One of the main problems faced in doing an outsourced operation is power. Yes, fast expanding economies results in power demands increasing at exponential rates. Coupled with the problem that building a Power Plant take a couple of years… this generally results in a temporary (hopefully) shortfall of power.
I believe… another problem with such countries is the subsidizing of electricity. Somehow, even though there is insufficient power to prevent load shedding, authorities are prevented from correcting this demand and supply inconsistency by raising the price of power. Electrical power like oil prices are fixed at artificially low prices for fear of upsetting the general populace (my own guess… no official data to verify).
Just recently, the state-owned Telephone company launched a strike nation-wide over wages.
The current electricity price in Singapore is 21.38 cents per KWH, based on the post below.
http://www.post1.net/lowem/entry/singapore_electricity_price_increase_2007q4
In Pakistan, the electricity rates for the top bracket, i.e. maximum consumer, is only half of that, i.e. 10 cents per KWH. To deal with the shortfall in power, the government started imposing periods of loadshedding whereby the electricity supplies will be turned off during certain timings for certain districts.
I hope they will just free up the pricing of electricity and let it go up naturally. It will resolve a lot of issues. Generally, electricity demand in Pakistan is very price elastic as the general populace are very poor. I believe a small increase in electrical charges will solve most of the electricity problems.
Businesses with an inelastic demand for electricity will be able to pay for all the electricity they need. Electricity supplies will be naturally diverted from residential activities to high-value business activities, thus greatly stimulating the economy.
At the first glance, investors might be mistaken that Pakistan has cheap electrical costs, i.e. half of Singapore. On the contrary, the truth is that electrical charges in Pakistan is much, much higher, if you take into account all the indirect costs…
Because of the artificially low price, electricity shortages are caused. Businesses are forced to incur expensive electrical set-ups to combat the shortage of electricity during load-shedding periods. Below is a diagram of the electrical set up of my office:
Initially I started with a simple cheap UPS. However, as the UPS output was not exactly sinusoidal, I had to get another higher end UPS for the computers. (Yes.. after some research, it seems that square wave UPS damages the computer circuitry). That seemed to work for quite a while until the rain season came in. Somehow rainwater causes massive disruptions in the power network… causing long periods of blackout, i.e. 3-6 hours.
Generally, UPS do not provide power for 3-6 hours.
Ended up, we had to get a generator… with a Switch Box. I thought I had finally solved the problem… but no.. the UPS just refuses to get charged. Well, the problem was that the generator did not have a stable output voltage, i.e. so we will need a voltage stabilizer….
So that is the result of "cheap electricity" charges:
- 1 Generator
- 1 Voltage Stabilizer
- 1 SwitchBox
- 2 UPS
Generator
Expensive UPS
Cheap UPS
