Philippines may miss trade targets due to high power rates

The government’s target to double exports to $120 billion in the next five years will not likely materialize so long as power rates and other costs of doing business here remain high.

In a briefing Friday, Philippine Exporters Confederation executive vice president and chief operating officer Aniano Bagabaldo said exporters, composed mostly of small and medium enterprises, would not likely meet this year’s government-set growth target of 10 percent.

“The Export Development Council has not yet scaled down its 10-percent export growth target. But at the rate the sector has performed, we now realize meeting that fighting target will be extremely hard for our members,” Bagabaldo said in a speech.

He related that after experiencing a slump in late 2008 to 2009 due to the global financial crisis, exporters only had a year of recovery before being hit by new problems—the weak United States and Europe economies, the strong peso and high costs of doing business.

According to data from the National Statistics Office, merchandise exports in July slipped 1.7 percent to $4.43 billion, from $4.51 billion in the same month a year ago.

July exports, however, were up 7.3 percent from June’s $4.13 billion. Exports from January-July likewise went up by 3.3 percent to $29.19 billion, from $28.25 billion in the same period last year.

But these increases, Bagabaldo said, were “a far cry from the 26-percent growth of the sector last year.”

The weak US and Europe economies, coupled with the still strong peso, were hampering exporters from growing faster than the industry and the government were hoping, he said.

Exacerbating the exporters’ plight, Bagabaldo said, was the high cost of power.

“The cost of doing business in this country has escalated, driven up by the highest electricity rates in Asia plus the high cost of petroleum. We have the highest power rate in Asia,” Bagabaldo said.

Citing data from the Department of Energy, he said, current local power rates stood at 24 US cents per kilowatt-hour (kWh) vis-a-vis Thailand’s 8 US cents and Malaysia’s 7 US cents.

Since most local exporters were SMEs, Bagabaldo said, it would become increasingly difficult for them to stay afloat because of these issues. High power rates not only prevent the export sector to grow, it will also discourage foreign investors from coming here.

If the trend of high power rates continues, coupled with external factors that are beyond anyone’s control, Bagabaldo said the government’s five-year export growth target would not be achieved.

“Electricity accounts for up to 30 percent of (exporters’) monthly operating costs. The sector may be giving up jobs through lay-offs and closures instead of creating new ones,” he said.