Private sector involvement key to development of energy sector

KB Ahmed Energy, being the core and driving force behind any economic activity , has received utmost attention from all governments around the world , but unfortunately in Bangladesh, such attention is neither visible nor is it found appropriately in our national planning. Since 1975, all governments had down-rated the agencies dealing with energy and engaged unprofessional and incompetent personnel to manage this very important sector of the economy. Politics and politicians in their priority did never appreciate the relevance and importance of energy. There are countries like Japan, South Korea and Taiwan, with no energy resources which have successfully developed their economies and there are countries like Nigeria, Sudan and Bangladesh, with abundant energy resources but they suffer from underdevelopment, poverty and deprivation. "National energy policies are necessary for countries to keep in constant reminder of certain objectives and aspirations. Goals and strategies typically found in national energy policies include improving the efficiency of an energy system, ensuring against energy disruptions, promoting production and exploration, protection of the environment, and promoting economic development and growth." Shawn King, a conservationist at the US Department of Energy and an environmental scientist from the University of Rochester, said while outlining her recommendation. "National energy policies are developed to assist nations in achieving a myriad of broad based goals. Some of the goals may even seem contradictory." "Though not explicitly named as a goal, every country utilises energy policy to promote economic development and growth", she added. Without energy, goods and services could not be manufactured or delivered. High energy prices tend to negatively impact the economy as goods and services cost more to produce, deliver and buy; and in a strained economy, exploration and development of energy resources become less attractive to investors. This is a scenario famously attributed to Bangladesh since its independence. Bangladesh, to start with, failed to articulate the relevance of energy to its economic development and failed as well to sell an integrated national energy plan to its population. No white paper proposal or legislative agenda was ever made public. The nature and extent of energy demand and utilisation in a national economy are, to a large extent, indicative of its level of economic development. For a productive economy and for rapid and secure economic advancement, the country must pay maximum attention to the optimal development and utilisation of the energy resources and to the security of supply of the energy needs. To do this, the country needs to put in place a coordinated and coherent energy policy, which will serve as a blueprint for sustainable development, supply and utilisation of energy resources within the economy, and for the use of such resources in international trade and cooperation. The policy must also address the issues of energy manpower development, indigenous participation, domestic self-reliance, the energy needs of various sectors of the economy, energy sector financing, as well as private sector participation in the energy sector. Luckily, the country is endowed with many energy resources including gas, coal, solar, hydro, bio-fuels and other renewable energy resources. The national policy should, therefore, promote the harnessing of all the viable energy resources so as to have an optimal energy mix, while ensuring sustainable and environmentally friendly energy practices. Existing policies in the energy sector have been those of individual energy sub-sectors such as electricity, gas, and solid minerals. These had been developed from the limited perspectives of each of the sub-sectors and had resulted, in some cases, to conflicting policies and programmes, to the detriment of the country as a whole. There is a need, therefore, for a comprehensive and integrated national energy policy so as to provide proper direction to the development of the entire energy sector. Such a document will assist the international investor community in appreciating the thrust of the government on energy matters. With the exception of the upstream oil and gas sub-sectors, and to a smaller extent, the electricity sub-sector, the government has been largely responsible for the ownership and operation of the energy sector industries. In particular, investment capital had been sourced from public funds, while the industries had relied on public interest, within management, as the motivation for responsible and transparent management of the industries. "The funds required for the maintenance and refurbishment of the energy supply infrastructure, and for the expansion of capacity, are enormous. In the face of increasing demands on government for investments in other areas of the economy such as transport, health, education and security, the government has been unable to provide the funds needed by the energy sector. Efficient and transparent management of the industries had also not been achieved. Consequently, established facilities had progressively deteriorated while new capacity had not been added, in spite of increasing demand. The funding and management deficiencies had given rise to inadequate and unreliable supply, specially of electricity and petroleum products, insecurity of the energy supply system and loss of productivity the economy. Increased private sector participation in the energy sector will attract new investments to the sector, while the profit motive will assist in solving much of the management problems experienced under public ownership. The restructuring of the sector, required to bring this about, will involve both deregulation and privatisation. The greater proportion of private investment funds required by the sector will be foreign capital