January 21, 2017
To My Fellow Team Members at AboitizPower,
Every year, your company holds the AP Management Conference. Your most senior leaders present to your officer core the overall situation of your company in various aspects. This year is a particularly meaningful year.
Over the past couple of decades, the Energy World of the Philippine Economy has undergone an evolution. The transformation of the energy and electricity provision system from being publicly managed to being privately managed has been a huge success. This world was taken over by the government four decades ago and the result was disastrous. It ended up in 8 to 10 hour brownouts in our capital city, Manila, to a shortage of power in one of our main islands, Mindanao. But with its reversion to private hands, it has ended up in an excess of power everywhere. We have or will soon have too much power.
This has also meant that the level of competition in the power business is intensive. There is freedom of ingress and egress. Billions of dollars have been and will be invested by many, many more entrants. Returns are dropping. This is the intent of privatization – to create competition so that both availability and reliability reach superior levels, making us a competitive economy. Government policy is not about lowering rates but rather about making sure these are at market levels. In other countries, power rates are low because government subsidizes them and instead of paying electricity, they pay taxes. It distorts consumption and the economy because the wrong decisions are made.
In my succeeding statements, ignore the accuracy of the years mentioned as these are just approximations to make a point and to create the correct feeling of the story.
20 years ago, EPIRA was crafted. Ten years ago, plants were privatized. Five years ago, the private sector began to build. Today, we have many players building many plants of all types all over the country so the consumer now has the choice. Open Access will give him more choices as it enhances competition.
The priority of government has changed to that of providing our consumers and our citizens the lowest possible power source. Forcing the consumer to pay for expensive renewable power is taking away from the consumer purchasing power that he can otherwise use for other choices in his life. Government should never force the consumer to pay more without a very, very valid reason.
We are a developing country with a high proportion of renewable energy. There is no reason why we should increase that proportion today when we know that clean renewable energy will be commercially viable without subsidies in a few years and not decades. Personal interest by renewable lobbyists concerned with high returns forced on the consumer and short-sighted government policy makers have caused this. The present administration, with greater wisdom, has stopped this before it was able to do any serious real damage.
Business and government can eradicate poverty in 14 to 20 years. If we grow at 7%, we will quadruple our GDP to a 1.2-trillion dollar economy in 20 years. If we grow at 10%, we can achieve this in 14 years. At $1.2 trillion, 140 million Filipinos will have a per capita income of 8,500 US dollars. We will no longer be a poor country and we can have a situation of no poor people if we divide it properly. We will not be able to do that if we make people pay for non-competitive power and if our economy is not structured right.
The tax reform that the government’s economic team is passing will achieve much of this drive towards inclusivity and make us more competitive so we can create more and better jobs. Tourism is a major driver of inclusivity as it drives employment at the very bottom of the structure as well as at the very top. It can also push development to the provinces and outside of a very crowded Manila.
The wind is blowing in our favor. There is more and stronger wind to fill our sails. Now, there is much more current against us as we sail up the river. The story we face at AP is one of both wind and current. More wind for our sails and more current, i.e competition, against us. That is how it should be. It also seems that today, we have a more responsive government that truly wants to do what is good for all of us. Now we have to see if they really do.
Until now, AP has had an easy time. There have been lots of wind and very little current. That has changed. The wind is blowing harder but so is the current getting stronger. So now we have to really work for a living by working as one in a more creative and innovative atmosphere that is totally people- and customer-centric.
Our economy has never been stronger.
Our company has never been stronger.
The rate of change has never been faster.
Society’s expectation has never been higher.
Technology has never been so limitless.
People say the world has never been more uncertain. I say it has never been more secure or more certain. Globalization and technology will continue to build a world middle class that wants to travel and consume, and does not want to fight. So, do not listen to the noise that you hear on social media and the regular media. Politicians are becoming irrelevant; they cannot cope with change so they have to make noise to be noticed.
There is a wonderful future for the world and for our socio-political economic enterprise called ROP – the Republic of the Philippines.
Endika M. Aboitiz
Chairman of the Board