Malaysia's power blackout dims Mahathir's vision

By Bill Tarrant

KUALA LUMPUR (Reuter): A power failure which blacked out much of Malaysia is worrying foreign investors and has cast at least a momentary shadow over Prime Minister Mahathir Mohamad's plan to become an industrialized nation, officials and analysts say. It also highlighted a problem across Asia, where booming economies must spend US$1.5 trillion on infrastructure over the next decade, according to the World Bank.

The 15-hour blackout on August 3-4 across Peninsular Malaysia killed four children when the candles they were using set fire to their house. The outage trapped people in lifts, stranded commuters at airports and brought electric trains to a halt. It also forced unplanned candlelight dinners for the peninsula's population of 16 million.

Penang, known as "Malaysia's Silicon Valley" because of its many foreign-owned electronics plants, looked anything but high- tech as residents lit fires in oil drums.

"As the country moves toward developed nation status it continues to be plagued with a Third World problem -- power disruptions," said a Business Times editorial.

The timing could not have been worse.

Malaysia was hosting executives from global information technology firms at an exhibition designed to showcase a newly- launched zone for multimedia foreign investors.

"Where are we going to show our faces," Mahathir moaned to reporters, putting the blame squarely on national utility Tenaga Nasional. "We invited people to invest and now their factories are affected..."

The Multimedia Super Corridor (MSC) is a key part of the prime minister's "Vision 2020" blueprint for Malaysia to become a fully developed country over the next 25 years.

International Trade and Industry Minister Rafidah Aziz said important foreign investors such as Japan and the United States, the major players in Penang's electronics industry, were growing concerned about the power disruptions.

Penang suffered a weeklong partial blackout last year after a Tenaga cable from the mainland exploded.

Compounding the embarrassment, Malaysia was forced to accept emergency power from Singapore, which has prospered for years by offering services in shipping, oil refining, banking -- and multimedia applications -- that neighboring Malaysia and Indonesia could not provide to investors.

After lightning struck the same Paka plant in 1992 triggering a two-day blackout over the peninsula, the government invited independent power producers to enter what had been Tenaga's monopoly on power generation.

Today, Malaysia has no shortage of electricity. The Ministry of Energy Telecommunications and Posts says that on a typical day Malaysia uses 7,250 megawatts from a total capacity of 11,000 MW on the grid -- a 40 percent surplus.

The latest blackout has prompted calls to allow the private sector to break into Tenaga's monopoly on distribution and transmission as well.

A key question about the blackout is why the extra capacity was not used to keep the grid from crashing.

"That is the issue," Deputy Prime Minister Anwar Ibrahim told Reuters. "In the 1992 blackout we had a shortage, now we have an excess. So, we're looking into whether there should be an alternative (transmission) grid."

Bruce Gale, regional manager for the Political & Economic Risk Consultancy in Singapore, said the blackout could reinforce a perception that Malaysia is "just another developing country".

"Foreign investors may view the blackout as raising question marks over major infrastructure projects. I would guess when they dig into it, they will find it was poor maintenance by Tenaga that caused the trip."

The 70-year-old Mahathir has taken considerable pride -- and come in for a great deal of criticism -- in rushing to complete expensive mega-projects in time for the Asia-Pacific Economic Cooperation summit and the Commonwealth Games that Kuala Lumpur will host in 1998.

In the super corridor alone, the government is building a new 20 billion ringgit ($8 billion) federal administrative capital and a 9.0 billion ringgit airport. Billions more will be spent on high speed rail and expressway links and other infrastructure.

About 260 billion ringgit ($105 billion) in private and public sector infrastructure projects are planned over the next five years. They include 12 billion ringgit in new independent power producer (IPP) plants and 11 billion on Tenaga's transmission grid, analysts said.

Although Malaysia has a surplus of power, many rapidly developing Asian countries, where power is mostly supplied by state-owned companies, have chronic shortages.

Staggering amounts of investment are planned across the region to meet spiraling demand, spurring a power privatization trend. Power outages for hours are routine in India, Pakistan Bangladesh and Vietnam where there are severe capacity shortages. The authorities in Indian and Bangladesh call the daily blackouts in summer "load shedding".

India has a power shortage of 10 percent, which rises to 22 percent during peak times, according to officials of the state- owned National Thermal Power Corp. Annual growth in demand is estimated at about 6.5 percent over the next 12 years.

The Independent Power Producers Association of India say the country will require an energy investment of $120 billion over the next decade, half of it coming from the private sector.

Power cuts are frequent in many parts of Pakistan, especially its biggest city, the southern port of Karachi where they cause production losses of $140 million to $180 million a year. Pakistan is seeking private sector investment in both generation and transmission.

Power cuts lasting up to 24 hours are daily occurrences in Vietnam's towns and cities.

The state-owned Electricity of Vietnam (EVN) expects total domestic output of power this year to be 16.4 billion kilowatt hours (kwh), an increase of some 35 percent since 1994. But even that is one billion kwh short of its needs. EVN says it needs a billion dollars a year to build new plants.

Thailand, by contrast, has a surplus of power and has not had a major blackout since 1978. The state-owned Electricity Generating Authority of Thailand (EGAT) said that, like Malaysia, Thailand has an integrated grid and keeps 10 percent of its supply in reserve to deal with local plant failures.

EGAT plans to invest $11.5 billion over the next five years in added capacity and will begin allowing private sector power generation by the year 2000.