Lucky Me, bureaucracy rightsizing, electricity prices, and MPIC

* My column in BusinessWorld last July 18. 
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There were five events last week that I want to comment on....

BUREAUCRACY RIGHTSIZING

On July 13 and 14, I saw two television/radio interviews of Department of Budget and Management (DBM) Secretary Amenah F. Pangandaman where she reiterated the DBM’s plan to “rightsize” the bureaucracy. According to Secretary Pangandaman, rightsizing is to “determine which among the 187 government agencies and government-owned and -controlled corporations (GOCCs) with more or less 2-million personnel, may be streamlined through merging, restructuring, or abolition.”

This is a good move by the Marcos Jr. economic team and I support it. There should be some spending cuts to reduce the need for more debt to pay old debts.

I computed the averages in government spending and GDP level every four years, computed the expenditures/GDP ratio, and compared it with average GDP growth for the same four-year period. The result seems convincing — we have faster economic growth when government spending (and borrowings) decline, and vice versa (Table 2).

Meanwhile, my friend and fellow BusinessWorld columnist Romy Bernardo wrote in his column yesterday, “A first look at the medium-term fiscal program,” that “the government’s 6.5% to 8% growth target through 2028 is rather ambitious… rather the 6-7% of the past decade pre-pandemic.”

Romy has good reasons for arguing his numbers but I think the economic team’s 6.5-8% growth targets are achievable. Partly because I believe that the US, Canada, and Europe will deteriorate economically and deindustrialize in the short and medium term, many companies there will migrate to Asia including the Philippines. It will be a supply-push investment plus demand-pull investment if we do big reforms like faster growth, reduced debt stock without resorting to high taxation, and no threats of blackouts, nor yellow and red alerts.

ELECTRICITY DEMAND AND PRICES

On July 13, I joined the media briefing of the Independent Electricity Market Operator of the Philippines (IEMOP). Their data show the following: 1.) based on peak power demand for June, the 2022 numbers are much higher than the pre-pandemic 2019 level and implies that economic recovery is indeed occurring; 2.) Customer effective spot settlement price (ESSP) this year declined in April-May and increased only in June; and, 3.) Coal share to total power generation has increased to 60% while the share of Malampaya natural gas has declined to 19%, and the share of solar + wind has shrunk to only 2.2% as the country experienced less-windy and more cloudy conditions recently (Table 3).

If we want fast and sustained economic growth, and attract more foreign investors, we should rely less on unstable, unreliable, intermittent solar-wind and have more thermal fossil fuel plants, plus nuclear power....

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