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p. 21 of 21 BACK | NEXT Introduction: Looking ahead Past policies and operations Changing context of the policy review Future assistance in the changing context Conclusions

Energy 2000: Review of the Energy Policy of the Asian Development Bank

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Conclusions

83. Since its inception, ADB has assisted its DMCs in the development of the energy sector and in turn gained considerable insight about various aspects of the business. ADB is ideally positioned to understand the changes in developmental policies and the structure of the energy sector, and to assist the DMCs in charting a course that would maximize the benefits of such changes. The needs of the DMCs for ADB assistance are not limited to resolving policy issues but include also the financing of investments both in the private and public sectors (in the case of the latter, until private capital is adequately available and at acceptable cost). ADB will, therefore, continue to support energy sector investments and assist in their implementation. The DMCs have large sections of the population still not served with modern forms of energy; by emphasizing the four operational priorities of its energy policy, ADB will help improve the quality of their lives.

84. Physical features, resource endowment, and economic standards differ among DMCs. The region has net exporters of energy and net importers; most are tropical countries but some have very cold and long winters when energy supply becomes an essential item; there are archipelagoes and landlocked countries; the region has the two most populous countries in the world and also the small Pacific island countries; considerable regional cooperation is seen in part of Asia and regional conflicts in others; there are economies that have already graduated out of regular ADB assistance while there are many others that are still struggling to reduce the number of poor. In implementing its energy sector policy, care will be taken to identify the specific situation in each DMC and plan the interventions accordingly.

85. The review of the 1995 Energy Policy has confirmed that the existing energy policy framework is sound. Nevertheless, a realignment toward four operational priorities will be initiated to take into account recent developments. The scope of ADB’s future assistance is detailed in the section on future assistance. Compared with the focus of ADB assistance based on

the 1995 Energy Policy, it is now recognized that there are some limitations to the creation of energy markets in all DMCs, but private sector investments are always possible and desirable, subject to adequate competition and regulatory oversight. The BOT mechanism should be adapted to DMCspecific circumstances for promoting private sector investments, and merchant power plants should be encouraged where competitive electricity markets are possible. ADB must continue to place emphasis on supply and demand-side efficiency improvements, environmental protection, and regional trade. As before, there may be a limited number of loans for projects in the coal subsector, but ADB will continue to have an advisory role in ensuring that a proper framework is established to attract private investment. In the gas subsector, ADB assistance for transmission and distribution projects may be needed under certain circumstances to facilitate private sector participation. The emphasis on the four operational priorities is being reflected in the preparation of the country assistance plans. The 2001–2003 pipeline indicates that, on average, there will be about eight energy sector loans every year, which is the same as in the past five years. Similarly, the annual lending volume will remain at about $1 billion. More of the future loans will support rural electrification, renewable energy, and sector restructuring. Processing of these loans is expected to be more complex and to present new challenges to ADB staff.

86. In conjunction with ADB’s policy of assigning more responsibility to resident missions, it is expected that existing staff resources in the energy divisions are adequate to implement the changing operational priorities. The skill mix has been evolving in line with priorities, and will continue to do so in the future. While the emphasis was earlier on project specialists with analytical skills in engineering and finance, during the past few years there has been a blending with skills in the areas of macroeconomic analysis and social and institutional development. Induction of new staff and in-house training programs have helped the energy divisions keep abreast with the latest approaches to sector restructuring and engage in policy dialogue with DMCs in those important areas. As new projects are prepared to support pro-poor growth in line with ADB’s poverty reduction strategy, staff in the energy divisions will be further sensitized to relevant issues.

87. The next review will be undertaken in 2005 to again ensure that ADB’s energy operations are properly aligned to the needs of its DMCs.

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