The ADB and the World Bank Group in Mekong Energy Development

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The ADB and the World Bank Group in Mekong Energy
Development
Jelson Garcia ? Asia Program ? Information Center
(www.bicusa.org)
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What do we do?

• We partner with civil society in developing and
  transition countries to influence the World Bank
  and other international financial institutions to
  promote social and economic justice and
  ecological sustainability.
• Advocate for greater citizen participation,
  transparency, and public accountability and
  rights.
• Aim to protect and enhance environmental, social,
  and cultural rights of locally affected
  communities.

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(No Transcript)
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Our core activities
Key Partners civil society (environment, social
justice, human rights, labor) in Global South
Regional Programs Asia, Africa, Latin America,
Europe and Central Asia

• Outreach and Awareness Building
• Information Services
• Capacity Building
• Networking and Coalition Building
• Project and Policy Monitoring and Advocacy
  Support
• Policy and Institutional Reforms at the IFIs
• Maintain Relationships w/ the IFIs to try and
  open space for NGOs
• Focus on policy makers at the Banks, the US
  Government and Congress

Policy Program transparency, accountability,
climate change, energy and extractives
Staff 22 full time staff and consultants
Source of Funds private foundations listed on
website Founded in 1987
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Overview

• The ADB and WBG Why do they matter?
• How are they governed? Who rules the Banks?
• How do they engage in the regions and countrys
  energy development?
• Energy lending portfolio
• Are there tools and opportunities to influence
  the Banks?

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IFIs and the MDBs Whats the difference

• IFIs generic name given to all financial
  institutions operating at the international level
  
• Multilateral Development Banks (MDBs) Publicly
  owned institutions that provide financing to
  governments and corporations operating in the
  developing world and transition economies
• World Bank Group
• Asian Development Bank
• Inter-American Development Bank
• European Bank for Reconstruction Development
• European Investment Bank
• African Development Bank
• International Monetary Fund (IMF)
• Unilateral banks/export-credit agencies (ECAs)
  e.g. the Export-Import Credit Bank of each
  country JBIC

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Why do MDBs matter?

• Owned by governments, with unique commitments and
  obligations
• Public taxpayer money, including from Global
  South, supports them so everyone has a claim
• Stated mission often linked to public good, such
  as poverty reduction
• Donors and borrowers are represented on the
  Board, albeit unequally
• Ministry of Finance is typically contact with WBG
  and IMF in member country
• There may be parliamentary/legislative oversight
  of IFI operations in your country

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Why do the mater?The many roles they play

• AS LENDERS
• AS KNOWLEDGE BROKERS
• AS GATEKEEPERS OF DEVELOPMENT FINANCE

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• AS LENDERS

• Arguably the worlds most influential
  development institutions, although no longer
  the largest international financiers
• Public sector investment projects
• All types of sectoral loans (from finance trade
  to agriculture, water and education)
• From hard infrastructures (public works,
  transportation, large dams, etc.) to soft
  infrastructures (schools, hospitals, etc.)
• Several loans have an attached policy condition
• Policy reform loans
• Formerly known as structural adjustment loans,
  now called development policy loans for World
  Bank program loans for ADB
• Lend money for economic, institutional or other
  policy reforms
• Can influence the amount and composition of
  public spending in your country
• Pave the way for greater private sector
  involvement and management of sectors previously
  run by governments
• Private sector projects
• Loans go to private companies primarily for
  infrastructure and financial sector projects
• Equity agreements, risk guarantees, etc.

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World Bank lending portfolio across regions

• What sectors? Lending is focused on
• budget support (programmatic lending single
  disbursement)
• regional projects and trade
• infrastructure (power, transport)
• extractive industries (oil, gas, mining)
• Natural resource management

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Where do the Banks get their funds?

• Through subscription fees from member countries.
• Loan repayments and earnings on insurance
  premiums
• But most funds used for financing, particularly
  by IBRD, IFC MIGA are raised by selling bonds
  on the international capital markets. Then the
  Bank lends to borrowing countries at a higher
  rate.
• IDA gets funds from donor countries, usually
  through tri-annual replenishment, transfers from
  IBRD and some reflows from past loans
• Banks also raise money thru special funds from
  and serve as conduits with donor/big member
  countries
• WBG and ADB have AAA rating in international
  markets - The highest rating awarded by various
  bond agencies.  It indicates that an investment
  is extremely safe and there is very little risk
  of default.

