Mindanao: Huge challenge for Duterte

Herminio R.s. Calalang, Danilo V. Sarmiento

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Mindanao: Huge challenge for Duterte
For a unique makeover to happen in Mindanao, it needs a special carve-out from the 'business as usual' mode that we’ve been accustomed to

A long time ago, we survived through worldwide crises including the Middle East oil embargo and the rocketing global interest rates.

Amid the country’s aspirations of industrial development to compete with its ASEAN neighbors, a dictator plunged its economy into a downward spiral by excessive, lavish and wasteful spending. And coupled with unprecedented corrupt practices, the people had had enough and took it to EDSA.

That was then and this is now, where we find a bit of the aspirations fulfilled in Makati, the financial center with the modern skyscrapers like any major city in the world. That’s in Luzon’s Metro Manila area but beyond that, it’s a different story. 

What are we missing? 

Take our second largest island, Mindanao. A forgotten land of opportunity? 

If you believe that as we do, it’s a huge challenge for the new president to bring it back. It requires a monumental policy change. For a unique makeover to happen, it needs a special carve-out from the “business as usual” that we’ve been accustomed to.

Industrialization says it all

Last year, our East Asian neighbor with around a third of our land area and just about half of our population, produced 2-1/2 times more in gross domestic product (GDP) than we did. It’s a valuable model for Mindanao.

A quick metric of a country’s economic status is the installed generating capacity because economic activities especially manufacturing, need power. Before scrutinizing the Southeast Asian corner, we should look ourselves in the mirror and think for a second. Comparing Luzon’s capacity against Mindanao is an astonishing 6 to 1 ratio. Now you know why looking down from a jetliner window, it’s darker in Mindanao.

Industrialization demands congruent objectives between the government and the people. In Southeast Asia, increased foreign investments paved the way to successful leaps into thriving industrializations. 

But for investments to come in, three things are needed: lower cost labor, lower cost power and political stability. Mindanao has already the first one, so work needs to be done on the other two.

Having the highest cost of electricity in Asia is already an uphill battle for the new President in sustaining economic growth. There’s a boatload of reforms he has promised in a country that continues to suffer from internal struggles retarding its full capability for growth.

After taking several EPIRA pills for the ailing competition in the electricity market, the consumers still face a corrupt political system with power oligarchs showering them with sporadic token rate cuts only to be taken back later by staging power shortages. 

The degree of industrialization or lack of it, is virtually at the discretion of a handful of family oligarchs with laser-focused eyes on building generating capacities where maximum profits can be had. To make matters worse, traceability of ownership has been spun around webs of layered holding companies from China, Indonesia and other foreign capitals, to get around the EPIRA law. 

The new President will have his hands full and it’s easy to get stuck in the web when not carefully looking.

MINDANAO CHALLENGE. Incoming President Rodrigo Duterte. File photo by Manman Dejeto/Rappler

Real solution to brownouts

In Mindanao, with more than half of the energy mix in hydroelectric plants or hydros, brownouts continue during the dry season. Planning has not used “dry season” base load capacity, when the highest peak demand occurs. A shift from intermittently available hydros to base load sources available 24/7, has to take place over a period of time. 

In an environment where the privatized electricity market is at the mercy of the leading business families and their allied foreign investors, it’s utterly difficult to make a change. The monopolized operation of power grid only exacerbated that problem. 

But if the new President decides to implement energy policy changes, these brownouts can be eliminated for good.

The Forgotten Land

During the next six years under a new President, Mindanao could remain a forgotten land of opportunity, unless meaningful changes are instituted toward its industrialization. It needs an intrepid leader to start the long iterative change process similar to turning a big ship around. 

The makeover will be unique in many ways because of the way the current energy policy and regulations have been put together. 

To start, the process must be independent of the Luzon and the Visayas grids and its power generators. It would require full cooperation from the DOE-ERC and non-interference by the power oligarchs in Mindanao. In the shift to base load capacities, ownership of new capacities should rest with the Mindanaoans. It should be left to the small IPPs, business and community leaders as well as consumers, to come together and decide.

As part of the shift, new combined-cycle plants similar to the plants in Batangas should be built.  As more combined-cycles are added to the mix, the composite cost will continue to drop down.

With a steeper growth trajectory, Mindanao will become the next Luzon, capable of competing globally. And it will no longer be the forgotten land. – Rappler.com

 

Herminio R.S. Calalang holds a BSME and a BSEE and has extensive experience in the power industry. Danilo V. Sarmiento holds a BSEE and an MBA and has extensive experience in the non-power and power industries

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