博士論文 Shortcomings in initial stage of power sector reform and their influence on the following process: case studies of Chile and the Philippines 電力セクター改革の初期段階における欠陥とその後のプロセスに 対するその影響 金 玟 住 キム ミンジュ Minju Kim i Supervisor Professor Hideyuki HORII Advisors Professor Hironori KATO Professor Kazumasa OZAWA Professor Shunsaku KOMATSUZAKI Professor Toshiro NISHIZAWA ii Abstract About 70 of the 150 developing countries have embarked on reforming of the power sector since the early 1990s. The drivers of this reform movement are disenchantment with the poor performance of state-owned power utilities, the need for new investments and modernization to meet the rapid growth in demand, and fiscal pressure, along with the desire to protect and help the poor(Gratwick and Eberhard 2008). However, various technical and economic evaluations of power sector reform indicate that they are still facing difficulties even after the reform. These power problems in developing countries especially affect the industrial production in the developing countries who aim to economic growth. In some developing countries, another huge amount of money is provided for the re-design of the roadmap and technical assistance for restoration from multilateral institutions. Although the power sector reform has been introduced in order to escape from the existing problems and challenges of the power sector, still those problems have persisted for a long time throughout the developing countries. Some researchers, in a skeptical perspective, strongly criticize the reform itself in developing countries and insist that the reform should be backward (Eberhard and Gratwick 2007). In many cases from the literature reviews, the main question and issues in reform have not been ‘whether’ but ‘how’ to do it. In this point, we still need to answer this question by a more critical assessment from empirical experiences; can unfavorable initial condition of developing countries truly be overcome by good design and implementation of the reform? Also, recent study mainly focuses on how to solve the problems as a feedback for the reform. Despite the importance of design and execution of reform in the initial stage is generally agreed by researchers and reform participants, its mechanism is not yet clearly clarified. Hence, the following questions can be posed; how do the reform design and execution in initial stage contribute to the result of the reform? To answer for these two research questions above, following three objectives are established: 1. Identify unfavorable initial conditions that developing countries typically face in their power sector reforms. iii 2. Clarify unfavorable initial conditions in which shortcomings in policy design and implementation are critically important in that lead to failure in the following process. 3. Suggest important aspects to avoid the shortcomings in design and implementation of the initial stage. In order to select case study area, an eligible country list was first prepared that satisfied the following conditions: (a) developing country that have already initiated the power sector reform, (b) the country has a long enough history that allows us to understand the whole process, (c) the country has a similar size of economy and power capacity, which indicate market demand and economy of scale of power. As a result, Chile and the Philippines were selected, which can show how the implementation and design in initial stage brought out different initial results. After cases are selected, case study using causality analysis was conducted based on the result of literature review, in-depth interviews. Obtained data were firstly classified into three phases: initial condition, initial implementation and initial result. Using identified factors, causality diagram was derived. Throughout drawing the causality diagram, subsequently, some fundamental findings from the proposed causality diagram were suggested. To decide an analytic dimension in causality diagram, initial implementation and initial results corresponding to an initial condition is set as a domain. This domain setting can be verified by the stakeholders’ analysis results that derive four main stakeholders in initial stage. Moreover, all links of factors in causality diagram were also investigated by applying weight to determine critical factors. In Chile case, the initial condition of Chilean power sector reform could be characterized with absence of clear regulation governance, vertically integrated monopoly by state-owned power company and its fiscal constraints. On top of that, less political supports for the national human resources, Chile's unique political condition under the dictatorship, general social comprehensive reform before the power sector reform in security service and education are initial condition that can be differentiated from the other developing countries. Among these initial conditions, the unfavorable regulatory governance was improved by establishing independent regulatory body and capacity building by utilizing local human resources who are qualified in economics and engineering and by funding form the domestic business group. Besides, Chilean regulatory body in initial stage had to build their capacity by themselves because they did not have any reference iv cases and supports from outside. Through the internal capacity building process, consequently, they could have high institutional capacity enough to regulate the tariff with simple and logical economic rules. Fiscal constraints of state-owned power company were improved by promoting private investment on generation capacity, since they successfully fostered investor’s confidence in the power market through the initial implementation. That credible environment could be developed by many incentives for the investors. First of all, the market signal was accurate with marginal pricing model, which was empowered by electricity law. Moreover, the investors was able to be protected by the jurisdiction and explicit regulatory framework imbedded in legislation. We also cannot deny the influence of the abundant domestic capital market on the initial success in attracting new investment on generation capacity which was resulted from the general and comprehensive reform in social security and education prior to the power sector reform. With regards to the political interference, Chilean unique political environment ironically had positive influence on the power sector reform, promoting quick decision making under the dictatorship. Regulatory body also could maintain their independency under the military government. Lastly, fulfilling competition in the market were failed to meet the expectation that the reform would bring more efficiency throughout competition in the market. Vertical integration maintained in the power market due to an inadequate allocation of property right and loopholes in law enactment that allow cross-ownership between generation and distribution caused limited competition in the market. In the Philippines case, the initial condition of the power sector reform could be characterized as frequent changes in energy governance, weak regulatory body, insufficient funds for capacity building, IPP contracts and its burden to state-owned power company, and vertically integrated monopoly by conglomerate. Absence of well-organized political party and family oriented political activities is also a unique feature of the initial condition that influences on the power sector reform. Other external factors such as Asian financial crisis, supports from ADB and USAID were also reflected on the causality analysis. Philippines had concerns on techno- economic design of regulation, when the independent regulatory body was created, because the regulatory responsibility had been unclear before the power sector reform. Due to the inability of funding on capacity building, ADB provided technical assistance but this caused high dependence on external consultants without building internal competency. Regulatory body’s organizational features for example, salary policy also failed to attract qualified personnel v because of relatively lower salary than other sector’s utility regulatory body. Moreover the regulatory body’s independence and autonomy was threatened by political appointee of the chair and high dependency on government supports. These strong political influence is also one of the characteristics of the Philippines that hamper the quick decision making process. Especially in the initial stage, there was severe delay in decision making on whether to initiate the reform or not, prior to the reform. Before the official enforcement of the reform, the political interest groups could had information about the future industry and easily involve in rent seeking behavior. Delay intensified the coalition of the interests group, thus delays in decision making iterated. In terms of the investment expansion on generation, the Philippines failed to increase the private investment by privatizing state-owned generation assets. Due to the risky contract with the IPPs made NPC too much focus on generation’s privatization, rather than transmission assets. Moreover, with high transmission loss problems, private investors hesitated to invest on generation. External shocks such as Asian Financial Crisis and Enron in 1997 also influenced on the financial feasibility of Distribution Company who is the main purchaser of the generation and deteriorated the investment climate. Consequently, as the number of the private participants in wholesale