and thus the environment must be made conducive to attract foreign investments to the sector. This is, notwithstanding, the necessity to encourage and promote indigenous private sector participation in the sector", reported the recently commissioned the National Energy Commission of Nigeria. "Given the vital role of energy in national development and its impact on every aspect of our life, energy planning must be viewed as an integral part of national development planning such that energy development decisions are not taken as isolated sectoral plans, but rather, closely linked and reconciled with those of the rest of the economy." A necessary condition for the optimal development of the energy sector is the effective coordination of the various energy sub-sectors because of their interrelatedness. It is also necessary to coordinate the energy related activities of the non-energy sectors of the economy. It is important that in order to increase the efficiency and effectiveness of energy delivery in the country, there is a need to develop the technological capabilities of the energy sector companies to cope with the challenges of future energy development. There should also exist at state and local government level units responsible for energy matters. These would provide necessary links for the formulation of national energy policies plans and programmes as well as for the execution of some of the programmes. The successful implementation of the energy policy will require the active participation of the private sector. Therefore, the inputs of the organised private sector are essential in the formulation of policy and implementation of strategies. The national energy policy should recognise the multi-dimensional nature of energy and therefore addresses diverse issues such as research and development, energy pricing and financing, legislation, energy efficiency, environment etc. The overall thrust of the energy policy is the optimal utilisation of the nation's energy resources for sustainable development. The policy objectives and implementation strategies must be carefully defined with the fundamental guiding premises that energy is crucial to national development goals and that the government has a prime role in meeting the energy challenges facing the nation. The dependence on oil can be reduced through the diversification of the nation's energy resources, aggressive research, development and demonstration (R D& D), human resources development, etc. National Energy Policy should include the following: i. To ensure the development of the nation's energy resources, with diversified energy resources option, for the achievement of national energy security and an efficient energy delivery system with an optimal energy resource mix. ii. To guarantee increased contribution of energy productive activities to national income. iii. To guarantee adequate, reliable and sustainable supply of energy at appropriate costs and in an environmentally friendly manner, to the various sectors of the economy, for national development. iv. To guarantee an efficient and cost effective consumption pattern of energy resources. v. To accelerate the process of acquisition and diffusion of technology and managerial expertise in the energy sector and indigenous participation in energy sector industries, for stability and self-reliance. vi. To promote increased investments and development of the energy sector industries with substantial private sector participation. vii. To ensure a comprehensive, integrated and well-informed energy sector plans and programs for effective development. viii. To foster international co-operation in energy trade and projects development in both the in the region and the world at large. ix. To successfully use the nation's abundant energy resources to promote international co-operation. If the political leadership had given enough importance to developing energy resources, by now Bangladesh would have become a middle income country. What is essentially needed is engaging the private sector in formulating a plan to invest about 500 million US dollars in exploring and developing viable and alternative energy resources over a period of next three years and for the time being, suspend proposed multi-billion dollar bridges and other political projects. It is wrong to claim that there is abundance of natural gas reserve as it is equally wrong to project that natural gas reserve in Bangladesh is depleting. The fact is that sufficient survey and drilling have not been done to conclude either way. While the neighbouring India drilled about 300 wells , Thailand drilled 220 wells , Vietnam drilled 160 wells , Malaysia drilled about 400 wells , Bangladesh drilled so far only 65 wells. The territory of Bangladesh needs to be mapped, surveyed with 3D seismic technology, and with satellite imaging. All these should be done by Bangladesh's own resources, which will attract foreign participation and bring dividends at a later period as the exploration companies will need to buy these geological and geophysical data. There is a section of people who are unknowingly hindering progress in the energy sector on the pretext of saving natural resource for the future generation. They are somewhat misleading the public perception. Their claims are not only irrational and unsubstantiated; in some cases it appears very much motivated. To remove this doubt and dilemma, it is essential to produce a white paper as is done now by National Commission of Nigeria and a public dialogue should be initiated to settle for the public support for the programme for developing energy resources. This is not, however, achievable if the policy makers are engaged only in arrogance on one hand and on the other, dissenters resort to misinformation and motivated campaign. The writer is an economist, business consultant and President of Bangladesh Myanmar Chamber of Commerce & Industry. kbahmed1@gmail.com