Drag to economic prosperity
The World Bank was spot-on when it pointed out what was hampering the sustained growth of the Philippine economy — monopolies, duopolies and oligopolies in important industry sectors, particularly power, telecommunications and transportation.
The multilateral lender presented a study last week showing that the Philippine economy remained “more concentrated” than other economies in the region.
It explained that letting more players enter these vital industries could improve services, generate higher-paying jobs and, ultimately, hasten poverty reduction.
Previous administrations tried, but failed more often than not, to open up these sectors to new investors.
The Ramos regime successfully broke the decadeslong monopoly of PLDT Inc. While a lot of moneyed Filipinos were initially attracted, the local telecommunications sector is now back to the duopoly of PLDT and Globe Telecom.
Regulators allowed this to happen when they approved the duopoly’s acquisitions of BayanTel from the Lopez family and Sun Cellular from the Gokongweis.
About three years ago, businessman Ramon Ang tried to break the duopoly by seeking a partnership with Telstra of Australia, but had to sell all his telecommunication assets to the duopoly, which had threatened to file legal action against the entry of the new player.
Irked by continuing complaints about poor service, President Duterte then ordered all concerned government agencies to fast-track the entry of a third telco player, which after more than
a year of processing ended up in the hands of businessman and presidential friend Dennis Uy and his foreign partner, China Telecom.
Still, its entry is facing delays in Congress, which has sat on the transfer of its needed franchise to start operating.
So what we have now is what the World Bank described as the highest cost of mobile phone services in East Asia, and four times higher than the average price in rich countries.
The case with the power sector is no different. The World Bank noted that Philippine electricity costs were high and capacity limited largely due to the slow implementation of reforms, particularly the open access and retail competition provision of the Electric Power Industry Reform Act of 2001 or Epira.
Republic Act No. 9136 was among the landmark promarket reforms in the Philippines that broke the government’s monopoly in power generation through the bankrupt National Power Corp.
While dozens of private companies entered the industry, the government focused on selling to them the old Napocor power plants instead of encouraging them to build newer and more efficient facilities. Thus electricity prices remained high.
Worse, the more important provision on open access and retail competition has yet to be implemented nearly 18 years since the Epira law took effect.
The Supreme Court had issued a temporary restraining order on the Department of Energy circular that would have implemented this Epira law provision, which would have given consumers the option to choose their own supplier of electricity.
Indeed, even as various administrations adopted key reforms to foster competition, slow implementation continues to hinder the potential benefits of these reforms to consumers, keeping prices high and choices limited, according to the World Bank.
One big stumbling block to new investments remains the fact that the entry of foreign investors is still restricted in the key sectors that need them most.
The Duterte administration has promised to pursue measures in Congress aimed at opening up the economy to more foreign investors. It has its work cut out for it, as it will be very difficult to push reforms if lobby money continues to be given more importance than consumer welfare.
All these recalcitrant quarters need to do is check out the travel industry and see the beneficial effects of the air travel liberalization on consumers. So many more Filipinos now get to fly to new and farther destinations, with more competition having made airfares really cheap. What’s the excuse for the other industries?
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