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• AS KNOWLEDGE BROKERS

• By publishing many books and reports on
  development
• They frame/influence the debate on development
  issues/policies
• Many countries get their information about
  economic policies and development models from the
  World Bank
• Their medium-term plans (CSP, CPS, Sector
  strategies, development outlook, etc.) are some
  examples
• Bank advice and technical services as precursor
  to policy reform and conditionality
• Tied to a borrowing countrys acceptance of
  Bank-generated knowledge and advice (including
  technical assistance or TA for ADB and
  analytical and advisory activities (AAA for World
  Bank)
• By creating their own research and training
  groups (World Bank Institute/ADB Institute)
• They directly influence development
  discoursetrain government officials,
  parliamentarians and even civil society
  representatives on various dimensions of
  development policy and planning
• By convening regional policy/sector strategy
  dialogues/conferences

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RESEARCH PRODUCTS, TECHNICAL AND POLICY ADVISE AS
INFLUENTIAL TOOLS TO PROMOTE PRIVATE SECTOR LED,
MARKET-ORIENTED DEVELOPMENT
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• AS DEVELOPMENT FINANCE GATEKEEPER

• The Banks lending decisions and evaluation of
  country development strategies affect the
  countrys access to capital from different
  sources
• Examples
• Country policy and Institutional Assessments
  (CPIA)
• Investment Climate Assessment (CIA)
• These rate countries largely on the basis of
  their economic policies and openness to foreign
  investment
• In short, borrowing countries are compelled to
  follow the market-driven approach to
  development theory of the Banks in order to
  continue access to financing and attract foreign
  investments

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How are they governed? Who rules the MDBs? Who
represents your country
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How are they governed? The Board, the Management
and the Resident Missions
BOARD OF GOVERNORS One representative for each of
184 member countries Meets once per year
BOARD OF DIRECTORS 24 Executive Directors
represent all 184 member countries Day to day
decision-making on projects and policies
ICSID Est.1966 Purpose A legally
autonomous international organi-zation
established to arbitrate disputes between foreign
investors and host governments.
WORLD BANK PRESIDENT Oversees all five arms of
the World Bank Group
Inspection Panel
CAO
Private sector
Public sector
IBRD Est. 1944 Purpose Lends money to
middle-income countries at near-market interest
rates. Financing instrument credits of 15-20
years with 3-5 year grace period on
repayment 2005 financing 13.6 billion
IDA Est. 1960 Purpose Lends money to poorer
countries at below-market interest rates. Financin
g instrument credits of 35-40 years with 10 year
grace periods on repayment 2005 financing
8.7 billion
IFC Est. 1956 Purpose Provides loans and equity
investments to private companies operating in
developing and transitional countries. 2005
financing 6.5 Billion
MIGA Est. 1988 Purpose Provides political risk
insurance to foreign investors in developing
countries. 2005 guarantees 1.2 Billion
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How are they governed? The Board, the Management
and the Resident Missions
\
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How are they governed?
In World Bank, votes are proportional to the size
of a countrys economy
Country Voting Share ()
Seats US 16 1 Other
G-7 27 6 Other non-borrowers 18 7 Devel
oping country Borrowers 39 10
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Structure Governance

• Adopted by 38 countries at Bretton Woods (US) in
  1944 to reconstruct post-war Europe and protect
  against financial crises
• Grown from single institution (IBRD) to five
  ARMS
• Four lending arms 2 public
• IDA/IBRD (the Bank) finance public sector
  (government)
• 2 private IFC/MIGA finance private sector
  (companies)
• 1 non-lending ICSID

• A REGIONAL Bank, adopted in 1966 by 31 countries
  in Manila to foster economic growth and
  integration of Asian economy
• Grown from 31 to 66 countries, 47 from Asia
  Pacific and 19 from outside

