Example Of Private Sector Participation Success (Bangladesh)

‘Instructor’s Name’

‘Subject’
Private Sector Participation Success (Bangladesh)
Evaluation
Adequate physical infrastructure is one of the key elements for effective privatization and the underdeveloped energy infrastructure of Bangladesh will pose a serious problem to privatization activities. Each day, over 900 events of power outages happen in Bangladesh. A majority of these outages are due to infrastructure problems, such as faults in the depilated condition of the supply network and inadequate power generation. At present only 50% of Bangladesh population have access to electricity, which shows the poor quality of the infrastructure and management. The Padma-Jamuna-Meghna River divides the country into two zones - East and West. The East zone contains almost all the power generating facilities of Bangladesh and the West with its meager natural resources, is forced to import power from the East. The vast majority of electric consumption of the country takes place in the East and this resource allocation should be taken care for a nationwide development.
If the power sector is privatized, the electricity distribution network can be segmented to enable easier operation. Each network can then be further sold to different private investors to ensure fair competition and prevent monopoly. Building smaller individual private power stations can also be considered an option instead of building larger plants that run into operational inefficiencies. At present, 83% of the electricity produced is from gas-based power plants and the rest is fuel-based. A huge influx of private and public investment is required to meet the forecasted demand of electricity for the year 2015, which is 10,283 MW.
There is the necessary political consensus to ensure that the power sector is privatized. The politicians of Bangladesh recognize the need to pump in much needed capital in power generation, as half of the country suffers from severe blackouts. In October 1996, the government initiated a policy called, "Private Sector Power Generation Policy of Bangladesh." In the subsequent years, there have been many policies devised to ensure private participation in power generation, and there has been a conscious and sustained effort from the Bangladesh government, over the past decade, to encourage private investors.

Recommendations

It is necessary to keep in mind that private sector and investors are merely a means to an end and not an end in themselves. The long term interests of poor consumers have to be considered before designing the framework for privatization of the electricity sector. What is best practice from an investor’s perspective may not necessarily be the best for poor consumers. So, attracting foreign investments should not be the goal in itself, and any regulatory (legal and judiciary) framework should take into account that the private investment should be socially useful and appropriately regulated to serve the public interest. In past, we have seen how public protests against non-governmental projects have rebounded on investors. Thus, the conflicting aims of the private investors and the consumers should be aligned, so that the investors can make profit and, at the same time, meet their social and environmental obligations.
There should also be transparency in award procedures. Corruption has been a major problem in Bangladesh, and, in the past, many projects have been compromised by official preference. Hence, there should be a transparent procedure and it should be based on an objective evaluation criteria. Also, the existing judicial and regulatory frameworks are weak and they are basically designed to define public sector responsibility. It might prove inadequate for private sector participation, and there needs to be a clear framework designed, so that it addresses the needs of non-state participants of long-term contracts.
The potential risk for private investors includes tackling conflicting public authorities, for example central vs. regional authorities or various ministries vs. regulatory departments etc. They also might face competition from existing service providers, mostly state owned, who would be given preferential treatment. Unless there is a complete privatization, these problems cannot be addressed.

Bibliography

Feld, Lowell. Country analysis - Bangladesh. 2002. http://www.geni.org/globalenergy/library/national_energy_grid/bangladesh/BangladeshCountryAnalysisBrief.shtml (accessed March 9, 2015).
Masuduzzaman, Mahedi. "Electricity Consumption and Economic Growth in Bangladesh:Co-Integration and Causality Analysis." Global Journal of Management and Business Research Volume 12 Issue 11, 2012: 46-56.