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Tomorrow, at the end of the annual stockholders’ meeting
of the Manila Electric Co. (Meralco), we will know if
the Lopez family will still manage the country’s largest
power- distribution utility, or if the big block of
government shares, led by Government Service Insurance
System (GSIS), will prevail.
This is
basically an intracorporate matter that the government
should best leave to the best judgment of the
protagonists. The crux of the matter, however, is
bringing down high electricity bills, and whoever wins
will have to listen to the growing public clamor to cut
power rates that’s now the second-highest in Asia.
Cheaper
electricity, we must emphasize, is not in Meralco’s
hands alone. After all, distribution charges reflected
in our monthly bills account for only 12 percent, while
system-loss charges amount to 8 percent. The rest of our
monthly bill is made up of generation and transmission
charges, as well as taxes imposed by the government,
which all come up to 80 percent.
It is
clear, therefore, that the government holds the key to
lower power rates. And one way to do this is by
implementing open access.
President Arroyo has indicated in no uncertain terms
that she favors open access to “mitigate the high cost
of electricity and give our consumers the power of
choice.”
But how
does it work? The National Economic and Development
Authority (Neda) explains it this way: Industrial and
commercial consumers, including malls, factories and
five-star hotels, who use up at least 1 megawatt of
power during peak hours can deal directly with
independent power producers, or IPPs. The interim
open-access scheme, which will be proposed by the IPPs
to the Energy Regulatory Commission (ERC), removes
distribution and system-loss charges being charged by
power-distribution companies, including Meralco.
The
interim open-access scheme, according to Neda, is a
stop-gap measure to allow consumers to directly deal
with IPPs even if the government has yet to privatize
most of its power-generation assets.
The
advantages of open access are obvious. One, it will
allow end-consumers to choose the electricity supplier
that offers lower rates. And two, it will create
competition and ensure a level playing field where no
dominant player can exercise undue advantage, thereby
leading to lower power rates.
Apart
from open access, various groups are also calling on the
government to remove the value-added taxes on fuel and
even on the system losses and royalties on indigenously
produced natural gas. These are sound proposals that we
think should be seriously considered by the government.
It’s in
the government’s power to bring about lower electricity
rates, and it should do so now, not at some time in the
future, and regardless of who sits at the helm of
Meralco.
Upping the ante
The
economic and social importance of small and medium
enterprises, or SMEs, cannot be overemphasized. But the
major problem faced by SMEs—add to that “micro”
enterprises—is that most of them simply do not qualify
for conventional collateral-based bank lending, nor do
they have high enough returns to attract formal venture
capitalists and other risk investors, leading to what
has been called, particularly in emerging economies, the
“SME finance gap.”
This is
the basic rationale for Republic Act (RA) 950, or the
Magna Carta for Micro, Small and Medium Enterprises (MSMEs),
which was signed into law last week.
The new
law, authored in the Senate by Sen. Loren Legarda, in
the House by Bulacan Rep. Maria Victoria Alvarado and
Quirino Rep. Junie Cua, and prioritized for passage
during the last Legislative Executive Development
Advisory Council, amends the 17-year-old RA 6977, which
does not include micro enterprises.
RA 9501
defines micro enterprises as businesses with a total
asset size of not more than P3 million, small
enterprises as businesses with P3,000,001 to P15 million
in total assets and medium enterprises as those with
P15,000,001 to P100 million.
The new
law increases the capitalization of the government-owned
Small Business Guarantee and Finance Corp. from P5
billion to P10 billion.
RA 9501
also provides for the mandatory allocation of credit
resources of all lending institutions for MSMEs,
requiring them to lend at least 8 percent of their loan
portfolio to micro and small businesses.
At
present, lending institutions only have to allocate 6
percent to small and 2 percent to medium enterprises.
One
approach to overcoming the SME finance gap involves
broadening the collateral-based approach by encouraging
bank lenders to finance SMEs with insufficient
collateral. This might be done through an external party
providing the collateral or guarantees required.
The
other approach is based on the viability of the business
itself. The viability-based approach aims to provide
better general business-development assistance to reduce
risk and increase returns. This often entails a detailed
review and assistance with the business plan, as well as
provision of appropriate finance that is tailored to the
cash flows of the SME.
The
enactment of the Magna Carta for MSMEs is commendable.
By addressing the problems faced by MSMEs, particularly
the lack of capital and access to credit, the new law
will significantly strengthen the entrepreneurial spirit
in the country and redound to the benefit of the economy
as a whole in the years ahead. |