Goal for Both POVERTY REDUCTION!
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Structure Governance

• Owned by Member Governments (IBRD 185 IDA 166)
• Each country has rep on Board of Governors (BoG),
  usually Minister of Finance/Economy
• BoG meet once annually to discuss strategic
  directions and policies
• Day-to-day decisions taken by Board of Directors
  (BoD)

• Owned by Member Governments
• Highest decision-making body is BoG, member
  country repd by its Governor (usually minister
  of Finance/Economy)
• Meet once annually to discuss strategic
  directions and policies
• BoD meets twice a week elected for 2 year term
  (renewable) and oversee the general operations

• Note
• YOU CANNOT SUE THE BANKS. THEY HAVE IMMUNITY TO
  NATIONAL LAWS
• ALTHOUGH WB IS PART OF UNITED NATIONS ECONOMIC
  AND SOCIAL COUNCIL (ECOSOC), IT IS NOT BOUND BY
  UN LAWS AND IS NOT ACCOUNTABLE TO IT

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Why are people concerned about the Banks?

• Secrecy
• Despite progress in making WBG and ADB more
  transparent, many decisions still taken in secret
• Neo-liberal development model
• Emphasize export-led growth and large-scale
  private investment as path out of poverty
• Conditionality
• Structural adjustment and governance rules
• Debt
• Borrowing countries must pay money back
• Corporate welfare
• Public money supports policies that favor private
  sector and directly finance businesses investing
  in developing countries
• Standard-Setting
• IFIs claim to establish best practices in
  development others use their standards as gauges

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On the other hand, they can also be

• Advocacy targets finance problematic policy
  reforms and investments
• Sources of information documents, data, contacts
• Sources of pressure on governments and companies
  influence through financing, advice and
  assessment
• Channels of access to accountability public
  institutions with unique obligations, standards,
  commitments and complaint mechanisms
• Lightning rods for international attention
  increased access to international advocacy
  networks and media

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How the ADB and World Bank engage in Mekongs
energy development

• Key messages
• Hydropower remains high on the World Bank and ADB
• Hydropower development affects rivers and
  communities in the upper and lower Mekong
• There are better ways to meet water and energy
  needs but the Banks still have low gains in
  renewable and energy efficinecy

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World Bank and ADB lending to Mekong compared
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How do they engage in the regions and countrys
energy development?
World Banks Overall Loans to Mekong Countries
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How do they engage in the regions and countrys
energy development?
World Banks Overall Energy Investments in Mekong
Countries
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The Vietnam case
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WB Loans to Vietnam
by sector
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Lending activities by sector As of 31 December
2005
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Vietnams installed Power in 2005
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Power Development Plan (PDP) IV

• PDP runs from 2006-2015, with an outlook until
  2025
• Electrification rate approx 90 (although of
  varying quality in rural areas). Target is 95
  by 2010.
• Until the economic crisis, power demand in
  Vietnam was increasing at
  13-15 per year

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These plans have huge implications for Vietnams
rivers and its peoples
Vietnam plans to develop all domestic
economically viable hydropower by 2025 a total
of 16,000 MW
Villages to be resettled by Son La Dam, Vietnam
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These plans have huge implications for Vietnams
rivers and its peoples
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These plans have huge implications for Vietnams
rivers and its peoples
(As of end of 2006)
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These plans have huge implications for Vietnams
rivers and its peoples
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Meeting Vietnams electricity needs is challenging

• Current situation
• High power demand growth rate (around 15
  increase per year)
• EVN is struggling to find enough capital to meet
  this demand
• Electricity is partly-subsidized (in 2005, 5.2 US
  cents/ kWhr sale cost versus 7.7 US cents / kWhr
  actual costs)
• Effectiveness of production is low
• Energy efficiency is low
• Supply-side led planning (building new power
  stations rather than saving electricity)
• Electricity Law (2005), prepared with significant
  technical backing from the World Bank and the
  ADB, fundamentally restructures Vietnams
  electricity sector

