Foreign businessmen in the Philippines cautioned the Arroyo government against reversing the policies of deregulation and privatization in the power sector, saying these reforms will help improve the country’s competitiveness.

In a joint letter to President Gloria Macapagal-Arroyo May 27, the Joint Foreign Chambers of the Philippines (JFCP) also expressed their concerns about "unwarranted accusations" of legislators and officials of government corporations that may lead to reversals of reforms in the power sector.

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"Many of the unwarranted accusations being raised by legislators and government-owned corporations (GOCs) appear to be questioning bedrock principles that are sound and, in fact, practiced by many progressive power industries around the world," the JFCP said.

The letter was jointly signed by Rick Santos, president of the American Chamber of Commerce of the Philippines., Inc.; Richard Barclay, president of the Australian-New Zealand Chamber of Commerce (Phils.), Inc.; Stewart Hall, president of the Canadian Chamber of Commerce of the Phils., Inc.; Hubert D. Aboville, president of the European Chamber of Commerce of the Phils., Inc.; Toshifumi Inami, president of the Japanese Chamber of Commerce & Industry of the Phils., Inc.; Jae J. Jang, president of the Korean Chamber of Commerce of the Phil., Inc.; and Shameem Qurashi, president of the Philippine Association of Multinational Companies Regional Headquarters, Inc.

The JFCP suggested that Mrs. Arroyo continue to implement the Electric Power Industry Reform Act (EPIRA) since the measures in the 2001 law, such as privatization of formerly state-owned power assets, would result in lower electricity rates.

"Amending EPIRA will have negative consequences that will not only dampen the confidence of both foreign and local investors but could even drive them away at a time when shortages in power supply already plague the Visayas and are expected in Luzon in the next several years," the JFCP said.

"Amending EPIRA will result in a highly unstable legal framework for the industry and investors. Further, such action would impact the credibility, and put at risk, the ongoing power sector reforms," it said.

The foreign chambers urged the President to continue "to demonstrate leadership and foresight when you signed the EPIRA law in April 2001 and have mandated its full implementation by 2010."

"We would like to reiterate our long-standing position not to amend RA 9136, the Electric Power Industry Reform Act (EPIRA)," the JFCP said. "We appeal to the Executive and Legislative branches of government to instead focus its effort on implementing EPIRA in a timely fashion."

The foreign businessmen said progress is being made in the privatization of formerly state-owned power assets.

"The initially slow pace of National Power Corporation’s (NPC) privatization is now making progress, as three of the five conditions required to begin Retail Competition and Open Access have already been met," the JFCP said.

"The remaining two unmet provisions require government to privatize at least seventy percent (70%) of the NPC assets, as well as seventy percent of NPC-IPP contracts. These two conditions, according to PSALM President Nono Ibazeta in the recent JCPC [Joint Congressional Power Commissioin] hearing, could be met by fourth quarter of 2008," it said.

The PSALM is the Power Sector Assets and Liabilities Management Corp., which is tasked to dispose and privatize power assets of the state as well as help make the power sector competitive and market-driven.

"We applaud PSALM and encourage them to continue their solid performance to attain the seventy percent target prior to close of this year," the JFCP said.

The foreign chambers also urged the government to continue reforms aimed at making the power sector market-driven.

"Suggestions that may lead to caps on NPC rates indicate a departure from the current market-based pricing policy that is transparent and reflects the true cost of electricity. Threats of yet another round of contract reviews and renegotiations with independent power producers will cast doubt on the stability of policies and regulatory rules and on the integrity of investment promotion programs in the Philippines," the JFCP said.

"In addition, it becomes a major disincentive to investors intending to build the required additional power generation capacities or to participate in the government’s privatization program. It would also hurt many private investments that have already been brought in at government’s enticement," the group said "Competitive pricing is vital to a healthy and competitive economy."

The foreign chambers likewise called on the government to speed up reforms that would allow big industrial and commercial customers to choose their electricity suppliers.

"Please note the JFCs [Joint Foreign Chambers], together with other organizations including SEIPI [Semiconductor and Electronics Industries in the Philippines Inc.], have supported the initiative of private power industry stakeholders to allow early and open access for industrial and commercial customers with at least 1-megawatt (MW) consumption," the JCIP said.

"The proposal should effectively jumpstart retail competition amongst the generation sector players that are within the mandated cap of EPIRA. End-users with at least 1-MW consumption will be allowed the freedom to choose their electricity suppliers, thus introducing pricing competition to win these quality loads. This action is a progressive way forward and will not contradict the spirit of the EPIRA law," the letter said.

"Further, these initiatives will bring us a step closer to the power reforms primary objectives of providing a truly transparent, competitive and vibrant electricity industry market," it said.

The foreign businessmen said the Philippines badly needs to see these power sector reforms implemented since its competitiveness is hampered by high power rates.

"The reduction in the power rate to high load factor industrial customers will give a tremendous boost to the global competitiveness of Philippines industries whose counterparts in other Asian countries presently enjoy lower generation costs," the JFCP said.

"A reliable and competitive supply of power is paramount to a growing economy and requires investment in Greenfield plants which in turn, requires the full confidence of domestic and foreign bankers and investors," it added.

"Consequently, Philippine industries may be in the position to lead in cost competitiveness since many other economies would not be as resilient in an environment of rising energy prices as the Philippines economy grows under your administration. The potential to create new jobs and spur growth in the Philippine economy is immense," the JFCP said.