The Future of Power Industry Reforms: International Experiences and Lessons for the Philippines

The Asian Institute of Management Policy Center, in partnership with the Department of Energy (DOE), the United States Agency for International Development (USAID) and the Energy and Clean Air Project (ECAP) hosted a lecture-forum entitled “The Future of Power Industry Reforms: International Experiences and Lessons for the Philippines,” held last May 26, 2006 at the Rizal Ballroom C of the Makati Shangri-La Hotel.

This lecture-forum featured Stanford University professor and Program on Energy and Sustainable Development Director, Dr. David G. Victor. Upon discussing points from the experiences of reforms made in Brazil, China, India, Mexico and South Africa, Dr. Victor drew the following conclusions:

1. The role of the independent power producers (IPPs) in power sector reform is significant, as it has been observed in many country cases. The Philippines experience has been unprecedented due to the number of IPP contracts that the government engaged in to abate the power crisis in the 1990’s.

2. Reforms tend to be slow and sometimes lead to the dominance of “dual firms”. In essence, no successful reforms have been recorded, especially those that are designed to create real markets.

3. Market reforms create weak links. The experience of countries points to the insolvency of state companies, usual those on the distribution side.

4. The role of independent regulators is very essential although true empowerment is difficult.

Following the discussion of Dr. Victor, reactions were culled from key leaders from the power sector, business and the academe. The reactors included:

• Hon. Cyril C. Del Callar, President, National Power Corporation
• Mr. Peter D. Garrucho, Jr., Vice President and CEO, First Gen Corporation
• Mr. Lasse A. Holopainen, President, Philippine Electricity Market Corporation
• Dr. Benjamin Austria, Committee on Energy, Philippine Chamber of Commerce and Industry, on behalf of Amb. Donald G. Dee, President of PCCI
• Dr. Fernando Y. Roxas, Faculty, AIM-W.Sycip Graduate School of Business

The lecture-forum gathered corporation heads such as Mr. Jesus Francisco of Meralco, Mr. Gil Gu Lee of Kepco Philippines and Mr. Geronimo Nepomuceno of Angeles Electric Corporation, among others. Government officials such as Comm. Oliver Butalid of the Energy Regulatory Commission came to participate. The event closed with an address from DOE Secretary Raphael P.M. Lotilla on the direction of the reforms spearheaded by the department – one that takes into consideration the social dimension of reforms being implemented.

The presentation of Dr. David Victor and two other papers prepared by Dr. Erik Woodhouse of the PESD entitled "The IPP Experience of the Philippines" and "The Experience of Independent Power Producers in Developing Countries" may be downloaded at the AIM Policy Center website: www.policy.aim.edu

World Competitiveness Yearbook 2006

Glimpse of Hope for the Philippines:Why and why not?


The Philippines maintains its position as the 49th most competitive economy in the world. This is despite of its drops in terms of economic performance (41st to 52nd), business efficiency (38th to 44th), infrastructure (55th to 56th) and a slight improvement in government efficiency (47th to 45th). The study covered the performance of 61 countries and regional economies in 2005.

The Philippines ranks high in the following domains: cost-of-living index (1st), real short-term interest rate (2nd), consumption tax rate (6th), collected total tax revenues as percentage of GDP (7th), compensation levels (4th), working hours (5th), remuneration in services professions (6th), high-tech exports as percentage of manufactured exports (1st) and investments in telecommunications as percentage of GDP (9th).

The Philippines scores poorly in terms of: GDP per capita (59th), GDP (PPP) per capita (58th), relocation of production – threat to the future of economy (55th), consumer price inflation (54th), employment (54th), risk of political instability (60th), bribing and corruption (60th), custom’s authorities and efficient transit of goods (59th), independence of public service from political interference (59th), country credit rating (58th), brain drain (58th), value traded on stock markets (58th), overall productivity (57th), country image abroad (57th), foreign high skilled people attracted (57th), pupil-teacher ratio (61st), dependency ratio (60th), total health expenditure (60th), total public expenditure on education (60th), and total expenditure on R&D (60th).

Several Asia-Pacific economies figure prominently in the rankings. Hong Kong and Singapore are gaining on the US and remain 2nd and 3rd, respectively. China (+12, 31st to 19th), India (+10, 39th to 29th), Malaysia (+5, 28th to 23rd) and Japan (+4, 21st to 17th) post the biggest gains while Korea (-9, 29th to 38th) and Thailand (-5, 27th to 32nd) suffer from drastic declines. The Asia-Pacific region’s performance boosts its position as the new driver of global economic growth. The Philippines stays as the 14th most competitive economy out of the 15 Asia-Pacific economies included in the study.

The world economy has been booming in 2005. Of the 61 economies covered by the World Competitiveness Yearbook in 2005, 22 had a growth rate above 5%, 39 above 3% and 48 above 2%. The Philippines posted a 5.1% (22nd) growth. In fact, Italy is the only economy that did not post any economic growth last year.

