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Special Evaluation Study on the Energy Policy - Position PaperThe Regional and Sustainable Development Department (RSDD) of ADB requested the Operations Evaluation Department (OED) to conduct an independent evaluation of ADB's energy policy (2000 Review) to assess its relevance and effectiveness in directing and guiding ADB’s operations in the energy sector. Prior to elaborating the purpose, scope, and methodology of this evaluation, this position paper describes the global context of energy, ADB’s operations in energy, and major lessons from these operations. It briefly provides the contextual setting of the evaluation of the 2000 Review.BackgroundThe Asian Development Bank’s (ADB) role in power sector development among its developing member countries (DMCs) started in the early 1980s. ADB’s first Energy Policy paper (Working Paper No. 2–81. Role of the Bank in the Energy Sector in the Region) was released in March 1981, several years after the first oil shock of 1973, and shortly after the second oil crisis of 1979 in the wake of the Iranian revolution. In both events, the world faced record-high crude prices and supply spigots so that ADB’s policy focused on overcoming the crisis caused by these two oil price shocks. Furthermore, the policy paper emphasized the development of energy infrastructure and indigenous energy sources to promote efficiency and create incentives in order to attract foreign investment to DMCs. In 1995, ADB released its second Energy Policy paper. (The Bank’s Policy Initiatives for the Energy Sector) The paper noted that the power sectors in the DMCs were growing bigger, unmanageable, and inefficient. The worsening situation of the energy sector was attributed to the seeming dual role of government as both monopoly owner and policy maker. The 1995 Energy Policy recognized the changing needs of the sector, with a reduced requirement for infrastructure and emphasized the need for a financially robust and highly efficient energy sector operation. It advocated the recovery of full costs, and the avoidance of subsidies and cross-subsidies. It further sought the establishment of independent regulators to adjust electricity tariffs on the basis of transparently promulgated tariff principles. For the short term, ADB promoted corporatization and commercialization of government-owned utilities as a prelude to their privatization efforts and the entry of the private sector through build-own-operate/build-own-operate-transfer (BOO/BOOT) options. The development of interregional trading in energy was also recommended. The most recent paper (Energy 2000. Review of the Energy Policy) on ADB’s energy policy (2000 Review) was circulated on 8 December 2000. The policy emphasis was particularly attuned to the development of independently regulated and privatized energy markets, which in turn, was expected to lead to more efficient uses of energy, lower costs, and more private investments. The 2000 Review recommended four operational priorities:
These core areas provide an intent and emphasis on creating an appropriate policy and institutional environment, and capacity development to enable DMCs to develop and extend the availability of their energy resources. Within the bounds of its basic principles and objectives, the 2000 Review supports a wide range of energy development initiatives. In addition to sector restructuring and private sector participation, it recommends specific directions common to all sub-sectors, such as poverty reduction, social development, removal of subsidies, governance, information technology, environmental protection, efficiency improvements, energy conservation, co-financing, and capacity building to support ADB’s energy policies. Comments on the ReportComments and suggestions on the report are welcome. Please send your comments to rshenck@adb.org and aguha@adb.org. |
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