April 04, 2008	Friday	Rabi-ul-Awwal 26, 1429

KARACHI, April 3: Despite considerable effort having been made, the Asian Development Bank-assisted power sector reforms in Pakistan have yet to fully achieve its desired objectives.

This was stated by ADB Country Director Peter L. Fedon while speaking on the “Role of the Asian Development Bank in Pakistan’s Development” at a meeting of the Pakistan Institute of International Affairs members here on Thursday. The meeting was presided by PIIA Chairman Fatehyab Ali Khan.

Expressing his concern over the energy crisis in Pakistan, Mr Fedon said the power sector in this country was characterised historically by huge losses, both technical and commercial, which had to be tackled by the government. Every year, he said, the government had to provide a subsidy of close to $1 billion to make up for the difference between the notified tariff and actual cost of electricity. These accumulated debt overhang/arrears to date stood at $4 billion, he added.

He pointed out that the ADB had supported the power sector reforms and investments through its $355 million energy sector restructuring loan (in 2000), $800 million power transmission enhancement (in 2006), $510 million renewable energy development programme (in 2006) and $800 million power distribution enhancement (in 2008).

“While Wapda has been unbundled to a degree, the successor generation, transmission and distribution companies lack a clear mandate to focus on commercial performance and client orientation and do not have the necessary financial and operational independence,” he observed.

He was of the view that chronic under-investments in the sector had led to a generation shortfall, transmission constraints and distribution bottlenecks, as well as a distorted mix of energy sources. “The nuclear power generation is small.”

He stressed that the overall efforts for reforms had to be expedited to ensure energy security because the current situation in the power sector highlighted the very high economic cost to the nation.

The cumulative lending assistance from the Asian Development Bank to date amounting to $18.6 billion for the reforms was aimed at promoting economic growth and development but at times these reforms did not produce the desired results, he said. ”One of the priorities set by the ADB is the better implementation of projects with balanced approach. Some of its projects in Pakistan, including those in Sindh, are not moving properly,” Mr Fedon observed.

He said that the Bank’s policy reforms measures related to improving policy and regulatory environment and supporting increased efficiency and effectiveness in both public and private sectors. “The conditionality which attempts to buy reform from an unwilling partner has rarely worked.” However, he had no reply when asked that why the ADP appeared approved of the alleged anti-worker policies pursued by the Shaukat Aziz government, especially with regard to reforms through SMEDA. He also had no answer when his attention was drawn to the negative impact of the government’s investment policies vis-a-vis the power sector in the ’90s.

Mr Fedon stressed that the new government should focus on the priority areas — infrastructure, logistics, energy, water, connectivity, urban services and private sector development —, and said that with right policies and better implementation, Pakistan could replicate success.

He pointed out that the ADB contributed to Pakistan’s major reforms and investment programmes over the past 10 years and these included capital market development, trade export promotion, industry, energy, agriculture, access to justice, decentralisation, financial (non bank) markets, governance, local government capacity building, etc.

The ADB official said that the bank was supporting mass transit system costing $2 billion in Lahore through private sector investment and discussing with the government on an improved urban transport system for Karachi.