The AIM Policy Center, as IMD’s partner institution, lists the following challenges for the Philippines for the year 2006: Undertake capacity-building for regulatory agencies to ensure transparency, non-discrimination and procedural fairness; Improve quality of basic education to further promote human capital development; Progress on a clear and coherent population policy; Improve distribution infrastructure for faster turn-around times and lower transaction costs; and, Accelerate implementation of e-governance projects to promote transparency and facilitate trade.

The AIM Policy Center notes that the threats to the Philippines’ competitiveness outweigh the gains in 2005. The improvement in terms of government efficiency is attributed chiefly to the likelihood of improvement in the management of public finances, reforms in tax measures, real short-term interest rate (real discount/ bank rate), central bank policy’s positive impact on economic development and gender related issues. The declines in the other indicators presage a long term negative effect on the country’s ability to compete. The Philippines’ dismal performance in the domains of education, basic infrastructure, technological infrastructure, scientific infrastructure, health and environment, and corruption are particularly alarming and unless immediately addressed can result to irreversible damage. These indicators pose enormous degrees of multiplier effects on the other indicators of competitiveness. Education or the lack thereof, for example, can disrupt our labor advantages. The poor infrastructure, as another example, can retard the economy’s ability to innovate and further develop the high-tech industry.

Intellectual Property Rights for the Interactive Media:
Trends and Practices
May 2, 2006, 2:00pm –4:00pm
AIM World Bank Global Distance Learning Center

Synthesis

John Casey, author of the Interactive Media Industry, Intellectual Property Rights, the Internet and Copyright: Some lessons from the Trust DR Project stressed during the forum on IPR in the interactive media: Trends and Practices that IPR and Digital Rights Management (DRM) is best viewed as a holistic ‘systems’ problem, the importance of social, cultural and legal factors are easy to overlook but can help provide lo-tech solutions by informing your decisions. He emphasized IPR and DRM as a ‘systems’ problem and the importance of cultural, social and legal factors intertwining with these two related areas. Moreover, he shed light on his work on IPR, Internet and Copyright particularly focusing on the TrustDR Framework. There are 6 stages of the TrustDR framework: first stage, the recognition of rights-relevant rights is the stage at which staff, employers, and suppliers all need to be aware of who the rights holders are and what uses they might be licensed for; second stage, the assertion of rights is provided by a legal framework in which people and organizations can assert their rights in a form that is defendable under law; third stage, the expression of rights has traditionally involved only a copyright statement in a human readable form.
While this is still important it is also essential to take account of machine-to-machine communication when considering digital rights management. These first three stages all address the DRM policy creation.

The fourth stage, dissemination of rights ensures that wherever a resource is described its rights are also described; fifth stage, exposure of rights is the stage at which a user will see the rights information associated with a resource; sixth stage, enforcement of rights includes both protective measures to ensure that rights are not infringed and steps to be taken when infringements are detected. The final three stages concern the DRM policy projection. Normally he stressed that the first four levels/stages are already sufficient measures with education and that the first 3 or 4 levels are adequate and one might not need expensive DRM technical enforcement measures.
He also explained that education shares many of the same problems and opportunities as commerce on how to get the benefits, avoid the risks and reduce/control transaction costs. He stressed also to use the opportunity to re-examine your business model and processes and introducing a DRM system to use it to improve asset management and project management activities.
Moreover, he stressed to think carefully about ‘where the value lies’ in your economic model, in education the learning materials generally hold little financial value and high utility value. That in main stream education the real “value added” are with these components of the educational enterprise such as the faculty, the support and administrative staff, the institutional buildings and not much on the learning materials. But in e-learning, education invests a lot on having database of learning materials.

Moreover, that Intellectual Property Rights is used to describe the legal status and protection that can be claimed for information and knowledge. It is fair to say that the law is lagging behind the digital technology that is changing the way that the creation, publication and access to the products of intellectual activity now happen. Intellectual Property is concerned with the results of human creativity. Value is recognized in its expression and IP law exists to provide protection and to encourage development of ideas into assets. This protection must be balanced with the rights of those wishing to access these assets.
He explained that Intellectual Property Rights include copyrights, moral rights, patents, trademarks and logos, design rights, ideas or “know-how’ and database rights.

That IPR law has always been a balancing act between owners and users and increasingly between private and public. He mentioned that legalizing piracy cost about 2 billion dollars in the last six months. That simple record keeping, administration, policy and procedures is the foundation of successful DRM. He also emphasized that ownership can’t be transferred in moral rights.

Further, he emphasized that a secure and robust form of content management should be used to record and protect all rights management information. Policies should be embedded and clearly communicated, with processes in place such as license templates and standard contracts. Finally, he stressed on what is the value of what we do? Where is the value of what we do and how do we assign the resources and protect the value of what we do?

