Asia's Electricity Crunch, Policy-Making and the IPP Solution

Abstract

A lack of electric power continues to constrain the economic growth of Asia's developing countries. Traditionally, the state­ run power sector tends to be manipulated by domestic politics in regard to the size, cost, output pricing, financing, and location of new plants. As a result, when recession hits, generator construction and planning literally grind to a halt, exacerbating economic conditions and slowing recovery. In this paper, an alternative to the cyclical frustration of unwieldy state projects is explored. Privately-owned Independent Power Producers (IPPs) can provide developing Asian countries with power plants and related infrastructure specifically tailored to local demand, fuel sources, and financing capacity. Addition­ally, IPPs can assume risks in project management, construc­tion, technology, and financing that developing world govern­ments and their state power sectors are ill-equipped to handle. Current power sector policy-making in Asia's developing countries tends to overlook the benefits of international IPPs in favor of political and security interests that, in fact, impede economic growth. Furthermore, governments need to install a credible and transparent regulatory and policy mechanism for the power sector that encourages private participation and investment.