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Vietnams power sector is changing
from a stateowned model
Owned by state utility
Industry consumers
Owned by state utility
Owned by state utility
Owned by state utility
Domestic consumers
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Vietnams power sector is changing
to a competitive power market model
Independent Regulator
Private Sector owned
Industry consumers
Competitive market
EVN owned
Owned by state utility
Private Sector owned
Domestic consumers
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The Electricity Law means that

• New Law tries to clarify the rights of consumers
  and investors
• Vietnam will have more private-sector power
  producers.
• Domestic and foreign investors
• An independent regulator (Electricity Regulatory
  Authority of Vietnam)
• Equitization of EVN assets. EVNs role to be
  limited to
• Power transmission and distribution
• Strategically important power stations (Hoa Binh,
  Yali, Son La, and Tri An hydropower plants, Phu
  My thermal power plant)

There have been delays in the process, apparently
due to the reluctance of EVN to commit to the
full plan
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Vietnams hydropower development has regional
implications

• Transboundary impacts on shared rivers (Sesan,
  Srepok)
• Planned power imports from Laos and Cambodia

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The ADBs plan for regional integration of
electricity

• Until the economic crisis, there had been a high
  growth in power demand, especially in Thailand
  and Vietnam
• Hydropower development is high on the agenda of
  all regional governments
• The Asian Development Bank has promoted the
  Mekong Power Grid since the early 1990s under the
  Greater Mekong Subregion (GMS) Programme

Regional Powertrade Masterplan (ADB)
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How does the ADB support the Mekong Power Grid
plan?

• The ADB has promoted the Mekong Power Grid plan
  by
• Regularly hosting regional inter-governmental
  meetings that promote the Mekong Power Grid
• Giving grants for technical studies
• Providing experts to facilitate legal and other
  arrangements
• Provides financing and risk guarantees for
  transmission lines and dams
• Draws in other bilateral donors and the World Bank

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GMS Transmission lines under consideration by
Vietnam
with CAMBODIA

• Chau DocPhnom Penh 230kV 90km 2004

• Tan Dinh Sambor 230kV 150km 2019

with LAO PDR

• Ban Mai Nam Mo (105MW) 230kV 85km 2008

• Ha Tinh Nam Theun 2 500kV 160km 2008
  Exchange with Thailand

• Pleiku Ban Sok 500kV 180km 2010
• 2,600MW exchanged in 2020

with YUNNAN

• Soc Son Malutang (400MW) 230/500kV 250km
  2019

(SOURCE Norconsult International AS)
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ADB Study on Ban Sok-Pleiku transmission line
Officially (2009) Xe Kaman 1 (488 MW), Upper Se
Kong 3 (152 MW), Lower Se Kong 3 (96 MW), and Dak
Emeule (138 MW) hydropower projects Officially
(2007) Xe Pian Xe Nam Noi (296) Xe Kaman 1
(488) Xe Kong 4 (464) Nam Kong 1 (229) Xe Kong
5 (388)

• Supported by Japan Special Fund through ADB
• Would open up Southern Lao dams to export to
  Vietnam (and Thailand)
• Now being designed
• Sekong 4 is of particular concern due to
• Impact on fisheries, affecting 190,000 people in
  Lao and an unknown number in Cambodia
• 5,000 people resettled

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Key concerns

• Key issues about the Mekong Power Grid are
• Marginal economic benefits (2 cheaper than
  limited trading scenario)
• Questionable commitment of the governments to
  regional competitive power trade
• No cumulative environmental
  and social impact
  assessment
  undertaken
• No options assessment
• No consultation with affected
  people or the public
  on the
  plan
• Promotes a model that fosters
  vested interests and
  corruption
• Who really benefits?