On the other hand, Eugene Scodigor, consultant, Centre for Applied Research Time emphasized IPR in relation to its purpose wherein the use of the educational materials is purely for educational purpose or having it for commercial value. He recommended projects to have management systems. He also recommended the use of watermarks, adobe acrobats and other software to ensure property rights.
Atty. Eugeniano Perez, consultant of the Intellectual Property Office in the Philippines stressed that there are 3 main sectors for Intellectual Property Rights; first is the creation referring to the intellectual capital; second is the protection pertaining to patents, copyright, trademarks and this is the part where the law usually intervenes; and third is the commercialization aspect, placing/ putting the creation into the market.

Atty. Perez explained that there is always a need for access. That knowledge is cumulative and is always built on prior knowledge. When we restrict access, we also restrict creativity. That IPR and DRM should not restrict creativity. He stressed that there is a delicate balance between IPR and DRM and access to create creativity.
He also clarified that there is no case law covering Digital Rights Management in the Philippines. That it is still an infant stage for digital rights management. The public still has not really defined its position on DRM and it is only the private sector that has given its position.

Atty. Calvario of the Intellectual Property Office Philippines explained that there are two identical bills (House Bill No. 222 and House Bill No. 3308) filed by Representatives Imee Marcos and Joey Salceda seeking to amend the Intellectual Property Code in terms of updating the copyright portion of the IPR and development in digital technology. Both bills seek to amend the existing Intellectual Property Code on technological production management and digital rights management information. The Philippines Intellectual Property Code has been implemented beginning 1998. He also stressed the importance of the Intellectual Property Rights as a social function. That IPR is enforced by the state for the common good of the society and in most cases to till the balance in favor of the common good.

Further, Atty Calvario explained that in the Philippines, IPR extend to a lifetime of the author plus 50 years. The reason given by lawmakers that this is enough time for the author to be remunerated on his efforts.
During the open forum, a participant from the Islamic Development Bank in Saudi Arabia asked on how do you generate income to your copyrights.

Mr. Casey replied that one must really understand his business particularly in these unchanging times. To identify as to where is the value in your business, who are your customers .

Dr. Lagroza asked a question on main stream education and e-learning. She also commented that the value of the education may not be in the educational materials but rather in the skills in using these learning materials. She asked on how do you view the importance of learning materials in main stream education and in e-learning.

Atty. Perez explained that in this case Dr. Lagroza is having two hats, so to speak, one as a user needing access for the purpose of education and research considered as fair use and the other hat as provider of the database materials on e-learning.

Likewise, he stressed that teaching is a positive right and therefore a justifiable use.

He also emphasized that we have a lot of research institutions with developed databases like DOST, National Computer Center that need to be under property rights. That the use of database materials in e-learning is subject really to agreement.
Another question posted by the Vice President of the Cultural Center of the Philippines focused on protecting the rights of the performing arts. He mentioned the use of lightning design not being acknowledged by others who have just used or copied the same.

Atty. Perez and Atty. Calvario explained that any performance is copyright protected. That most of the time, it is a problem of enforcement.


Further, Mr. Casey and Atty. Perez both explained that a collaborative work, a production work usually has the employer or the company as the owner of the work and the employee who did the work has only moral rights on the same. With only moral rights accorded to him, the employee has to be recognized for his work.

Dr. Patt Lontoc, Moderator of the IPR forum stressed the themes occurring for this forum; I for International practices referring to the common practices and trends in the global arena for IPR and DRM; P for Purpose referring to educational or commercial use; P for participants referring to the owners, users, audience; and R for reach referring not just access to intellectual creation but access in trying to enrich societies. That IPR is a balance of our claims from private property with public property and the need to protect public interest.

Dr. Macaranas explained in his synthesis and closing remarks that understanding the TrustDR Framework, 6 steps of which three are on policy creation, the recognition of rights, assertion of rights, expression of rights and the other three steps on policy projection, the dissemination of rights, exposure of rights and the enforcement of rights. The AIM Policy Center is interested on the DRM policy projection.
He stressed that education is part of policy projection. How locals can transform these into value creation is a challenge for everyone. Value creation is at the heart as to what to protect. The social aspect is to protect the creativity that generates a lot of value added in their domestic industries. Different cultures and social aspects may come to the fore.
As have been stressed in the forum, the learning materials have less value in education because it is the skills on how we use these learning materials that are more valuable.

Moreover, he clarified that there are two kinds of learning literacy and numeracy. That we would like to focus on the higher level of education as many can read and write but few really understand.

He mentioned also on the business relations of education. That in terms of moral rights, we are obligated to our elders, who had passed away. He also cited ephemeral rights.
The rights of our ancestors and at times a most sensitive issue on ethnic relations.

Further, he emphasized that the valuation process in here is not only economic but also social and cultural.