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Electricity powers many economic
activities in any society, from small shops that give jobs to micro
entrepreneurs to cranes that build huge and tall buildings. Economies that rely
more on human and animal power and energy tend to be very poor because of low
productivity while those that use more machines that run on extensive
electricity tend to be rich because of higher productivity.
Below is an illustration of how selected
Asian economies have expanded their electricity use over two decades.
See the big jump in power use in just
two decades by Vietnam (10.6x increase), China (5.8x), Maldives (4.6x),
Indonesia (4x) and Thailand (3.2x). The other countries have a simple doubling of
use, or even flat lined, like the case of Mongolia.
There have been several literatures that
show the near causality between electricity use and economic growth. The next
table further illustrates this point.
See the pattern and possible causality?
In South East Asia, Singapore, Brunei and Malaysia are at the top in
electricity consumption and they are also at the top in per capita GDP. At the
bottom in both tables are Cambodia, Myanmar and Laos.
In North East Asia, at the bottom are
China and Mongolia while the four economic dragons alternate each other at the
top in both tables. And in South Asia, it is Maldives and Bhutan at the top,
Bangladesh and Nepal at the bottom in both tables.
Of all the countries mentioned above,
the electricity-poorest are Afghanistan and Nepal. Nepal’s electricity use in
2010 was just 1/10th of Bhutan consumption, 1/90th of
Singapore, and 1/100th of
Taiwan and South Korea.
In the February 2013 issue of this
magazine, this column wrote about “Addressing power shedding and rationing” in
Nepal and these proposals were made:
One, facilitate and hasten more power
imports from India especially those from coal power plants. Coal is generally cheap and supply is stable. This
will require building more transmission lines from India to Nepal.
Two, deregulate power rates. Let those
who can afford to pay higher electricity rates in exchange for more stable
supply do so, whether imported from India or locally produced. This will
encourage faster construction of more power generation plants and transmission
lines.
Three, privatize some power plants that
produce more losses than revenues for the government, sell to private power
companies in a competitive bidding. Such privatization should be coupled with
industry deregulation, at least the power generation sector, to encourage more
competition among various players.
Four, reduce the requirements,
bureaucracies, taxes and fees for companies putting up new power generation
plants and transmission lines. Invite
more power supply companies from many countries to enter Nepal and put up more
power generation and transmission infrastructures over the medium- to
long-term.
Fifth, entertain the possibility of
getting nuclear power as this is a cheap, stable and generally safe power
source.
This column reiterates the above
proposals once more. In addition, Nepal and other electricity-poor countries may
consider using natural gas as this is also a cheap and stable power source. The
shale gas revolution in the US, Europe and other Asian countries means that
natural gas prices will stabilize or even decline either in the short or long
term.
Regardless of the power source that
investors will use for their power plants, government bureaucracies that hinder
such initiative should be drastically reduced, as well as the taxes, fees and
royalties that result in high electricity prices for businesses and households.
--------------See also:
Business 360 13: US Government Shutdown and Lessons for Asia, November 28, 2013
Business 360 14: Middle Income Trap and Economic Freedom, January 02, 2014
Business 360 15: How to Improve Economic Freedom in Asia, January 22, 2014
Business 360 16: ASEAN Economic Community 2016, March 21, 2014
Energy Econ 16: Electricity and Development, March 20, 2014
Energy Econ 17: Brown outs in Mindanao, Thin Reserves in Luzon, April 11, 2014
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