleman sitting to my right took the message too literally. If I can extend a word of advice to him – green maybe the colour for future generation but it doesn`t really work with socks.