29 April 2008
Philippine Working Group on the ADBMANILA, Philippines
—The Asian Development Bank should stop pushing for and profiteering from the privatization of the energy and grain sectors in the country amid the skyrocketing prices of rice and electricity, according to civil society groups.
The Philippine Working Group on the ADB issued this call days before the Bank’s 41st Annual Meeting of the Board of Governors in Madrid, Spain, on 3-6 May 2008.
Milo Tanchuling, secretary general of the Freedom from Debt Coalition, said ADB should seriously reconsider its strategy of pushing for the participation of the private sector in the power sector.
“Clearly, today’s problems come from yesterday’s solutions. Our problem on the rising electricity rates today is a result of the ADB’s private sector participation strategy,” said Tanchuling, adding that the Masinloc coal-fired power plant is a case in point. Masinloc case
“First, they funded the construction of Masinloc in the mid 1990’s. The total cost of the dirty power plant amounted to $687 million which the government owed mostly to the ADB. Then in 2001, the Bank pushed for reforms in the energy sector and funded the passage of the Electric Power Industry Restructuring Act (EPIRA) which pushed for the privatization of the state-owned power plants. The government, in pursuing this goal, attempted to sell Masinloc. But the sale of the ‘country’s gem’ failed at first due to lack of Power Purchase Agreements (PPAs) with distribution utilities and big end-users. The sale only consummated recently after the AES Corp. acquired the 660-MW plant in Masinloc, Zambales, at $930 million, with the help of the National Power Corporation securing 265-MW PPAs for the new owner and with the $200-million loan from ADB,” explained Tanchuling.
The Bank announced earlier that AES Corp. also raised $400 million from equity investments and subordinated loans, $35 million from a loan from the International Finance Corp. (IFC) and $295 million from loans from the IFC and four commercial banks. The AES Corp. has already paid the government in full last April 16.
“Where do you think this new Masinloc owner will get its return of investment? Obviously, from us, the consumers,” said Tanchuling. “And the ADB is allowing that because it is acting like a commercial bank, a great profiteer. It has profited a lot, in terms of repayments, from construction of the power plant to restructuring of the industry to privatization of Masinloc.”
Maris dela Cruz of EmPOWER Consumers said that in reality, the so-called power sector reforms or privatization program being peddled by the ADB is not about providing access to all, especially the poor nor it is about making power rates more affordable for the poor.
“In fact, the recent increase in electricity charges is because of the more expensive power bought through the wholesale electricity spot market (WESM) which is the heart of the privatization and restructuring program financed by the ADB. A separate funding for this was provided by the ADB which profits again from this in the process. With so much investments on this, the consumers still end up paying high electricity rates, now among the highest in the world," dela Cruz said.
Further, FDC’s Tanchuling said that the power sector receives the largest sector loan in ADB’s portfolio, from financing the energy sources development in the 1970’s to early 1980’s, power crisis management in 1980’s to early 1990’s, up to electric power sector restructuring from mid-1990’s to present.
Private sector participation was first introduced in the 80’s and intensified in the 90’s, primarily to address the lack of capital of the government to finance the rehabilitation and construction of new power plants in the country to address the power crisis.
In the 21st century, the Bank wants full private sector participation – not just in management, operation, but full ownership of the utilities to free up government resources for this sector and use it instead for other services. This was the aim of the EPIRA whose passage in 2001 was facilitated by the $300-million loan from ADB. Grain sector
Meanwhile, Alice Raymundo of the Task Force Food Sovereignty (TFFS) said the ADB is “guilty of compromising food security” not only in the Philippines, but also in some parts of Asia.
TFFS criticized the bank for its loan conditionalities that forced governments to deregulate and turn over agriculture to the profiteering private sector, citing the case of the Philippines and many other Asian member countries that are now threatened by the rice shortage.
The Philippines is among the world’s top rice producers (rank = 8) yet it remains a net importer of the staple. It was rice sufficient up to the early 80s but lost control and relied on importation since the early 90s. Current RP rice production can only cover for 80 per cent of the country’s needs.
“The ADB must be held accountable to the growing food insecurity in developing countries. Since its founding in 1967, the Bank had financed countless agricultural projects, but weakened farmers and communities instead of strengthening them. ADB supported the commodification of rice, application of market mechanisms and the price system in agriculture, liberalization and opening of trade,” Raymundo said.
“ADB projects like the Grain Sector Development Program (GSDP) in the Philippines and the Khulna-Jessore Drainage Rehabilitation Project in Bangladesh have been given with many policy conditionalities, including the removal of quantitative restrictions and lowering of tariffs of agricultural products. ADB conditionalities force countries to adopt policies that are harmful, especially those in the margins, farmers and fishers included,” Raymundo said.
“Many of the Bank’s projects are controversial and are considered “onerous” because other than its anti-poor conditionalities, the projects have destroyed lives. The Khulna-Jessore Drainage in Bangladesh now caused prolonged flooding in surrounding communities, causing families to lose livelihoods and wallow in poverty. The Philippines’ Grain Sector Development Program barely took off, and was cancelled after $100 million had been taken by government. In both instances, the supposed benefits are non-existent, and beneficiaries continue to suffer. The absurdity of it all is that the ADB will collect on these debts, no matter what,” explained Raymundo.