ADB assures critics on privatization policies

The Asian Development Bank (ADB) assured its critics yesterday that it will pay attention to their concerns on the impact of the private sector’s involvement in public utilities.

"ADB shares many of your concerns and we will study your materials very closely," Richard Ondrik, acting country director of ADB’s Philippine Country Office, told Ana Maria Nemenzo, president, of Freedom from Debt Coalition (FDC) one of the protest organizers.

Be happy to meet with you after the Annual Meeting," Ondrik said.

In a statement, ADB responded to the main issues raised by a broad coalition of civic and labor groups calling itself the Philippine Working Group on ADB.

On the issue of ADB and privatization, ADB said it only assists its developing member countries, including the Philippines, in privatizing public sector enterprises where such action is determined to be economically viable, technically and financially feasible, and socially desirable.

When privatization is used, ADB policy calls for mitigation of the social costs involved and the protection of the interests of those directly affected by privatization.

On ADB’s support to power sector reform, the bank supports government initiatives to create competitive electricity markets, initiatives that hopefully will lead to lower electricity prices for consumers, and restore the financial sustainability of the National Power Corp. (Napocor) prior to privatization.

"Any labor rationalization related to the sale of state-owned enterprises in the Philippines would be carried out in a way protecting the interests of workers. Reform of the power sector is aimed at ensuring the quality, reliability, security, and affordability of the country’s electricity supply," it said.

In order to create a competitive power supply market, ADB said a number of power generating plants owned by Napocor will be privatized so they can bid in the wholesale electricity spot market.

The ownership of Napocor’s transmission assets, it pointed out, will remain in the public sector with a qualified private sector concessionaire as operator. These measures would help to lower electricity tariffs in the medium and long term and to expand electricity supply to rural areas.

"Because the privatization process remains incomplete, consumers have not yet seen the benefits of competition. Current high prices may also be attributed in part to oversupply caused by the impact of the Asian financial crisis on power demand, and the subsequent economic slow down,"it said.

On water tariffs and future water demand, ADB said Manila’s water sources can barely meet current demand, let alone connect additional customers. This requires the development of new water sources, which most likely cannot be accomplished with public resources alone given the government’s tight budgetary situation.

"Water provided from additional sources will not only ensure improved and sustainable service delivery for existing customers, but will also enable extension of service coverage, particularly benefiting the urban poor," it said.

ADB has around $3.2 billion in loans to the Philippine government, equivalent to about 6 percent of the country’s total external debt.