June Issue 2015
Interview: Werner E. Liepach, Country Head Asian Development Bank
In your view, is Pakistan’s economy heading towards stabilisation. And, if so, what can the government do to further accelerate growth?
The macroeconomic environment is improving since FY2013-14 with higher foreign exchange reserves, lower fiscal deficit and moderate inflation. GDP has room to grow further, to the level that is required to absorb a growing labour force. Security challenges continue to weigh on Pakistan’s business climate, though the government’s sincere efforts to address the challenge is appreciated widely. But lower international oil prices should also benefit the economy overall. The government has agreed on a comprehensive economic reform programme, underpinned by a US$ 6.7 billion Extended Fund Facility arrangement with the IMF. Implementation of this programme is critical to restore the macroeconomic balance, relieve energy shortages, and guide the economy towards more rapid growth.
How much money will the Asian Development Bank (ADB) be releasing in the next five years and what percentage of that will be earmarked for the energy sector?
The ADB is working with Pakistan on a new Country Partnership Strategy to be approved shortly, which would earmark about US$ 6 billion in support for the country — or over US$ 1 billion per year — over the next five years. In line with Pakistan’s key priorities, this would address sectors such as energy security, transport network, irrigation facilities, and basic urban public services. ADB is also supporting its most vulnerable people through support to the Benazir Income Support Programme. In addition, we seek to leverage our own funds through partnerships and co-financing from both official and commercial sources
The major hurdle is the energy crisis in Pakistan. What measures is ADB taking to revive the power sector? What advice has the bank given for the revamping and restructuring of the energy sector?
A reliable supply of power is critical to the achievement of Pakistan’s economic growth targets. Being Pakistan’s leading development partner in the energy sector we are working with the government, along with other development partners and the private sector, to broaden and strengthen the country’s energy mix. ADB is assisting the Government of Pakistan (GOP) in implementing its Power Policy 2013 through a comprehensive Energy Sector Reform Programme. ADB’s support includes financing for hydropower projects, super-critical coal power plants, energy-efficiency programmes, and innovative clean-energy initiatives. ADB is also helping Pakistan improve its power transmission and distribution systems. The transmission and distribution network has been rehabilitated and new capacity has been added to ensure reliable high-quality power for industrial, commercial, agricultural and domestic customers.
We appreciate the government’s commitment to pursue the proposed reforms to make the power sector financially viable through restructuring, privatisation and technology. We look forward to continue our efforts with the GOP on how best to enhance the performance of this vital sector.
After the energy crisis, the government is already embroiled in the crisis that has commenced on the water front. What is your comment on this and what can ADB, as a lender, do to help with this issue?
In our view, dealing with water issues is of utmost importance for the country. The importance of water resources to the sector is evident from the fact that irrigated agriculture accounts for over 90 per cent of agricultural output, and is by far the largest water user consuming over 93 per cent of available water. We will continue to support improvements in irrigation and water management. For instance, we are currently undertaking an important project in Punjab to rehabilitate and upgrade its irrigation infrastructure. ADB is also helping the Federally Administered Tribal Areas (FATA) to better manage its water resources and agriculture productivity. We are also working with the provincial governments to address increasingly severe drinking water and sanitation issues.
The IMF has been pushing Pakistan to increase the electricity tariff and to curb circular debt. Is ADB in agreement with this formula or can Pakistan take other steps to control this menace?
The government is committed to pursuing reforms to make the power sector financially viable through more efficient and wide-ranging measures. This also requires bringing circular debt and loss under control. We will continue our efforts with the government and other development partners on how best to enhance the performance of the energy sector.
Recently, the vice president of ADB visited Pakistan and met the Chief Ministers of all the provinces. What was the focus of the meeting and what results are you expecting in the next one or two years?
Yes, the purpose of ADB Vice President Wencai Zhang’s recent visit was to gather feedback on ADB’s operations in Pakistan, as well as our future direction as we are about to finalise our new Country Partnership Strategy. He had productive meetings with senior officials here, including Prime Minister Nawaz Sharif, Finance Minister Ishaq Dar, the water and power minister, the planning and development minister, as well as the chief ministers. He also met with business leaders and entrepreneurs in Karachi. ADB believes that, in addition to an efficient public sector, a robust private sector is a key driver of growth and development, and we’ll continue to work with the private sector to promote investment, industrialisation and job creation, and improve the citizens’ quality of life, particularly the poor. As a result, we expect to further scale up our operations in the future.
ADB is one of the supporters of the TAPI pipeline. What is the horizon for the pipeline and to what extent will ADB lend support to this initiative?
Yes, the Turkmenistan-Afghanistan-Pakistan-India or TAPI natural gas pipeline is an important initiative for energy security of the countries involved. The pipeline will export up to 33 billion cubic meters of natural gas a year from Turkmenistan to Afghanistan, Pakistan, and India over 30 years. Turkmenistan has the world’s fourth-largest proven gas reserves, and the pipeline will allow the landlocked country to diversify its gas export markets to the southeast. Turkmen gas, in turn, will provide a key new source of fuel for southern Afghanistan, Pakistan and Northern India.
ADB was appointed the transaction advisor for the TAPI gas pipeline project in November 2013. In that role, ADB advised on the establishment of the TAPI pipeline company as an integral part of the larger goal of identifying and selecting a commercial consortium leader to spearhead the construction and operation of the pipeline.
What proactive role is ADB playing or will it play in the China-Pakistan economic corridor and what proposals can you table to make the project feasible?
ADB shares Pakistan and China’s leaderships’ vision for improved regional integration. The proposed economic corridor between China and Pakistan will bolster trade and commerce and economic growth in Pakistan and China and among countries in the region. ADB is currently supporting major interventions in Pakistan’s transport sector. These include Expressway-35 (Hassanabdal-Havelian), Motorway-4 (Gojra Khanewal), and key national highways in Balochistan (Qila Saifullah-Waghum) signed recently.
ADB is further improving Pakistan’s highways. Our work, under the framework of Central Asian Regional Economic Cooperation (CAREC), and Country Partnership Strategy will complement the proposed economic corridors. We look forward to further help through scoping and analytical work, development of master plans and other requirements as needed.
ADB has been talking about regional harmony and the economic revival of the country. For that to happen, peace is necessary in the region. What part can ADB play in building a better relationship between Pakistan and India?
We share Pakistan’s vision for increased regional connectivity, and ADB is working with the Federal Board of Revenue and other key stakeholders to develop world class border-crossing points at Torkham, Chaman, and Wagah to promote Pakistan as a regional hub. These strategic investments in infrastructure will go a long way in realising the economic corridors that the current government is aiming to develop. We strongly believe that sustainable development can only happen in an environment of peace and harmony.
There is a general perception that the data provided by the government in relation to growth, inflation and other key indicators are somewhat questionable. What can ADB do to help improve the data collection process?
Availability of quality data is important for economic and development planning and is a challenge in many countries. I understand that the government is planning to conduct a much-awaited census next year and that should provide a comprehensive overhaul of the country’s database. We welcome and support the government’s efforts in this direction.
This interview was originally published in Newsline’s June 2015 issue.