Gov’t urged to help SMEs deal with high cost of electricity

MANILA, Philippines - The Association of Filipino Franchisers Inc. (AFFI), is seeking government support to allow small and medium enterprises (SMEs) to deal with the rising cost of electricity in the country.

“We urgently request the government to provide support to SMEs in terms of power cost relief discounts while the long-term plans to address the supply of low cost sources of energy are being put into place,” AFFI chairman Armando Bartolome and AFFI President Victor Fernando said in a statement.

The AFFI pointed out that the high cost of power remains a concern for businesses here, particularly for those engaged in retail or manufacturing.

Citing a study of the International Energy Consultants in October 2010, the group said the Philippines, with an average retail rate of electricity of 18.1 in US centavos per kilowatt hour, has dislodged Japan (17.9 in US centavos per kilowatt hour) in having the most expensive electricity in Asia.

High power costs have forced labor-intensive industries such as those engaged in the manufacture of footwear and garments to move out of the Philippines to countries with lower production costs such as Bangladesh, Cambodia, China, Indonesia, and Vietnam.

As electricity makes up a significant part of expenses, an impending power rate hike could affect the viability of businesses.

SMEs are seen to be the hardest hit by any rise in overhead costs such as power, because unlike the larger corporations, they have limited resources to fund additional fixed costs.

“It is therefore critical for the government to address the issue of high power costs now, not only because of the strong link between SME viability and employment generation, but also because of the ASEAN (Association of Southeast Asian Nations) integration in 2015, where cost competitiveness is a key factor that will determine whether or not the Philippines can maximize the economic potential of this opportunity,” AFFI said.

The lower the overhead costs, the greater chance Filipino businesses could succeed in tapping opportunities provided by the ASEAN integration as SMEs could hire more people and invest in training, marketing, product development and market expansion.

The ASEAN aims to establish a single market economy with free movement of goods, services and investments in the region by December 2015.

Data from the World Franchising Council show the Philippines currently ranks fifth in the world in terms of the number of franchisees and the fourth biggest in the world in terms of the number of jobs generated by franchising.

“The country’s expertise at franchising will not be maximized unless franchisers are supported with government initiatives to bring down their costs,” AFFI said.

The AFFI is set to convene with the SME Division of Manila Electric Co. next month to discuss the power situation.

Established in 1997, the AFFI is the country’s prime trade organization committed to promoting responsible micro, SME businesses through franchising.