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Mekong mainstream dams

• Luang Prabang Dam (1410 MW) is being studied by
  PetroVietnam Power Corporation
• Mainstream dams represent a serious threat to the
  ecology of the entire Mekong River

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General areas of ADB and World Bank energy
sector intervention

• Four areas of intervention by ADB and World Bank
• Power Sector Reform
• Strategic Environmental Impact Assessment
• River Basin Planning (and River Basin
  Organizations)
• Developing and Financing Individual Projects
• Thermal
• Hydropower
• Transmission lines
• Rural Electrification

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Power Sector Reform
Generally, demands for electricity and water
policy reform in Vietnam by the World Bank and
ADB is tied to their financial support for
infrastructure projects. Recent World Bank
projects include 1. Transmission and
Distribution Project II, 2. Rural Energy project
II 3. Systems Efficiency Improvement
Equitization and Renewables project 4.
Renewable Energy Development 5. IPP Guarantee
6. AAA - particularly on IPP Framework, 7.
Greater Mekong Strategy project, 8. IFC TA and
investments
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ADB support for hydropower planning in Vietnam

• Strategic Environmental Impact Assessment
  prepared in 2008
• Second phase proposed to be linked to PDP VII

www.gms-eoc.org
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River Basin Planning

• The World Bank coordinated the preparation of
  Vietnams Hydropower Master Plan, completed in
  2001 (funded by Norway and Sweden)
• The ADB funded the Sekong-Sesan and Nam Theun
  River Basins Hydropower Development Study,
  completed in 1998, that prioritized six dams for
  further development (and then ADB tried to fund
  Sesan 3)
• ADB supporting River Basin
  Organizations in Red River,
  Lower Mekong Delta, Dong
  Nai River, Vu
  Gia-Thu Bon (projects are linked to
  water resource or
  hydropower projects)
• http//www.adb.org/Water/Actions/VIE/next-gen-RBO.
  asp

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Transboundary River Basin Planning The Mekong
Water Resources Assistance Strategy (MWRAS)

• ADB / WB / MRC project targeting 3 transboundary
  regions, including the Mekong Delta

• Dubiously claims win-win benefits,
  but may just end
  up justifying more large
  infrastructure with transboundary
  impacts
• Does not look for innovative solutions

http//www.internationalrivers.org/en/node/1988
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Transmission Lines

• The banks avoid direct responsibility for the
  impacts of hydropower
• ADB funded the US360 million transmission line
  for Son La Dam
• World Bank funded the transmission line for Yali
  Falls Dam
• Safeguards did not apply

• Both WB and ADB are currently funding major
  transmission projects in Vietnam

Resettlement at Son La (2008)
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ADB and WB support for Power Projects

• Thermal Power
• WB Phu My 2.2 (Risk Guarantee
• ADB Phu My 2.2 and 3
• Hydropower
• WB considering Trung Son (250MW) (US310 million)
• ADB supporting Song Bung 4 (156 MW) (US270
  million) and considering Song Bung 25
• Banks have also supported some rural
  electrification, renewable energy, and energy
  efficiency projects

Phu My Power Plant
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ALTERNATIVES?

• Balanced assessment of supply and demand side
  electricity options urgently needed
• Energy efficiency potential is huge
• New renewable and decentralized technologies
  becoming viable
• Empowered energy regulators needed
• Public participation crucial
• Balanced assessment of supply and demand side
  electricity options urgently needed
• Energy efficiency potential is huge
• New renewable and decentralized technologies
  becoming viable
• Empowered energy regulators needed
• Public participation crucial

Opportunities around PDP VII??
Micro hydropower turbine, Thailand
Biogas pig farm, Thailand
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Are there opportunities to influence the Banks?

• Contacts
• Executive Director
• Minister of Finance
• Management
• Resident Missions
• Line departments, Ministries
• Parliamentarians
• Citizens
• Access to information
• Some opportunities in policy and project
  development cycle
• Existence of relevant, though some problematic,
  policies such as safeguards and accountability
  mechanisms
• External mechanisms
• International human rights and other standards
• Media and other citizen-based approaches
• Parliamentary Oversight to IFIs Initiative
• Others???

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Strategy PRSP and CPS/CAS

• Poverty Reduction Strategy Paper (PRSP)
• Outlines country priorities and targets for
  reducing poverty over the next 3-5 years
• Public consultation process remains flawed
• Publicly available
• Country Assistance Strategy (CAS)
• Outlines Bank priorities in a country over the
  next 3-5 years, as well as planned lending and
  non-lending activities
• Provides lending scenarios
• Publicly available

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Are there opportunities to influence the Banks?
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?
Thank you.