NATIONAL11 [ (Spotlight Weelky)]

‘Nepal Should Develop Export-Oriented Power Projects’

— MASON CHARLES MOSELEY

MASON CHARLES MOSELEY, director of Utility Programs, International Resources Group Ltd., was recently in town to conduct a South Asian Regional Initiative Energy SARI\E training program on energy sector restructuring and private-sector participation. Moseley spoke to SPOTLIGHT on various issues regarding the energy sector. Excerpts:

Why does Nepal need energy restructuring?

Energy restructuring is a term that can be regarded as energy reform. Energy reform is important because it's like a power-generation program. The world is changing so fast and the opportunity is greater. There is a need to look at all national sectors, including power, to find out whether they satisfy the needs of the people. We have found this recognition across the globe, including in the United States, Latin America, Europe and Asia. The basic idea about reforming the electricity sector is to organize production in favor of the society. Everywhere, we have found better ways of doing things.

You have been working in the energy sector for more than four decades in different parts of the world. How do you see the process of reform?

I have been working in this sector since 1961. I have seen various reforms undertaken in the energy sector to improve the efficiency in power generation. Handing over power from the public sector to the private sector is a difficult task.

What is your impression of private-sector participation in the energy sector?

The United States is the country with the greatest experience in private-sector participation. The private sector is responsible for supplying about 70 percent of electricity in the United States. I don't approach this from an ideological perspective. As the Chinese say, it does not matter whether the cat is black or white as long as it catches mice. We approach the issue of reform in terms of enhancing performance.

In earlier decades, policymakers talked about the need for public-sector participation in development. Today they are talking about private-sector participation. What does this shift signify?

Well, the shift toward private-sector participation was in a part a recognition that the government-owned utilities in many parts of the world were not able to raise the capital that they needed to expand. The power sector requires a lot of capital. It also requires an ability to recover the cost of the system. Over the years, most government-owned utilities in the power sector have not been able to recover costs. Governments have borrowed a lot of money. Even in the United States, we can see the limits the government faces in borrowing money. The government has turned over power development to the private sector.

Pakistan has had a bitter experience with Independent Power Producers (IPPs) because of complications in signing agreements. Nepal, too, is inviting private investment in the power sector. What does Nepal need to do?

I have worked for six and half years in Pakistan and we developed very comprehensive reform program for the country. Pakistan has been in political turmoil for the last 10\15 years. As a result, a lot of decisions were made under political compulsions rather than economic ones. In the case of Nepal, you have done a wonderful job of attracting private investment in harnessing hydroelectric resources. Even though the country is small and the topography is difficult, Nepal has attracted a significant volume of foreign investment in hydroelectric power generation. Your challenge is to expand investment and include India, as it is one of your key markets. While satisfying the growing demand of electricity at home, you have to develop export-oriented projects.

You have held discussions with the senior Nepalese government officials responsible for the power sector. What are your views on reforming the sector in Nepal?

Every country is unique and has something it can share. Regardless of whether a country is developed or developing, the bottom line is financial performance. If you have capital and are not using it well, it becomes a burden for the treasury. In the case of Nepal, like in many countries, the electricity sector requires more capital. The government has opened the energy sector for private investment.

You mean, we have to revise our spending priorities?

Your country needs huge investments in education, health and security. If you allow the private sector to come in to invest in energy projects, you can have money to invest in education, health and security. Energy is a much more profitable sector for private investors. By investing in education and health, you can prepare for greater industrialization. Once you start investing more in education and health, you can expect better living standards for people over the long run.

How do you see the concept of a South Asian power grid?

I came to Nepal after working in various parts of the world. I see a great possibility for regional trade in South Asia. It is not happening because of political problems. Once things are stabilized, a bright era of regional cooperation can materialize. In the case of Nepal and India, one of the challenges is to identify the benefits of big projects in Nepal and try to encourage Indians who will benefit from the projects.

How safe is it to invest in the hydropower sector?

The hydropower sector is a high-risk area for investment. An investor has to put all the money up front. The operating cost is low, but you have a very high capital cost. That is why it is very important that Nepal should be very competitive in terms of benefits to investors. Nepal should be respectful of agreements signed with investors. If Nepal promotes itself as a trustworthy partner, investors will start coming in.